THE  LIBRARY 

OF 

THE  UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 

SCHOOL  OF  LAW 


A  TREATISE 


ON 


THE  LAW  OF  DEFENSES 


IN  ACTIONS  ON 

COMMERCIAL  PAPER 

INCLUDING 

THE  DEFENSES  AT  COMMON  LAW  AND  UNDER 
THE  NEGOTIABLE  INSTRUMENTS  ACTS 


BY 

JOSEPH  A.JOYCE 

AND 

HOWARD  C.JOYCE 

Authors  of  "Damages,"  "Electricity,"  etc. 


INDIANAPOLIS 

THE  BOBBS-MERRILL  COMPANY 
1907 


r 


Copyright  1907 
By  the  BOBBS-MERRILL  COMPANY 


THE   HOLLENBECK    PRESS 
INDIANAPOLIS 


V 

«0 


PREFACE. 


The  purpose  of  the  authors  in  this  work  has  heen  to  furnish  a 
treatise  on  the  defenses  in  actions  upon  commercial  paper,  including 
therein  a]l  of  the  common  law  defenses,  and  also  those  which 
are  provided  for  by  the  Negotiable  Instruments  Laws. 

The  preparation  of  this  manuscript  has  necessitated  the  examination 
of  many  thousands  of  decisions,  all  of  which  has  been  done  personally 
by  the  authors. 

The  subjects  have  been  arranged  to  present  logically  those  de- 
fenses which  originate  with  the  inception  of  the  paper,  and  extend 
down  to  the  final  action  thereon,  and  to  include  those  defenses  which 
may  arise  subsequent  to  the  commencement  of  the  action. 

The  English  Bills  of  Exchange  Act  is  also  added,  as  well  as  the 
Negotiable  Instruments  Laws,  and  these  are  considered  with  reference 
to  the  latest  decisions. 

It  is  believed  that  this  book  will  prove  a  practical  working  tool,  and 
a  convenient  handbook  for  the  busy  lawyer. 

Joseph  A.  Joyce, 
Howard  C.  Joyce. 

New  York,  September,  1907. 


Ill 


TABLE  OF  CONTENTS. 


CHAPTER  I. 


AVAILABILITY,   GENERALLY   AS   TO    PARTIES. 


Sec. 

1.  Rule  as  to  makers. 

2.  Same    Subject  —  That   transfer 

from   payee   was  procured   by 
undue  influence. 

3.  Joint  and  several  makers. 

4.  Defense  of  maker  not  available 

to  indorser. 

5.  Where  maker  concluded  by  acts 

of  agent. 

6.  Accommodation  indorser  —  Rule 

as  to. 


Sec. 

7.  In  action  on  corporation  note  or 

indorsement. 

8.  Clearing-house    rules  —  When 

available. 

9.  Guarantor — Rule  as  to. 

10.  Note  indorsed  in  blank. 

11.  On  note  purchased  from  bank. 

12.  Obligors    on    bond — Rule    as    to 

where   given  in   consideration 
of  extension  of  time. 


CHAPTER  II. 


EXECUTION    OR   DELIVERY. 


Sec. 

13.  Execution   or   delivery  procured 

by  force  or  fraud. - 

14.  Hon    est    factum — Where    name 

signed  by  another. 

15.  Where  payee  signs  note  at  foot 

with  maker's  name. 

16.  Signing  after  delivery. 

17.  Mistake. 

18.  Reliance  on  recitals  in  note. 

19.  As  to  re-^enue  stamp. 

20.  Want  of  delivery. 

.  21.  Delivery  by  agent  in  violation  of 
instructions. 


or    indorsement    in 


Sec. 

22.  Execution 

blank. 

23.  Same    subject  —  Application   of 

rule. 

24.  Instruments  payable  to  fictitious 

person. 

25.  Misrepresentations  as  to  nature 

of  instrument. 

26.  Same  subject — Bona  fide  holder. 

27.  Same  subject — Maker  unable  to 

read  English. 

28.  Effect  of  negligence. 

29.  Instruments    executed,    accepted 

or  delivered  on  Sunday. 


VI 


TABLE    or    CONTENTS. 


CHAPTER  III. 


INCAPACITY  AND  WANT  OF  AUTHORITY. 


Subdivision  I. 
Subdivision  II. 
Subdivision  III. 
Subdivision  IV. 
Subdivision  V. 
Subdivision  VI. 


Coverture    §§  30-62 

Infancy   63-68 

Intoxication    69-79 

Mental  incapacity  and  insanity 71-72 

Want  of  authority 73-94 

To  whom  defense  is  available 95 


Subdivision  I. 


COVERTURE. 


Sec.  Sec, 

30.  Coverture — Rule  at  common  law.    45. 
31.'  Effect  of  new  promise  after  hus- 
band's death.  46. 

32.  Rule    In    equity — English    deci- 

sions. 47. 

33.  Same  subject— United  States  de-    48. 

cisions.  49. 

34.  Defense  of  coverture  as  affected 

by  statute.  50. 

35.  Statute    does   not   have   retroac-    51. 

tive  effect. 

36.  Coverture  a  defense  when  trans-     52". 

action    not    within    statutory 
exceptions.  53. 

37.  Same   subject — Burden  of  proof 

—Pleading.  54. 

38.  Assent  of  husband.  55. 

39.  Note  given  for  insurance  premi- 

ums. 56. 

40.  Where  note  made  by  wife  to  hus-    57. 

band.  58. 

41.  Where  wife  a  joint  maker. 

42.  Where    husband    and    wife    live     59. 

apart — English  decisions. 

43.  Same  subject — United  States  de-     60. 

cisions — Conclusion.  61. 

44.  Where   wife    signs    as    surety —    62. 

Generally. 


Same  subject — ^Where  statute  ex- 
pressly prohibits. 

Same  subject — Under  particular 
statutes. 

Same  subject — When  no  defense. 

Same  subject — Bona  fide  holders. 

Rule  as  to  determining  whether 
principal  or  surety. 

Liability  as  acceptor. 

Indorsement  by  married  woman 
— Common-law  rule. 

Same  subject — Assent  of  hus- 
band. 

Same  subject — Under  particular 
statutes. 

Same  subject — General  rule. 

Woman  in  business — Sole  trader, 
etc. 

Separate  estate,  benefit,  etc. 

Same  subject  continued. 

Same  subject  continued  —  Note 
for  borrowed  money. 

Same  subject  continued — Inten- 
tion as  affecting. 

What  law  governs. 

Who  may  urge. 

Where  there  is  a  failure  to  plead 
coverture  and  judgment  is  ren- 
dered. 


TABLE   OF    CONTENTS. 


Vll 


Subdivision  II. 


INFANCY. 


Sec. 


Sec. 


63.  Infancy  as  a  defense — Generally.  67.  Where  Infant  accepts  bill  of  ex- 

64.  Effect  of  ratification.  change. 

65.  Note  given  for   support  of  has-  68.  Who   may   urge    defense    of    in- 

tard  child.  fancy. 

66.  Note    given    in    satisfaction    of 

tort. 


Subdivision  III. 


INTOXICATION, 


Sec. 

69.  Of  maker  or  drawer. 


Sec. 

70.  Of  indorser. 


Subdivision  IV. 


MENTAL   INCAPACITY   AND   INSANITY. 


Sec. 

71.  Of  maker. 


Sec. 

72.  Of  indorser  or  surety. 


Subdivision  V. 


WANT   OF    AUTHORITY. 


Sec. 

73.  Unauthorized    signature    or    in- 

dorsement. 

74.  Where  unauthorized  signature  is 

ratified — Estoppel. 

75.  Violation     of     instructions     by 

agent. 

76.  Unauthorized   collection   of  note 

given  as  collateral. 

77.  Receipt  of  paper  by  public  officer 

only     authorized     to     receive 
cash. 


Sec. 

78.  Paper  given  to  or  transferred  by 

administrator  or  executor. 

79.  Corporate  want  of  authority  as 

affected   by   illegality  or  stat- 
ute. 

80.  Want  of  authority  of  corporate 

officers  or  agents. 

81.  Same     subject  —  Application     of 

rules — Illustrations. 

82.  Same     subject  —  Bank     officials' 

acts. 


Vlll 


TABLE   OF    CONTENTS. 


Sec, 
83. 

84. 


86. 
87. 


Same  subject — Paper  issued  by- 
public  officers. 

Ultra  vires  instruments. 

Same  subject  —  Corporation  au- 
thorized to  issue  paper. 

Same  subject — Application  and 
illustration  of  rule. 

Same  subject  —  Municipal  or 
public  corporations. 

Guarantee  of  checks  beyond  de- 
posits. 


Sec, 
89. 
90. 
91. 

92. 
93. 

94. 


Want  of  authority — Partner. 

Same  subject  continued. 

Same  subject  —  Qualifications 
and  limitations  of  rule. 

Note  between  partner  and  firm. 

Paper  given  in  violation  of  ar- 
ticles of  partnership. 

Paper  executed  in  firm  name 
after  dissolution. 


Subdivision  VI. 


Sec, 

95.  To  whom  defense  is  available. 


CHAPTEE  IV. 


FOKGEKY. 


Sec. 

96.  General   rule  as  to  forgery. 

97.  Particular  cases  where  forgery 

no  defense. 

98.  Of  name  of  maker  or  drawer. 

99.  Where     drawer     obligated     to 

know  signature  of  drawer. 


Sec. 

100.  Payment  of  or  by  forged  paper 

— Duty  as  to  notice. 

101.  In  case  of  certified  check. 

102.  Of  name  of  payee. 

103.  By  agent  of  owner. 

104.  To  whom  defense  available. 


CHAPTER  V. 


DUEESS. 


Sec. 

105.  General  rule  as  to  duress. 

106.  Equity  may  decree  cancellation. 

107.  What   does   not    constitute    du- 

ress. 

108.  Where    procured  from  one  un- 

der illegal  arrest  or  restraint. 

109.  By  abuse  of  legal  process. 

110.  Effect  of  threat  to  lawfully  in- 

voke legal  process. 

111.  Giving    of    paper    indorsed    by 

fear  of  violence. 


Sec. 

112.  Threatened    criminal    prosecu- 

tion and  imprisonment  as  in- 
ducing. 

113.  Availability  of  as  between  par- 

ties. 

114.  Same  subject  —  Against   subse- 

quent parties. 

115.  Same  subject — Parties  with  no- 

tice. 


TABLE    OF    CONTENTS 


IX 


CHAPTER  VI. 


FEAUD  AND  FRAUDULENT   KEPEESENTATIONS. 


Sec. 

116.  Rule  as  to   fraud  and   fraudu- 

lent representations  —  Gener- 
ally. 

117.  What    constitutes    a    misrepre- 

sentation which  is  a  defense. 

118.  Fraudulent  concealment. 

119.  As  against  bona  fide  holder — 

Generally. 

120.  Same  subject— Rule  illustrated. 

121.  Same  subject — Fraud  of  partic- 

ular persons. 

122.  False  representations  as  to  con- 

sideration. 

123.  Same  subject — Bona  fide  holder. 

124.  Certified  check— Effect  of  fraud 

— Bona  fide  holder. 


Sec. 

125.  Paper  in  fraud  of  creditors. 

126.  Fraudulent  procurement  of  in- 

dorsement. 

127.  Fraud  as  to  amount. 

128.  Fraud  as  to  surety. 

129.  Same  subject — Bona  fide  hold- 

ers. 

130.  Fraudulent  transfer. 

131.  Same  subject— By  partner. 

132.  Same     subject  —  By     adminis- 

trator. 

133.  Availability     of     defense- 

Maker. 

134.  Same  subject— Other  parties. 


CHAPTER  VII. 

ALTERATIONS    OF    PAPER. 

Subdivision  I.      General   rules §§  135-150 

Subdivision  II.     Particular  alterations §§  151-182 

Subdivision  I. 

GENERAL   RULES. 


Sec. 

135.  Availability  of  alterations  as  a 

defense  generally. 

136.  Rule  as  to  hona  fide  holders. 

137.  Immaterial  alterations. 

138.  Alteration    by    co-m  a k  e  r    or 

drawer. 

139.  Alteration    by    maker    without 

surety's  consent. 

140.  Alteration    by    payee   or   subse- 

quent   holder  —  Effect    on 
rights  of  surety. 


Sec. 

141.  Alteration  by  agent  of  holder. 

142.  Alteration  by  third  party. 

143.  Alteration  by  mistake  or  acci- 

dent. 

144.  Filling    in    blanks — Instrument 

incomplete — Rule  as  to. 

145.  Same    subject  —  Application    of 

rule. 

146.  Same     subject— Where     instru- 

ment complete. 


TABLE   OF    CONTENTS. 


Sec. 
147. 

148. 


Defense  to  action  on  original 
consideration  or  debt. 

Alteration  not  fraudulent — To 
make  paper  conform  to  orig- 
inal agreement — May  recover 
on  original  consideration. 


Sec. 

149.  Effect  of  consent  or  ratification, 

150.  Same    subject  —  "What    consti- 

tutes. 


Subdivision  II. 


PARTICULAR   ALTERATIONS. 


Sec. 
151. 
152. 
153. 

154. 
155. 

156. 

157. 

158. 
159. 

160. 

161. 


162. 
163. 

164. 

165. 
166. 


Sec. 
Alteration  of  number.  168. 

Alteration  of  date.  169. 

Same    subject — To    conform   to    170. 
actual  date.  171. 

Alteration  of  time  of  payment. 
Same    subject — Application    of    172. 

rule. 
Alteration   in   statement  as   to    173. 

consideration. 
Alteration  of  form  of  promise.       174. 
Alteration  of  name  of  payee. 
Same   subject — To  correct  mis-    175. 

take. 
Alteration     as     to     negotiable    176. 

words. 
Substitution     or     addition     of    177. 

words       "or       order" — "Or 

bearer."  178. 

Alteration  of  place  of  payment.     179. 
Same  subject — By  agent  before 

delivery.  180. 

Designation    of    place    of    pay-    181. 

ment  where  none  specified. 
Alteration  of  amount.  182. 

Same  subject — Where  there  are 

marginal  figures.  167. 


Alteration  of  interest  clause. 

Same  subject — Rate  of  interest. 

Addition  of  an  interest  clause. 

Alteration  of  conditions  or  stip- 
ulations. 

Erasure  or  alteration  of  mak- 
er's signature. 

Same  subject — When  alteration 
not  a  defense. 

Rule  where  signatures  are  add- 
ed. 

Same  subject — When  not  a  de- 
fense. 

Alteration  or  destruction  of 
seal. 

Alteration,  erasure  or  addition 
of  names  of  witnesses. 

Stamping  of  note. 

Addition  or  erasure  of  memo- 
randa. 

Alteration  of  indorsement. 

Erasure  or  alteration  of  name 
of  surety. 

Addition  of  name  as  surety  or 
guarantor. 

Alteration  in  medium  of  pay- 
ment. 


TABLE    OF    CONTENTS. 


XI 


Sec. 


CHAPTER  VIII. 


CONSIDERATION   GENERALLY. 


Sec. 


i  183.  Presumption    as    to    considera-  156.  "Value     received"  —  Considera- 
tion— Rules.  tion    not    expressed  —  Rebut- 

184.  Showing    real     consideration —  ting  presumption. 

Rebutting  presumption  as  to  187.  Showing    real     consideration — 
consideration.  To  what  parties  rule  applies. 

185.  Same   subject — Matters    dehors 

contract. 


CHAPTER  IX. 


ADEQUACY   OR  SUFFICIENCY   OF   CONSIDERATION. 


Sec. 

188.  Inadequate  or   insufficient  con- 

sideration distinguished  from 
want  or  failure  of  considera- 
tion. 

189.  Sufficient  if  consideration  is  a 

benefit  or  injury. 

190.  Distinction     between     valuable 

consideration  other  than 
money  and  a  money  consid- 
eration. 

191.  Slight    consideration — Purchas- 

ing paper  at  undervalue. 


Sec. 

192.  Adequacy  in  value  unnecessary. 

193.  Inadequacy   or    insufficiency   of 

consideration — Rule  as  to  in- 
quiry into — Fraud. 

194.  Sufficient     consideration — Illus- 

trations. 

195.  Compromise,    settlement  or   re- 

linquishment note. 

196.  Same  subject — Unfounded  or  il- 

legal claim. 

197.  Compromise  of  forgery  claim. 


CHAPTER  X. 


WANT   OR   FAILURE   OF    CONSIDERATION. 


Sec. 

198.  Total   want   of   consideration — 

Defense  between    original   or 
immediate  parties. 

199.  Upon    acceptance — Between    ac- 

ceptor   and    other    parties — 
"Want  of  consideration. 


Sec. 

200.  Indorser    and    indorsee    as   im- 

mediate   parties — W  ant    of 
consideration. 

201.  Partial  want  of  consideration. 

202.  Total  failure  of  consideration — 

Defense  between   original   or 
immediate  parties. 


Xll 


TABLE   OF    CONTENTS. 


Sec.  Sec. 

203.  Upon   acceptance — Between   ac-    220. 

ceptor    and    other    parties — 
Failure  of  consideration. 

204.  Indorser    and    indorsee   as   im- 

mediate   parties — Failure    of    221. 
consideration. 

205.  Consideration     acknowledged —    222. 

Failure  of  consideration. 

206.  Non-negotiable    paper    made   at     223. 

request    of    another — Failure 

of  consideration.  224. 

207.  Partial  failure  of  consideration 

— Defense — Between   original    225. 
parties. 

208.  Same    subject— Review    of    de-    226. 

cisions. 

209.  Where    number    of    notes    are 

given — Partial  failure  of  con-     227. 
sideration. 

210.  Rescinding  contract  and  restor-    228. 

ing     consideration  —  General 
rule.  229. 

211.  Same     subject — Exceptions     to 

and  qualifications  of  rule. 

212.  As  to  guarantors.  230. 

213.  As  to  sureties.  231. 

214.  As  to  donor  and  donee.  232. 

215.  As  to  donor  and  donee — Nego- 

tiable check  on  bank. 

216.  Joint    and    joint    and    several    233. 

notes. 

217.  Notes  under  seal.  234. 

218.  Notes    under    seal — Gratuitous    235. 

promise  to  pay. 

219.  Renewal  notes  generally. 


Renewal  notes — Waiver  by 
principal  precluding  defense 
of  failure  of  consideration — 
Surety's  defense. 

Renewal  notes — Implied  or  ex- 
pressed consideration. 

Renewal  notes — Consideration 
for  original  paper. 

Renewal  notes — Discount  be- 
fore maturity. 

Notes  or  checks  given  for  other 
notes  or  bills  purchased. 

Drafts  accepted  to  extinguish 
other  drafts. 

When  only  part  of  considera- 
tion is  good  —  Action  by 
payee. 

Defense  to  one  note  in  action 
on  another. 

Note  given  for  political  assess- 
ments. 

Where  paper  sued  on  is  impos- 
sible to  perform  in  reason- 
able time. 

As  to  agents. 

As  to  trustees  or  committees. 

As  to  holders  of  municipal  war- 
rants and  coupons  attached 
to  bonds. 

Third  persons  as  holders  of 
notes. 

Note  of  third  person. 

Note  given  to  promote  peace  be- 
tween husband  and  wife — 
Note  of  stranger. 


CHAPTEE  XI. 


WANT   OR   FAILURE   OF    CONSIDERATION    CONTINUED. 


Sec. 

236. 

237. 
238. 


Assignees — Consideration  of  as- 
signment. 

Assignees — Want  or  failure  of 
consideration. 

Bona  fide  indorsees  or  holders 
—Rule, 


Sec. 

239.  Transfer  after  maturity. 

240.  Rule  as  to  payment  of  value; 

its  basis  and  qualifications — 
Bona  fide  indorsees  or  hold- 
ers. 


TABLE   OF    CONTENTS. 


Xlll 


Sec.  Sec. 

241.  Rule   as   to   value   continued —    260. 

Payment  of  pre-existing  debt 

— Bona  fide  indorsees  or  hold-    261. 

ers.  262. 

242.  Same  subject — Decisions  contra 

or  qualifications.  263. 

243.  Bank  s — Distinctions  between 

crediting  amount-  of  note  on     264. 
undrawn    deposit  and   credit 
on   pre-existing   indebtedness    265. 
— Bona  fide  holder. 

244.  Parting  with  value — Surrender    266. 

by  creditor  of  debtor's  own 
not  e — Receiving  negotiable 
note  of  third  person.  267. 

245.  Joint  note  of  husband  and  wife 

— Outlawed  debt  of  husband 
— Indorsee  for  past  indebted- 
ness— Indorsement   by   presi-     268. 
dent  payee  to  bank. 

246.  Rule  as  to  value — Collateral  se- 

curity for  pre-existing  debt —     269. 
Bona  fide  indorsees  or  hold- 
ers. 

247.  Same  subject — Particular  deci-    270. 

sions. 

248.  Same    subject — Specific    excep-    271. 

tions. 

249.  Security  for  pre-existing  debt —     272. 

Additional  consideration. 

250.  Intermediary    party — H  older    273. 

from  bona  fide  holder.  274. 

251.  Paper  issued  by   corporation — 

Bona  fide  holder.  275. 

252.  Want   or   failure   of   considera-     276. 

tion  subsequent  to  transfer —     277. 
Bona  fide  holder. 

253.  Suit  in  name  of  original  party     278. 

— Bona  fide  holder. 

254.  Lex  Fori.  279. 

255.  Indorsement  for  transfer  mere- 

ly or  to  pass  title. 

256.  Same  subject — Instances.  280. 

257.  Purchase-price    notes — Original 

I>arties.  281. 

258.  Same  subject — acceptor. 

259.  Same  subject — Guarantors. 


Same  subject — Bona  fide  holder 

or  assignee. 
Effect  of  judgment — Assignees. 
Purchase-price  notes — Property 

useless  or  of  no  value. 
Vendor  or  seller  without  title — 

Loss  of  title. 
Purchase-price      notes — Land — 

Warranty. 
Purchase-price   notes — Personal 

property — Warranty. 
Where  property  for  which  note 
given   is   of   some   value — No 
failure  of  consideration. 
Rights   of   holder    where    prior 
indorsee  held  note  as  collat- 
eral security  and  for  continu- 
ing credit — Lien. 
Purchase-price   notes — In- 
stances in  general  of  want  or 
failure  of  consideration. 
Accommodation   paper — Consid- 
eration   as    between   original 
or  immediate  parties. 
Bona  fide  holders — Assignees — 

Notice  or  knowledge. 
Same   subject — Particular  deci- 
sions. 
Accommodation   acceptor — Gen- 
eral rules  and  illustrations. 
Same  subject — Continued. 
Same     subject     continued — Ex- 
ceptions and  qualifications. 
Bill  payable  to  order. 
Taking  before  acceptance. 
Accommodation     p  a  p  e  r — Con- 
flict of  laws— Acceptance. 
Accommodation    check — B  a  n  k 

check. 
Accommodation         indorsers  — 
Availability      of      defenses- 
General  rule. 
Same    subject — Application    of 

rule. 
Same  subject — Qualifications  of 
and  exceptions  to  rule. 


XIV 


TABLE   OF   CONTENTS. 


Sec.  Sec. 

282.  Bona  fide  holder — Accommoda-     285. 

tion  paper  taken  after  matur- 
ity— Want  of  consideration.      286. 

283.  Accommodation    of    other    par- 

ties in  general.  287. 

284.  Payment  of  pre-existing  debt — 

Bona  fide  holder  against  ac- 
commodation maker. 


Same  subject — Particular  rul- 
ings and  opinions. 

Same  subject — Bona  fide  in- 
dorsee against  indorser. 

Same  subject — Drafts  and  bills 
— Payee — Accommodation  ac- 
ceptor. 


CHAPTEE  XII. 


ILLEGAL  OR  IMMORAL   CONSIDERATION. 


Sec 

288.  Illegal    consideration — Original 

parties — Bona  fide  holders. 

289.  Same   subject — Exceptions   and 

qualifications    —    Notice    — 
Knowledge — Fraud,  etc. 

290.  Illegal     considerations  —  Effect 

on  surety. 

291.  Paper   given   for   consideration 

in  violation  of  statute. 

292.  Same  subject. 

293.  Where    constitution    and    laws 

violated — Enemy  aided. 

294.  Illegal  sales. 


Sec. 

295.  Compounding  criminal  acts. 

296.  Where  consideration  is   money 

or  property  won  at  gambling 
device. 

297.  Same     subject — Statutory    pro- 

hibitions. 

298.  Same     subject — Qualifications 

of  rule — Other  instances. 

299.  Illegal  and  immoral  considera- 

tions. 

300.  Same  subject — Decisions. 

301.  Same    subject — Decisions    con- 

tinued. 


CHAPTER  XIII. 


USURY. 


Sec.  Sec. 

302.  Usury — Generally.  304.  Maker     and     transferee  —  Dis- 

303.  Bona  fide  holders— Paper  based  count  and  transfer. 

on  usurious  contract  between     305.  Renewal    bill    or    note — Exten- 
original  parties.  sions. 

306.  Corporations. 


TABLE   OF   CONTENTS. 


XT 


CHAPTEK  XIV. 


EFFECT   OF    CONDITIONS    OR  AGREEMENTS. 


Sec.  Sec. 

307.  Collateral  conditions  or  agree-    327. 

ments — General  rules. 

308.  Same  subject— Illustrations.  328. 

309.  Evidence    explanatory    of    con- 

tract. 329. 

310.  When    note    and     contempora- 

neous agreement  are  mutual    330. 
and  dependent.  331. 

311.  Conditions      precedent — Gener-    332. 

ally.  333. 

312.  Conditional  delivery — Maker  to 

payee — Effect  of.  334. 

313.  Same  subject  continued — Appli-    335. 

cation  of  rule. 

314.  Same    subject — Effect    upon    336. 

third  parties — Bona  fide  hold- 
ers. 337. 

315.  Condition  that  other  signatures     338. 

be  procured. 

316.  Same  subject  continued. 

317.  Delivery  in  escrow.  339. 

318.  Same    subject — Payee    without    340. 

notice. 

319.  Same    subject — W  h  e  re    paper     341. 

taken    as    security    for    ante- 
cedent debt. 

320.  That  instrument  is  to  be  void     342. 

or  payable  on  contingency. 

321.  Same     subject — Happening     of    343. 

contingency  prevented  by  act    344. 
of  maker.  345. 

322.  Conditions   affecting  considera- 

tion. 346, 

323.  Same    subject — Application    of 

rule  generally. 

324.  Same  subject — When  not  a  de-     347. 

fense.  348. 

325.  Same    s  u  b  j  e  c  t — Performance 

prevented     by     maker — non-    349. 
performance     prevented     by 
maker.  350. 

326.  Same    subject — Agreement    not 

to  do  certain  acts. 


Same  subject  —  Purchase-price 
notes. 

Same  subject  —  Purchase-price 
notes — Subsequent  holder. 

Same  subject — Agreement  to 
render  services  or  labor. 

Note  not  to  be  negotiated. 

As  to  place  of  payment. 

As  to  amount. 

As  to  mode  or  manner  of  pay- 
ment. 

Same  subject  continued. 

Same  subject — Note  to  admin- 
istrator. 

Executed  agreement  as  a  de- 
fense. 

Agreements  not  to  sue. 

Same  subject — Where  simulta- 
neous or  subsequent  and  for 
a  limited  time. 

As  to  time  of  payment. 

Subsequent  agreements  extend- 
ing time. 

Same  subject — What  essential 
to  render  such  an  agreement 
a  defense. 

Agreements  to  release  from  or 
limit  liability. 

Effect  of  conditions  in  note. 

Same  subject  continued. 

Same  subject — Substantial  per- 
formance of  condition. 

Same  subject — Condition  that 
contract  be  completed  to  ac- 
ceptance of  agent. 

Conditional   acceptance. 

Conditional  or  restricted  in- 
dorsement. 

Indorsement  of  condition  to  en- 
force which  would  be  illegal. 

Waiver  of  conditions. 


XVI 


TABLE    OF    CONTEXTS. 


CHAPTER  XV. 


COLLATERAL   SECURITY. 


Sec.  -    Sec. 

351.  Original  patries.  367. 

352.  Surety — Guaranty — Indemnity. 

353.  Accommodation     paper — Maker    368. 

— Bona  fide  holder. 

354.  Accommodation     paper  —  In- 

dorser — Bona  fide  holder. 

355.  Bills — Accommodation  acceptor.    369. 

356.  Form  of  assignment,  when  im- 

material— Bona  fide  holder. 

357.  When    note    not    collateral    se-    370. 

curity   but  independent  obli- 
gation. 

358.  Note  payable  to  order,  assigned    371. 

but  not  indorsed. 

359.  Contemporaneous      or      future    372. 

loans — Advances — Bona     fide 
holder.  373. 

360.  Same  subject — Instances. 

361.  Agreements  and  conditions. 

362.  Same  subject.  374. 

363.  Security    for   the    performance 

of  illegal  contract.  375. 

364.  Note    secured    by    mortgage — • 

Mortgagee    against    maker — 
Surety.  376. 

365.  Note   secured   by   mortgage   or 

other   instrument — Bona  fide    Zll. 
holder — Pledgee. 

366.  Same  subject.  378. 


Same  subject — Knowledge  or 
notice. 

Transferee  of  note  and  mort- 
gage— Payment  of  or  collat- 
eral security  for  pre-existing 
debt. 

Receiving  or  surrendering  col- 
lateral— Exhausting  collat- 
eral. 

Paper  given  or  indorsed  for 
specific  purpose  —  Principal 
and  agent. 

Defense  subsequent  to  indorse- 
ment— Bona  fide  holders. 

Transferee  after  maturity — 
Pledgee. 

Pledgor  and  pledgee — Laches, 
negligence  or  tortious  acts — 
Statute  of  limitations. 

Priority  of  transfer — Different 
notes. 

Renewals — Continuance  of  se- 
curity —  Extinguishment  of 
debt. 

Extent  of  recovery — Bona  fide 
holders. 

Same  subject — Collateral  for 
pre-existing  debt. 

Same  subject — Accommodation 
paper. 


CHAPTER  XYI. 


DIVERSION   AND   FRAUDULENT   TRANSFER. 


Sec. 
379. 
380. 


As  a  defense  generally. 

Where  paper  is  taken  in  ordi- 
nary course  of  business — 
Bona  fide  holders. 


Sec. 

381.  Same    subject — Evidence — Bur- 

den of  proof. 

382.  Same  subject — Transfer  in  vio- 

lation of  statute. 


TABLE    OF    CONTEXTS. 


XVH 


Sec. 
383. 

384. 
385. 

386. 


387. 


Accommodation     paper  —  Bona 

fide  holders. 

Same  subject  continued. 

Accommodation  paper  —  Other 
holders. 

Accommodation  paper — Where 
purpose  substantially  effected 
or  no  restrictions  imposed. 

Negotiation  of  accommodation 
paper  to  party  not  contem- 
plated. 


Sec. 

388.  Same  subject — Paper  to  be  dis- 

counted at  a  particular  bank. 

389.  Paper  to  be  discounted  at  par- 

ticular bank  continued — Rule 
illustrated. 

390.  Where    transferred    or    applied 

as  security  for  an  antecedent 
debt. 

391.  Same  subject  continued. 

392.  Diversion  of  proceeds  of  paper. 

393.  Effect  of  waiver. 


CHAPTER  XVII. 


LOST    OR   STOLEN   INSTRUMENTS. 


Sec. 

394.  Lost    or    stolen    instruments — ■ 

General  rules  and  principles. 

395.  Same    subject — Application     of 

rule. 

396.  Statutory  provision  as  to  holder 

in  due  course  construed. 

397.  Non-negotiable  paper. 


Sec. 

398.  Bank  and  treasury  notes. 

399.  City    or    county    certificates — 

Stolen  after  cancellation. 

400.  Action  under  statute  by  owner 

of  lost  instruments. 

401.  Evidence — Burden  of  proof. 


CHAPTER  XYIII. 


WANT   or    TITLE   OR   INTEREST. 


Sec 
402, 
403. 


Possession  as  evidence  of  title. 
Right  of  holder  or  owner  to  sue 
— Real  party  in  interest. 

404.  Right    to    recover    generally — 

Legal  and  equitable  title. 

405.  Payees. 

406.  Indorsee  against  indorser. 

407.  Assignee. 

408.  Agency. 

409.  Recovery   for  benefit  of  holder 

— Beneficial  interest. 


Sec. 

410.  Transfer    of    title    or    interest 

after  suit  commenced. 

411.  Character  of  title  or  interest. 

412.  Void  or  voidable  title  or  trans- 

fer. 

413.  Checks. 

414.  Bill  of  lading. 

415.  To  protect  maker  or  let  in  his 

defense.  , 

416.  Same  subject. 

417.  Denial  of  ownership  or  title. 

418.  Same  subject. 


Joyce  Defenses — ii 


XVlll 


TABLE   OF    CONTENTS. 


CHAPTER  XIX. 


PURCHASERS   AFTER   MATURITY. 


Sec. 
419. 
420. 
421. 
422. 

423. 

424. 

425. 
426. 
427. 
428. 


429. 


General  rule. 

Same  subject  continued. 

Application  of  rule — Generally. 

Application  of  rule  continued 
— Set-off  and  recoupment. 

Where  series  of  notes  mature 
on  failure  to  pay  any  one. 

Where  payable  on  default  in 
payment  of  interest. 

Application  to  particular  paper. 

Same  subject — Coupon  bonds. 

Certificate  of  deposit. 

Where  transferred  before  but 
not  indorsed  until  after  ma- 
turity. 

Non-negotiable  note. 


Sec. 

430.  Effect  of  statute  providing  that 

suit    by    assignee     shall     be 
without  prejudice. 

431.  Limitations    of    rule — In    gen- 

eral. 

432.  Pro  tanto  recovery. 

433.  Purchaser      from      bona      fide 

holder — General  rule. 

434.  Same    subject — Application     of 

rule. 

435.  Demand  paper. 

436.  Defenses  and  equities  between 

maker  and  indorsee  or  inter- 
mediate holder. 

437.  Secret  equity  in  favor  of  entire 

stranger. 


CHAPTEE  XX. 


BONA   FIDE    HOLDERS    AND    RIGHTS    ON    TRANSFER. 


Sec. 

438.  Bona  fide  holders — Preliminary 

statement. 

439.  Bona  fide  holders — Rule. 

440.  Essentials  of  rule. 

441.  Exceptions  to  and  qualifications 

of  rule — Generally. 

442.  Bona    fide    holder    generally — 

Decisions. 

443.  Certified     bank     checks  —  Dis- 

counting paper. 

444.  Notes  under  seal. 

445.  Equities  generally. 

446.  Holder,   transferee   or  assignee 

— Non-negotiable  paper  — 
Equities  and  defenses. 

447.' Defenses  against  assignees. 

448.  Assignee — Equities  —  Construc- 
tion and  essentials  of  rule — 
Generally. 


Sec. 

449.  Assignee — Negation    and    quali- 

fications of  rule. 

450.  Assignee    of    void    note  —  For- 

bearance to  sue. 

451.  So-called       assignments  —  Not 

subject  to  equities. 

452.  Assignment   by    parol — Suit   in 

own  name — Equities. 

453.  Suit   for  use   or   benefit  of   as- 

signee. 

454.  Subsequent  defenses   and   equi- 

ties. 

455.  Note  payable  to  order  or  bearer. 

456.  Transferee      without      indorse- 

ment. 

457.  Agents  and  trustees. 

458.  Agent's  unauthorized  acts. 

459.  Corporate  certificates  of  indebt- 

edness issued  in  restraint  of 
trade — Anti-trust  law. 


TABLE    OF    COXTEXTS. 


XIX 


Sec. 

460.  Guarantor — Guaranty. 

461.  Same  subject. 

462.  Pledge     of     note     by     holder — 

Pledgee's  rights. 

463.  Note  payable  to  order  or  bearer. 


Sec. 

464.  Under  statutes  and   codes — No- 

tice or  knowledge — Bad  faith. 

465.  Same  subject. 

466.  Joint  and  several  notes. 


CHAPTER  XXL 


BONA   FIDE    HOLDERS   AXD   EIGHTS    OX    TRAXSFER   COXTINUED. 


Sec. 

467.  Overdue  paper. 

468.  Overdue  paper — Default  in  pay- 

ment of  interest. 

469.  Overdue  paper — Demand  notes. 

470.  Delivery    of  paper  to    imposter 

or  wrong  party — Liability  to 
drawee  or  bona  fide  holder. 

471.  Application    by    bank    of    pro- 

ceeds to  credit  of  depositor. 

472.  Notice     or     knowledge — Gener- 

ally. 

473.  Notice    or    knowledge — Con- 

tinued.   . 

474.  Notice    or   knowledge — Matters 

apparent  from  the  paper   it- 
self. 

475.  Notice      or      knowledge  —  Sus- 

picious circumstances — Gross 
negligence — Bad  faith. 

476.  Same  subject — Decisions. 


Sec. 

477. 

478. 

479. 
480. 
481. 

482. 

483. 
484. 
485. 
486. 
487. 


489. 


Same  subject  —  Rule  in  Ver- 
mont. 

Indorsement  subsequent  to  no- 
tice. 

Notice — Fraud. 

Notice — Fraudulent  alteration. 

Erasures — Forgery  —  Notice  — 
Negligence — Recovery. 

Knowledge — Purchaser  of  mar- 
ried woman's  note. 

Notice — Accommodation    paper. 

Notice — Notes  of  a  series. 

Notice — Corporation — Agency. 

Same  subject. 

Corporation  indorsement  —  Ac- 
commodation paper. 

Notice — Purchaser  of  bonds. 

Transferee  of  bona  fide  holder 
— Notice. 


CHAPTER  XXII. 


WANT   OF    PRESENTMENT — PRESENTMENT   FOR   ACCEPTANCE. 


Sec. 
490. 


491. 


When     presentment     must     be 

made — Fixing     maturity     of 

instrument. 
Agreement  as  to  acceptance  or 

presentment — Want  of  funds 

— Promise  to  accept. 


Sec. 

492.  Acceptance    not   refused — Time 

desired — Want  of  funds. 

493.  Presentment    after    refusal    to 

accept. 

494.  When      presentment     unneces- 

sary. 


XX 


TABLE   OF    CONTEXTS. 


Sec. 

495.  Effect  of  presentment  made  un- 

necessarily— Presentment  be- 
fore due. 

496.  Release  of  drawer  and  indorser 

— Presentment  or  negotiation 
in  reasonable  time. 


Sec. 

497.  Presentment    how    made  —  By 

whom. 

498.  Same  subject — Time  and  place. 

499.  Same  subject — To  whom. 

500.  Acceptance  of  order  on  commit- 

tee. 

501.  Where  presentment  is  excused. 


CHAPTER  XXIII. 


WANT    OF   PRESENTMENT    CONTINUED PRESENTMENT    FOR   PAYMENT. 


Sec.  Sec. 

502.  Want  of  demand   on   principal    512. 

debtor  —  When     presentment 
necessary    to    charge    drawer     513. 
and  indorsers. 

503.  Same  subject  continued — Agent 

—^Acceptor — Instances.  514. 

504.  Sureties  and    guarantors — Par-    515. 

ties     primarily     liable  —  De-     516. 
mand. 

505.  Time     of     presentment     where    517. 

note  is  not  and  is  payable  on     518. 
demand^Reasonable   time. 

506.  Same  subject  continued. 

507.  Same     subject — Notes     payable    519. 

with  or  without  interest. 

508.  Demand  note  and  demand  note     520. 

bearing  interest,  distinctions 
abrogated     by     statute — Pre- 
sentment—  Reasonable    time    521. 
— Question   of   law  or   fact — 
Pleading — Burden  of  proof.        522. 

509.  Time    of   maturity — Sunday   or 

holiday — Saturday. 

510.  Same  subject  continued.  523. 

511.  Sufficiency     of     presentment —     524. 

By  whom  made — Time  when 
made.  525. 


Sufficiency  of  demand — Bring- 
ing suit. 

Sufficiency  of  presentment — Ex- 
hibition and  delivery  up  of 
instrument. 

Place  of  presentment. 

Same  subject  continued. 

Presentment — Instrument  pay- 
able at  bank. 

Same  subject  continued. 

Same  subject  continued  —  In- 
solvency or  suspension  of 
bank. 

Presentment  to  whom — Person 
primarily  liable  dead. 

Same  subject — Persons  prima- 
rily Uable — Partners  —  Joint 
debtors. 

Excuses  for  delay  in  present- 
ment. 

Excuses  —  When  presentment 
dispensed  with — Drawer — In- 
dorser. 

Same  subject  continued. 

Waiver  of  presentment  and  de- 
mand. 

Same  subject  continued. 


TABLE    OF    COXTEXTS. 


2X1 


CHAPTER  XXIV. 


PEOTEST   AND    WANT   OF   PROTEST. 


Sec. 

526.  Protest  defined. 

527.  In  what  cases  protest  necessary. 

528.  In  what  cases  protest  unnecesr 

sary. 

529.  Same  subject  continued. 

530.  How  made — Form,  contents  and 

sufficiency  of. 

531.  Same  subject— Signature. 

532.  Same    subject — Instances — Cer- 

tificate. 

533.  By  whom  made. 

534.  When  to  be  made. 

535.  Where  made. 


Sec, 

536.  When  protest  dispensed  with — 

Excuses. 

537.  Waiver  of  protest  generally. 

538.  Same  subject  continued. 

539.  Same  subject  continued — What 

is  included. 

540.  Same   subject   continued — Deci- 

sions. 

541.  Same  subject — Parties. 

542.  Certificate      of      protest  —  Evi- 

dence. 

543.  Same  subject. 


CHAPTER  XXV. 


WANT   OF   NOTICE    OF    PROTEST   AND   DISHONOR. 


Sec. 

544.  To    whom    notice    of    dishonor 

must  be  given — Discharge  of 
drawer  or  indorser. 

545.  Same  subject. 

546.  Notice    to    all    other    parties. — 

Necessary  after  non-accept- 
ance at  holder's  election,  not- 
withstanding subsequent  ac- 
ceptance. 

547.  To  whom  notice  may  be  given. 

548.  Same    subject — Notice    of    pro- 

test. 

549.  By  whom  given. 

550.  Effect   of   notice   given   on   be- 

half of  holder  or  by  party  en- 
titled to  give  notice. 

551.  When    notice    sufficient — Form 

of  notice — Notice  personally 
or  by  mail. 

552.  Form,  contents  and  sufficiency 

of  notice,  continued. 


Sec. 

553.  Manner  or  mode — Oral,  written, 

and  personal  notice. 

554.  Same  subject — Notice  by  mail. 

555.  Same     subject — Sufficiency     of 

address  and  mailing. 

556.  Same  subject — What  is  includ- 

ed in  the  term  mailing. 

557.  Same  subject — Mailing  notice — • 

Usage  or  custom. 

558.  Same  subject — Mailing  notice — 

When    sufficient    and    insuffi- 
cient— Instances. 

559.  To  whom  notice  given — Where 

party  dead. 

560.  Notice  to  partners. 

561.  Notice  to  persons  jointly  liable, 

562.  Notice  to  bankrupt. 

563.  Time  within  which  notice  must 

be  given. 

564.  Same    subject    continued — Dili- 

gence— Reasonable  time. 


XXll 


TABLE   OF    CONTENTS, 


Sec. 

565.  Same     subject     continued — 

Where  parties  reside  in  same 
place. 

566.  Same     subject     continued — 

Where  parties  reside  in  dif- 
ferent places. 

567.  Time     of     notice  —  Subsequent 

and  antecedent  parties. 

568.  Same   subject — Notice   received 

on  Saturday — Form  of  notice 
sent  by  last  indorser — Plead- 
ing. 


Sec. 
569. 

570. 


571. 

572. 


573, 


Where  notice  must  be  sent. 

When  notice  is  dispensed  with 
— Drawer  —  Indorser  —  Ex- 
cuses. 

Same  subject. 

Delay  in  giving  notice — Ex- 
cuses— Circumstances  beyond 
holder's  control. 

Waiver  of  notice. 


CHAPTER  XXVI. 


CHECKS. 


Sec 

574.  Presentment — Reasonable   time 

— Diligence. 

575.  Same  subject  continued. 

576.  Same    subject    continued — Mail 

— Collection  through  bank. 

577.  When  presentment  is  made. 

578.  Substituted    check  —  Present- 

ment— Want  of  diligence. 

579.  Substituted      presentment      by 

copy  or  description. 

580.  Substituted   checks — Local  cus- 

tom of  banks. 

581.  Effect    of    certification — Opera- 

tion of  check  as  assignment 
or  lien. 


Sec 
582. 


Necessary  that  drawer  sustain 
actual  loss  or  injury  from 
laches  in  presentment. 

Where  drawee  becomes  insol- 
vent or  bankrupt — Collection 
through  bank, 

584.  Surety. 

585.  Indorser. 
Reasonable     expectation      that 

check  will  be  honored — Want 
of  funds. 

Protest. 

Notice  of  non-payment. 
589.  Waiver  of  presentment  for  pay- 
ment. 


583. 


586. 


587. 
588. 


CHAPTER  XXYII. 

SET-OFF,   RECOUPMENT   AND   COUNTERCLAIM. 

Subdivision  I,      General  rules  as  to. 

Subdivision  II.     Availability  in   respect  to  particular  parties  and 
holders  other  than  maker  or  drawer. 

Subdivision  I. 

GENERAL   RULES   AS    TO, 


Sec. 

590.  What  law  governs. 

591.  What  essential  to  allowance  of 

a  set-off. 


Sec. 

592.  Right  to  set  off — Must  have 
been  acquired  prior  to  com- 
mencement of  suit. 


TABLE    OF    CONTENTS. 


XXlll 


Sec.  Sec. 

593.  Where    claim    or    demand    ac-    604. 

quired    subsequent    to    trans^     605. 
fer. 

594.  Where   claimed   set-off  was  ac-     606. 

quired  after  notice  of  assign-     607. 
ment. 

595.  A  mere  contingent   liability  is     608. 

not  available. 

596.  What  may  be  set  off  generally     609. 

— Particular    claims    or    de- 
mands. 610. 

597.  Set-off  of  damages  recoverable 

in  an  action  of  tort.  611. 

598.  Same     subject     continued — Ap- 

plication of  rule.  612. 

599.  Damages   arising  ex   contractu     613. 

and  under  same  contract. 

600.  Damages  arising   ex  contractu    614. 

but  under  different  contract. 

601.  Damages    for    breach    of    war-     615. 

ranty  or  covenant. 

602.  Same  subject — In  action  by  an     616. 

innocent  holder. 

603.  Money  paid  to  clear  land  of  in-    617. 

cumbrance. 


Of  bank  deposits — Rule  as  to. 

In  action  by  depositor  to  re- 
cover bank  deposit. 

Of  bill  or  note. 

Same  subject  —  Essentials  to 
availability. 

Same  subject  —  Essentials  to 
availability  continued. 

Same  subject — Where  a  fraud 
on  plaintiff. 

Same  subject — As  affected  by 
statutes  or  laches. 

Same  subject — Want  of  title  to 
notes  will  preclude. 

Of  bills  or  notes  of  bank. 

Where  collateral  has  been 
given. 

Usurious  interest — Rule  as  to 
recoupment  of. 

Same  subject — Right  as  affect- 
ed by  federal  statutes. 

Right  of  set-off  generally  as  af- 
fected by  statutes. 

Waiver  of  right  to  set  off. 


Subdivision  II. 

AVAILABILITY  IN"  RESPECT  TO  PARTICULAR  PARTIES  AND  HOLDERS  OTHER 
THAN   MAKER    OR   DRAWER.     . 


Sec. 

618.  Availability  in  respect  to  par- 

ties generally. 

619.  Acceptor. 

620.  Administrators  and  executors. 

621.  Agents  and  brokers. 

622.  Same  subject — Collecting  banks. 

623.  Assignees  and  indorsees — What 

available  generally. 

624.  Same   subject — What    available 

generally  continued. 

625.  Same  subject — Statute  as  to  set- 

off against  indorsees. 

626.  Bankrupts  and  insolvents. 

627.  Bona  fide  purchasers — General 

rule  as  to. 


Sec. 

628.  Husband  and  wife. 

629.  Joint  creditors  and  debtors. 

630.  Same     subject  —  Where     party 

sues   in   his   sole   right — Set- 
off of  joint  liability. 

631.  Same  subject — Right  as  affect- 

ed by  statute. 

632.  Same     subject — Principal     and 

surety. 

633.  Same    subject — Joint   and    sev- 

eral note. 

634.  Partners. 

635.  Purchasers  after  maturity. 

636.  Same  subject  continued. 


XXIV 


TABLE   OF   CONTENTS. 


Sec. 

637.  Same     subject— Set-off     arising 

out  of  other  transactions. 

638.  State  — No      right      of      set-off 

against. 


Sec. 

639.  Sureties. 

640.  Same   subject — Set-off   of 

ages  due  to  principal. 


dam- 


CHAPTER  XXVIII. 


WAIVER  AND   ESTOPPEL. 


Sec. 
641. 
642. 

643. 

644. 
645. 
646. 
647. 
648. 
649. 
650. 
651. 

652. 


653. 


654. 


655. 

656. 
657. 
658. 

659. 
660, 


Sec. 

By  acceptance — Generally.  661. 

Same   subject — Certification  by    662. 
bank  of  check.  663. 

Same     subject  —  Payment     by 
bank  of  check.  664. 

By  signature  and  execution.  665. 

By  indorsement.  666. 

By  recitals. 

Recitals  in  bonds. 

By  bill  or  note.  667. 

By  giving  of  new  note. 

By  new  promise.  668. 

By    new    promise — Limitations 
of  rule. 

By  giving  paper  to  cover  short-     669. 
age  in  accounts  or  to  deceive 
state  officials.  670. 

By    representations    in    connec- 
tion    with     transfer  —  What     671. 
operates  as  an  estoppel. 

By    representations    in    connec-     672. 
tion  with  transfer  continued 
— When  an  estoppel  does  not 
arise.  673. 

Effect  of  representations  subse- 
quent to  transfer.  674. 

By  admission  or  declaration. 

Same  subject  continued.  675. 

By  admissions   or   declarations 
continued.  676. 

By  acts,  conduct  or  words.  677. 

Same  subject — Corporate  trans- 
actions. 


By  laches. 

By  retaining  consideration. 

By  another  action  or  proceed- 
ing. 

As  to  consideration  in  general. 

Where  consideration  illegal. 

Signing  for  accommodation — 
Want  or  failure  of  considera- 
tion. 

By  receipt  of  benefits — Failure 
of  consideration. 

By  conduct,  representation  or 
promise — Want  or  failure  of 
consideration. 

By  knowledge  or  notice — Want 
or  failure  of  consideration. 

As  to  capacity  and  authority 
generally. 

Same  subject — Corporate  trans- 
actions. 

Same  subject  continued — Act  of 
public  or  corporate  official  in 
violation  of  statute. 

As  to  forgery  and  alteration — 
In  general. 

Same  subject — By  admission  of 
signature. 

Same  subject — Failure  to  give 
notice  of  forgery. 

Same  subject — As  to  checks. 

As  to  statute  of  limitations.' 


TABLE   OF    COXTEXTS. 


XXV 


CHAPTER  XXIX. 


DISOHARGB. 


Sec. 

678.  What  constitutes  a  discharge — 

Under  statute. 

679.  Same  subject — Maker. 

680.  Discharge  of  surety. 

681.  Discharge  of  guarantor. 

682.  Mortgage  security. 

683.  Sale  or  surrender  of  collateral, 

or  satisfaction  of  debt. 

684.  Agreement  and   condition — De- 

cisions generally. 

685.  Same  subject. 

686.  Payment   by   note  or  check  of 

or  by  order  on  third  person — 
Accord  and  satisfaction. 

687.  By  payment  of  other  indebted- 

ness. 

688.  By  bill,  note  or  check — Substi- 

tuted note — Renewal  note. 

689.  By  stock  or  bonds. 

690.  By     conveyance     of     land     or 

agreement  to  take  deed. 


Sec. 

691.  By  assignment,  transfer  or  sur- 

render of  property. 

692.  Siirrender    of    valid    notes    for 

forged  notes. 

693.  By  work,  labor  or  services  per- 

formed or  rendered. 

694.  Tender  of  payment. 

695.  Indorsements     of     payments — 

Receipts — Cancellation. 

696.  Whether    a    purchase    or    pay- 

ment. 

697.  Payment — By  whom. 

698.  Same  subject — To  whom. 

699.  Same  subject. 

700.  Renunciation  by  holder. 

701.  Right  of  party  who  discharges 

instrument. 

702.  Discharge — Miscellaneous    deci- 

sions. 


APPENDIX. 


Negotiable  Instrument  Law  of  New  York pp.  857-  901 

Bills  of  Exchange  Act PP-  902-  939 

Index   pp.  941-1091 


TABLE  OF  CASES. 


[References  are  to  Sections.'] 


Abat  V.  Gormley,  3  La.  238,  439 

Abbe  V.  Newton,  12  Conn.  20,        193 

V.  Root,    6    McLean    (U.   S.) 

106.  143 

Abbott  V.  Bailey,  213  Mass.    (6 

Pick.)    89,  43 

V.  Muir,  5  Ind.  444,  658 

V.  Rose,  62  Me.  194,     22,  144,  145 

V.  Winchester,  105  Mass.  115,  51 

Abel  V.  Burgett,  3  Blackf.  (Ind.) 

502,  2^8 

Abernathy  &  Pinegar  v.  Myer 
Bridges  Coffee  &  Spice  Co. 
(Ky.  C.  A.  1907),  100  S.  W. 
862,  598 

Aborn  v.  Pardon  Bosworth,  1  R. 

L  401,  527 

Abraham    v.    Mitchell,    112    Pa. 

St.  320,  283 

Abrams  v.  Bank,  31  La.  Ann.  61,  138 
Ackland  v.  Pearce,  2  Camp.  599,  303 
Acme  Co.  v.  Erne,  83  Kan.  858,  257 
Acme  Harvest  Co.  v.  Butterfield, 

12  S.  D.  91,  163 

Adair  v.  England,  58  Iowa  314,      162 

Adams  v  Adams,  25  Minn.  72,      288 

V.  Adams,  91  N.  Y.  381,  288 

V.  Ashman,  203  Pa.  St.  536,      116 

V.  Blancan,   6   Rob.    (N.   Y.) 

334,  307 

V.  Blethen,  66  Mo.  19,  451 

V.  Curry,  15  La.  Ann.  485,       213 
V.  De   Frehn,    27    Pa.    Super. 

Ct.  184,  680 

V.  Faircloth   (Tex.  Civ.  App. 
1906),  97  S.  W.  507, 

135,   140,  158 
V.  Johnson,   11   Ky.   L.   Rep. 

137,  329 

V.  Leland,  30  N.  Y.  309,  514 

V.  McGrew,  2  Ala.  675,  608 

V.  Nelson,  22  U.  C.  Q.  B.  199,    682 
V.  Otterback,  15  How.  (U.  S.) 

539,  534 

V.  Robinson,    69    Ga.    627, 

320,  449 
V,  Rowan,    8    Smedes    &    M. 

624,  289 

V.  Smith,  35  Me.  324,  314 


Adams     v.     Wilson,     12     Mete. 
(Mass.)   138,  320 

V.  Woodbridge,  3  Scam.   (111.) 

255,  296 

Adams  Bank  v.  Jones,  16  Pick. 

(Mass.)  574,  389 

Adle    V.    Metoyer,    1    La.    Ann. 

254,  ■  271,  340 

Adler    v.    Broadway    Bank,    30 

Misc.    (N.  Y.)    382,  73 

Aebi  V.  Bank  of  Evansville,  124 

Wis.  73,  525,  579,  585 

Aeby  v.  Rapelye,  1  Hill  (N.  Y.) 

9,  302,  303 

^tna  Nat.  Bank  v.  Fourth  Nat. 
Bank,  46  N.  Y.  82,  243,  581 

V.  Winchester,  43  Conn.  391, 

135,  165 
Agaman  Nat.  Bank  v.  Downing, 

169  Mass.  297,  688 

Agee  V.  Smith,  7  Wash.  471, 

503,  545 
Agnew  V.  Alden,  84  Ala.  502,  208 

V.  Bank.  2  Har.  &  G.  478,  511 

Agra   &   Masterman's   Bank,   In 

re,  L.  R.  2  Ch.  App.  391,  627 

Ahern  v.  Goodspeed,  9  Hun   (N. 

Y.)  263,  aff'd  72  N.  Y.  108,  653 
Aikens  v.  Wilson,  7  Idaho  12,  690 
Ainsworth     v.     Ainsworth,     24 

Miss.  145,  419 

Akers   v.    Demond,    103    Mass. 

318,  302 

Akin  V.  Jones,  93  Tenn.  353,         581 

Akshire  v.  Corey,  113  Ind.  484,     630 

Alabama  National  Bank  v.  Hal- 

sey,  109  Ala.  196.         119,  122,  288 

V.  Parker  &  Co.,  40  So.  987,     291 

V.  Rivers,  116  Ala.  1, 

525,   536,  537,   538,  573 
Albany  County  Bank  v.  People's 
Co-operative   Ice   Co.,   92   App. 
Div.    (N.  Y.)    47,  243 

Albany   Trust    Co.   v.   Frothing- 
ham,  99  N.  Y.   Supp.  343. 

555,  564,  570 
Albee  v.  Little.  5  N.  H.  277,  617 

Albertson   v.    Halloway,    16    Ga. 
377,  216 


XXVll 


XXVlll 


TABLE   OF   CASES. 


[References  are  to  Sections.'] 


Albertson  v.  Laughlin,   173  Pa. 

St.   525,  288 

Albietz  V.  Hellon,  37  Pa.  St.  367,  121 
Alcock  V.  Alcock,  3   Man.  &  G. 

268,  72 

Alden  v.  Parkhill,  18  Vt.  205,        465 
Alderson   v.    Langdale,   3    Barn. 

&  Ad.  660,  147,  154 

Aldine   Mfg.  Co.  v.  Warner,  96 

Ga.  370,  570 

Aldous  V.  Cornwall,  L.  R.  3  Q. 

B.  573,  155 

Aldrich    v.    Campbell,    4    Gray 

(Mass.)   284,  592 

V.  Grimes,  10  N.  H.  194,  64 

V.  Smith,  37  Mich.  468,    135,  158 

V.  Stockwell,  91  Mass.  45, 

262,  265,  460 
Alexander  v.  Birchfield,  1  Car.  & 
Marsh.  75,  576 

V.  Bouton,  55  Cal.  14,  34 

V.  Mackenzie,  6  C.  B.  766,  75 

V.  Parsons,  3  Lans.  333,  507 

V.  Pierce,  10  N.  H.  494,  112 

V.  Wilkes,    11    Lea    (Tenn.) 

221,  312,  315 

Alexander  &  Co.  v.   Springfield 

Bank,  2  Mete.  534,  355 

Alexandria    Sav.    Bank    v.    Mc- 
Veigh, 84  Va.  41,  569 
Alfred   v.   Watkins,   1   Code   R. 
N.   S.   343,  4 
V.  Watkins,  1  Edm.  Sel.  Cas. 

(N.  Y.)  369,  4 

Allaire  v.  Hartshorne,  21  N.  J. 

Law  665,  241,  369,  376 

Allan  V.  Eldred,  50  Wis.  132,  496 

Alleman   v.   Wheeler,   101   Ind. 

141,  645 

Allen  V.  Bank,  127  Pa.  St.  51,       125 
V.  Bank  of  United  States,  20 

N.  J.  L.  620,  208 

V.  Brown,  44  N.  Y.  228,  418 

V.  Chambers,  13  Wash.  327,     238 
V.  Deming,  14  N.  H.  133,  29 

V.  Dunn    (Neb.),    99    N.   W. 

680,  302,  366,  367 

V.  Freedman's  Savings  &  Trust 

Co.,  14  Fla.  418,         670,  671 
V.  Furbish,   4   Gray    (Mass.) 

504,  324,  328 

V.  Johnson,  13  Pa.  Co.  Ct.  218,   57 
V.  Kemble,    6    Moore  •  P.    C. 

314,  639 

T.  Kimball,  23  Pick.  (Mass.) 

473,  338 

y.  Long,    19    Ky.    Law   Rep. 

488,  57 

V.  McCreary,  101  Ala.  514,         232 


Allen    V.    McFadden,    20    N.   Y. 
Supp.   360,  294 

V.  Newberry,  8  Clarke  (Iowa) 

65,  410 

V.  O'Donald,  28  Fed.  17,  341 

V.  Pearce,  84  Ga.  606,  291 

V.  Rightmere,  20  Johns.  365,    504 
V.  Shackleton,    15    Ohio    St. 

145,  601 

V.  Suydam,  20  Wend.  321,         496 
V.  Thompson,    22    Ky.    Law 

Rep.  164,  342 

V.  West  Point  Min.  &  M.  Co., 

132  Ala.  292,  80,  86 

V.  Woodard,  125  Mass.  400,  390 
Aller  V.  Aller,  40  N.  J.  L.  446,  218 
Allison  V.  Barrett,  16  Iowa  278,  472 
Allum  V.  Perry,  68  Me.  232,  654 

Alpena  National  Bank  v.  Green- 

baum,  80  Mich.  1,  126 

Alsop  V.  Todd,  2  Root   (Conn.) 

109,  64 

Altoona  Second  National  Bank 

V.  Dunn,  151  Pa.  St.  228,  246 

American    Bank    v.    Gluck,    68 
Minn.  129,  85 

V.  Jenness,  2   Mete.    (Mass.) 

288,  419 

American  Boiler  Co.  v.  Foutham, 

50  N.  Y.  Supp.  351,      199,  202,  203 
American  Buttonhole,  Overseam- 
ing  &  S.  M.  Co.  V.  Murray,  Fed. 
Cas.  292,  12 

American  Car  Co.  v.  Atlanta  St. 

Car  Co.,  100  Ga.  254,  213,  220 

American     Exchange    Bank    v. 

Blanchard,  7  Allen  333,  367 

American  Exchange  Nat.  Bank 
V.    American    Hotel    Victoria 

Co.,  92  N.  Y.  Supp.  1006,    553 
V.  New  York  B.  &  P.  Co.,  148 

N.  Y.  698,     359,  473,  483,  484 
V.  New    York    Belting    &    P. 

Co.,  74  Hun  (N.  Y.)  446,   381 
American  Express  Co.  v.  Haire, 

21  Ind.  4,  527 

American   File   Co.   v.   Garrett, 

110  U.  S.  288,  246 

American  Ins.  Co.  v.  Avery,  60 

Ind.  566,  30 

V.  McWhorter,  78  Ind.  136,        28 

V.  Wellman,  69  Ind.  413,  291 

American  Iron  &  Steel  Mfg.  Co. 

V.  Beal,  101  Md.  423,  681 

American  Nat.  Bank  v.  Banks, 
42  Mo.  450,  179 

V.  Cruger,   44  S.  W.   278,  91 

Tex.  446,  644 


TABLE   OF    CASES. 


XXIX 


[References  are  to  Sections.'} 


American  Nat.  Bank  v.  Harrison 
Wire  Co.,  11  Mo.  App.  446,         380 
V.  Junk    Bros.    Lumber    Co., 

94  Tenn.  624,  562 

V.  Lumber  Mfg.  Co.,  94  Iowa 

624  523 

V.  Watkins,  119  Fed.  545, 

208,  264 
American   Trust   &   S.   Bank  v. 

Yluck,  68  Minn.  129,  474 

American    Trust  &    Sav.   Co.   v. 

Crowe,  82  111.  App.  537,  581 

American  Zinc  L.  &  S.  Co.  v. 
Marble  Leadworks,  102  Mo. 
App.  158,  414 

Ames  V.  Crosier,  101  Cal.  260,        119 
V.  Foster,  42  N.  H.  381,  56 

V.  Colburn,     77     Mass.     (11 

Gray)   390,  137 

Ames  &  F.  Co.  v.  Smith,  65  Minn. 

304,  402 

Amor  V.  Stockele,  76  Minn.  180, 

525,  573 
Amory  v.  Merryweather,  4  Dowl. 

&  R.  86,  296 

Amsinck   v.    Rogers,    93    N.    Y. 

Supp.  87,  527 

Anderson  v.  Anderson,  4  Dana 
(Ky.)  352,  .        272 

V.  Bank,  98  Mich.  543,      368,  376 
,V.  Chicago  Title  &  Trust  Co., 
'  101  Wis.  385,  409 

V.  Gill,  79  Md.  312,  578,  583 

V.  Johnson,  106  Wis.  218, 

409,  597 
V.  Kissan,  35  Fed.  699,  476 

V.  Lee,  73  Minn.  397,  198 

V.  Mason,  6  Dana  (Ky.)  217,   624 
V.  Oregon  Mortg.  Co.,  8  Idaho 

418,  302 

V.  Robertson,  32  Miss.  241,        634 
V.  Rodgers,  53   Kan.   542, 

574,  583 
V.  Starkweather,  28  Iowa  409, 

19,  178,  288 
V.  Van  Alen,  12   Johns.    (N. 

Y.)   343,  626 

V.  Walter,  34  Mich.  113,  28 

V.  Warne,  71  111.  20,     27,  129,  133 
Andover    Savings    Bank   v.   Ad- 
ams, 1  Allen  28,  679 
Andrews  v.  Bond,  16  Barb.   (N. 
Y.)  633,  418 
V.  Bradley,  102  Fed.  54,  574 
V.  Butler,  46  111.  App.  183,        380 
V.  Campbell,  36  Ohio  St.  361,   657 
V.  Galloway,  50  Ark.  358, 

142,  161 


Andrews  v.  German  Nat.  Bank, 

9  Heisk.  211,  581 
V.  Hart,  17  Wis.  297,  123 
V.  Hoxie,  5  Tex.  171,  292 
V.  McCoy,  8  Ala.  920,  260 
V.  Meadows,  31  So.  971,  278 
V.  Pond,   13   Pet.    (38   U.  S.) 

65,  436,  483 

V,  Pope,  126  N.  C.  472,  681 

V.  Robertson,    111    Wis.    334, 

87  N.  W.  190,  54  L.  R.  A. 

673,  489 

V.  Simms,  33  Ark.  771,  180 

V.  Varrell,  46  N.  H.  17,  632 

Androscoggin  Bank  v.  Kimball, 

10  Cush.   (Mass.)  373,  22 
Andrus  v.  Bradley,  102  Fed.  54, 

582,  659 
Andrysiah  v.  Satkowski,  159  Ind, 

428,  49 

Angier  v.  Brewster,  69  Ga.  362,       25 

V.  Smith,  101  Ga.  844,       302,  303 

Angle  V.  Northwestern  Mut.  L. 

Ins.  Co.,  92  U.  S.  330,  144,  476 

V.  Northwestern    Mut.    L.    I. 

Co.,  92  N.  S.  330,  22 

Anglo-Californian  Bank  v.  Ames, 

27  Fed.  727,  72,  670 

Aniba  v.  Yeomans,  39  Mich.  171,   348 
Ankeney  v.  Hannon,  147   N.   S. 

118,  56 

Annan  v.  Houck,  4   Gill    (Md.) 

325,  431,  637 

Ansell  V.  Baker,  15  Q.  B.  20,  682 

Ansern  v.  Byrd,  6  Ind.  475,  210 

Anthony  v.  Fritts,   45  N.  J.  L. 

1,  271,  340 

V.  Harrison,  14  Hun  (N.  Y.) 

198,  217 

Apache  County  v.  Barth   (Ariz. 

1898),  53  Pac.  187,  87 

Appeal  of  Taylor,  45  Pa.  St.  71,    125 
Apperson    v.    Stewart,    27    Ark. 

619,  651 

Apple  V.  Lesser,  93  Ga.  749, 

527,  544,  555,  564 
Applegarth  v.  Robertson,  65  Md. 

493.  4  Atl.  896,  663 

Appling  County  v.  McWilliams, 

69  Ga.  840,  288 

Ai-agon    Coffee    Co.    v.    Rogers 

(Va.),  52  S.  E.  843,  489 

Arbold  V.  Sprague,  34  Vt.  402,        272 

Arbuckle  v.  Hawks,  20  Vt.  538,      325 

Archer  v.  Heiman,  21  Ind.  29,      679 

V.  Shea,  14  Hun  493, 

61,  279,  283,  304 
Arden  v.  Watkins,  3  East  317,      203 


sxx 


TABLE    OF    CASES. 


[References  are  to  Sections.'] 


Arents  v.  Com.,  18  Gratt.  (Va.) 

750,  419 

Arman  v.  First  National  Bank, 

36  Fla.  398,  392 

Armendiaz    v.    Serna,    40    Tex. 

291,  523 

Armour    v.    Michigan    Cent.    R. 

Co.,  65  N.  Y.  Ill,  414 

V.  Mitchell,  36  N.  J.  L.  92, 

241,  246 

V.  Moore,  5  111.  App.  533,  302 

Armstrong     v.     American     Ex- 
change Bank,  133  U.  S.  433, 

527,  641,  653 
V.  Brown,  1  Wash.  C.  C.   (U. 

S.)  43,  600 

V.  Cook,  30  Ind.  22,  116,  389 

V.  Gav,  1  Stew.   (Ala.)  175,      523 
V.  Noble,  55  Vt.  428,  431,  637 

V.  Scott,  36  Fed.  63,  270' 

V.  Southern    Express    Co.,    4 

Baxt.  376,  288' 

Arnold   v.   Engleman,   103    Ind. 
512,  34,  37 

V.  Jones,  2  R.  I.  345,  158 

V.  National  Albany  Exch. 
Bank,  3  Thomp.  &  C.  (N. 
Y.)  769,  641 

V.  Spragiie,  34  Vt.  402,     183,  199 
Arnot  V.  Woolburn,  35   Mo.  98, 

99,  431,  637 

Arnson  v.   Abrahamson,  930  N. 

Y.  Supp.  514,  270 

Arpin  v.  Owens,  140  Mass.  144, 

187,  198,  199,  200,  202,  272 
Arthurs  v.  Hart.  17  How.  6,  449 

Ashburn    v.    Evans    (Tex.    Civ. 

App.),  72  S.  W.  242,  702 

Ashby  V.  Carr.  40  Miss.  64,  596 

Ashe  V.  Beasley,  6  N.  Dak.  191, 

542,  549 
Ashton  V.  Burbank,  2  Dill.  435,     679 
V.  Sproule,    35    Pa.    St.    492, 

270,  341 
Aspinwall    v.    Meyer,    2    Sandf. 

(N.  Y.)    280,  240,  418 

Association  v.  Stewart,  27  Tex. 

Civ.  App.  299,  423 

Atchison.  T.   &  S.  F.   R.   Co.  v. 

Kearney,  58  Kan.  19,  232 

Atherton  v.  Dearmond,  33  Iowa 

353,  332 

Atkins  V.  Knight,  46  Ala.  539, 

420,  608 
Atkinson  v.  Brooks,  26  Vt.  569, 

248,  353,  355 
V.  Burt.  65  Ark.  316,  302 

V.  Hawdon,  2  Adol.  &  E.  628,   147 


Atlanta  Bottling  Co.  v.  Hutchin- 
son, 109  Ga.  550,  241,  648 
Atlanta  R.  Co.  v.  American  Car 

Co.,  103  Ga.  254,  265 

Atlantic  National  Bank  v.  Frank- 
lin, 55  N.  Y.  235,  341 
V.  Franklin,  64  Barb.  449, 

353,  359 
Atlas  Bank  v.   Holm,  34  U.   S. 

App.  472,  288,  475,  476,  483 

Attleborough  Nat.  Bank  v.  Rog- 
ers, 125  Mass.  339,  671 
Attorney-General  v.  Continental 
Life  Ins.  Co.,  71  N.  Y.  325,          581 
V.  Life    &    Fire    Ins.    Co.,    9 
Paige  (N.  Y.)  470, 
Atwater  v.  Smith,  73  Minn.  507, 
Atwood    V.    Crowdie,    1    Stark 
485, 
V.  Lewis,  6  Mo.  391,  392, 

338,  339 

V.  Mumings,  7  B.  &  C.  285,         75 

V.  Weeden,  12  R.  I.  293,  296 

Aubert  v.  Maze,  2  Bos.  &  P.  374, 

Aubuchon   v.    McKnight,   1   Mo. 

312, 
Auburn  Nat.  Exch.  Bank  v.  Ben- 

eman,  43  Hun  (N.  Y.)  241, 
AudleuT  V.  Kuffel,  71  Ind.  543, 
Auerbach  v.  Le  Sueur  Mill  Co., 

28  Minn.  291, 
Auld  V.  Magruder,  10   Cal.  282, 

290, 
Aultman     v.     Hetherington, 
Wis.  622, 
V.  Jett,  42  Wis.  488, 
V.  Olson,  34  Minn.  450, 
Aultman  and  Taylor  v.  Rush,  26 

S.  C.  517, 
Aultman,   Taylor  &  Co.  v.   Hef- 
ner, 67  Tex.  54,  11,  212,  601 
Aurora  v.  West,  22  Ind.  88,  292 
Austell  V.  Rice,  5  Ga.  472,      191,  195 
Austin  V.  Feland,  8  Mo.  309,  629 
V.  Rodman,  1  Hawks  194,         523 
V.  Vandermark,    4    Hill     (N. 
Y.)   259, 
Auten  V.  Gauner,  90  111.  300, 
V.  Manistee    Nat.    Bank,    67 

Ark.  243,  518 

Averett    v.    Booker,    15    Gratt. 

(Va.)   163,  183 

Averton  v.  Mathews,  35  Ark.  146,   23 

Avery  v.  Brown,  31  Conn.  398,       208 

V.  Swords.  28  111.  App.  202,      699 

Ayer  v.  Hutchins,  4  Mass.  370, 

288,  348,  419 
V.  Tilden,  15  Gray  (Mass.) 

178.  303 


288 
684 

282 


296 

152 

28 
648 


85 


42 
603 
603 

25,  133 


44 


25 


TABLE   OF   CASES. 


XKXl 


[References  are  to  Sections.'] 


Ayer  v.  Younker,  10  Colo.  App. 

27,  297 

Ayers  v.  Burns,  87  Ind.  245,  63 
V.  Doying,   42    Hun    (N.   Y.) 

630,  390 

V.  Warren,  47  Me.  217,  43 

Aymar  v.  Beers,  7  Cow.  705,  496 
Aynsworth,    Ex    parte,    4    Ves. 

678,  306 
Avrault  v.  Pacific  Bank,  47  N. 

Y.  570,  583 

Ayres  v.  McConnel,  15  111.  230,  606 

V.  Milroy,  53  Mo.  516,  316 

V.  Prebasco,  14  Kan.  175,  292 

Ayrey  v.  Davenport,  2  Bos.  &  P. 

474,  679 


B 


Babbitt  v.  Moore,  51  N.  J.  L. 

229,  683 

Babcock  v.  Hawkins,  23  Vt.  561,   691 
V.  Murray,  58  Minn.  386,  175 

V.  Stone,   Fed.   Cas.   No.  701, 

3  McLean  172,  89 

Baborg  v.  Peyton,  2  Wheat.   (U. 

S.)  385,  199 

Babson  v.  Webber,  9  Pick.  (Mass.) 

163,  1 

Bachellor  v.  Priest,  12  Pick.  399, 

498,  511 
Backus  V.  Spaulding,  116  Mass. 
418,  606 

V.  Spaulding,  129  Mass.  234, 

593,  594 
Bacon  v.  Abbott,  137  Mass.  397,    365 
V.  Bacon,  94  Va.  686,  505 

V.  Hanna,  137  N.  Y.  379,  514 

V.  Harris,  15  R.  I.  599,  282 

V.  Iowa  Sav.  &  Loan  Assoc, 

121  Iowa  449,  302 

V.  Lee,  4  Iowa  490,  292,  303 

Badger  v.  Stephens,  61  Mo.  App. 

387,  1  Mo.  App.  Rep.  627,  650 

Bagley     v.     Cohen      (Cal.),     50 

Pac.  4,  681 

Bahmsen    v.    Gilbert,    55    Minn. 

334,  402 

Bailey  v.  Adams,  10  N.  H.  162, 

340,  341 
V.  Cromwell,   3   Scam.    (111.) 

71,  262,  310,  327 

V.  Dozier,  6  How.  23,  528,  534 

V.  Pearson,  29  N.  H.  77,  56 

V.  Porter,  14  Mees.  &  W.  44,      523 
V.  Seymour,  42  S.  C.  322,  368 

V.  Sharkey,  29  Mo.  App.  518,   514 
V.  Smith,  14  Ohio  St.  396, 

240,  365,  439,  440 


Bailey  v.  Stiles,  3  N.  J.  Eq.  249,    288 
V.  Tompkins.  127  Mich.  74,  86 

N.  W.  400,  87 

Bair  v.  People's  Bank,  27  Neb. 

577,  43  N.  W.  347,  671 

Baird  v.  Bruning,  84  Ky.  645,  57 

Baker  v.  Arnold,  2  Cai.  Cas.  (N. 

Y.)   279,  238,  441 

V.  Charlton,  Peake  80,  89 

V.  Faris,  61  Mo.  889,  288 

V.  Hawkins,  14  R.  I.  359,  689 

V.  Kennett,  54  Mo.  82,  68 

V.  Kinsey,  41  Ohio  St.  403, 

421,  630 
V.  Lichtenberger,  41  Neb.  751,  433 
V.  Nipple,  16  Pa.  Co.  Ct.  659,  447 
V.  Scott,  29  Kan.  136,  539 

V.  Singer   Mfg.   Co.,   122   Pa. 

St.  363,  57 

Baker-Boyer  Bank  v.  Hughson, 

5  Wash.  St.  100,  238 

Baker,  In  re,  76  N.  Y.  Supp.  61,    699 

Balch  V.  Wilson,  25  Minn.  299.      626 

Baldwin  v.  Barrour,  86  Ind.  351,     28 

V.  Bricker,  86  Ind.  221,         25,  28 

V.  Daly.  41  Wash.  416,  700 

V.  Dow,  130  Mass.  416,  283 

V.  Hart,  136  Cal.  222,  194 

V.  Killian,  63  111.  550,  328 

V.  Sewall,  23  La.  Ann.  444,      292 

Bales  V.  Hyman,  57  Miss.  330,        620 

Balkwill    V.    Bridgeport    Wood 

Finishing  Co.,  62  111.  App.  102,  583 

Ball  V.  Denniston,  4  Dall.  163,      564 

V.  Powers,  62  Ga.  757,  29 

V.  Putnam,  123  Cal.  134,  288 

Ballard  v.   Insurance  Company, 

81  Ind.  239,  141,  147,  164 

Ballston    Spa    Bank    v.    Maine 

Bank,  16  Wis.  120,  74 

Baltimore  &  Ohio  R.  Co.  v.  Wil- 

kins,  44  Md.  11.  414 

Bamet  v.  Bank,  98  U.  S.  555,  306 

Bancroft  v.  McKnight.  11  Rich. 

L.  (S.  C.)  663,  121 

Banerman  v.  Radenius,  7  Term 

R.  663,  679 

Banghaman  v.  Gould,  45  Mich. 

481.  601 

Bangor  Electric  Light  &  Power 

Co.  V.  Robinson,  52  Fed.  520, 

523,  397 

Bangs  V.  Hornick,  30  Fed.  97,      298 

Bank  v.  Alsop,  64  Iowa  97,  291 

V.  Anderson,  32  S.  C.  538,  260 

V.  Bank.  10  Wall.  380,  576 

V.  Barnett,  27  La.  Ann.  177,     377 

V.  Carrington,  5  R.  I.  515,        246 

V.  Chambers,  11  Rich.  657,        376 


IXXH 


TABLE   OF    CASES. 


[References  are  to  Sections.l 


Bank  v.  Coit,  104  N.  Y.  537,  212 

V.  Dumell,  5  Mason  56,  500 

V.  Farmers'     Deposit     Nat. 

Bank,  130  Pa.  St.  209,        605 
V.  Flanigan,  39  Leg.  Int.  (N. 

Y.)   264,  303 

v.  Goss,  31  Vt.  315,  477 

v.  Hooper.  47  Md.  88,  476 

V.  Hunt  (R.  I.),  13  Atl.  115,  681 
V.  Johnston,  105  Tenn.  521, 

241,  242 
V.  Mayberry,  48  Me.  198,  29 

V.  O'Connell,  84  Iowa  377,  373 
V.  Portner.  46  Ohio  St.  381,  291 
V.  Rider,  58  N.  H.  512,  270 

V.  Short,  15  Pa.  Co.  Ct.  64,  45 
V.  Stowell,  123  Mass.  196,  146 

V.  Tartter,  4  Abb.  N.  C.  215,  604 
V.  Thomas,  79   Hun    (N.  Y.) 

595,  155 

V.  Vanderhorst,  32  N.  Y.  553, 

353,  359 
V.  Vankirk,  39  111.  App.  23,  291 
V.  Wood,  142  Mass.  563,  616 

Bank  of  Alexandria  v.  Swan,  9 

Pet.  33,  530,  552,  563,  566 

Bank  of  America  v.  Shaw,  142 
Mass.  290,  560,  562,  569 

V.  Wavdell,    92    N.   Y.    Supp. 

666,  583 

Bank  of  Batavia  v.  N.  Y.  L.  E. 

&  W.  R.  Co.,  106  N.  Y.  195,         414 
Bank  of  Bennington  v.  Raymond, 

12  Vt.  401,  494 

Bank  of  British  North  Amer- 
ica V.  Ellis,  6  Sawy.  (U.  S.) 
96,  184,  187,  240,  279 

V.  Jones,  8  U.  C.  Q.  B.  86,  682 
V.  Mechanics'    Nat.    Bank   of 

N.  Y.  City,  91  N.  Y.  106,    676 
Bank   of   Buffalo   v.    Dantziger, 

65  N.  Y.  Supp.  981,  681 

Bank  of  California  v.  J.  L.  Mott 

Iron  Works,  113  Cal.  409,  402 

Bank    of    Charleston    v.    Cham- 
bers, 11  Rich.   (S.  C.)  657,  246 
Bank  of  Columbia  v.  French,  1 
Cranch  (U.  S.)   221,  279 
V.  Lawrence,  1  Pet.    (U.  S.) 

578,  563,  569 

Bank  of  Commerce  v.  Baird  Min- 
ing Co.   (N.  M.  1906),  85  Pac. 
970,  80 

V.  Haldeman,    22    Ky.    Law 

Rep.  717,  145 

V.  Miller,  105  111.  App.  224,      585 
Bank  of  Commonwealth  v.  Cur- 
ry, 2  Dana  (Ky.)  142,  22 


Bank  of  Cooperstown  v.  Woods, 

28  N.  Y.  545,  531 

Bank    of    Cumberland    v.    May- 
berry,  48  Me.  198,  29 
Bank  of   Edgefield  v.   Farmers' 

Co-operative  Mfg.  Co.,  52  Fed. 

98,  476,  545 

Bank  of  Gallipolis  v.   Trimble, 

5  B.  Mon.   (Ky.)   599,  590 

Bank     of    Genesee    v.     Patchin 

Bank,  19  N.  Y.  312,  280 

V.  Patchin    Bank,    13    N.    Y. 

309,  180 

Bank  of  Herington  v.  Wangerin, 

65  Kan.  423,  146,  165 

Bank  of   Horton  v.   Brooks,   64 

Kan.  285,  680 

Bank    of    Indian    Territory    v. 

First  Nat.  Bank,  109  Mo.  App. 

665,  475,  697 

Bank  of  Ireland  v.  Archer,  11 

M.  &  W.  383,  491 

Bank  of  Jamaica  v.  Jefferson,  92 

Tenn.  537,  503,  529,  545 

Bank  of  Kentucky  v.  Brooking, 

2  Lift.   (Ky.)  41,  93 

V.  Pursley,  3  T.  B.  Mon.  238,    530 
Bank   of   Limestone  v.   Penick, 

5  T.  B.  Mon.   (Ky.)   25,  33,  174 

Bank  of  Louisiana  v.  Satterfield, 

14  La.  Ann.  80,  511 

Bank  of  Louisville  v.  First  Nat. 

Bank    of    Knoxville,    8    Baxt. 

101,  583 

V.  First  Nat.  Bank  of  Rush- 

ville,  8  Baxt.  101,  583 

Bank  of  Luverne  v.  Birmingham 

Fertilizer  Co.    (Ala.  1905),  39 

So.  126.  307 

Bank  of  Martin  v.  Cassedy,  103 

Ky.  363.  627 

Bank  of  Metropolis  v.  Bank  of 

New  England,  1  How.  (U.  S.) 

234,  622 

Bank  of  Middlebury  v.  Bingham, 

33  Vt.  621,  388 

Bank  of  Missouri  v.  Phillips,  17 

Mo.  29,  316 

Bank  of  Mobile  v.  Hall,  6  Ala. 

639,  -  352 

V.  Poelnitz,  61  Ala.  147,  626 

Bank  of  Monongahela  Valley  v. 

Weston,  159  N.  Y.  201,  483 

Bank    of    Montgomery     Co.     v. 

Walker,   9    Serg.   &  R.    (Pa.) 

229,  340 

Bank  of  Montpelier  v.  Joyner, 

33  Vt.  481,  390 


TABLE   OF    CASES. 


XXXlll 


[References  are  to  Sections.l 


Bank  of  Montreal  v.  Douglas,  17 

U.  C.  Q.  B.  208,  679 

Bank  of  Morehead  v.  Elam,  24 

Ky.  L.  Rep.  2425,  680 

Bank  of  Morganton  v.  Hay  (N. 

C.  1906),  55  S.  E.  811,  73,  75 

Bank  of  Newark  v.  Crawford,  2 

Houst.   (Del.)    282,  135 

Bank  of  Newberry  v.  Richards, 

35  Vt.  281,  387 

Bank  of  Newbury  v.  Sinclair,  60 

N.  H.  100,  658 

Bank  of  New  York  v.  Bank  of 
Ohio,  29  N.  Y.  619,  80,  82 

V.  Muskingum  Branch  of 
Bank  of  Ohio,  29  N.  Y. 
619,  121 

V.  Vanderhorst,  32  N.  Y.  553,   383 
Bank  of  Niagara  v.  McCracken, 

18  Johns.  (N.  Y.)  493,  612 

Bank  of  North  America  v.  Pet- 
tit,  4  Dall.  127,  564 
Bank   of   Ohio    Valley   v.   Lock- 
wood,  13  W.  Va.  392,            135,  162 
Bank  of  Pittsburgh  v.  Neal,  22 

How.  95,  22,  121,  476 

Bank  of  Port  Jefferson  v.  Dar- 
ling, 36  N.  Y.  Supp.  153,     559,  671 
Bank  of  Ravenswood  v.  Wetzel 

(W.  Va.),  50  S.  E.  886,  559 

Bank  of  Richland  v.  Nicholson, 

120  Ga.  622,  543,  545,  571 

Bank   of   Rochester  v.   Gray,   2 
Hill  227,  530 

V.  Monteath,  1  Denio  (N.  Y.) 

402,  89 

Bank    of    Rutland    v.    Buck,    5 

Wend.    (N.  Y.)   66,  386 

Bank  of  Sandusky  v.  Scoville,  24 

Wend.  416,  471 

Bank  of  Spencer  v.  Simmons,  43 

W.  Va.  79,  402 

Bank  of  St.  Albans  v.  Farmers' 

&  Merchants'  Bank,  10  Vt.  141,   99 
Bank  of   Staten    Island  v.   City 
of  New  York,  68   N.  Y.  App. 
Div.  231,  232 

Bank  of  St.  Clairsville  v.  Smith, 

5  Ham.   (Ohio)   222,  217 

Bank     of     Tennessee     v.     Cum- 

mings,  9  Heisk.  (Tenn.)  465,    293 

V.  Johnson,  1  Swan  217,  389 

Bank  of  United  States  v.  Beirne, 

1  Graft.  (Va.)  234,  561 

V.  Corcoran,  2  Pet.  121,  555 

V.  Dandridge,  12  Wheat,  64,     581 

V.  Daniel,  12  Pet.  32,  527 

V.  Davis,  2  Hill  551,  542 

V,  Leachers,  10  B.  Mon.  64,      525 

Joyce  Defenses — iii 


Bank  of  United  States  v.  Russell, 

3    Yeates     (Pa.)     391,  154 

Bank  of  University  v.  Tuck,  96 

Ga.  556,  699 

Bank  of  Upper  Canada  v.  Jar- 
dine,  9  Up.  Can.  C.  P.  332,  340 
Bank    of    Utica    v.    Bender,    21 
Wend.  645,  570 
V.  Hillard,  3  Cow.  153,  306 
V.  Smith,  18  Johns.  230,  511,  549 
Bank  of  Vergennes  v.  Cameron, 

7  Barb.  143,  89,  542,  560 

Bank  of  Woodstock  v.  Kent,  15 

N.  H.  579,  369 

Bankers'  Iowa  State  Bank  v. 
Mason  Hand  Lathe  Co.,  90  N. 
W.  612,  270,  280 

Bannister    v.    Kenton,    46    Mo. 

App.  462,  240 

Banque  de  Peuple  v.  Denincourt, 
Rap.  Jud.  Queb.  10  C.  S.  428, 

505,  506 
Barbaroux   v.    Barker,    4    Mete. 

(Ky.)   47,  609 

Barber  v.  Boyd,  24  Ky.  L.  Rep. 
1389,  702 

v.  Gordon,  2  Root  95,        342,  685 
V.  Ruggles,    27    Ky.   L.   Rep. 

1077,  680 

V.  Van  Horn,  54  Kan.  33,    121,  131 
Barbour   v.    Bank,    45    Ohio   St. 
133,  306 

V.  Washington   Fire   &   Mar. 

Ins.  Co.,  60  Ala.  433,  699 

Barclay  v.  Pursley,  110  Pa.  St. 
13,  173 

V.  Weaver,  19  Pa.  396,  538 

Bardsley  v.  Delp,  88  Pa.  St.  420, 

241,  380,  390 
Barker  v.  Earth,  88  111.  23,  237 

V.  Barth,  192  111.  460,  446 

V.  International  Bank  of  Chi- 
cago. 80  111.  96,  353 
V.  Lichtenberger,      41      Neb. 

751,  241 

V.  Parker,  23  Ark.  390.  288 

V.  Parker,   10   Gray    (Mass.) 

339,  627 

V.  Richards,  20  Law  J.  Exch. 

135,  136,  380 

V.  Valentine,  10  Gray  341,         441 
Barkhamsted  v.   Case,   5    Conn. 

528,  122 

Barlow  v.  Bishof,  1  East  432,  51 

V.  Fleming,  6  Ala.  146,  322 

V.  Myers,  3  Hun  (N.  Y.)  720,      627 

V.  Scott,  12  Iowa  63.         239,  419 

Barmby  v.  Wolfe,  44  Neb.  77,        376 

Barnard  v.  Mercer,  54  Kan.  630,  702 


XXXIV 


TABLE    OF    CASES. 


[References  are  to  Sections.'] 


Barnard  State  Bk.  v.  Fesler,  80 

Mo.  App.  217,  456 

Earner    v.    Moorehead,    22    Ind. 

354,  198 

Barnes   v.    De   France,    2    Colo. 
294,  55 

V.  McMullins,  78  Mo.  260, 

431,  637 
V.  Ontario    Bank,    19    N.    Y. 

156,  581 

V.  Shelton,  Harp.  (S.  C.)  21,    208 

V.  Stevens,  62  Ind.  226,  110 

V.  Van  Keuren,  31  Neb.  165,    182 

Barnet  v.  Bank,  98  U.  S.  555, 

614,  615 
V.  Smith,  31  N.  H.  256,  581 

Barnett   v.    Denison,   145    N.    S. 
135,  87 

V.  Offerman,   7  Watts    (Pa.) 

130,  198,  202,  239 

Barney  v.  Clark,  46  N.  H.  514,  655 
V.  Norton,     2     Fairf.     (Me.) 

350,  635 

Barnum  v.  Barniim,  9  Conn.  242,  198 
V.  Phoenix,  60  Mich.  388,  366 

V.  Young,  10  Neb.  309,  46,  56 

Barr  v.  Baker,  9  Mo.  850,  208 

Barrett  v.  Bank,  85  Tenn.  426,  306 
V.  Mahnken,  6  Wyo.  541,  111,  194 
V.  Russell,  45  Vt.  43,  98 

Barrington  v.  Bank  of  Washing- 
ton, 14  Serg.  &  R.  (Pa.)  405,        172 
Barroll  v.  Foreman.  88  Md.  188,    698 
Barrow  v.  Miltenberger,  21  La. 

Ann.   396,  34 

Barry    v.    Holderman,    6    J.    J. 
Marsh.  (Ky.)  471,  380 

V.  Kirkland    (Ariz.),  52  Pac. 

771,  650 

V.  Stover,  107  N.  W.  672,  254 

V.  Wachosky,  57  Neb.  534,         407 
Barstow  v.  Mining  Co.,  64  Cal. 

388,  397 

Bartholomew      v.      First      Nat. 
Bank,  18  Wash.  683,  517 

V.  Hendrix,  5  Blackf.  572,        472 
Bartle  v.  Breniger,  37  Iowa  139, 

113,  659 
Bartlett  v.  Farrington,  120  Mass. 

284,  600' 

Barton  v.  Anderson,  4  Rich.   (S. 
C.)    507,  312 

V.  Beer,  35  Barb.  (N.  Y.)  78, 

34,  55 
Bascom  v.  Young,  7  Mo.  1,  89 

Baskerville    v.    Brown,    2    Bur- 
rows 1229,  617 
V.  Harris,  41  Miss.  535,  525 


Bass   V.    Inhabitants   of   Welles- 
ley  (Mass.),  78  N.  E.  543,  692 
Bassenhorst   v.   Wilby,   45    Ohio 

333,        503,  523,  524,  540,  545,  573 
Batavian    Bank    v.    North,    114 

Wis.  637,  313 

Batchelder  v.  White,  80  Va.  103, 

135,  165 
Batchellor    v.    Priest,    12    Pick. 

(Mass  )   399  179 

Bates  V.  Butler,  46  Me.  387,    108,  113 
V.  Hyman    (Mass.   1900),    26 

So.  567,  71 

V.  Kemp,  12  Iowa  99,  419,  436 
V.  Kemp,  13  Iowa  223,  328,  637 
V.  Leclair,  49  Vt.  229,  656 

V.  Rosekrans,  37  N.  Y.  409,     688 
V.  State  Bank,  2  Ala.  451,       671 
Bath    Gas   Light   Co.   v.    Claffy, 

151  N.  Y.  24,  277 

Bathe   v.    Tayler,   15   East   412, 

416,  135,  137,  152 

Battalora  v.  Earth,  25  La.  Ann. 

318,  22,  238 

Batterman  v.  Butcher,  95  App. 

Div.  213,  269 

Battersbee  v.  Calkins,  128  Mich. 

569,  230,  402,  489 

Battle   V.   Weems,   44   Ala.   105, 

282,  419 
Battrell  v.  Franklin,  57  Mo.  566,  208 
Baucom  v.  Smith,  66  N.  C.  537,  419 
Baumgardner  v.  Reeves,  35  Pa. 

St.  250,  323 

Baxter  v.  Ellis,  57  Me.  178,  294 

V.  Graves,    2    A.    K.    Marsh. 

152,  523 

V.  Little,  6  Mete.   (Mass.)   7, 

624,  635 
Bay  V.  Church,  15  Conn.  15,  528 

y.  Shrader,  50  Miss.  326,  155,  179 
Bayley  v.  Taber,  5  Mass.- 286, 

291,  292 
Bayou  Sara,  Town  of,  v.  Harper, 

15  La.  Ann.  233,  231 

Bay  View  Brew.  Co.  v.  Tecklen- 

berg,  19  Wash.  469,  407 

Beach  v.  Bennett,   (Colo.-  App.), 

66  Pac.  567,  467 

v.  Lattner,  101  Ga.  357,  302 

V.  State  Bank,  2  Ind.  488,         272 

Beacon  Trust  Co.  v.  Robbins,  173 

Mass.  261,  351 

Beale  v.  Parrish,  20  N.  Y.  407, 

550,  570 
Beall  V   General  Electric  Co.,  16 
Misc.  Rep.  611,  270,  433 

V.  January,  62  Mo.  434,  122 


TABIJB   OF    CASES. 


XXXV 


[References  are  to  Sections.'] 


Beall  V.  Pearre,  12  Md.  550, 

198,  201,  207,  208 

Bealle  v.  Bank,  57  Ga.  274, 

120,  121,  376 

Bean  v.  Jones,  8  N.  H.  149,  201 

V.  Morgan,  4  McCord  (S.  C.) 

148,  43 

V.  Proseus,  31  Pac.  49,  224 

Beard  v.  Bingham,  76  N.  C.  285,  302 

V.  Bedolph,  29  Wis.  136,  478 

V.  Westerman,    32    Oliio    St. 

29,  525 

Bearden  v.  Moses,  75  Tenn.  459,  252 
Beardsley  v.   Weber,    104   Midi. 

88,  512 

Beath    v.    Chapoton,    115    Mich. 

506,  113 

Beatty  v.  Carr,  109  Iowa  183,         208 
Beattyville  Banli  v.  Roberts,  117 
Ky.  689,  223,  240,  243 

V.  Roberts,  25  Ky.  Law  Rep. 

1796,  324 

Beauchamp  v.  Parry,  1  Barn.  & 

Adol.  89,  657 

Beauford  v.  Patterson,  63  How. 

Prac.  (N.  Y.)  81,  122 

Beauregard    v.     Knowlton,     156 

Mass.  395,  523,  586 

Beberdick  v.  Crevier,  60  N.  J.  L. 

389,  41 

Becherwaise  v.  Lewis,   L.   R.   7 

C.  P.  372,  639 

Beck  V.  Thompson,  4  Harr.  &  J. 

531,  525 

Becker    v.    Headstine     (Mich.), 
100  N.  W.  752,  302 

V.  Sandusky    City    Bank,    1 

Minn.  311,  371 

V.  Seymour,  71  Minn.  394,         604 
Beckhaus    v.    Commercial    Nat. 

Bank  (Pa.),  12  Atl.  72,       353,  376 
Beckley  v.  Union  Bank,  79  Va. 

478,  112 

Bedell  v.  Hering,  77  Cal.  572,  27 

V.  Scarlett,  75  Ga.  56, 

439,  440,  441 
Bedford   v.   Deakin,   2   Barn.   & 

Aid.  210,  688 

Bedford    Bank    v.    Acoam,    125 

Ind.  584,  606 

Beebe   v.   Real   Estate   Bank,   5 

Pike  183.  410 

Beecher  v.  Buckingham,  18  Conn. 

110,  472 

Beeman  v.  Duck,  11  Mees.  &  W. 

251,  641,  673 

Beer  v.  Clifton,  98  Cal.  323,  503,  545 
Behl  V.  Schuett,  88  Wis.  471,  108 


Beissner    v.    Weekes,    21    Tex. 

Civ.  App.  14,  504,  529 

Belcher     v.      Smith,      7      Cush. 

(Mass.)   482,  460 

Belden  v.  Hann,  61  Iowa  42,         180 
Belknap  v.  Bank,  100  Mass.  376, 

136,  146 
Bell  V.  Bean,  75  Cal.  86,  376 

V.  First    Nat.    Bank    of    Chi- 
cago, 115  U.  S.  373,  534 
V.  Hagerstown   Bank,   7   Gill 

(Md.)   216,  566 

V.  Lent,    24    Wend.    (N.    Y.) 

230,  542 

V.  Mahin,  69  Iowa  408, 

29,  135,  150,  158 
V.  McNiece,    17   N.    Y.    Supp. 

846,  242 

V.  Pletscher,  65  N.  Y.   Supp. 

669,  199 

V.  Sheridan,  21  D.  C.  370,         211 
V.  Shields,  19  N.  J.  L.  93,  673 

V.  Wandby,  4  Wash.  743,  747,     74 
V.  Wood,  1  Bay.   (S.  C.)   249, 

288,  295 
Bellemare  v.  Gray,  12  Rap.  Jud. 

Queb.  C.  S.  581,  489 

Belleville    Sav.    Bank    v.    Born- 
man,  124  111.  200,  10  N.  E.  552, 

312,  472,  688 
Belloc  V.  Davis,  38  Cal.  242,  34 

Bellows  V.   Folsom,   2   Rob.    (N. 
Y.)    138,  345 

V.  Lovell,     4     Pick.     (Mass.) 

153,  663 

Belshaw  v.   Bush,  11  C.  B.    (O. 

S.)  191,  697 

Bement  v.  McClarlen,  1  B.  Mon. 

(Ky.)   296,  119,  238,  447 

Bemis  v.  Horner,  62  111.  App.  38, 

241,  439 
Bemmon    v.    Whitman,    75    Ind. 

318,  614 

Benedict   v.    Cowden,    49    N.    Y. 
396,  171 

V.  Cox,  52  Vt.  274,  3 

V.  De  Groat,  45  How.  Pr.  (N. 

Y.)    384,  433 

V.  Miner,  58  111.  19, 

139,  152,  168 

V.  Schmieg,  13  Wash.  476,       520 

Benjamin  v.  Delahv.  9  111.  536,      155 

V.  McConnel,  9  111.  536.  179 

V.  Rogers,  126  N.  Y.  60,  380,  385 

Bennett  v.  Carsner,  1  Tex.  App. 

Civ.  Cas.,  §  618,  419 

V.  Ford,  47  Ind.  264,  108 

V.  Mattingly,  110  Ind.  197,         61 

V.  Smith,  15  Johns.  355,  304 


XXXYl 


TABLE    or    CASES. 


[References  are  to  Sections.] 


Benninger  v.  Hawkes,  61  Pa.  St. 

343,  343 

Benson  v.  Abbott,  95  Ga.  69,  358 

V.  Harrison,  39  Mo.  303,  341 

V.  Huntington,  21  Mich.  415, 

13,  20 

V.  Keller     (Oreg.),    60    Pac. 

918,  473 

V.  Warehouse  Co.,  99  Ga.  303,  91 
Bent  V.  Weston,  167  Mass.  529,  195 
Benton  v.  Klein,  42  Mo.  97,  328 

Berenbroick  v.  Stephens,  8  Daly 

249,  376 

Berg  V.  Abbott,  83  Pa.  177,    517,  543 
Bergen  Invest.  Co.  v.  Vette,  142 

Mo.  560,  44  S.  W.  754,  64  Am. 

St.  Rep.  567,  .     475 

Bergman    v.    Salmon,    79    Hun 

(N.  Y.)  456,  116 

Berkley   v.   Cannon,    4  Rich.   L. 

(S.  C.)  136,  69 

Bernau  v.  Wessels,  53  Mich.  549,    29 
Bernheimer  v.  Marshall,  2  Minn. 

78.  99 

Bernstein    v.    Coburn,    49    Neb. 

734,  626 

Berry  v.  Barton,  12  Okla.  221,       418 
V.  Robinson,  9  Johns.  121, 

502,  503 

V.  Thompson,    3    Johns.    Ch. 

395,  303 

V.  Wisdom,  3  Ohio  St.  241,  367 
Berryman   v.   Manker,    56   Iowa 

150,  182 

Berryn     v.     Bates,     2     Blackf. 

(Ind.)   118,  338 

Bertrand  v.   Barkman,   13   Ark. 

150,  241,  246,  352 

Best  V.  Crall,  23  Kan.  482,     246,  359 
V.  Givens,   3   B.   Mon.    (Ky.) 

72,  75,  64 

Bethune  v.  Dozier,  10  Ga.  235,      135 
Bick  V.  Seal,  45  Mo.  App.  475,       288 
Bickford    v.    Mattocks,    95    Me. 
•     547,  214 

Bidsall  V.  Wheeler,  62  App.  Div. 

625,  296 

Biegler    v.    Merchants'    Loan    & 
Trust  Co.,  62  111.  App.  560,         296 
V.  Merchants'  Loan  &  T.  Co., 

164  111.  197,  45  S.  E.  512,  473 
Bierce  v.  Stocking,  77  Mass.  174,  262 
Bierv  v.  Haines,  5  Whart.  (Pa.) 

563.  138,  176 

Bigelow  V.  Denison,  23  Vt.  564,      94 

V.  Stilphen,  35  Vt.  521.      141,  142 

Biggerstaff  v.  Marston,  161  Mass. 

101,  699 


Big  Sandy  Nat.  Bank  v.  Chilton, 

40  W.  Va.  491,  553 

Bill  V.  Stewart,  156  Mass.  508,       123 
Billings  V.  Everett,  52  Cal.  661, 

311,  322 
Billings  Estate,  In  re    (Minn.), 

85  N.  W.  162,  548 

Billingsley  v.    Niblett,   56   Miss. 

537,  263 

Billington  v.  McColpin,   22   Ky. 

L.  Rep.  1281,  292 

Bilofsky  v.  Conveyances'  Title 
Ins.  Co.  (Mass.  1906),  78  N. 
E.  534,  116 

Bilters'    Estate,    In    re,    30    Pa. 

Super.  Ct.  84,  680 

Bingham   v.   Sessions,    6    Sm.  & 

M.   (Miss.)  13,  109 

Binghamton  Trust  Co.  v.  Clark, 

52  N.  Y.  Supp.  941,  635 

Binney  v.  Globe  Nat.  Bank,  150 

Mass.  574,  53,  61 

Birch  V.  Fisher,  51  Mich.  36,  380 

Bircher  v.  Payne,  7  Mo.  462,  333 

Bircleback  v.  Wilkins,  22  Pa.  St. 

26,  342,  446 

Bird  v.  Daggett,  97  Mass.  494, 

80,  487 
V.  Kendall,  62  S.  C.  178,  302 

V.  Louisiana  State  Bank,  93 

U.  S.  96,  549,  558 

Birdsall  v.  Russell,  29  N.  Y.  220,   151 
Birket  v.  Edward,  68  Kan.  295,     246 
Birmingham  Trust  &  Sav.  Co.  v. 
Whitney,  95  App.  Div.  (N.  Y.) 
280,  158,  180 

V.  Whitney,  183  N.  Y.  22,  76 

N.  E.  1089,  158,  180 

Bisbee  v.  Tornlus,  26  Minn.  165,  208 

Bisburg  v.  Graham,  14  Pa.  14,       451 

Biscoe  V.  Moore,  12  Ark.  77,  344 

Bishop  V    Chase,  156  Mo.  158,       474 

V.  Dexter,  2  Conn.  419,  503 

V.  Eaton,  161  Mass.  496,  681 

V.  Tucker,  4  Rich.  L.  (S.  C.) 

178,  592 

Bissell  V.  City  of  Kankakee,  64 

111.  249,  87 

V.  Curran,  69  111.  20,         419,  635 

V.  Dickerson,  64  Conn.  61,       123 

V.  Gowdy,  31  Conn.  47,  419 

Bivins  V.  Helsley,  4  Mete.  (Ky.) 

78,  315 

Bizzell  V.  Stone,  12  Ark.  378,        620 

Black  V.   Bowman,  15  111.  App. 

166,  147,  168 

V.  Epstein,  93  Mo.  App.  459.     117 

V.  First   Nat.    Bank,   96    Md. 

399,  119,  240,  489 


TABLE   OF    CASES. 


xxxvn 


[References  are  to  Sections.'] 


Black  V.  Mitchell,  14  Ind.  397,        472 
V.  Reno,  59  Fed.  917,  359 

Blackburn  v,   Harrison,  39   Mo. 

303,  339 
Blackman   v.    Bowling,    63    Ala. 

304,  343 
Blackmer  v.   Phillipe,   67  N.  C. 

340,  11,  260,  627 

Blackwell  v.  Denie,  23  Iowa  63, 

19,  178 
Blades  v.   Grant  Deposit  Bank, 
21  Ky.  Law  Rep.  1761,  677 

V.  Newman,  19  Ky.  Law  Rep. 

1062,  43  S.  W.  176,  653 

Blair    v.    Bank,    30    Tenn.     (11 
Humph.)  84,  173 

V.  Chicago,    201    U.    S.    400, 

447,  448,  447 

V.  Hagemeyer,    26   App.  Div. 

(N.  Y.)   219,  383 

V.  Reed,  20  Tex.  310,  602 

V.  Rutherford,  31  Tex.  465, 

251,  439 
V.  Wilson,  28  Gratt.  165,  581 

Blake  v.  Blake,  110  Mass.  202,      336 
V.  Manufacturing  Co.    (N.  J. 

Ch.  1897),  38  Atl.  241,  85 
Blakeslee  v.  Hewett,  76  Wis.  341,  511 
Blakey     v.     Johnson,     13     Bush 

(Ky.)   197,  144,  168,  661 

Blakley  v.  Adams   (Ky.),  68  S. 

W.  473,  614 

Blanc  V.  Mutual  Nat.  Bank,  28 

La.  Ann.  921,  524 

Blanchard    v.    Boom,    40    Mich. 

566,  503 

V.  Stevens,  57  Mass.  162,  126,  241 

Bland  V.  O'Hagan,  64  N.  C.  471,  152 

Blane  v.  Mutual  Nat.  Bank,  28 

La.  Ann.  921,  538 

Blankenship  v.  Rogers,  10   Ind. 

333,  630 

Blant   V.    Blant,    41    Misc.    Rep. 

572,  442 

Blatchford    v.    Harris,    115    111. 

App.  160,  539 

Blazo  V.  Cochran,  71  N.  H.  585,     214 
Blee  V.   Giltinan    (Pa.),  12  Atl. 

479,  117 

Blendermann  v.  Price,  50  N.  J. 

L.  296,  570 

Bliss  V.  Houghton,  13  N.  H.  126, 

590,  593 

Block  V.   Commissioners,   99   N. 

S.  686,  87 

V.  Espy,  6  Ohio  Dec.  833,         449 

Blodgett  V.  Durgin,  32  Vt.  361,     525 

V.  Weed,  119  Mass.  215,  89 


Blood  V.  Northrup,  1  Kan.  28, 

202,  205,  211,  237 
Blount  V.  Rick,  107  Ind.  238,         596 
V.  Riley,  3  Ind.  471,  658 

Blue  V.  Capital  Nat.  Bank,  145 

Ind.  518,  597,  598 

Blue     Valley     Lumber     Co.     v. 

Smith,  48  Neb.  293,  238 

Blum  V.  Bidwell,  20  La.  Ann.  43,  523 
Blumenthal  v.  Jassoy,  29  Minn. 

177,  367 

Blum,    Jr.'s,    Sons    v.    Whipple 

(Mass.  1907),  80  N.  E.  501,  80 

Blunt  V.  Walker,  11  Wis.  334,         85 
V.  Windley,  68  N.  C.  1,  612 

Bly  V.  Second  Nat.  Bank,  79  Pa. 

St.  453,  302,  303 

Blydenburgh  v.  Thayer,  3  Keyes 

393,  376 

Boagin  v.  Fouchy,  26  La.  Ann. 

594,  28 

Boalt  V.  Brown,  13  Ohio  St.  364,  168 
Board  v.  O'Donovan,  82  111.  App. 

163,  183 

Boardman  v.  Gore,  15  Mass.  331,    89 
V.  Hayne,  29  Iowa  339,  232 

V.  Larrabee,  51  Conn.  39,  341 

Board  of  Commissioners  v.  Green- 
leaf,  80  Minn.  242,  135,  169 
V.  Vandoiss,  115  Fed.  866.         647 
Board  of  Commissioners  of  Has- 
kell Co.  V.  National  Life  Ins. 
Co.,  32  C.  C.  A.  591,  488 
Board   of  Education  v.   Thomp- 
son, 33  Ohio  St.  321,  290 
Bock  V.  Lauman.  24  Pa.  St.  435,    306 
Bockhoven  v.  National  M.  &  T. 
Bk.,  11  Wkly.  Not.  Cas.  (Pa.) 
570,  199 
Boddington     v.     Schlencker,     4 

Barn.  &  A.  752,  576 

Bogart    V.    McClung,    11    Heisk. 

105,  525 

Bogarth   v.   Breedlove,   39    Tex. 

561,  167 

Bogert  V.  Gulick,  65  Barb.    (N. 

Y.)   322,  30,  59 

Boggs    V.    Lancaster    Bank,    7 
Watts  &  S.   (Pa.)   331,         199,  273 
V.  Wann,  58  Fed.  681, 

193,  210,  417 
Boiler  Co.  v.  Foutham,  50  N.  Y. 

Supp.  351,  272 

Bolinger  v.  Gordon,  11  Humph. 

(Tenn.)   61,  600 

Boiling   V.    Chambers,    20    Colo. 
App.  113,  680 

V.  Munchus,  65  Ala.  558,  189 


XXXVlll 


TABLE   OF    CASES, 


IReferences  are  to  Sections.'] 


Bolo   V.    Hansen,   2   Bailey    (S. 

C.)    114,  64 

Bolton  V.  Puller,  1  B.  &  P.  539,       21 

Bomar   v.    Equitable   Mort.    Co., 

Ill  Ga.  143,  402,  403,  416 

V.  Roser,  131  Ala.  215,  117 

V.  Rosser,  123  Ala.  641,  119 

Bonaud  v.  Genesi.  42  Ga.  639,       359 

Bond  V.  Bragg,  17  111.  69,  528 

V.  Central  Bank,  2  Kelly  92, 

439,  670 
V.  Fitzpatrick,  4  Gray  (Mass.) 

89,  635 

V.  Fitzpatrick,  72  Mass.  536, 

242,  432,  658 
V.  Kidd   (Ga.  1905),  50  S.  B. 

934,  110,  111 

V.  Stockdale,   7   Dow.   &  Ry. 

140,  186 

V.  Storrs,  13  Conn.  412,  504 

V.  Wiltse,  12  Wis.  611,      359,  376 

V.  Worley,  26  Mo.  253,  339 

Bondurant    v.   Bladen,    19    Ind. 

160,  353 

Bonebrake  v.  King,  49  Kan.  296,  681 
Bonker  v.  Randies,  31  N.  J.  L. 

335,  208 

Bonner  v.  Nelson,  57  Ga.  433,       316 
Bonsall  v.  Bauer,  2  Wkly.  Notes 

(Pa.)   Cas.  298,  270,  354 

Bonsted  v.  Cuyler,  116  Pa.  551,     512 
Boodv  V.  Bartlett,  42  N.  H.  558,    456 
V.  McKenney,  23  Neb.  517,        320 
Book  V.  Stinger.  36  Ind.  346,  80 

Booker  v.  Robbins,  26  Ark.  660,  293 
V.  Wingo,  29  S.  C.  116,  44 

Bookheim  v.  Alexander,  64  Hun 

(N.  Y.)  458,  241 

Bookstaver  v.   Jayne,  60   N.  Y. 

146,  286,  323 

Boone  v.  Boone,  58  Miss.  820, 

195,  196 
V.    Queen,  2  Cranch  37,  208 

Booth    V.    Dexter    Steam    F.    E. 
Co.,  118  Ala.  369, 

183,  185,  189,  195,  196 

V.  Powers,  56  N.  Y.  22,  161 

V.  Storrs,  75  111.  438,  128 

Borah  v.  Curry,  12  111.  66,  344 

Borchsenius  v.  Manutson,  7  111. 

App.  365,  648 

Bordelon   v.  Kilpatrick,  3   Rob. 

159,  439 

Borden  v.  Peavy,  20  Ark.  293,        339 
Borgess  v.  Vette,  142  Mo.  560, 

366,  476 
Born    V.    First   Nat.    Bank,    123 
Ind.  78,  581 


Borrough  v.  Moss,  10  Barn.  &  C. 

558,  637 

Bosler  v.  Exchange  Bank,  4  Pa. 

St.  32,  620 

Bostick  V.  Scruggs,  50  Ala.  10,      627 
Bostwick    V.    Bryant,    113    Ind. 
448,  472 

V.  Dodge,    1    Doug.     (Mich.) 

413,  241,  439 

V.  Scruggs,  50  Ala.  10,  465 

Bottum  V.  Scott,  120  N.  Y.  623,     183 

Bouche  V.  Souttet,  104  Cal.  230,     446 

Boughner  v.  Meyer,  5  Colo.  71, 

288,  296 
Bouker  v.  Galligan   (N.  J.  Eq.), 

57  Atl.  1010,  302 

Boulton    V.    Langmuir,    24    Ont. 

App.  R.  618,  152 

Boulware  v.  Bank,  12  Mo.  542,       143 
Bound    V.    Fitzpatrick,    8    Gray 

536,  376 

Bourne  v.  Ward,  51  Me.  191, 

183,  186 
Boustead  v.  Cuyler,  116  Pa.  St. 

551,  170 

Boutelle   v.    Wheaton,   13   Pick. 

(Mass.)   499,  385 

Boutin,  In  re.  Rap.  Jud.  Queb. 

12  C.  S.  186,  541,  570 

Bovier  v.  McCarthy,  4  Neb.  490,    303 

Bowen  v.  Bradley,  9  Abb.  N.  S. 

(N.  Y.)   395,  277 

V.  Clark,  25  Oreg.  592,      181 

V.  Laird  (Ind.  App.  1906), 

77  N.  E.  295,         22,  144,  164 
V.  Needles     Nat.     Bank,     87 

Fed.  430,  582 

V.  Thrall,  28  Vt.  382,  11,  419,  635 
Bower  v,    Hastings,   36  Pa.   St. 

285,  282,  419 
Bowerbank  v.  Monteriro,  4  Taunt. 

844,  307 

Bowers    v.    Douglass,    2    Head 

(Tenn.)  866,  307 

V.  Jewell,  2  N.  H.  543,      135,  153 

V.  Rineard,  209  Pa.  St.  545,      152 

V.  Thomas,  62  Wis.  480,       27,  28 

Bower's  Adm'r  v.  Briggs,  20  Ind. 

139,  174 

Bowery  Nat.  Bank  v.  Sniffen,  54 

Hun   (N.  Y.)   394,  40 

Bowes    V.    Industrial    Bank,    64 

111.  App.  300,  563 

Bowie  V.   Hume,  13  App.  D.  C. 

286,  561 
Bowles    V.     Newby,     2     Blackf. 

(Ind.)    364,  237 

Bowling    V.    Harrison,    6    How. 
248,  553 


TABLE   OF    CASES. 


XXXIX 


[References  are 

Bowman   v.   Halstead,   2   A.   K. 
Marsh.  (Ky.)   200,  591 

V.  Hiller,  130  Mass.  153,  114,  295 
V.  Mitchell,  79  Ind.  84,  135,  169 
V.  Pope,  33  Miss.  94,  6 

V.  Rector    (Tenn.),  59  S.  W. 

389,  14,  219,  679 

V.  Van  Kuren,  29  Wis.  209,      385 

V.  Wright,  7  Bush  (Ky.)  375,  619 

Bowser  v.  Rendell,  31  Ind.  128,     175 

Boyce  v.  Tabb,  18  Wall.  546,  292 

Boyd  V.  Bank  of  Toledo,  32  Ohio 

St.  526,  537 

V.  Central     Bank,     2     Kelly 

(Ga.)  92,  241 

V.  Cummings,  17  N.  Y.  101, 

353,  354 
V.  Johnson,  89  fenn.  284,  183 
V.  McConnell,    29    Tenn.    (10 

Humph.)    68,  142,  152 

V.  Pape     (Neb.),    90    N.    W. 

646,  698 

V.  Tarrant,  14  Tex.  230,  447 

Boyer    v.    Richardson,    52    Neb. 

156,  568 

Boyett  V.  Standard  Chem.  &  Oil 

Co.,  41  So.  756,  291 

Boynton  v.  McDaniel,  97  Ga.  400,    28 
Bozeman  v.  Allen,  48  Ala.  512, 

288,  291 

Brackett    v.    Mountfort,    11    Me. 

115,  177 

Bradbury,  In  re,  93  N.  Y.  Supp. 

418,  192 

Bradford  v.  Boyer,  17  Ohio  St. 
388,  472 

V.  Hubbard,  25  Mass.  155, 

273,  274,  679 
V.  Prescott,  85  Me.  482,  679 

V.  Williams,  91  N.  C.  7,       23,  217 
Bradley  v.  Anderson,  5  Vt.  152,       17 
V.  Asher,  65  Mo.  App.  589,       539 
V.  Bush,  1  Cal.  App.  516.  701 

V.  Linn,  19  111.  App.  322,  419 

V.  Mann,  37  Mich.  1,  136,  170 

V.  Marshall,  54  111.  173,     336,  447 
V.  Pratt.  23  Vt.  378,  63 

V.  Trammel,  1  Hemp.  164,       447 
Bradshaw    v.    Van    Valkenburg, 

97  Tenn.  316,  303 

Braithwaite  v.  Coleman,  4  Nev. 

&  M.  654,  607 

Brake  v.  Corning,  19  Mo.  125, 

597,  598 
Braley  v.  Goff,  40  Iowa  76,  265 

Braly  v.  Henry,  71  Cal.  481, 

322,  333 


to  Sections.l 

Bramhall  v.  Bank,  36  N,  J.  L. 
243,  306 

V.  Beckett,  31  Me.  205,  353 

Branch  v.  Dawson,  33  Minn. 
399,  577 

.V.  Howard,  4  Tex.  Civ.  App. 

271,  184,  202,  208 

Branch   Bank  v.   James,  9   Ala. 

949,  953,  3 

Branch  Bank  at  Mobile  v.  Boy- 
kin,  9  Ala.  320,  651 
Brandegee  v.  Kerr,  7  Mart.  (La. 

N.  S.)   64,  41 

Brandenburgh  v.  Three  Forks 
Deposit  Bank,  19  Ky.  Law  R. 
1974,  45  S.  W.  108,  646 

Brandon  v.  Loftus,  4  How.  127,  542 
Brandt  v.  Mickle,  28  Md.  436,  502 
Brannum  v.  O'Connor,  77  Iowa 

632,  194 

Brant  v.  Barnett,  10   Ind.  App. 

653,  1,  3 

Bratton  v.  Lowry,  39  S.  C.  383,       58 
Bray  v.  Hadman,  5  Maule  &  S. 
68,  566 

V.  Pearson,  12  Ind.  334,  222 

Brayant  v.  Merrill,  55  Me.  515,       30 
Breckenridge   v.   Berrier,   3    Po- 
sey Unrep.  Cas.  (Tex.)  324,        122 
V.  Lewis,  84  Me.  349, 

22,  23,  241,  383 
Breedon     v.      Grigg,      8      Baxt. 

(Tenn.)  163,  312 

Breese  v.  Crumpton,  121  N.   C. 

122,  456,  684 

Breham     v.      German-American 

Bank,  144  U.  S.  173,  87 

Bremmerman    v.    Jennings,    61 

Ind.  334,  238,  439 

Brenerman    v.    Furniss,    90    Pa. 

St.  186,  342 

Brennan  v.  Vogt,  97  Ala.  647, 

510,  554 
Brent  v.  Bank,  2  Cranch  C.  C. 

(U.  S.)   517,  624 

Brett  V.  Marston,  45  Me.  401, 

143,  180 
Brewer  v.   Hobbs,    17   Ky.   Law 
Rep.  134,  51 

V.  Slater,  18  App.  D.  C.  48, 

119,  475 
Brewster  v.  Burnett,  125  Mass. 
68,  645 

V.  Scrader,    57    N.    Y.    Supp. 

606,  353 

Brey  v.  Hagan,  23  Ky.  Law  R. 

18,  182 

Brick  V.   Campbell,   50  N.  J.  L. 
282,  338 


xl 


TABLE    OF    CASES. 


[References  are  to  Sections.'] 


Brick  V.  Scott,  47  Ind.  299,  30 

Brickley  v.  Edwards,  131  Ind.  3, 

119,  671 
Bridenbeeker  v.  Lowell,  32  Barb. 

(N.  Y.)  9,  21 

Bridge  v.  Hubbard,  15  Mass.  96,  303 
V.  Livingston,  11  Iowa  57, 

119,  199 
V.  Tiernan,  36  Mo.  439,  338 

Bridgeport  Bank  v.  Dyer,  19 
Conn.  136,  496 

V.  Welch,  29  Conn.  475,     246,  354 
Bridgeport    City    Bank    v.    Em- 
pire   Stone    Dressing    Co.,   19 
How.  Prac.  51,  270 

Bridges    v.    Winters,    42    Miss. 

135,  167 

Briggs  V.  Beatrice  First  Nat. 
Bank,  41  Neb.  17,  47 

V.  Boyd,  37  Vt.  543,  388 

V.  Central  Nat.  Bank  of  City 

of  N.  Y.,  89  N.  Y.  182,       583 
V.  Ewart,  51  Mo.  245,  25 

V.  Latham,  36  Kan.  205,  212,  259 
V.  Moore,  14  Ala.  433,  596 

Brigham  v.  Marean,  7  Pick.  40,     418 
V.  Wentworth,  65   Mass.    (11 

Cush.)  123,  135 

Bright  V.  Judson,  47  Barb.    (N. 

Y.)   29,  242,  277 

Brighton  Five-Cent  Savings 
Bank  v.  Sawyer,  132  Mass. 
185,  600 

Brinckerhoff    v.    Foote,    1    Hoff 

Ch.  291,  305 

Brink  v.  Stratton,  72  N.  Y. 
Supp.  87,  680 

V.  Stratton,   98   N.   Y.    Supp. 

421,  688 

Brisbane   v.   Lesterjette,  1   Bay 

S.  C.)  113,  289,  291 

Briscoe  v.  Kinealy,  8  Mo.  App. 

76,  201,  208 

Bristol  V.  Warner,  19  Conn.  7,     183 
Bristol  Bank  &  T.  Co.  v.  Jones- 
boro  Bkg.  &  T.  Co.,  101  Tenn. 
545.  473 

British  American  Mortg.  Co.  v. 

Smith,  45  S.  C.  83,  419 

Brittain  v.  Pioneer  State  Bank 

(Wash.  1906).  87  Pac.  1051,         75 
Brittin  v.  Chegary,  21  N.  J.  L. 

625,  288 

Britton  v.  Fisher,  26  Up.  Can. 
Q.  B.  338,  341 

V.  Dierker,  46  Mo.  591.  152 

V.  Hall,  1  Hilt.   (N.  Y.)   528, 

433,  502 
V,  Milson,  19  Ont.  App.  96,     573 


Britton  v.  Nichols,   104  U.  S. 

757,  549 

Broadbelt  v.  Huddleson,  2  Wkly. 

Notes  Cas.  293,  28 

Broadway  Sav.  Bank  v.  Vorster, 

30  La.  Ann.  587,  75,  408 

Broadwav    Trust    Co.    v.    Man- 

heim,  95  N.  Y.  Supp.  93,  464 

Broadwell  v.   Stiles,  8  N.  J.  L. 

58,  673 

Brockway  v.  Mason,  3  Williams 

(Vt.)   519,  260,  328 

Bromley   v.   Hawley,   60  Vt.  50, 

12  Atl.  222,  477 

Brook  V.  Hook,  L.  R.  6  Exch.  89,  674 
V.  New  York  &c.  R.  Co.,  108 

Pa.  St.  529,  414 

Brooklyn  City  R.  Co.  v.  Repub- 
lic Bank,  102  U.  S.  14, 

241.  391,  476 
Brooklyn  Trust  Co.  v.  Toler,  138 

N.  Y.  675,  585 

Brookman  v.  Metcalf,  32  N.  Y. 

591,  241,  359,  627 

Brooks  V.  Allen.  62  Ind.  401, 

140,  141,  142,  143,  168 
V.  Christopher,    5    Duer    (N. 

Y.)   216,  238 

V.  Hey,  23  Hun  (N.  Y.)   372, 

383,  392 
V.  Martin,  43  Ala.  360,  653 

V.  Matthews,  78  Ga.  739,  25 

V.  Stachpole,  168  Mass.  537,  631 
V.  Struthers,  110  Mich.  562,  366 
V.  Sullivan,  129  N.  C.  190,  246 
V.  White,  2  Mete.  283,  686,  688 
V,  Whitson,     7     Sm.     &     M. 

(Miss.)   513,  314,  343 

V.  Wright.  13  Allen    (Mass.) 

72,  341 

Brou    V.    Bechel,    200    La.    Ann. 

254,  212,  461 

Broughton  v.  Fuller,  9  Vt.  373, 

138,  158 
V.  Manchester  Water  Works 

Co..  3  Barn.  &  A.  1,  84 

V.  West.  8  Ga.  248,  181 

Brower  v.  Rupert,  24  111.  182,       523 

Brown  v.  Bank  of  Abingdon,  85 

Va.  95,  553,  558 

V.  Callaway,  41  Ark.  418, 

359,  376 
V.  Chenoworth,  51  Tex.  469,  418 
V.  Clark,  14  Pa.  St.  469,  418 

V.  Coit,    1    McCord     (S.    C.) 

408,  321 

V.  Daggett.  22  Me.  30,  668 

V.  Davies,  3  Term  R.  80,  419 

V.  Davis,  3  T.  R.  86,  483 


TAELE   OF    CASES. 


xH 


[Refere7ices  are  to  Sections.'] 


Brown  v.  Donnell,  49  Me.  421,   52,  95 
V.  Everett-Ridley-Ragan    Co., 

Ill  Ga.  404,  288 

V.  Feldwert  (Oreg.),  80  Pac. 

414,  26,  137,  240 

V.  Ferguson,  4  Leigh.  37,         568 
V.  First  National   Bank,   115 

Ind.  572,  18  N.  E.  56,       651 
V.  First  National  Bank,  112 

Fed.  901,  392 

V.  First  Nat.  Bank,  132  Fed. 

450,  680 

V.  Fort,  1  Mart.  O.  S.   (La.) 

34,  200,  281 

V.  Foster,  4  Ala.  282,  679 

V.  Hall,     2     A.     K.     Marsh, 

(Ky.)   599,  183 

V.  Hoffelmeir,   74    Mo.   App. 

385,  475 

V.  Johnson,  127  Ala.  292,  174 

V.  Johnson,  135  Ala.  608,  183 

V.  Jones,  3  Port  (Ala.)  420,     170 
V.  Jones,  125  Ind.  375, 

532,  552,  566 
V.  Kewley,  2  Bos.  &  P.  516,  688 
V.  Kinsey,  81  N.  C.  245,  300 

V.  Lambeth,  2  La.  Ann.  822,     210 
V.  Leavitt,  31  N.  Y.  113,  241 

V.  Leckie,  43  111.  497,        596,  619 
V,  Merchants'  &  T.  Bank,  44 

N.  Y.  Supp.  645,  525 

V.  Montgomery,  20  N.  Y.  287,  118 
V.  Mott,    7    Johns.     (N.    Y.) 

361,  270,  280,  384 

V.  North,  21  Mo.  528,  127 

V.  Noyes,  2  Woodb.  &  M.  (U. 

S.)   75,  322 

V.  Orr,  29  Cal.  120,  41 

V.  Penfleld,  36  N.  Y.  473,  418 

V.  Pettit,  178  Pa.  17,  91,  474 

V.  Powell,  L.  R.  10  C.  P.  562,  414 
V.  Prophit,  53  Miss.  649,  302 

V.  Reed,  79  Pa.  St.  370,     138,  144 
V.  Rice's    Admr.,    26    Gratt. 

(Va.)  467,  116 

V.  Roberts,  90  Minn.  314, 

201,  208 
V.  Schintz    202  111.  509,  511 

V.  Schmitz,  203  111.  136,  679 

V.  Schmitz,  98  111.  App.  452,     581 
V.  Scott,  87  Ala.  453,  616 

V.  Smedley,  136  Mich.  65, 

198,  322 
V.  Smith,  122  Mass.  589,  689 

V.  Spofford,  95  U.  S.  474, 

307.  333.  439,  476 
V.  Straw,  6  Neb.  536,  538, 

139,  152,  153 


Brown  V.  Tabor,  5  Wend.  (N.  Y.) 

566,  385 

V.  Tarkington,    3    Wall.    (U. 

S.)    377,  292 

V.  Teague,  52  N.  C.  573,  503 

V.  Thompson,  79  Tex.  58,         383 
V.  Turner,  15  Ala.  832,  520 

V.  Turner,  7  Term  R.  630,       296 
V.  Tyler,  16  Vt.  22,  110 

V.  Union  Bank,  62  Miss.  754,  237 
V.  United  States  Home  &  D. 
Assn.    (Ky.  1890),  13  S. 
W.  1085,  95,  671 

V.  Wilcox,  15  Iowa  414,  303 

V.  Wilson,  45  S.  C.  519,  528 

Brown,    In    re,    Fed.    Gas.    No. 

1985,  523 

Brownell    v.    Winne,    29    N.    Y. 

400,  182 

Browning  v.  Carson,  163  Mass. 
255,  61,  502,  544 

V.  Fountain,    1    Duv.    (Ky.) 

13  387    388 

V.  Gosnell,  91  Iowa  448,  16,'  175 
Brownlee  v.  Arnold,  60  Mo.  79,  367 
Brownville  v.  Winnie,  29  N.  Y. 

400,  175 

Broyles    v.    Absher     (Mo.    App. 

1904),  80  S.  W.  703,  705,  25 

Bruce  v.  Carter,  7  Daly  (N.  Y.) 
37,  342 

V.  First  Nat.  Bank  of  Weath- 
erford,  25  Tex.  Civ.  App. 
295  246 

V.  Westcott,  3  Barb.   (N.  Y.) 

374,  136,  146,  160,  161 

Brumbach  v.  Bank,  46  Neb.  540, 

316    318 
Brush  V.  Barrett,  82  N.  Y.  400, '  523 
V.  Scribner,  11  Conn.  388, 

383,  385,  391 
Brutt  V.  Picard,  Ryan  &  M.  37,  153 
Bruvn  v.  Russell,  38  N.  Y.  St. 

Rep.  50,  186 

Bryan  v.  Brimm,  1  111.  59,  419 

V.  Harr,    21  App.   D.   C.  190, 

201,  135 

V.  Saltenstall,  3  J.  J.  Marsh. 

(Ky.)   672,  663 

Bryant  v.  Lord,  19  Minn.  396, 

524,  573 
V.  Merchants'  Bank,  8  Bush 

43,  524 

V.  Merrill,  55  Me.  515,  30,  35 

V.  Peck  &  Whipple  Co.,  154 

Mass.  460,  112 

V.  Pembler,  45  Vt.  487,  262 

V.  Vix,  83  III.  11,  365 


xlii 


TABLE    OF    CASES. 


[References  are  to  Sections.'\ 


Bryniolson  v.  Osthus,  12  N.  D. 

42,  240,  402 

Bryon  v.  Thompson,  11  Adol.  & 

E.  31,  161 

Buch  V.  Pope,  114  Ga.  334,  135 

Buchanan  v.  Adams,  49  N.  J.  L. 
636,  336 

V.  Drovers'  National  Bank,  6 

U.  S.  App.  506,  288 

V.  Mechanics'  Loan  &  Sav- 
ings Institution,  84  Md. 
430,  241,  246 

Buck  V.  Appleton,  14  Me.  284,       180 
V.  Troy  Aqueduct  Co.,  76  Vt. 

75,  56  Atl.  285,  403 

V.  Wood,  85  Me.  204,  27  Atl. 

103,  673 

Buckanan   v.   Findley,    9   Barn. 

&  C.  738,  621 

Bucklen  v.  Huff,  53  Ind.  474, 

137,  179 

Buckley     v.     Second     National 
Bank,  35  N.  J.  L.  400,  102 

V.  Seymour,     30     La.     Ann. 

1341,  511 

Buffalo   City   Bank  v.   Howard, 

35  N.  Y.  500,  94 

Bull  V.  Allen,  19  Conn.  101,  3 

V.  Jackson,   1    A.   K.    Marsh. 

(Ky.)    168,  208,  210 

V.  Kasson    First   Nat.    Bank, 

123  U.  S.  105,  582 

Bullard  v.  Dorsey,  7  Sm.  &  M. 

(Miss.)   9,  629 

V.  Raynor,  30  N.  Y.  197,  302 

V.  Smith,  28  Mont.  389,  195 

Bullen    V.    Milwaukee   Treading 

Co.,  109  Wis.  41,  80 

Bullock  V.  Ogburn,  13  Ala,  346, 

196,  198 
V.  Wilcox,    7    Watts.     (Pa.) 

328,  238,  439 

Bullpin    V.    Clark,    17    Ves.    Jr. 

365,  32,  33 

Bumatt  V.  Frazier  (Ky.),  40  S. 

W.  697,  630 

Buning  v.  Berteling,  5  Ohio  N. 

P.  167,  41 

Bunnell  v.  Butler,  23  Conn.  65, 

1,  198,  606 

Bunsall  v.  Harrison,  1  Mees.  & 

W.  611,  436 

Buntain  v.  Button,  21  111.  190,  596 
Bunzel  v.  Maas,  116  Ala.  68.  383,  384 
Buquo  V.  Bank  of  Erin  (Tenn.), 

52  S.  W.  775,  302 

Burch  V.  Hubbard,  48  111.  164,       685 

V.  Pope,  40  S.  E.  227,  250 


Burchfield  v.  Moore,  3  El.  &  Bl. 

683,  136,  164 

Burdette    v.    Robinson,    97    Ga. 

612,  302 

Burge  V.  Duden  (Mo.  App.),  78 

S.  W.  653,  680 

Burgen    v.    Straughan,    7    J.    J. 

Marsh.  (Ky.)  584,  301 

Burgess  v.  Merrill,  4  Taunt.  468,    68 
V.  Nash,  66  Vt.  44,  208 

V.  Northern    Bank,    4    Bush 

(Ky.)   600,  645 

Burgettstown  Nat.  Bank  v.  Nill, 

213  Pa.  456,  538 

Burgwin  v.  Babcock,  11  111,  28,     629 
Burham  v.  Baylis,  14  Hun   (N. 

Y.)  608,  242 

Burke  v.  Allen,  29  N.  H.  106,  72 

V.  Dulaney,    153    U.    S.    228, 

232,  307,  312,  313 

V.  McKay,  2  How.  66,        527,  571 
V.  Shreve,  2  N.  J.  L.  92, 

527,  569,  570 
V.  Ward  (Tex.  Civ.  App.),  32 

S.  W.  1047,  541 

Burkhalter    v.    Bank,    42    N.    Y. 
538,  576 

V.  Pratt,   1   City   Ct.   R.    (N. 

Y.)   22,  286 

Burkhart  v.  Hart,  36  Ore.  586,      288 
Burks    V.    Wonterline,    6    Bush 

(Ky.)   20,  302 

Burlingame  v.  Brewster,  79  111. 

515,  173 

Burnap  v.  Cook,  32  111.  168,  240,  415 
Burnes  v.  Scott,  117  U„  S.  582, 

307,  312 
Burnett    v.    Hawpes'    Exr.,    25 

Graft.    (Va.)   481,  59 

Burnham  v.  James,  100  Va.  493,    702 
V.  Merchants'     Exchange 

Bank,  92  Wis.  277,  246 

V.  Spring,  22  Me.  495,  523 

V.  Tucker,  18  Me.  179, 

419,  436,  635 
V.  Windram,  164  Mass.  313,     679 
Burnham,   H.   M.    &  Co.   v.   Mc- 

Cormick,  18  Utah  42,  524,  573 

Burns  v.  Goddard   (S.  C.  1905), 
51  S.  E.  915,  327 

V.  Ross,  17  Ky.  L.  Rep.  181,     257 
V.  Sparks,    26    Ky.    L.    Rep. 

688,  185,  447 

V.  Yocum    (Ark.),    98   S.   W. 

956,  574 

Burpee  v.  Smoot,  4  Wkly.  Notes 

Cas.    (Pa.)    186,  280 

Burrall  v.  Jones,  20  N.  Y.  Super. 
Ct.  404,  683 


TABLE   OF    CASES. 


xliii 


[References  are  to  Sections.'] 


Burrill  v.  Parsons,  71  Me.  282, 

119,  238 
V.  Smith,  7  Pick.  (Mass.)  291,  61 
V.  Stevens,  73  Me.  395,  472 

Burroughs  v.  Bank,  70  N.  C.  283,  425 
V.  Nettles,  7  La.  113,  419 

V.  Nors,  10  Barn.  &  G.  558,        628 
V.  Pacific  Guano  Co.,  81  Ala. 

255,  25 

V.  Richman,  13  N.  J.  L.  233, 

238,  69 

Burrow  v.  Zapp,  69  Tex.  474,  681 

Burrows  v.  Klunk,  70  Md.  451, 

23,  136,  146,  165 
V.  W.    U.    T.    Co.,    86    Minn. 

499,  470 

Burrus  v.  Life  Ins.  Co.,  124  N. 

C    9,  490,  499 

Burt  V.  Bennett,  137  Cal.  227,       257 

V.  Gwinn,  4  Harr.  &  J.  507,      303 

Burton  v.  Stewart,  3  Wend.  (N. 

Y.)  236,  208,  210,  211 

V.  Stewart,  62  Barb.    (N.  Y.) 

194,  79 

V.  Wynne,  55  Ga.  615,  419 

Burton's  Appeal,  93  Pa.  St.  214,     380 

Burwell  v.  Orr,  84  111.  465,     136,  165 

Bush  V.  Brown,  49  Ind.  573,   112,  184 

V.  Gilmore,    61    N.    Y.    Supp. 

682,  .  502 

V.  Peckard,    3    Harr.    (Del.) 

385,  119,  238,  241 

V.  Whittaker,  45  Misc.  75,        192 

V.  Wright,  10  Rob.  23,  439 

Bushley  v.  Reynolds,  31  Ark.  657,   323 

Bussard  v.   Levering,  6  Wheat. 

102,  510,  566 

Bute  V.  Brainerd,  93  Tex.  137,       679 
Butler  V.  Cams,  37  Wis.  61,      25,  26 
V.  Moore,  73  Me.  151,  644 

V.  Murison,  18  La.  Ann.  363,  436 
V.  Slocum,  33  La.  Ann.  170,  365 
V.  Sturges,  6  Blackf.    (Ind.) 

186,  407 

Butler  &  Co.  v.  McCall,  119  Ga. 

503,  262 

Butt  V.  Picard  Ryan  &  M.  37,        137 
Butterfield  v.  Davenport,  84  Ind. 

590,  114 

Button  V.  Belding,  48  N.  Y.  Supp. 

981,  534 

V.  Pratt,  (Ky.),  11  S.  W.  821,  524 

Buzzell  V.  Bennett,  2  Cal.  101,        63 

Byerly  v.  Walker  (La.  1907),  42 

So.  931,  56 

Byers  v.  Daugherty,  40  Ind.  198,      25 

V.  Harris,  56  Tenn.  652,    230,  255 

Bynum  v.  Apperson,  9  Heisk.  632,  514 


Byrd  v.   Bertrand,  7   Ark.   322, 

183,  199 
v.  Campbell    Printing    Press 

&  M.  Co.,  94  Ga.  41,  17 

V.  Craig,  1  Mart.  N.  S.  (La.) 

625,  202,  263 

Byrne   v.    Schwing,    6    B.   Hon. 
(Ky.)  199,  199 


Cabbell  v.  Knote,  2  Kan.  App. 

68,  367 

Cabot  Bank  v.  Morton,  4  Gray 

(Mass.)  156,  645 

Cadillac  State  Bank  v.  Cadillac 
Stave  &  Heading  Co.,  129 
Mich.  15,  80 

Cady  V.  Bradshaw,  116  N.  Y.  188, 

524,  525,  573 
V.  Goodnow,  49  Vt.  400,  304 

Cagle  V.  Lane,  49  Ark.  465,  238 

Cagwin  v.  Hancock,  84  N.  Y.  532, 

542,  87 

Cain  v.  Apann,  1  McMull  (S.  C.) 
258,  419 

V.  Gimon,  36  Ala.  168,  302 

Calder  v.  Billington,  3  Shep.  398,     447 
Caldwell  v.  Cook,  5  Litt.   (Ky.) 
180,  591 

V.  Dismukes   (Mo.  App.),  86 

S.  W.  270,  447 

V.  Hurley,  41  Wash.  296,  679 

V.  Jones,  115  Mich.  129,  41 

V.  Lawrence,  84  111.  161,  404 

V.  May,  1  Stew.  (Ala.)  425,      332 
V.  Nash,  190  Mass.  507,  40 

V.  Ruddy,  2  Idaho  5,  189 

Calfee  v.  Burgess,  3  W.  Va.  274,    665 
California  Bank  v.  Sayre,  85  Cal. 

102,  •  74 

California  Canneries  Co.  v.  Pa- 
cific Sheet  Metal  Co.,  144  Fed. 
986,  600 

Callahan  v.  Bank  of  Kentucky, 

82  Ky.  231,  562 

Callanan  v.  Shaw,  24  Iowa  441       653 
Callaway  v.  Price,  32  Graft.  1,        688 
Callen  v.  Fawcett,  58  Pa.  St.  113,     523 
Calvert  v.  Baker,  4  Mees.  &  W. 
417,  164 

V.  Roberts,  3  Camp.  343,  138 

Cambridge     Savings     Bank     v. 

Hvde,  131  Mass.  77,  169 

Camden  v.  Mullen,  29  Cal.  564,        55 
Camden  Bank  v.  Hall,  14  N.  J. 

L.  583,  135 

Cameron  v.  Chappell,  24  Wend. 
94,  304 


xliv 


TABLE   OF    CASES. 


[References  are  to  Sections.'] 


Camp  V.  Byrne,  41  Mo.  525,  95,  671 
V.  Carpenter,  52  Mich.  375,  96 
V.  Sturdevant,  16  Neb.  693,  456 
V.  Walker,    5    Watts.     (Pa.) 

482,  657 

Campbell   v.   Brown,   100   Tenn. 
245,  119,  473 

V.  Oilman,  26  111.  120,  663 

V.  Jones,    2    Tex.    Civ.    App. 

263,  291,  294 

V.  McCormack,  90  N.  C.  491, 

183,  186 
V.  Morgan,  111  Ga.  200,  304 

v.  Moulton,  30  Vt.  667,  263 

V.  Nixon,  25  Ind.  App.  90,         695 
V.  Pettingill,  7  Me.  126,  523 

V.  Rusch,  9  Iowa  337,  442 

V.  Upshaw,  26  Tenn.  184,         339 
V.  Upton.  73  N.  Y.  Supp.  1084,    485 
Campbell  Printing  Press  &  Mfg. 

Co.  V.  Hickok,  140  Pa.  St.  290,    327 
Campbell's  Estate,  In  re,  7  Pa. 

St.  100,  695 

Canadian    Bank   v.    Coumbe,    47 

Mich.  358,  203,  274 

Canadian  Bank  of  Commerce  v. 

Gurley,  30  U.  C.  C.  P.  583,  246 

Canadian    Nat.    Bank    v.    Fries- 

Breslin  Co.,  214  Pa.  395.      442,  479 
Canady  v.  Detrick,  63  Ind.  485,      261 
Canajoharie   Nat.   Bank   v.    Die- 
fendorf,    4    N.    Y.    Supp.    262, 

292,  476,  484,  488 
Canal  Bank  v.  Bank  of  Albany, 

1  Hill    (N.  Y.)   287,  641 

Candee  v.  Smith,  93  N.  Y.  349,       679 

Canfield     v.     Arnett,     17     Colo. 

App.  426,  68  Pac.  784,  629,  631 

V.  Ives,  18  Pick.  253,  405 

Cannam  v.  Farmer,  3  Exch.  698,      30 

Cannon  v.  Canfield,  11  Neb.  506,    123 

V.  Lindsey,  85  Ala.  198,  28 

v.  Serrel,  15  Colo.  App.  199, 

236,  240 
Canon  v.  Grigsby,  116  111.  151, 

23.  145,  168 
Capehart  v.  Moon,  5  Jones  Eq. 

(N.  C.)  178,  17 

Capell  V.  Long,  84  N.  C.  17,  419 

Capital  Bank  v.  Armstrong,  62 

Mo.  59,  170 

Capital  City   Ins.  Co.  v.  Quinn, 

73  Ala.  560,  199,  304,  699 

Capital   National   Bank  v.   Rob- 
inson, 41.  AVash.  454,  685 
Capital     Sav.    &    Trust    Co.    v. 
Montpelier  Sav.  Bank  &  Trust 
Co.,  77  Vt.  189,                       119,  477 


Caponigri   v.   Altiere,    48    N.   Y. 

Supp.  808,  614 

Capps  V.  Smith,  3  Scam   (111.) 

177,  202 

Cardwell  v.  Martin,  9  East  190,      138 
Carey  v.  Miller,  25  Hun  (N.  Y.) 

28,  28 

Carey-Lombard  Lumber  Co.  v. 
First  Nat.  Bank  of  Ballinger, 
86  Tex.  299,  510 

v.  First  National  Bank  of 
Ballinger  (Tex.  Civ. 
App.),  24  S.  W.  260,  534 

Caries  v.  Tattersall,  2  Man.  &  G. 

890,  137,  150,  161 

Carithers  v.  Levy,  111  Ga.  740,       122 

Carleton  v.  Whitcher,  5  Vt.  196,     288 

v.  White,  99  Ga.  384,  570 

v.  Woods,  28  N.  H.  290,  288 

Carlisle  v.  Hill,  16  Ala.  19,  525 

V.  Wishart,  11  Ohio  172,  241 

Carlton  v.  Bailey,  27  N.  H.  230,     288 

Carman  v.  Harrison,  13  Pa.  St. 

158,  621 

Carmena  v.  Bank  of  Louisiana, 

1  La.  Ann.  369,  568 

Carmichael  v.  Bank  of  Pennsyl- 
vania, 4  How.  567,  498,  533 
Carnegie  Steel  Co.  v.  Chattanoo- 
ga (Tenn.  Ch.  App.),  38  S.  W. 
102,                     .      525,  527,  540,  544 
Carnwright  v.  Gray,  127  N.  Y. 

92,  183,  186 

Carolina  Nat.  Bank  v.  Wallace, 

13  S.  C.  347,  557,  559 

Carothers    v.    Richards,    17    Ky. 

Law  Rep.  42,  30  S.  W.  211,  627 

Carpenter  v.  Bank,  106  Pa.  St. 
170,  353 

V.  First   Nat.   Bank,   119   111. 

352,  28 

V.  Longan,  16  Wall.  271,  366 

V.  McClure,  37  Vt.  127,  691 

V.  McClure,  39  Vt.  9,  125,  336 

V.  Murphree,  49  Ala.  84,  685 

V.  National  Bank  of  the  Re- 
public, 106  Pa.  St.  170,      380 
V.  Phillips,    2    Houst.    (Del.) 

524,  208 

V.  Rosenbaum,  73  Ark.  259,     702 
Carr  v.  Jones  (Wash.),  69  Pac. 
646,  701 

V.  National     Security    Bank, 

107  Mass.  45,  581 

Carridine  v.  Wilson,  61  Miss.  573, 

241 

Carrier  v.  Sears,  4  Allen  336, 

2,  72,  133,  307,  679 


TABLE    OF    CASES, 


xlv 


[References  are  to  Sections.} 


Carrington    v.    Odom,    124    Ala. 
529,  516,  566 

V.  Turner,  101  Md.  473,     485,  689 
V.  Waff,  112  N.  C.  115,       310,  312 
Carroll  v.  Sweet,  37  N.  Y.  St.  R. 
868,  574,  583,  585,  586 

V.  Warren  (Ala.  1904),  37  So. 

687,  164 

Carroll    County    Sav.    Bank    v. 

Strather,  28  S.  C.  504,      288,  681 
Carruthers    v.    West,    11    Q.    B. 

143,  282 

Carskaddon    v.    Miller,    25    Pa. 

Super.  Ct.  47,  418 

Carson    v.    Alexander,    34    Miss. 
528,  523 

V.  Buckstaff,     57     Neb.     262, 

369,  613 
V.  Reed,  137  Cal.  253,  681 

Carter    v.    Bolin,    11    Tex.    Civ. 
App.  283,  659,  669 

V.  Burley,  9  N.  H.  558,  530 

V.  Christie,  30  Ga.  813,  239 

V.  Eighth  Ward  Bank,  67  N. 

Y.  Supp.  300,  442 

V.  Flower,  16  Mees.  &  W.  75,  570 
V.  McClintock,  29  Mo.  464,  116 
V.  Moses,  39  111.  539,  302 

V.  Moulton,  51  Kan.  9,  318 

V.  Odom,  121  Ala.  162, 

553,  554,  557,  565 

V.  Steele,  83  Mo.  App.  211,         90 

Cartwright  v.  Gardner,  5  Cush. 

(Mass.)  273,  17 

V.  Gray,  127  N.  Y.  92.       183,  186 

Caruth  v.  Thompson,  16  B.  Mon. 

(Ky.)  572,  394 

Cary  v.  James,  7  Ala.  640,  606 

Caryl  v.  Williams,  7  Lans.  416,      682 
Casco   Bank    v.    Keene,    53    Me. 

103,  74,  674 

Casco  Nat.  Bank  v.  Shaw,  79  Me. 

376,  556 

Case  V.  Burt,  15  Mich.  82,      492,  528 
V.  Grim.  77  Ind.  565,  208 

V.  Maxey,  6  Cal.  276,  208 

V,  Mechanics'     Banking    As- 
soc, 4  N.  Y.  166,  408 
V.  Smith,  107  Mich.  416,  288 
V.  Watson,  21  La.  Ann.  731,     417 
Case,  etc.,  Co.  v.  Wolfenden,  63 

Wis.  185,  472 

Case  Nat.  Bank  v.  Shaw,  79  Me. 

376,  562 

Casey-Swazy    Co.    v.    Anderson 

(Tex.  Civ.  App.),  83  S.  W.  840,   680 
Cason  V.  Bank,  97  Ky.  487,  145 

V.  Grant    County    Deposit 

Bank,  97  Ky.  487,  23 


Cason  V.  Wallace,  4  Bush  (Ky.) 


175 


Cassel  V.  Dows,  1  Blatchf.    (U. 

S.)  335,  180 

Cassell  V.  Davis,  1  Black's  C.  C. 
Rep.,       .  491 

V.  Morrison,  8  Bradw.    (111.) 

175,  238 

Cassidy   v.    Kreamer    (Pa.),   13 
Atl.  744,  565 

v.  Saline    County    Bank,    14 

Okla.  532,  74,  89 

Castle  v.  Rickly,  44  Ohio  St.  490,   504 
Caswell  V.  Railroad  Co.,  50  Ga. 

70,  359 

Catbell  V.  Goodwin,  1  Har.  &  G. 

(Md.)   468,  61 

Catlett   V.   McDowell,   4   Blackf. 

(Ind.)  556,  208 

Catlin  V.  Henton,  9  Wis.  476,        112 
Catskill  Bank  v.  Stall,  15  Wend. 

(N.  Y.)   364,  89,  90 

Catt  V.  Oliver,  98  Va.  580,  313 

Catton  V.  Sampson,  9  Adol.  &  E. 

136,  149 

Caulkins  v.  Fry,  35  Conn.  170,        69 

V.  Whisler,  29  Iowa  495,      23,  98 

Causey  v.  Snow,  122  N.  C.  326,       469 

Cawein    v.    Brewinski,    6    Bush 

457,  576 

Cayuga  County  Bank  v.  Warden, 

1  N.  Y.  413,  502 

Cazet  V.  Field,  9  Gray  329,     291,  295 

Cecil  V.  Board,  30  La.  Ann.  34,       87 

V.  Hicks,  29  Grat.  (Va.)   1,       292 

Cecil  Bank  v.  Farmers'  Bank,  22 

Md.   148,  622 

V.  Held,  25  Md.  562,  241 

Central  Bank  v.  Kimball,  76  N. 

Y.  Supp.  227,  681 

v.  Willard,  17  Pick.    (Mass.) 

150,  41,  338 

Central   Citv   Bank  v.   Rice,   44 

Neb.  594,  63  N.  W.  60,  418 

Central  Nat.  Bank  v.  Adams,  11 
S.  C.  452,  555,  570 

V.  Copp,  184  Mass.  328,  288 

v.  Dreydoppel,  134  Pa.  St.  499,  256 
V.  Pratt,  115  Mass.  539,  306 

V.  Valentine,     IS     Hun      (N. 

Y.)'417,  '  243 

Central   Ohio  R.  Co.  v.  Thomp- 
son, 2  Bond   (U.  S.)   296,  597 
Central  Park  v.  Lang,  1  Bosw. 

202,  456,  463 

Central   Railroad   Co.   v.    First 
National  Bank  of  Lynchburg, 
73  Ga.  383,  622 


slvi 


TABLE   OF   CASES. 


[References  are  to  Sections.'] 


Central  Savings  Bank  v.  O'Con- 
nor, 132  Mich.  578,  224 
Central  School  Supply  House  v. 

Donovan,  70  111.  App.  208,  489 

Central  Trust  Co.  v.  Burton,  74 
Wis.  329,  43  N.  W.  141,  646 

V.  First  Nat.  Bank,  101  U.  S. 

68,  419 

Chadwick  v.   Eastman,   53   Me. 

12,         ■  174 

Chaffee     v.     Garrett,     6     Ham. 
(Ohio)    421,  263,  288 

V.  Memphis,   C.   &  N.  W.  R. 

Co.,  64  Mo.  193,  270 

Chafin  v.  Bank,  7  Heisk.  499,  306 
Chalfoin  v.  Rich,  77  Cal.  476,  504 
Challis  V.  McCrum,  22  Kan.  157, 

302,  348 
Chamberlain    v.     Gorham,     20 

Johns.  144,  446 

Chambers  v.    Gilbert,   68    Minn. 
■    183,  302 

Chambers  County  v,  Clewes,  21 

Wall.  317,  476 

Champenois    v.    Collins     (Miss. 

1904),  36  S.  E.  72,  400,  401 

Champion  v.  Ulmer,  70  111.  322,      25 

Chancely  v.  Bailey,  37  Ga.  532,      293 

Chandler  v.  Dorsett,  Finch  431,     648 

Chapin  v.  Dake,  57  111.  295,    291,  297 

Chapman   v.   Black,    2   Barn.   & 

Aid.  590,  303 

v.  Kellogg,  102  Mass.  246,        679 

V.  Niantic  Nat.  Bank  (R.  I.), 

69  Atl.  646,  701 

V.  Ogden,  56  N.  Y.  Supp.  73, 

194,  553,  554 
■V.  Rose,  56  N.  Y.  137,  28,  120 
V.  Rose,   44   How.   Prac.    (N. 

Y.)    364,  25 

V.  Skellie,  65  Ga.  124,  646 

V.  Steiner,  5  Kan.  App.  326,     366 
V.  Wagner   (Neb.),  96  N.  W. 

412,  698 

Chappell     V.     Phillips,     Wright 
(Ohio)    372,  699 

V.  Spencer,  24  Barb.   (N.  Y.) 

584,  182 

Charles    v.    Marsden,    1    Taunt. 

223.  282 

Charles  River  Nat.  Bank  v.  Da- 
vis, 100  Mass.  413,  74,  676 
Charlisle  v.  Terre  Haute  &c.  R. 

R.  Co.,  6  Ind.  316,  312 

Charlton  v.  Reed,  61  Iowa  166, 

136.  162 
Charnoch  v.  Anderson,  11  N.  Y, 
Supp.  639,  278 


Chase  v.   Hathorn,   61  Me.  505, 

388,  673 
V.  Kellogg,  59  Hun  623,  447,  455 
V.  Senn,  35  N.  Y.  St.  Rep.  36, 

198,  202 
Chase  Nat.  Bank  v.  Faurot,  149 

N.  Y.  536,  17,  21,  306,  314 

Chatham   Bank  v.   Allison,   15 
Iowa   357,  534 

V.  Betts,  37  N.  Y.  356,  303 

Chatham  Nat.  Bank  v.  Pratt,  135 

N.  Y.  423,  681 

Chaxournes  v.  Edwards,  20  Mass. 

5,  281 

Cheetham  v.  Ward,  1  Bos.  &  P. 

630,  685 

Cheever  v.  Pittsburgh,  S.  &  L. 
E.  R.  R.  Co.,  150  N.  Y.  59,  66, 

476,  483,  484 
Chelsea   Bank   v.    Goodsell,   107 

Mass.  149,  472 

Chemical    Bank    v.   Wagner,    93 

Ky.  525,  370 

Chemical  National  Bank  v.  Col- 
well  (Sup.),  9  N.  Y.  Supp. 
285,  483 

Chemical  National  Bank  of  New 
York  V.  Kellogg,  183  N.  Y.  92, 
aff'd  87  App.  Div.  633,       448,  482 
Chemung  Bank  v.   Bradner,  44 

N.  Y.  680,  89 

Chenault  v.  Bush,  84  Ky.  528,       595 
Cheney  v.  Cooper,  14  Neb.  415        303 
V.  Higginbotham,     10     Ark. 

273,  185 

V.  Janssen,  20  Neb.  128,  303 

Cherry  v.  Miller,  7  Lea  (Tenn.) 
305,  341 

v.  Sprague,   187   Mass.   113, 

502,  545 
Chesbrough  v.  Wright,  41  Barb. 

(N.  Y.)   28.  79 

Cheshire  v.  Taylor,  29  Iowa  492, 

525,  538 
Chester  v.  Door,  .41  N.  Y.  279. 

239,   282.  419 
Cheurout  v.  Bee,  44  W.  Va.  103, 

183.  186 
Chevallier's  Adm'r  v.  State,  10 

Tex.  315,  638 

Chicago,   Danville  &  Vincennes 

R.  R.  Co.  V.  Fields,  86  111.  270,  617 
Chicago    Title    &    Trust    Co.    v. 
Bradv,  165  Mo.  197,  198,  269 

v.  Brugger,  196  111.  96.  474 

Chicago  Trust  &  S.  Bank  v. 
Nordgi-en,  157  111.  663,  42  N. 
E.  148,  460 


TABLE   OF   CASES. 


xlvii 


[References  are  to  Sections.'] 


Chicopee  Bank  v.  Chapin,  49 
Mass.  40,  369,  376,  384 

V.  Philadelphia  Bank,  8  Wall. 

(U.  S.)  641,  516 

Child  V.  McKean,  2  Miles  (Pa.) 
192,  198 

V.  Moore,  6  N.  H.  33,  186 

Childerston  v.  Hammond,  9  Serg. 

&  R.  68,  418 

Childs  V.  Eureka  Powder  Works, 

44  N.  H.  354,  273 
Chiles  V.  Corn,  3  A.  K.  Marsh. 

230,  447,  472 

Chillicothe    Bank    v.    Dodge,    8 

Barb.   (N.  Y.)   233,  84 

Chilton  V.  Town  of  Gratton,  82 

Fed.  873,  87 

Chipman  v.  Tucker,  38  Wis.  43,    317 
Chisholm  v.   City   of   Montgom- 
ery,  2  Woods  C.  C.  584,  Fed. 
Cas.  No.  2686,  87 

Chism  V.  Bank,  96  Tenn.  641,      102 
V.  Toomer,  27  Ark.  108  135 

Chittenango  First  Nat.  Bank 
V.  Morgan,  6  Hun  (N.  Y.) 
346,  89 

Christiansen  v.  Farmers'  Ware- 
house Assn.,  5  N.  D.  438,  366 
Chrity  v.  Ogle,  33  111.  295,  208 
Church  V.  Barlow,  9  Pick.  547,      568 
V.  Clapp,  47  Mich.  257,  419 
V.  Fowfe,  142  Mass.  52,             177 
V.  Howard,  17  Hun    (N.  Y.) 

5,  167 

V.  Muir,  33  N.  J.  L.  318,    125,  288 
Churchill  v.  Turnage,  122  N.  C. 

426,  302 

Citizens'  Bank  v.  Cowles,  180  N. 
Y.  346.  243.  439,  471 

V.  Oilman,  18  La.  Ann.  222,      241 
V.  Greenbrugh,  60  App.  Div. 

(N.  Y.)    225,  87 

V.  Payne,    18    La.   Ann.    222, 

243,  376 
V.  Strauss,  26  La.  Ann.  736,     240 
Citizens'  Bank  of  Louisiana  v. 

Grand,  33  La.  Ann.  976,  343 

Citizens'   Nat.   Bank   v.    Brown, 

45  Ohio  St.  39,  513 
V.  Cade,  73  Mich.  449,  569 
V.  Cammer  (Tex.  Civ.  App.), 

86  S.  W.  625,  447 

V.  Davis,  62  N.  H.  695,  44 

V,  Donnell,  172  Mo.  384, 

302,  305,  306 
V.  Richmond,  121  Mass.  110,  165 
V.  Smith,  55  N.  H.  593,  28 

V.  Wintler,  14  Wash.  558,         402 


Citizens'  Sav.  Bank  v.  Blakes- 
ley,  42  Ohio  St.  645,  80 

v.  Hays,  16  Ky.  L.  Rep.  505, 

560,  561 
V.  Vangham    (Mich.),   73   N. 

W.  143,  607 

Citizens'  State  Bank  v.  Adams, 
91  Ind.  280,  102 

V.  Nore     (Neb.),    93    N.    W. 

160,  464 

City  Bank  v.  Barnard,  1  Hall 
(N.  Y.)  70,  79,  288 

V.  Perkins,  29  N.  Y.  554, 

75,  95,  130,  366,  418 
V.  Taylor,  60  Iowa  66,  699 

City  Bank  of  Dowagiac  v.  Dill, 

102  Mich.  305,  419 

City  Bank  of  Hartford  v.  Press 

Co.,  56  Fed.  260,  671 

City  Deposit  Bank  of  Columbus 
V.  Green  (Iowa),  103  N.  W. 
96,  243,  310,  471 

City  National  Bank  v.  Kusworn, 
91  Wis.  166,  113,  662 

V.  Thomas,  46  Neb.  861,  402 

City  Nat.  Bank  of  Dayton  v. 
Clinton  County  Nat.  Bank,  49 
Ohio  St.  351,  525,  544 

City  of  Concord  v.  Pillsbury,  33 

N.  H.  310,  640 

City  of  Elizabeth  v.  Force,  29  N. 

J.  Eq.  587,  151 

City   Savings   Bank   v.   Hopson, 

53  Conn.  453,  504,  526,  545 

Claffin  V.  Torlina,  56  Mo.  369,        288 
Clafflin    V.    Boorum,    122    N.    Y. 
385,  292,  302,  303,  306 

V.  Farmers'  Bank,   25   N.  Y. 

293,  119,  124,  370,  440 

V.  Rowlinson,    2    Kan.    App. 

82,  376 

Claflin  V.  Tushler,  66  Barb.  (N. 

Y.)  649,  312 

Clanin    v.    Easterly   Harvesting 

Mach.  Co.,  118  Ind.  372,      307,  314 

Clapp  V.  Hanson,  15  Me.  345,  304 

V.  Mock,  8  Ala.  122,  392 

Claridge  v.   Dalton,  4   Maule  & 

Selw.  229,  523 

V.  Kleet,  15  Pa.  St.  255,  322 

Clark  V.  Allen,  132  Pa.  St.  40,        339 

V.  Ash,  5  N.  Brunsw.  211,        208 

V.  Bryce,  64  Ga.  486, 

315,  316,  318 
V.  Butts,  73  Minn.  361,  403 

V.  Castleman,  1  J.  J.  Marsh. 

69,  523 


xlviii 


TABLE   OF    CASES. 


[References  are  to  Sections.1 


Clark  V.  City  of  Des  Moines,  19 

Iowa  199,  87 

V.  Condit,  11  Mo.  79,  321 

V.  Day   (N.  J.),  60  Atl.  39,  302 

V.  Dederick,  31  Md.  148,  419 
V.  Ely,  2  Sandf.  Ch.   (N.  Y.) 

166,  242 
V.  Gallagher,  20  How.  Pr.  (N. 

Y.)   308,  240 

V.  Havard,  111  Ga.  242,  303 

V.  Hawkins,  5  R.  I.  219,    604,  612 

V.  Johnson,  54   111.  296,  20 

V.  Loker,  11  Mo.  97,  241 

V.  Loomis,  5  Duer  468,  303 

V.  Mallory,  185  111.  227,  679 
V.  Marlow,  20  Mont.  249, 

183  186 

V.  Moses,  50  Ala.  326,              '  502 
V.  Peabody,    9    Shep.     (Me.) 

500,                                  208,  266 

V.  Pease,  41  N.  H.  414,  114 
V.  Porter,  90  Mo.  App.  143, 

119  238 

V.  Ricker,  14  N.  H.  44,      288*,  295 
V.  Ross    (Iowa),   60    N.    W. 

627,  343 

V.  Sigourney,  17  Conn.  511,  263 
V.  Sisson,  4  Duer  408 

303,  304,  305 
V.  Stackhouse,  2  Mart.  (O.  S. 

La.)  319,  119 
V.  Tanner,  100  Ky.  275, 

122,  243,  439,  441 

V.  Thayer,  105  Mass.  216,  383 

V.  Tryon,  23  N.  Y.  Supp.  780,  418 

V.  Valentina,  41  Ga.  143,  43 
V.  Whitaker  (La.),  41  So.  580, 

439,  445 

V.  Whittaker,  50  N.  H.  474,  428 

V.  Young,  1  Cranch  181,  679 

Clark,  Appeal  of,  57  Conn.  565,  193 

Clark  Co.  v.  Rice,  106  N.  W.  231,  292 

Clarkemont  Bank  v.  Wood,  10  Vt. 

582,  3 
Clark  Nat.  Bank  v.  Bank  of  Al- 
bion, 52  Barb.  (N.  Y.)  592,  243 
Clause  V.  Press  Co.,  118  111.  612,  600 
Clauson    v.    Gustin,   5   N.    J.    L. 

821,  180 
Claxon    V.    Demaree,    14    Bush 

(Ky.)  172,  17 

Claxton  V.  Swift,  2  Show.  441,  679 

Clay  V.  Cottrell,  18  Pa.  St.  408,  419 
V.  Layton,  134  Mich.  317, 

194,  214 
V.  McClanahan,    5    B.    Mon. 

(Ky.)   241,  650 

Clemens  v.  Loggins,  1  Ala.  622,  447 


Clement  v.  Clement,  69  Wis.  599,  94 
V.  Leverett,  12  N.  H.  317, 

21,  203,  380,  390 
V.  Reppard,   15    Pa.    St.   Ill, 

184,  195 
V.  Sigur,  29  La.  Ann.  798,         239 
Clements  v.  Loggins,  2  Ala.  514, 

654,  656 
Cleveland,  City  of,  v.  Cleveland, 
C,   C.  &  St.  L.   Ry.,  93   Fed. 
113,  417 

Cleveland  School  Furn.  Co.  v. 
Greenville  (Ala.  1906),  41  So. 
862,  87 

Clews  V.  Bank  of  New  York,  89 

N.  Y.  418,  581,  642 

Clifford  V.  Parker,  2  Man.  &  G. 

909,  154 

Clifford  Banking  Co.  v.  Dono- 
van Commission  Co.,  195  Mo. 
262,  22,  119,  144,  288 

Clifton  Forge  v.  Alleghany  Bank, 
92  Va.  283,  87,  392 

v.  Brush  Electric  Co.,  92  Va. 

289,  87 

Clinch  Valley  Coal  &  I.  Co.  v. 

Willing,  180  Pa.  St.  165,  322 

Cline  V.  Guthrie,  42  Ind.  227,  13 

Clinton  Nat.  Bank  v.  Graves,  48 

Iowa  228,  29 

V.  Stieger,  67  N.  J.  Eq.  522,     400 

Clopper  V.  Union  Bank,  7  Har. 

&  J.    (Md.)   92,  337,  338 

Clopton  V.  Elkin,  49  Miss.  95,        128 
Close  V.  Fields,  2  Tex.  232,  23 

Closz  V.  Miracle,  103  Iowa  198. 

520,  523,  524 
Clothier  v.  Adriance,  51   N.  Y. 

322  119    126 

Cloug'h  V.  Baker,  48  N.  H.  254,  '  324 

V.  Holden,  115  Mo.  336,     511,  515 

Clute  V.  Frazier,  58  Iowa  268,      419 

Coakley  v.  Christie,  20  Neb.  509, 

260  328 
Coates  v.  Preston,  105  111.  470.  '  631 
Coatsworth    v.    Barr,    11    Mich. 

199,  302 

Cobb  V.  Arnold,  49  Mass.  403,      195 
V.  Doyle,  7  R.  I.  550,  246 

Cobleskill    First    Nat.    Bank    v, 

Emmitt,   52  Kan.  603.  402 

Coburn  v.  Odell,  30  N.  H.  540,     288 

V.  Webb,  56  Ind.  96,  135,  168 

Cochran    v.    Atchison,    27    Kan. 

728,  104 

v.  Foxchase  Bank,  209  Pa. 

34.  58  Atl.  117,         488 
V.  Nebeker,  48  Ind.  459,     171 


TABLE    OF    CASES. 


slix 


[References  are  to  Sections.'\ 


Cochran  v.  Siegfried   (Tex.  Civ. 

App.),  75  S.  W.  542,  408 

Cochrane  v.    Dickenson,   40   La. 

Ann.   127,  380 

Cocke  V.   Branch   Banli,  3  Ala. 
175,  91 

V.  Chaney,  14  Ala.  65,  376 

Cocker    v.    Cocker,    2    Mo.    App. 

451,  418 

Cockey  v.   Forrest,  3   Gill  &  J. 

482,  303 

Cockran  v.  Perkins,  40  So.  351,     222 
Cocks  V.  Nash,  9  Bing.  341,  679 

Coco   V.    Calihan,    21    La.    Ann. 

624,  292 

Codwise   v.   Gleason,   Fed.   Cas. 

No.  2939,  280 

Coffee    V.    Planters'     Bank    of 

Tenn.,  13  How.    (U.  S.)    183,     297 
Coffelt  V.   Wise,    62    Ind.    451, 

105,  114 
Coffin    V.    Anderson,    4    Blackf. 
(Ind.)  395,  96 

V.  Grand    Rapids  Co.,   61   N. 

Y.  Super.  Ct.  51,  311 

V,  President  Grand  Rapids 
Hydraulic  Co.,  18  N.  Y. 
Supp.  783,  362 

Coffman   v.   Bank  of  Kentucky, 
41  Miss.  212,  465,  699 

V.  Lookout      Bank,      5      Lea 

(Tenn.)    232,  106 

V.  Wilson,  2  Mete.  (Ky.)  542,  315 
Coggill  V.  Bank,  1  N.  Y.  113,  673 
Coghlin  V.  May,  17  Cal.  515, 

282,  419 

Cogwill  V.  Petifish,  51  Mo.  App. 

.    264,  28 

Cohen  v.  Prater,  56  Ga.  203,   446,  449 

V.  Teller,  93  Pa.  St.  123,     74,  673 

Colby  V.  Lyman,  4  Neb.  429,         667 

V.  Parker,  34  Neb.  510.  240 

Cole  V.  Carver,  6  East  109,  301 

V.  Hills,  44  N.  H.  227, 

137,  159,  302 
V.  Saulpaugh,  48  Barb.  104,  353 
V,  Temple,   142    Ind.   498,   41 

N.  E.  942,  646 

V.  Williams,  12  Neb.  440,  28 

V.  Wintercost,  12  Tex.  118.       523 

Coleman  v.  Post,  10  Mich.  422,     352 

V.  Riches    16  C.   B.  104,  414 

v.  Smith,  55  Ala.  368,  359 

Collier  v.  Mahan,  21  Ind.  110,        348 

V.  Waugh,  64  Ind.  456,  288 

Colliger    v.    Francis,    61    Tenn. 

422.  191 

Collingwood  v.   The   Merchants' 
Bank,  15  Neb.  118,         491,  496,  685 
Joyce  Defenses — iv 


Collins  V,  Allen,  12  Wend.    (N. 
Y.)  356,  635 

V.  Gilbert,  94  U.  S.  754,  240,  243 
V.  Makepeace,  13  Ind.  448,  153 
V.  Martin,  1  Bos.  &  P.  648, 

21,    199,   233,    270,   390 
V.  McDowell,  65  Minn.  10,         474 
V.  Schmidt,  126  Wis.  227,         473 
Colonial  &  N.  S.  Mtg.  Co.  v.  Brad- 
ley, 4  S.  D.  158,  47 
V.  Stevens,  3  N.  D.  265,  47 
Colorado  National  Bank  of  Den- 
ver V.  Boettcher,  4  Colo.  185,     581 
Colston  V.  Pemberton,  47  N.  Y. 

Supp.  1110,  212 

Columbus   City   Bank  v.   Bruce, 

17  N.  Y.  507,  670 

Columbus  Ins.  Co.  v.  First  Nat. 

Bank,  73  Miss.  96,  463 

Colyei  V.  Craig,  11  B.  Mon.  (Ky.) 

73,  626 

Comanche  National  Bank  v.  Dab- 
ney  (Tex.  Civ.  App.),  44  S.  W. 
413,  306,  615 

Combes  v.  Chandler,  33  Ohio  St. 

178,  380 

Comelander  v.  Bird,  11  Ala.  913,  324 
Comings  v.  Leedy,  114  Mo.  454,  30 
Commerce  Bank  v.  Bemero,  17 

Mo.  App.  313,  74 

Commercial  &  Farmers'  Bank  v. 

Patterson,  2  Cranch  C.  C.  540,    172 
Commercial  Bank  v.  Atherton,  1 
Smedes  &  M.  641,  443 

V.  Barkendale,  36  Mo.  563,  523 
V.  Bissett,    7    Manitoba  Rep. 

586,  517 

V.  Claiborne,  5  How.  (Miss.) 

301,  387 

V.  Clarke,  180  Mass.  249,  390 

V.  Cuvillier,  18   Up.   Can.    Q. 

B.  378,  682 

V.  First    National    Bank,    30 

Md.  11,  99,  101,  641 

V.  J.  K.  Armsby,  120  Ga.  74,  414 
V.  St.  Croix  Mfg.  Co.,  10  Shep. 

(Me.)  280,  85 

Commercial  Bank  of  Albany  v. 

Hughes,  17  Wend.  94,  573 

Commercial  Bank  of  Kentucky 

V.  Varnum,  49  N.  Y.  269,  527 

Commercial  Bank  of  Natchez  v. 

Perry,  10  Rob.  61,  490 

Commercial  Nat.  Bank  v.  Arm- 
strong. 148  U.   S.  50,  583 
Commercial  Nat.  Bank  of  Syra- 
cuse V.  Zimmerman,  185  N.  Y. 
210,  508 


TABLE   OF    CASES. 


[References  are  to  Sections.] 


Commissioners  Jefferson  Co.  v. 

Fox,  1  Morris  48,  699 

Commissioners  of  Marion  Co.  v. 

Clark,  94  U.  S.  278,  476 

Commonwealtti  v.  Emigrant  In- 
dustrial Sav.  Bank,  98  Mass. 
12,  151 

Compton  V.  Oilman,  19  W.  Va. 
312,  576,  582,  589 

V.  Smith,   120  Ala.   233,  47 

Comstock  V.  Draper,  1  Man. 
(Mich.)    481,  419 

V.  Hier,  73  N.  Y.  269,  246 

Conable  v.   Smith,  61   Hun   (N. 

Y.)  185,  15  N.  Y.  Supp.  924,  673 
Conant  v.  Wills,  1  McLean  427,  505 
Concord  Granite  Co.  v.  French, 

65  How.  Prac.  317,  697 

Cone  V.  Baldwin,  12  Pick.  545,      439 
V.  Rees,  11  Ohio  Cir.  Ct.  R. 

632,  3 

Conger  v.  Babbet,  67  Iowa  13,   9,  302 
V.  Bean,  58  Iowa  321,  118 

Congregational    Society  v.   God- 

dard,  7  N.  H.  430,  312 

Congress  Brewing  Co.  v.  Haben- 

icht,  82  N.  Y.   Supp.  481,  573 

Conklin    v.    Roberts,    36    Conn. 

461,  291,   297 

Conkling  v.  Underbill,  3  Scam. 

(111.)   388,  303 

V.  Vail,  31  111.  166,  122 

Conley  v.  Sims,  71  Ga.  161,  291 

Conn  V.  Coburn,  7  N.  H.  368,  372, 

63,  64 
V.  Gano,  1  Ohio  483,  516 

Connecticut  Trust  &  Safe  Dep. 
Co.  V.  Fletcher,  61  Neb.  166. 

359    366 
V.  Trumbo   (Neb.),  90  N.  W.' 

216.  359    698 

Connell  v.  Bliss,  52  Me.  476,      '  645 
V.  Nebeker,    58    Ind.    425,         661 
Connerly    v.    Planters    &    Mer- 
chants' Ins.  Co.,  66  Ala.  432, 

270,  282,  516 
Gonnersville      v.      Connersville 

Hydraulic  Co.,  86  Ind.  184,       232 
Connor  v.  Martin,  1  Strange  516,    51 
V.  Routh,  8  Miss.    (7  How.) 

176,  137 

V.  Thornton  (Tex.),  51  S.  W. 

354,  172 

Conover  v.  Stillwell,  34  N.  J.  54, 

183,  189,  195,  196 
Conrad  v.  Le  Blanc,  29  La.  Ann. 
123,  30,  57 

V.  Manning,  125  Mich.  77,       215 


Conrad  Seipp  Brew.  Co.  v.  Mc- 

Kittrich,  86  Mich.  191,  186 

Conroe  v.  Birdsall,  1  Johns.  Cas, 

(N.  Y.)   127,  63 

Conroy  v.  Logue,  87  Minn.  289,      202 
Consolidated  Association  of  Plant- 
ers V.  Avegno,  28  La.  Ann.  552, 

394,   395 
Consolidation  National  Bank  v. 

Kirklaned,  99  App.  Div.  121,     119 
Consumers'  Brewing  Co.  v.  To- 

bin,  19  App.  D.  C.  353.  117 

Consterdine  v.  Moore  (Neb.),  96 

N.  W.  1021,  366 

Continental    Bank    v.    Common- 
wealth Bank,  50  N.  Y.  575, 

642,  676 
Continental  Life  Ins.  Co.  v.  Bar- 
ker, 50  Conn.  569,  341 
Continental    National    Bank    v. 
Crosby,  1  N.  Y.  Supp.  256,  353 
V.  First  Nat.  Bank,  84  Miss. 

103,  581 

V.  McGeoch,  73  Wis.  332,  366 
V.  Metropolitan    Nat.    Bank, 

107  111.  App.  455,  100 

V.  Strauss,  137  N.  Y.  148,  68 
V.  Townsend,  87  N.  Y.  8, 

246,  249,   391 

V.  Wells,  73  Wis.  332,  367 

Converse  v.  Bartels   (Kan.),  46 

Pac.  940,  123 

V.  Foster,  32  Vt.  828,  288,  294 

V.  Moulton,   2   Root    (Conn.) 

195,  312,  320 

Conwell  V.  Pumphrey,  9  Ind.  135, 

260 
Cooch  V.  Money,  5  Houst.  (Del.) 

177,  17 

Cook  V.  American  Tubing  &  W. 
Co.    (R.   I.   1905),  65  Atl.  641,     81 
V.  Buhrlage,  159   Ind.   162,         49 
V.  Cook,  24  S.  C.  204,  693 

V.  Forker,  193  Pa.  St.  461,  555 
V,  Larkin,  19  La.  Ann.  507,  434 
V.  Lister,  13  C.  B.  N.  S.  543,  274 
V.  Merchants'  Nat.  Bank,  72 

Miss.  982,  532 

V.  Mix,  11  Conn.  477,  208 

V.  Smith.  3  Sandf.  Ch.  333,  449 
V.  Weirman,  51  Iowa  561,  79 
V.  Whitfield,  41  Miss.  541. 

325,  668 
Cooke  V.  Darwin,  18  Beav.  60,      695 
V.  Pomeroy,  65  Conn.  466,        540 
V.  State  Nat.  Bank,  52  N.  Y. 

96,  82,  581 

Cooks  V.  Pearce,  23  S.  C.  239,      251 


TABLE   OF    CASES. 


iReferenees  are  to  Sections.'] 


Cooley  V.  Barcroft,  43  N.  J.  L. 

363,  50 

Coolidge  V.  Burns,  25  Ark.  241,    447 
V.  Payson,   2    Wheat.    63,         491 
Coon  V.  Moore,  2  Pa.  Co.  Ct.  R. 

246.  284 

Cooney  v.  United  States  Wringer 

Co.,   101   111.  App.  468,  688 

Cooper  V.  Bank  of  Indian  Terri- 
tory, 4  Okla.  632,  47 
V.  McClurkan,  22  Pa.  St.  80,  89 
V.  Meyer,  10  Barn.  &  C.  468,  641 
V.  Nock,  17  Peck  (III.)  301,  419 
V.  Paige,  24  Me.  73,  504 
V.  Tappan,  4  Wis.  362,  302 
V.  Thompson,  20  La.  Ann.  182, 

293 
Coor  V.  Spicer,  65  N.  C.  401,  303 
Coors  V.  German  Bank,  14  Colo. 

202,  308,  348 

Coove  V.  Callaway,  1  Esp.  115,  511 
Copp  V.  Sawyer,  6  N.  H.  386,  198,  214 
Coquard  v.  Village  of  Oquawka, 

192  III.  355,  87 

Corbin  v.  Sistrunk,  19  Ala.  203,    329 
V.  Southgate,    3    Hen.    &    M. 
•   (Va.)  319,  199,  203 

Corbitt  V.  Miller,  43  Barb.  (N.  Y.) 

305,  386 

Corby  v.  Butler,  55  Mo.  398,         119 
V.  Weddle,  57  Mo.  452,         25,  28 
Cork  V.  Bacon,  45  Wis.  192,  583 

Cornell  v.  Bliss,  52  Me.  476,  23 

V.  Hichens,  11  Wis.  353,  251 

Cornett  v.  Hafer,  43  Kan.  60,  569 
Cornish  v.  Wolverton,  32  Mont. 

456,  237,  447 

Corser  v.  Paul,  41  N.  H.  24,  74 

Cory   V.   Scott,   3    Barn.   &  Aid. 

619,  523 

Coryell   v.   Croxall,   5   N.   J.   L. 

764,  636 

Cosgrove  v.  Cummings,  195  Pa. 
St.  497,  217 

V.  McKasy,  65  Minn.  426,   41,  639 
Costelo  V.  Crowell,  134  Mass.  280, 

343,  361 

Cotes  V.  Davis,  1  Camp  485.  51 
Cottam  V.  Smith,   27   La.   Ann. 

127,  93 
Cottle  V.    Cleaves,   70   Me.    256, 

291,  294 

Cotton  V.  Evans.  21  N.  C.  284,  89 

V.  Graham.  84  Ky.  672,     186,  240 
V.  John    Deere   Plow  Co.,  14 

Okla.  605,  446 

V.  Simpson.  8  Ad.  &  E.  136,  182 
V.  Van    Bokkelin,    21    N.    C. 

284,  131 


Cottrell  v.  Watkins,  89  Va.  801,    282 
Couch  v.  McKee,  1  Eng.  (Ark.) 

484.  236 

Council    Bluffs    Iron    Works    v. 

Cuppey.  41  Iowa  104,    11,  439,  627 
Counsell    v.   Livingston,   2    Ont. 

Law  Rep.   582,  552 

County  of  Bates  v.  Winters,  97 

U.  S.  83,  87 

Coupry  V.  Dufau,  1  Mart.  N.  S. 

(La.)   9,  230 

Court  Valhalla  v.  Olson,  14  Colo. 

App.  243,  117 

Courtney  v.  Doyle,  92  Mass.  122,   183 
Cover  V.  Myers,  75  Md.  406,  474 

Cowdrey    v.    Vandenburgh,    101 

U.  S.  572,  23,  679 

Cowee  V.  Cornell,  75  N.  Y.   98, 

192,  193 

Cowell  V.  Harris,  2  Ohio  Cir.  Ct. 

R.  404,  289 

Cowgill  V.   Jones,   99    Mo.   App. 

390,  303 

Cowie  V.  Halsall,  4  Barn.  &  Aid. 

187,  164 

Cowing  V.  Altman,  79  N.  Y.  167,   419 

V.  Altman,  71  N.  Y.  435,    291,  292 

V.  Cloud,  16  Colo.  App.  326,       324 

Cowles  V.  Gridley,  24  Barb.  (N. 

Y.)   301.  "  314 

V.  McVickar,  3  Wis.  725,  255 

Cox  V.  Bank,  8  N.  J.  L.  172,  612 

V.  Bank  (Ind.  App.),  47  N.  E. 

841,  635 

V.  Beck,  83  Fed.  269,  306 

V.  Boone,  8  W.  Va.  500,  576 

V.  Bruce,  18  E.  B.  Div.  147,     414 
V.  Cayan    (Mich.),  76  N.  W. 

96,  366 

V.  Citizens'      State      Bank 

(Kan.),  85  Pac.  762,  575 

V.  Cox,  25  Kv.  L.  Rep.  1934,     183 
V.  Maddux,  72  Ind.  206,  679 

V.  National  Bank,  100  U.   S. 

704,  502,  514 

v.  Smith,  1  Nev.  161,  192 

Coyle  V.  Campbell,  10  Ga.  570.      288 
V.  Fowler,    3    J.    J.    Marsh 

(Ky.)    473,  198,  202 

Cozen  V.  Middleton,  118  Pa.  St. 

622,  -  385 

Craig  V.  Butler,  9  Mich.  21,  614 

V.  Price,  23  Ark.  633,  490 

V.  Vicksburg,   31  Miss.  216,     439 

Craig  &  Co.  v.  Proctor,  6  R.  I. 

547,  288 

Craighead   v.   Building  &  Loan 
Ass'n,  69  Ark.  332,  316 


Hi 


TABLE   OF    CASES. 


[References  are  to  Sections.'\ 


Craighead  v.  McLonery,  99  Pa. 
St.    211,  135,  170 


73 

208 

208 

194 
119 
182 

119 

29 

635 
263 


232 

566 
109 

75 
256 
302 
679 


V.  Peterson,  72  N.  Y.  279, 
Cragin  v.  Fowler,  34  Vt.  326, 
Craigne  v.  Hall  &  Farr,  72  Vt. 

104, 
Crampton  v.  Newton's  Est.,  132 
Mich.  149, 
V.  Perkins,  65  Md.  22, 
Crandall  v.  Bank,  61  Ind.  349, 
V.  Vicery,   45   Barb.    (N.  Y.) 
156, 
Cranson  v.  Goss,  107  Mass.  439, 
Crawford  v.  Beal,  1  Dud.  (Ga.) 
204, 
V.  Beard,     4    J.     J.    Marsh. 

(Ky.)   187, 
V.  Board    of    Commissioners 
of    Noble    Co.,    8    Okla. 
450, 
V.  Branch  Bank  of  Mobile,  7 
,  Ala.  206, 

V.  Cato,  22  Ga.  594, 

V.  Hildebrant,    6    Laws     (N. 

Y.)  502, 
V.  Lyttle,  70  N.  C.  385, 
V.  Nimmons,  180  111.  143, 
V.  Roberts,  8  Oreg.  324, 
V.  Spencer,   92   Mo.   498, 

297,  298,  376 
V.  West  Side  Bank,  100  N.  Y. 

50,  152,   577,  581 

Crayton   v.    Clark,   11   Ala.    787, 

593,  594 
Creamer  v.  Perry,  17  Pick.  332,    525 
Credit    Co.,    Ltd.,   v.    Howe   Ma- 
chine Co.,  54  Conn.  357, 

81,  242,  287,  476 
Creed  v.  Stevens,  4  Whart.  (Pa.) 

223,  303 

Crenshaw  v.  Collins,  70  Ark.  5,      39 
Creston  Nat.  Bank  v.  Salmon,  93 

S.  W.   288.  254,   442,  476 

Creteau  v.  Foote,  57  N.  Y.  Supp. 

1103, 
Creveling  v.  Saladino,  89  N.  Y. 

Supp.  834. 
Crew  V.    Bank,   31   Grat.    (Va.) 

348, 
Crim  V.  Starkweather,  88  N.  Y. 

340,  464,  506.   507,  511 

Cripps     V.      BufRngton      (Iowa 
1906),  108  N.  W.  231,  628 

V.  Davis,  12  Mees.  &  W.  159.    419 
Crisp  V.   Griffiths,  2  Cromp.   M. 

&  R.  159,  688 

Crissey  v.  Interstate  Loan  &  T. 
Co.,  59  Kan.  561,  460 


505 
194 


178 


Cristy  v.  Campau,  107  Mich.  172, 

126,  280 
Crocker    v.    Getchell,    10    Shep. 
(Me.)  392,  230 

V.  Gilbert,    9    Cush.    (Mass.) 

131,  390 

Crockhite   v.    Nebeker,    81    Ind. 

319,  23 

Crofton  V.  Crofton,  33  Ch.  Div. 

612,  523 

Crofut  V.  Aldrich,   54   111.  App. 

541,  117 

Cromer  v.  Piatt,  37  Mich.  132,      552 
Cromwell  v.  Arrott,  1  Serg.  &  R. 
(Pa.)   180,  419 

V.  County   of   Sac,    94   U.    S. 

362,  476 

Cronise  v.  Kellogg,  20   111.  11, 

272,  274 
Cronkhite   v.    Nebeker,   81    Ind. 

319,  -  136,  146,  164 

Cronly  v.  Hall,  67  N.  C.  9,  293 

Crooke    &   Fowkes    v.    Mali,    11 

Barb.  205,  7,  359,  376 

Crooker  v.  Holmes,  65  Me.  195,     321 
Crosby  v.  Heartt,  15  La.  304,        439 
V.  Lane,  Fed.  Cas.  No.  3425, 

284,  439 
V.  Morton,  7  La.  227,  490,  494 
V.  Roub,  16  Wis.  616,  404 

V.  Tucker,  21  La.  Ann.  512,     260 
Crosley  v.  Roub,  16  Wis.  616,        359 
V.  Tanner,  40  Iowa  136,  437 

Crosly  V.    Tucker,   21    La.   Ann. 

512,  333 

Cross  V.  Herr,  96  Ind.  96,  122 

Crossan  v.  May,  68  Ind.  242,         655 
Crossley  v.  Ham,  13  East.  498, 

419,  420 
Grossman    v.    Fuller,    17    Pick. 

(Mass.)   171,  336 

Crosswell  v.  Lebree,  81  Me.  44,      161 
Crotty  V.  Hodges,  4  Man.  &  G. 

561,  164 

Crouch  V.  Wagner,  63  App.  Div. 

(N.  Y.)  526,  125 

Crout  V.  DeWolf.  1  R.  I.  393,    73,  74 
Crowe  V.  Reem  (Ind.  App.  1905), 

75  N.  E.  302,  343 

Crowell  V.  Plant,  53  Mo.  145,        347 
Cruger  v.  Armstrong,   3   Johns. 
Cas.  5,  523 

V.  Lindheim   (Tex.  App.),  16 

S.  W.  420,  534 

Crum  V.  Abbott,  2  McLean   (U. 

S.)  233,  149 

Crumbaugh  v.  Postell,  20  Ky.  L. 
Rep.  1366,  46,  49 


TABLE   OP    CASES. 


liii 


[References  are  to  Sections.'] 


Crystal  v.  Hutton,  1  Cal.  App. 

251,  701 

CuUinan  v.  Union  Surety  &  Guar- 
anty Co.,  80  N.  Y.  Supp.  58,        581 
Cullum  V.  Bank,   4  Ala.    21,   37 
Am.  Dec.  725,  664 

V.  Casey,  9  Port.  131,  527 

Culver  V.  Hide  &  Leather  Bank, 
78  III.  626,  119 

V.  Marks,  122  Ind.  554,     523,  586 
Culverhouse     v.     Alexander,     2 

Younge  &  C.  Exch.  218,  445 

Cumberland   Bank  v.    Hann,   18 

N.  J.  L.  222,  419,  627,  635,  636 

Cuminsky  v.   Kleiner,  68  N.  Y. 

Supp.  776,  585 

Cummings  v.  Boyd,  83   Pa.   St. 

372,  353,  354 

V.  Hummer,  61  111.  App.  393,    347 

V.  Little,  45  Me.  183,     3,  282,  419 

V.  Morris,  25  N.  Y.  625,     418,  419 

V.  Thompson,  18  Minn.  246,       27 

Cunningham  v.  Bank,  71  Ga.  400, 

291,  298 
V.  Davis,  175  Mass.  213,  695 

V.  Holmes,  66  Neb.  723,  92  N. 

W.  1023,  467 

V.  Peterson,  29  Ont.  R.  346,  137 
V.  McDonald,  98  Tex.  316,  698 
V.  Potter,  23  Ky.  L.  Rep.  847, 

324,  447 
Cunyus    v.    Guenther,    96    Ala. 

564,  183 

Currie  v.  Misa,  L.  R.  10  Exch. 

153,  246 

Curry  v.  Bank,  8  Port.    (Ala.) 
360,  180 

V.  Van  Wagner,  32  Hun  (N. 

Y.)    453,  341 

Curtice  v.  Hokanson,  38   Minn. 

510,  320 

Curtin  v.  Salmon  River  Hydrau- 
lic Gold  Mining  &  Ditch  Co., 
141  Cal.  308,  288 

Curtis  V.  Brooks,  37  Barb.  476,  679 
V.  Mohr,  18  Wis.  615,  359,  376 
V.  Sprague,   51  Cal.   239,  525 

Curtiss  V.  Martin,  20  111.  557,        658 
Gushing  v.  Field,  70  Me.  50,         179 
V.  Wyman,  44  Me.  121. 

307,  333,  684 
Cushman   v.    Harrison,   90   Cal. 

297,  523,  570 

Cussen  v.  Brandt,  97  Va.  1,  467 

Cuthbert  v.   Haley,  8   Term  R. 

390,  305 

Cutler  V.  Cook,  77  Mo.  388,   431,  637 
Cuyler  v.  Cuyler,  2  Johns.    (N. 
Y.)  186.  337 


D 


Dagal  V.  Simmons,  23  N.  Y.  491,  442 
Dages  V.  Lee,  20  W.  Va.  584,  41 

Dahle  v.  Starke,  96  N.  W.  353,     263 
Dahlman  v.  Antes  (Iowa  1906), 

109  N.  W.  784,  117 

Dailey  v.  Sharkey,  29  Mo.  App. 

518,  516 

Dainelly  v.  Cabaniss,  52  Ga.  211,    87 
Dair  v.  United  States,  16  Wall. 

(U.  S.)  1,  316 

Dalrymple    v.    Hillenbrank,    62 
N.  Y.  5,  125 

V.  Wyker,  60  Ohio  St.  108,        183 
Damon  v.  Pardow,  34  Cal.  278,         3 
Dampskibsaktieselskabet    Habil 
V.  United    States    Fidelity    & 
Guaranty  Co.    (Ala.),  39   So. 
54,  680 

Dana  v.  Sawyer,  22  Me.  244,  511 

Daudistel  v.  Beninghof,  71  Ind. 

389,  44 

Danforth  v.  Bank,  1  C.  C.  A.  62,  615 

Daniel  v.  Boyce,  96  Ga.  566,  47 

V.  Cartony,  1  Esp.  274,  304 

V.  Daniel,  Dud.    (Ga.)    239,       138 

Daniels  v.  Gower,  54  Iowa  319, 

315,  316 
V.  Wilson,  21  Minn.  530, 

238,  240,  440,  472 
Danieri  v.  Gazzola,  139  Cal.  416,  680 
Darby  v.  Institution,  1  Dill   (U. 

S.)  141,  292 

Darst  V.  Backus,  18  Neb.  231,        303 
Darwall    v.    Smith's    Admr.,    26 

Gratt.    (Va.)   878,  59 

Darwin  v.  Rippey,  63  N.  C.  318,    167 
Dashiell  v.  Merchants'  &  P.  Sav- 
ings Bk.   (Va.),  22  S.  E.  169,     402 
Davega  v.  Moore,  3  McCord  (S. 

C.)   482,  24 

Davenport  R.  Co.  v.  Rogers,  39 

Iowa  298,  343 

Davey  v.  Jones,  13  Vroom    28,       555 

V.  Kelly,  66  Wis.  452,  342 

V.  Waughtal,  99  Iowa  654,        681 

Davidson  v.  Bartlett,  1  Up.  Can. 

Q.  B.  50,  340 

V.  Keyes,  2  Rob.  (La.)  254,       199 

V.  Lanfer,    4    Wall,    (U.    S.) 

447,  144 

V.  Powell,  114  N.  C.  575,  451 

V.  Stuart,  10  La.  146,  41,  42 

Davies  v.  Byrne,  10  Ga.  329,  494 

V.  Jenkins,  6  L.  R.  Ch.  Div. 

728.  41 

v.  Stainbank,   6   De  Gex,  M. 

&  G.  679,  340 


liv 


TABLE    OF    CASES. 


IReferences  are  to  Sections.^ 


Daviess  v.  Newton,  5  J.  J.  Marsh. 

(Ky.)   89,  454 

Davis  V.  Bank,  66  Ga.  651,  390 

V.  Barrington,  30  N.  H.  517,  3 
V.  Bartlett,  12  Ohio  St.  584,  381 
V.  Bauer,  41  Ohio  St.  257,  158 
V.  Bean,  114  Mass.  358,  603 

V.  Benger,  57  Ind.  54,  29 

V.  Blanton,  71  Miss.  821,  238 

V.  Board,  74  N.  C.  374,  290 

V.  Bower,  29  Colo.  App.  422,  317 
V.  Bradley,  26  La.  Ann.  555, 

419,  436 
V.  Briggs,  139  Me.  304,  419,  634 
V.  Building    Union,    32    Md. 

285  121 

V.  Carlisle,  6  Ala.  707,  135 

V.  Clemson,    6    McLean     (U. 

S.)   622,  277 

V.  Coleman,  29  N.  C.  424,  172 
V.  Converse,  35  Vt.  503,  302 

V.  Dayton,  7  Misc.  Rep.  488,  278 
V.  Elmira  Sav.  Bank,  161  U. 

S.  275,  306 

v.  Eppler,  38  Kan.  629, 

522,  538,  569,  573 
V.  First   Nat.   Bank,    5   Neb. 

242,  46,  56 

V.  Foy,  7  Sm.  &  M.    (Miss.) 

64,  30 

V.  Gray,  61  Tex.  506,  316,  318 
v.  Henry,  13  Neb.   497, 

136,  170,  171 
V.  McVickers,  11  111.  327,  263 

V.  Merchants'  National  Bank, 

103  Ky.   586,  123 

V.  Merrill,  51  Mich.  480,  92 

V.  Miller,  14  Gratt.    (Va.)    1, 

282,  419,  593 
V.  Neligh,  7  Nebr.  78,  84, 

419,  431,  593,  635 
V.  Noll,  38  W.  Va.  66,  635,  637 
V.  Randall,  115  Mass,  547, 

270,  306 
V.  Rice,  88  Ala.  388,  110 

V.  Rockingham    Ins.    Co.,    89 

Va.    290,  80 

V.  Seelev,  71  Mich.  209,  119,  296 
V.  Sittig,  65  Tex.  497,  456,  644 
V.  Smith,  75  Mo.  219,  33 

V.  Snider,  70  Ala.  315,  27 

V.  Stout,  126  Ind.  12,  341 

V.  Thomas,  5  Leigh  (Va.)  1,  653 
V.  Wait,  12  Oreg.  425, 

208,  240,   274 
V.  West  Saratoga  Bldg.  Union, 

32   Md.   285,  80,   119 

V.  Willis,  47  Tex.  154,  94 


Davis  Co.  V.  Buckles,  89  111.  237, 

134,  681 
Davis,    McDonald    &    Davis    v. 

Tabdy,  107  Mo.  App.  437,  302 

Davis   Sewing   Machine    Co.   v. 
Best,  105  N.  Y.  59,  464 

V.  Buckles,  89  111.  237,       134,  681 
Davison  v.  Franklin,  1  Barn.  & 

Adol.  142,  653 

Dawson  v.  Bank,  5  111.  56,  339 

v.  Goodyear,  43  Conn.  548,  391 
V.  Graham,  48  Iowa  378,  122 
V.  Tolman,  37  111.  App.  134,  270 
Day  V.  Billingsley,  66  Ky.  157,  269 
V.  Cutler,  22  Conn.  632,  288 

V.  Long,  26  Ky.  L.  Rep.  123, 

183    2^8 
V.  Nix,   9  J.   B.   Moore  159,'  208 
Dayton  v.  Trull,  23  Wend.  345,     503 
Deaderick  v.  Mitchell,  65  Tenn. 

(6  Baxt.)  35,  126 

Deale  v.  Krofft,  4  Cranch  C.  C. 

(U.  S.)  448,  607 

Dean  v.  Carruth,  108  Mass.  242, 

183,  186,  193 
V.  King,  22  Ohio  St.  118,  414 
V.  Richmond,     23     Mass.     (6 

Pick.)  461,  43 

Deardorff  v.  Foresman,  24  Ind. 

481,  316,   319 

Dearman  v.  Trimmier,  26  S.  C. 

506,  365 

De  Bruhl  v.  Patterson,  12  Rich. 

L.  (S.  C.)   363,  657 

Debuys  v.  Johnson,  4  Mart.  N.  S. 

(La.)  286,  199 

De  Camp  v.  Hanna,  29  Ohio  St. 

467,  25,  26,  28 

Decatur  Bank  v.  Spence,  9  Ala. 

800,  22 

Decker  v.  Eisenhauer,  1  Pen.  & 

W.    (Pa.)   476,  659 

Dedham    Nat.    Bank   v.    Everett 

Nat.  Bank,  177  Mass.  392.  643 

Deener  v.  Brown,  1  MacArthur 

(D.  C.)  350,  278 

Deere  v.  Marsden,  88  Mo.  512,       359 
Deering  v.   Wiley,   56    111.   App. 

309,  524 

Deitz  V.  Regnier,  27  Kan.  94,         89 
De  la  Chaumette  v.  Bank  of  Eng- 
land, 9  Barn..&  C.  208,  408 
Delameter  v.  Kearns,  35  111.  App. 

634,  460 

Delauney  v.  Mitchell,  1  Starkie 

439,  391 

Delfosse   v.   Metropolitan   Nat. 

Bank,  98  111.  App.  123,  232 

Dell  V.  Oppenheimer,  9  Neb.  454,  302 


TABLE    OF    CASES. 


Iv 


[References  are  to  Sections.'] 


Delsman  v.  Friedlander,  40  Oreg. 

33,  524,  538,  573 

Delta  County  Bank  v.  McGrana- 
han    (Wash.    1905),    79    Pac. 
769,  112 

Demelman  v.  Brazier,  79  N.  E. 

812,  509 

De  Mott  V.  Starkey,  3  Barb.  (N. 

Y.)   403,  240,  419,  435,  472 

De  Nayer  v.  Bank,  8  Neb.  105,      655 
Denheim  v.  Wilmarding,  55  Pa. 

St.  73,  13 

Dennis  v.   Grove,   4  Pa.   Super. 

Co.  480,  57 

V.  Morris,  3  Esp.  158,  523 

V.  Water  Co.,  10  Cal.  369,         503 

Denniston   v.   Bacon,  10   Johns. 

(N.  Y.)  198,  210 

Dennistown  v.  Stewart,  17  How. 

606,  530 

Denny  v.  Palmer,  27  N.  C.  710,       525 
Deposit  Bank   of  Owensboro  v. 

Robertson  (Ky.),  34  S.  W.  23,    614 
Deposit  Bank  of  Sulphur  v.  Peak, 

23  Ky.  L.  Rep.  19,  342,  680 

Deppen  v.  German-American  Title 

Co.,   24   L.   Rep.    1110,  441 

Depuy  V.  Swart,  3  Wend.  (N,  Y.) 

135,  651 

Derby  v.  Thrall,  44  Vt.  413,    137,  159 
Derr  v.  Keaough,  96  Iowa  396, 

136,  170 
Derrick  v.  Hubbard,  27  Hun  347, 

175,  305 
Derry  v.  Mazarine,  1  Ld.  Raym. 

147,  42 

Desbrow   v.   Weatherly,    6    Car. 

&  P.  758,  154,  164 

Desha  v.  Robinson,  17  Ark.  228, 

208,  210,  211 
Des  Moines  Ins.  Co.  v.  Mclntire, 

99  Iowa  50,  63 

Des    Moines    Valley    R.    Co.    v. 

Graff,  27  Iowa  99,  231 

D'Esterre  v.   City  of  Brooklyn, 

90  Fed.  586,  476 

Detwiler  v.  Bish,  44  Ind.  70,  25 

Deussen  v.  Mogelin,  24  Tex.  Civ. 

App.  339,  214 

Devendorf  v.  West  Virginia  Oil 

&  Oil  Land  Co..  17  W.  Va.  135,    74 

Devlin  v.  Brady,  36  N.  Y.  531,        288 

De  Vries  v.  Conklin,  22  Mich.  255,  48 

Devries  v.  Shumate,  53  Md.  211,    312 

Dewey  v.  Bell,  5  Allen   (Mass.) 

165,  649 

V.  Cocran,  49  N.  C.  184,  388 

V.  Meritt,  106  111.  App.  156,     136 

V.  Reed,  40  Barb.  (N.  Y.)  16,  168 


De  Witt  V.  Perkins,  22  Wis.  451,  191 
De  Wolf  V.  Murray,  2  Sandf.  166,  542 
Dexter  Sav.  Bank  v.  Friend,  90 

Fed.  703,  81,  251 

De  Zeng  v.  Fyfe,  1  Bosw.  335,  353 
Diamond  v.  Harris,  33  Tex.  634,  419 
Dickens  v.  Beal,  10  Pet.  572, 

523,  555,  570 
Dickerman  v.  Day,  31  Iowa  444, 

303,  304 
v.  Miner,  43  Iowa  508, 

16,  174,  175 
Dickerson  v.  Cass  County  Bank 
(Iowa),  89  N.  W.  15,  402 

V.  Higgins    (Okla.),   82   Pac. 

649,  446,  447 

Dickey   v.   Pocomoke  City  Nat. 

Bank,  89  Md.  280,  407 

Dickinson  v.  Bowes,  16  East  110,  502 
V.  Edwards,  77  N.  Y.  573,  277 
V.  Hall,  31  Mass.  217,  262 

V.  Lewis,  34  Ala.  638,  1-28 

Dickson  v.  Evans,  6  Term  R.  57,  604 
V.  Kittson,  75  Minn.  168,  288,  472 
V.  Primrose,  2  Miles    (Pa.) 

366,  93 

V.  Tingstall,    3    C.    P.    Rep. 

(Pa.)  128,  257 

Dieringer   v.    Klekamp    (Ohio), 

11  Wkly.  Law  Bui.  123,  193 

Dietz    V.    City    Nat.    Bank,    42 
Neb.  584,  73 

V.  Harder,  72  Ind.  208,  168 

Dillaway   v.    Northwestern   Nat. 

Bank,  82  111.  App.  71,  581 

Dilley  v.  Van  Vie,  6  Wis.  209,     366 

Dinsmore  v.   Duncan,   57   N.   Y. 

573,  398 

V.  Stimlert,  12  Neb.  433,  28 

Dion    V.    Lachance,    Rapp.    Jud. 

Quebec,  14  C.  S.  77,  574 

District  of  Columbia  v.  Cornell, 

130  U.   S.  655,  13,   399 

Ditto  V.  Slaughter  (Ky.  Civ.  App. 

1906),  92  S.  W.  2,  482 

Diversv  v.   Loeb,   22   111.   393,       272 

V.  Moore,  22  111.  331,  270,  272 

Dixon  V.  Clayville,  44  Md.  573.     503 

V.  Dixon,  31  Vt.  450,  241,  316 

V.  Nuttall,  1  Compt.  Mees.  & 

Ros.  306,  490 

D.  M.  Osborne  &  Co.  v.  Gullick- 

son,  64  Minn.  218.  681 

Doane  v.  King,  30  Fed.  106,   123,  359 

Dobbins    v.    Blanchard,    94    Ga. 

500.  41,   73 

V.  Overman.   17   Neb.   163,       367 

Dod  V.  Edwards,  2   Carr.  &  P. 

602,  109 


Ivi 


TABLE   OF    CASES. 


[References  are  to  Sections.^ 


Dodd  V.  Dunne,  71  Wis.  578, 

13,   20,  314 

Dodge  V.  Freedman's  Savings  & 

Trust  Co.,  93  U.  S.  379,  657 

V.  Haskell,   69   Me.   429,     97,  165 

V.  Oatis,  27  Kans.  762,  322 

V.  Pope,  93  Ind.  480,  653 

Dod'son  V.  Taylor,  56  N.  J.  L.  11, 

552,  599 

Doe  V.  Burnham,  11  Fost.    (N. 
H.)  426,  288,  291,  294,  439 

V.  Callow,  10  Kan.  App.  581,    699 
V.  Northwestern    Coal    &    T. 

Co.,  78  Fed.  62,  475,  476 

Doll  V.  Rizotti,  20  La.  Ann.  263,   699 
Dollner,  Potter  &  Co.  v.  Snow, 

16  Fla.  86,  30 

Dolph  V.  Rice,  21  Wis.  590,  628 

Dolson   V.    De    Ganah,    70    Tex. 

620,  33 

Domestic   Machine   Co.   v.   Hat- 
field, 58  Ind.  187,  294 
Donaldson    v.    Grant,    15    Utah 
231,                                              364,  366 
V.  Means,  4  Dall.  109,      525,  573 
V.  Walker,  101  Tenn.  236,        232 
Donegan  v.  Wood,  49  Ala.  242, 

511,  530 

Donley  v.  Camp,  22  Ala.  695,  504 
Donlon    v.    Davidson,    39    N.    Y. 

Supp.  1020,  574 

Donly  V.  Brown,  3  Wkly.  Notes 

Cas.  (Pa.)  275,  685 

Donnerberg  v.  Oppenheimer,  15 

Wash.  290,  489 

Donovan  v.  Fox,  121  Mo.  236,        314 
Doolittle  V.  Ferry,  20  Kan.  230,    255 
V.  Lyman,  44  N.  H.  608,  288 

Doran  v.  Phillips,  47  Mich.  228,  288 
Doremus  v.  Bond,  8  Blackf.  368-  447 
Doss  V.  Ditmars,  70  Ind.  451,  457, 

422 

V.  Peterson,   82  Ala.  253,         339 
Dougherty  v.  Scudder,  17  N.  J. 

Eq.  248,  119 

Douglas  V.  Bank  of  Commerce, 
97  Tenn.  133,  532 

V.  Matting,  29  Iowa  498, 

28,   120,   441 

Douglass    V.    Phoenix    Ins.    Co., 

138  N.  Y.  209,  442 

V.  Scott,  8  Leigh   (Va.)    43,     154 

Dovey's  Appeal,  97  Pa.  St.  153,     121 

Dow  V.  Rowell,  12  N.  H.  49,  699 

V.  Tuttle,   4  Mass.   414,  339 

Dowden  v.  Cryder,  55  N.  J.  L. 

329,  75,  476 

Dowe  v.  Schutt,  2  Denio  621,        304 


Dowling  V.  Gibson,  52  Iowa  517, 

465,  635 
V.  National  Bank,  145  U.   S. 

512,  91 

Downey  v.  Beach,  78  111.  53,  28 

Downing  v.  Ely,  125  Mass.  369,    109 
V.  Wheeler,   93   Me.  570,  417 

Drake  v.  Lowry,  14  Iowa  125,     662 
Draper  v.  Cowles,  27  Kan.  484, 

119,  241,  288 
V.  Fletcher,  26  Mich.  154,  342 
V.  Wood,  112  Mass.  315, 

138,  165,  170 
Drawer  v.  Cherry,  14  La.  Ann. 

694,  343 

Dreelen  v.  First  National  Bank 
(Tex.  Civ.  App.  1907),  99  S.  W. 
850,  80 

Drennan  v.  Burne,  124  111.  184,     348 
Dresser  v.  Construction  Co.,  93 

U.   S.  92,  119 

Drew  V,  Towle,  27  N.  H.  412, 

208,  603 
V.  Wheelihan,  75  Minn.  68,     476 
Drexler  v.  McGlynn,  99  Cal.  143, 

549,  555,  559 
V.  Smith,  30  Fed.  754, 

89,  131,  241,  616,  629 
Driesbach  v.  Bank,  104  U.  S.  52, 

306,  615 

Driggs   V.   Rockwell,   11   Wend. 

(N.  Y.)  504,  635 

Drinkall   v.    Morris    (N.   Dak.), 

88  N.  W.  724,  699 

Drovers'  Nat.  Bank  v.  Anglo- 
American  Packing  Co.,  117  111. 
100,  581 

Drum  V.  Drum,  133  Mass.  566,     142 
Duboise  v.  Wheddon,  4  McCord 

(S.  C.)   221,  63 

Duck  V.  Autle,  5  Okla.  152,  196 

Dudley  v.  Cilley,  5  N.  H.  558,        288 

V.  Lake  Co.,  26  C.  C.  A.  82,        232 

V.  Littlefield,   8   Shep.    (Me.) 

418,  241 

Dugan  V.  Campbell,  1  Ohio  115,  183 

Duke  V.  Clark,  58  Miss.  465,   437,  448 

V.  Hall,  9  Baxt.  (Tenn.)  282,   102 

Dulles   V.   De   Forest,   19    Conn. 

190,  322 

Dulty  V.  Brownfield,  1  Pa.  St.  497,  68 

Dumas  v.  Hardwick,  19  Tex.  238,  344 

Dumont  v.  Pope,  7  Blackf.  367,    496 

Dunbar  v.  Marden,  13  N.  H.  — ,    262 

Duncan  v.  Clark,  2  Rich.  (S.  C.) 

587,  131 

V.  Finn,  79  Iowa  658,  436 

V.  Gosche,   8   Bosw.    (N.  Y.) 

243,  390 


TABLE    OF    CASES, 


Ivii 


[References  are 

Duncan  v.  Gilbert,  29  N.  J.  L. 
521,  240,  270,  377 

V.  McCollough,  4  Serg.  &  R. 

180,  502 

V.  Scott,  1  Camp.  100,  114 

Duncan,  Sherman  &  Co.  v.  Gil- 
bert, 29   N.  J.  L.   521, 

386,    387,    388,   391 
Dundas  v.  Sterling,  4  Pa.  St.  73,  341 
Dunham  v.  Deraismes,  52  N.  Y. 
Supp.  871,  573 

V.  Dey,    13    Johns.     (N.    Y.) 

40,  302 

V.  Peterson,  5  N.  D.  414, 

241,  460,  461,  463 
Duningan  v.  Stevens,  122  111.  396, 

524,  538,  573 

Dunn  V.  Clements,  52  N.  C.  58, 

137,  172 
V.  Dilks,  31  Ind.  App.  673,  679 
V.  Ghost,   5  Colo.   134, 

193,  237,  406 
V.  Meserve,  58  N.  H.  429,  456 
V.  Smith,  12  Sm.  &  M.  (Miss.) 

602,  318 

V.  Stokern,  43  N.  J.  Eq.  401, 

3  Atl.  349,  663 

V.  Weston,  71  Me.  270, 

282,  285,  388 

Dunning  v.  Sayward,  1  Greenl. 

366,  453,  664 

Dunscomb   v.   New   York,  H.   & 

N.  K.  Co.,  88  N.  Y.  1,  486 

Dunscombe  v.  Bunker,   2  Mete. 

8,  363 

Du  Pont  V.  Beck,  81  Ind.  271,        183 
Dupuy  V.  Clark,  12  Ind.  427,  369 

Duramus   v.    Harrison,    26    Ala. 

326,  630 

Durand  v.  Bowen,  73  Iowa  573,     681 
Durant   v.    Banta,    27    N.    J.    L. 

624,  304 

Durbin  v.  Northwestern  Scraper 

Co.  (Ind.  App.),  73  N.  E.  297,    680 
Durden  v.  Smith,  44  Miss.  548, 

521,  523 

Durkee    v.     Conklin,    13     Colo. 

App.  313,  199,  291,  641 

Durment  v.  Tuttle,  50  Minn.  426, 

208,  263 
Durnford  v.  Gross,  7  Mart.  (La. 

O.  S.)    466,  41 

Dusscomb    v.    Bunker,    2    Mete. 

(Mass.)   8,  6 

Dutchess  of  Kingston's  Case,   3 

Smith's  Lead.  Cas.  729,  343 

Dutton  V.  Clapper,  53  Ind.  276,       28 


to  Sections.l 

Duvall  V.  Farmers'  Bank  of  Ma- 
ryland, 9  Gill  &  J.  (Md.)  31, 

310,  339 
Dwelling  House  Ins.  Co.  v.  Bai- 
ley, 39  111.  App.  488,  28  ' 
V.  Downey,  39  111.  App.  524,      25  ' 
Dwiggins  v.  Merchants'  National 
Bank    (Tex.  Civ.  App.),   27  S. 
W.  171,                                             342 
Dye  V.  Grover,   17  Ky.  L.   Rep. 

685,  260 

Dyer  v.  Burnham,  25  Me.  9,  327 

V.  Homer,  22  Pick.  253,     446,  453 
V.  Sebrell,  135  Cal.  597, 

412,   416,  626 
Dyker  v.  Franz,  7  Bush    (Ky.) 

273,  137 

Dykman  v.  Northbridge,  80  Hun 
(N.   Y.)    258,  243,   516 

E 
Eagle  V.  Kohn,  84  111.  292, 

288,   289,   291 
Eagle  Bank  v.  Hathaway,  5  Met. 

212,  568 

Earl  V.  Peck,  64  N.  Y.  596, 

188,  192,  193 
Earle  v.  Enos,  130  Fed.  467,  270 

V.  Reed,    10    Mete.    (Mass.) 

387,  63 

V.  Robinson,  91  Hun  (N.  Y.) 

363,  202 

Early  v.  McCarthy,  2  Dana  (Ky.) 

414,  109,  297,  303 

Early    Times    Distilling    Co.    v. 

Earle,  21  Ky.  Law  Rep.  1709,      120 
Earnest  v.    Moline   Plow  Co.,  8 

Tex.  Civ.  App.  159,  263 

Easley  v.  Crockford,  3  Moore  & 

S.  700,  419 

Eason  v.  Locherer,  42  Tex.  173,  623 
Easter  v.  Minard,  26  111.  494,  128 
Eastern  v.  Iowa,  188  U.  S.  220,  306 
Eastern     Bank    v.    Capron,     22 

Conn.  639,  612 

Eastin  v.  Succession  of  Osborn, 

26  La.  Ann.  153,  199 

Eastman  v.  Lyon,  40  Iowa  438,     83 
V.  Shaw,  65  N.  Y.  522,  304 

East  Oakland  v.  Skinner,  94  U. 

S.  255,  87 

Easton  v.  Iowa,  188  U.  S.  220,  306 
Easton  Packing  Co.  v.  Kennedv, 

131  Cal.  130,  185,  329 

East  River  Bank  v.  Butterworth, 

45  Barb.   (N.  Y.)   476,  282,  353 

Eaton  v.  Alger,  57  Barb.  (N.  Y.) 
179,  408,  418 

V.  Berlin,  49  N.  H.  219,       80,  232 


Ivili 


TABLE   OF    CASES. 


[References  are  to  Sections.l 


Eaton  V.  Corson,  59  Me.  510,    436,  658 
V.  Emerson,  14  Me.  335,  339 

Eaves  v.   Henderson,   17  Wend. 

(N.  Y.)    190,  332 

Ebert  v.  Gitt,  95  Md.  186,  464,  474 
Eccleston    v.    Sands,    95    N.    Y. 

Supp.  1107,  680 

Eckert  v.  Louis,  84  Ind.  99,  157 

V.  Pickel,  59  Iowa  545,  135 

Eddy  V.  Bond,  19  Me.  461,      157,  177 

V.  Fogg   (Mass.  1906),  78  N. 

E.    548,  462 

V.  Herrin,  5  Shep.  (Me.)  338,  112 
Edgar  v.  Kline,  6  Pa.  St.  327, 

447,   653 
Edgerton  v.  Aspinwall,  3  Conn. 

445,  311 

Edison  General  Electric  Co.  v. 
Blount,  96  Ga.  272,  23  S.  E. 
306,  265,  648 

Edling  V.  Bradford,  30  Neb.  593,  367 
Edmisten  v.    Herpolsheimer,   66 

Neb.  94,  574,  576 

Edmunds  v.  Bushell,  L.  R.  1  Q. 
B.  97,  75 

V.  Rose,  51  N.  J.  L.  547,  61 

Edwards  v.  Jones,  2  Mees.  &  W. 
414,  685 

V.  Porter,  42  Tenn.  42,  208 

V.  Sarter,  69  S.  C.  540,  168 

V.  Thomas,  66  Mo.  468,  270 

Eggan  V.  Briggs,  23  Kan.  710,  419 
Ehrler  v.  Braun,  120  111.  503,  507,  96 
Ehrman  v.  Union  Cent.  Life  Ins. 

Co.,  33  Ohio  St.  324,  449,  670,  671 
Eich  V.  Greeley,  112  Cal.  171,  635 
Eichner    v.    Bowery    Bank,    20 

Misc.  90,  523 

Eigenman  v.  Clark  (Ind.),  51  N. 

E.  725,  635 

Ekemberg    v.     Mousseau,    Rap. 

Jud.  Queb.  19  C.  S.  289,  214 

Ela  V.  Kimball,  30  N.  H.  126,  327 

Elder  v.  Elder,  119  Ga.  174,  302 

Eldred  v.  Bank,  17  Wall.  545,         679 
V.  Paterson,  80  Iowa  264,         172 
Elenville,  The,  73  L.  J.  P.  104,       571 
Elias  V.  Finnegan,  37  Minn.  144,  379 
V.  Whitney,    98   N.   Y.   Supp. 

667,  464,  474 

Elliott  V.  Abbott,  12  N.  H.  549,       388 

V.  Blair,  47  111.  342,  158 

V.  Deason,  64  Ga.  63,  637 

V.  Levings,  54  111.  213,      171,  661 

Elliott  Nat.  Bank  v.  Western  & 

A.  R.  Co.,  70  Tenn.  676.  680,  83 
Ellis  V.  Ballon,  129  Mich.  303.        688 


Ellis    V.    Commercial    Bank    of 
Natchez,  7  How.  294, 

555,  566,  568 
V.  Hamilton,  26  Tenn.  512,  339 
V.  Littlefield   (Tex.  Civ.  App. 

1906),  93  S.  W. 171,  78 

V.  Watkins,  73  Vt.  371, 

96,  238,  240,  411 
Ellsworth  V.  St.  Louis  &  R.  Co., 

98  N.  Y.  553,  85 

Blminger  v.  Drew,  4  McLea  (U. 

S.)  368,  208 

Elmore  v.  Hoffman,  6  Wis.  68,  366 
Elsass  V.  Institute,  77  Ind.  72,  116 
Elting  V.  BrinkerofE,  2  Hall  (N. 

Y.)   459,  184 

Elwell  V.  Chamberlain,  17  N.  Y. 
Super.  Ct.  320,  224 

V.  Dodge,  33  Barb.  336,     439,  442 
V.  Turney    (Wash.  1905),  81 

Pac.  1047,  312 

Ely  V.  Kilborn,  5  Denio  (N.  Y.) 

514,  320 

Emanuel  v.  White,  34  Miss.  56,  241 
Embree     v.     Emmerson      (Ind. 

App.  1905),  74  N.  E.  44,      400,  401 
Emerson  v.  Harmon,  14  Me.  271,     89 
V.  Sheffer,  113  App.  Div.  19, 

98  N.  Y.  Supp.  1057,  194 

V.  Townsend,  73  Md.  224,  291 

Emery  v.  Lord,  26  Mich.  431,  48 

Emmert  v.  Meyer,  65  Mo.  App. 

609,  119 

Empire  Dairy  Feed  Co.  v.  Chat- 
ham National  Bank,  30  App. 
Div.  (N.  Y.)  476,  613 

Empire   Mfg.    Co.   v.    Stuart,  46 

Mich.  482,  9  N.  W.  527,  671 

Englehart   v.   Richter,  136   Ala. 

562,  45 

Englert  v.  White,  92  Iowa  97,         698 

English  V.  Darley,  2  Bos.  &  P. 

62,  688 

V.  Wall,  12  Rob.  137,  523 

English-American  Loan  &  Trust 

Co.  V.  Hiers,  112  Ga.  823,  473 

Enix  V.  Hays,  48  Iowa  86,  629 

Ennis  v.  Reynolds   (Ga.),  56  N. 

E.  104,  541,  544,  570 

Enscoe  v.  Fletcher,  1  Cal.  App. 

659,  679 

Eppens  v.  Forbes,  82  Ga.  748, 

504,  529 
Equitable  Ins.  Co.  v.  Harvey,  98 

Tenn.  636,  467 

Brhardt  v.  Yarn,  51  S.  C.  550,        302 

Erickson  v.  First  National  Bank, 

44  Neb.  622,  136,  158 

V.  Inman,  34  Oreg.  44,  199 


TABLE   OF    CASES. 


lix 


[References  are  to  Sections. 1 


Erie  Boot  &  Shoe  Co.  v.  Eiclien- 

laub,  127  Pa.  St.  164,  125 

Erskine  v.   Steele  County,  4  N. 

Dak.  339,  232 

Erwin  v.  Downs,  15  N.  Y.  575,         61 
V.  Lynn,  16  Ohio  St.  539,  679 

'       V.  Morris    (N.   C),  40   S.  E. 

53,  302 

V.  Saunders,  1  Cow.   (N.  Y.) 

249,  320 

V.  Schaffer,  9  Ohio  St.  43,  280 

Eskman  v.  Scott,  34  Neb.  817,  49 

Eskridge   v.   Barnwell,    106    Ga. 

587,  122 

Espy  V.  National  Bank  of  Cin- 
cinnati, 18  Wall.   (U.  S.)   605, 

581,  642 
Estep  V.  Burke,  19  Ind.  87,  222 

Estes  V.  German  Nat.  Bank,  62 
Ark.  7,  359 

V.  Lovering     Shoe     Co.,     59 

Minn.  504,  402,  470 

V.  Tower,  102  Mass.  65,     509,  511 

Estudillo  V.  Aguirre,  5  Pac.  109,  202 

Etheridge  v.  Gallagher,  55  Miss. 

458,  208,  238,  465 

V.  Parker,  76  Va.  247,  383 

Etz   V.    Place,   81   Hun    (N.   Y.) 

203,  164 

Eubler  v.  Pullen,  12  Ind.  567,       237 
Eureka  Bank  v.  Eureka  Woolen 

Mfg.  Co.,  33  N.  S.  302,  81 

Evans  v.  Bridges,  4  Port.  351, 

493,  495 
V.  Cook,  11  Nev.  69,  291 

V.  De  Roe,  15  Neb.  630,  303 

V.  Drummond,  4  Esp.  89,  369 

V.  Foreman,  60  Mo.  449, 

150,  168,  170 
V.  Gee,  11  Pet.  80,  451 

V.  George  D.  Cross  Lumber 
Co.,  21  Ohio  Cir.  Ct.  R. 
80,  516 

V.  Huey,  1  Bay  (S.  C.)  13,       111 
V.  Kneeland,  9  Ala.  42,  128 

V.  McHugh,    2    Woodw.    Dec. 

Pa.  21,  431 

V.  Murphy,     1     Stew.     &     P. 

(Ala.)  226,  208 

V,  Prosser,  2  Term  Rep.  186,     607 
V.  Speer    Hardware    Co.,    65 

Ark.    204,  241,  392,  473 

V.  Williamson,  79  N.  C.  86,        208 
V.  Dennett,  161  U.  S.  434, 

87,  488 
Evansville     National     Bank     v. 

Kaufman,  93  N.  Y.  273,  461 

Everett  v.  Tidball,  34  Neb.  803,     451 
Everhart  v.  Puckett,  73  Ind.  409,  288 


Ever  son  v.  Carpenter,  17  Wend. 

(N.  Y.)  419,  64 

Ewell  V.  Daggs,  108  U.  S.  143,       303 
Ewen  V.  Wilbor,  99  111.  App.  132, 

511,  515,  528 
Ewing  V.  Clark,  76  Mo.  545,  342 

V.  Clark,  8  Mo.  App.  570,  16,  342 
V.  Ewing,  26  Ky.  L.  Rep.  580,  702 
V.  Grisnold,  43  Vt.  400,  614 

V.  Trippe,    73    Ga.    776,    777, 

778,  94 

V.  Wightman,    28    App.    Div. 

(N.  Y.)  326,  327 

Exchange    Bank    v.    Butner    & 

Edgeworth,  60  Ga.  654,        359,  376 

v.  Monteath,  26  N.  Y.  505,  75,  80 

V.  Sutton  Bank,  78  Md.  577,     581 

V.  Bank    of   Little    Rock,    50 

Fed.  140,  136.  146 

Eyerman  v.  Pirou,  151  Mo.  107, 

183,  402 
Eylers  v.  Coens,  39  N.  Y.  St.  R. 

789,  56 

Eyre  v.  Yche,  67  Pa.  St.  477,  418 


F 


Fagle  V.  Kohn,  84  111.  292,  419 

Fair  v.  Howard,  6  Nev.  304,  246 

V.  Shelton,  128  N.  C.  105,  262 

Fairchild  v.  Brown,  11  Conn.  26, 

431,  437,  448 
Fairfield   v.   Rural    Independent 

School  Dist,  116  Fed.  838,  488 

Fale    v.    Dart,    19    N.    Y.    Supp. 

389,  355 

Faler  v.  Jordan,  44  Miss.  283,  89 

Falk  V.  Moebs,  127  U.  S.  597,  447 

Fall  V.  Youmans,  67  Minn.  83,       681 
Fall  River  Union  Bank  v.  Wil- 

lard,  5  Mete.  216,  491,  497 

Famous  v.  Crosswhite,  124  Mo. 

34,  119,  470 

Fanning   v.    Murphy,    126    Wis. 

538,  680 

Fant  V.  Miller,  17  Gratt.    (Va.) 

77,  303 

Faris  v.  King,  1  Stew.  255.  303 

Farkas  v.  Monk,  119  Ga.  115.         116 
Farley  Nat.  Bank  v.  Pollock  & 

Bernheimer  (Ala.),  39  So.  612,  583 
Farmer  v.  Perrv,  70  Iowa  358,       320 
V.  Rand,  14  Me.  225,  180 

Farmers'  and  Citizens'  Bank  v. 

Noxon,  45  N.  Y.  762.  381.  390 

Farmers'  and  Drovers'  Bank  of 

La.  V.  Unser,  13  Ky.  L.  Rep. 

965,  288 


Ix 


TABLE  OF  CASES. 


[References  are  to  Sections."] 


Farmers'  and  Mechanics'  Bank 
V.  Butchers'  and  Drovers' 
Bank,  14  N.  Y.  623,  82,  96 

V.  Butchers'     and     Drovers' 

Bank,  16  N.  Y.  125,      86,  101 
V.  Deering,  91  U.  S.  29,  306 

V.  Empire  Stone-Dressing  Co., 

18  N.  Y.  Super.  Ct.  275,    276 
V.  Humphrey,  36  Vt.  554, 

316,  383 
V.  Rathbone,  26  Vt.  33,  273 

Farmers'    and    Mechanics'    Nat. 

Bank  V.  Smith,  77  Fed.  129,      581 
Farmers'   and  Merchants'  Bank 
V.  Hathaway,  36  Vt.  539,  379 

V.  Bank   of   Rutherford,   115 

Tenn.  64,  643 

Farmers'  and  Merchants'  Bank 
of  Genesee  v.  Parker,  37  N. 
Y.  148,  303 

Farmers'  and  Merchants'  Nat. 
Bank  v.  Novich,  89  Tex.  381, 

135,  136,  170 
Farmers'  and  Traders'  Bank  v. 
Harrison,  57  Mo.  503,  306 

V.  Lucas,  26  Ohio  St.  385,  129 

Farmers'  Bank  v.  Boyd   (Neb.), 

93  N.  W.  676,  59 

V.  Butchers'  Bank,  28  N.  Y. 

425,  443,  581 

V.  Couch,  118  N.  C.  436,  389 

v.  Dunbar,  32  Neb.  487,  581 

V.  Duval,  7  Gill  &  J.  78,  513 

V.  Hale,  59  N.  Y.  53,  306 

V.  Willis,  7  W.  Va.  31,  612 

Farmers'  Bank  and  Trust  Co.  v. 

Newland,  97  Ky.  464,  581 

Farmers'  Bank  of  Grand  Rapids 

V.    Butler,  48  Mich.  192,  114 

Farmers'  Bank  of  Kentucky  v. 

Ewen,  78  Ky.  264,  524,  538 

Farmers'  Bank  of  Saratoga  Co. 

V.  Maxwell,  32  N.  Y.  579,  627 

Farmers'  Deposit  Bank  v.  Penn. 

Bank,  123  Pa.  St.  283,  605 

Farmers'  Exch.  Bank  v.  Altura 
Gold  Mill  &  Min.  Co.,  129  Cal. 
263,  524,  538,  573 

Farmers'  Loan  and  Trust  Co.  v. 
Northern  P.  R.  Co.,  120  Fed. 
873,  414 

Farmers'  Nat.  Bank  v.  Dreyfus, 
82  Mo.  App.  399,  574 

V.  Marshall,  9  Pa.  Super.  Ct. 

621,  543 

V.  Sutton  Mfg.   Co.,  52  Fed. 

191,  86 

V.  Thomas,  79  Hun   (N.  Y.) 

595,  145,  155 


Farmers'  Savings  Bank  v.  Haus- 

mann,  114  Iowa  49,  198 

Farmington   Sav.  Bank  v.  Buz- 

zell,  61  N.  H.  612,  73 

Farm  Land  Security  Co.  v.  Nel- 
son, 52  Neb.  624,  302 
Farnham  v.  Ingham,  5  Vt.  514,     320 
Farnsworth  v.  Drake,  11  Ind.  101,    24 
V.  Mullen,  164  Mass.  112, 

514,  515 
Farnum  v.  Fowle,  12  Mass.  89,  510 
Farrar  v.   New  York  Bank,   90 

Ga.  331,  271 

Farrell  v.  Lovell,  68  Me.  326,  120 
Farrer  v.  People's  Trust  Co.,  63 

Kan.  881,  504,  545 

Farrington    v.    Bank,    39    Barb. 
(N.  Y.)   645,  419 

V.  Frankfort,    31    Barb.    (N. 

Y.)  183,  286 

Farris  v.  Gatlett,  32  Mo.  469,        419 

V.  Wells,  68  Ga.  604,  456 

Farwell  v.  Hibner,  15  Hun   (N. 

Y.)  280,  238 

V.  Hilliard,  3  N.  H.  318,  679 

V.  St.     Paul     Trust    Co.,    45 

Minn.  495,  523 

V.  Tyler,    5    Clarke    (Iowa) 

535,  618 

Fassen  v.  Hubbard,  55  N.  Y.  485,   255 
Faulkner  v.  Ware,  34  Ga.  498,     238 
V.  White,  33  Neb.  199, 

380,  383,  384 
Faull  V.  Tinsman,  36  Pa.  St.  108,  343 
Paut  V.  Cathcart,  8  Ala.  725,  64 

Favorite  v.  Lord,  35  111.  142, 

436,  635 

Fawcett  v.  Insurance  Co.,  97  111. 

11,  348 

Fay  V.  Hunt,  190  Mass.  378,  195,  447 

v.  Richards,    21    Wend.     (N. 

Y.)   626,  327 

V.  Smith,  83  Mass.  (1  Allen) 

477,  138 

V.  Tower,  58  Wis.  286,  305 

Favette  County  Savings  Bank  v. 

Steffes,  54  Iowa  214,  119 

Fealey  v.  Bull,  163  N.  Y.  397,  467 
Fearing     v.     Clark,     16     Gray 

(Mass.)   74,  317 

Featherston   v.    Wilson,    4   Ark. 

154,  332 

Fechbermer  v.  Peirce,  70  Mich. 

440,  37 

Fegley  v.  Jennings,  44  Fla.  203,  681 
Fellers  v.  Penrod,  57  Neb.  463,  198 
Fellows  V.   Steamer  Powell,   16 

La.  Ann.  316,  414 


TABLE    OF    CASES. 


Ixi 


[References  are  to  Sections.'] 


Felsenthal  v.   Hawks,  50  Minn. 

178,  623 

Fenton  v.  Robinson,  4  Hun  (N. 
Y. )   252  28 

V.  White,  4  N.  J.  L.  115,  63 

Fenwick  v.  Bowling,  50  Mo.  App. 
516,  210,  262 

V.  Sears,  1  Cranch  259,  434 

Ferguson  v.  Harris,  39  S.  C.  323,     57 
V.  Hill,  3  Stew.  485,  456 

V.  Milliken,  42  Mich.  441,  633 

Fernandez  v.   Lewis,  1   McCord 

323,  496 

Fernando  v.  Beshoar,  9  Colo.  291,   30 

Ferner  v.  Williams,  37  Barb.  10,  502 

Ferris  v.  Adams,  23  Vt.  136,  288 

V.  Johnson    (Mich.  1904),  98 

N.  W.  1014,  310,  341 

Ferriss  v.  Tavel,  87  Tenn.  386, 

242,  288 
Ferst  V.  Blackwell,  39  Fla.  621,  681 
Fetters  v.  Bank,  34  Ind.  251, 

386,  390 
Fidelity  Trust  Co.  v.  Palmer,  22 

Wash.  473,  232 

Field  V.  Carr,  5  Bing.  13,  274 

V.  Nickerson,  13  Mass.  131, 

496,  506 
V.  Nbblett,  154  Ind.  357,  360,  49 
V.  Sibley,  77  N.  Y.  Supp.  252,  512 
V.  Sowle,  4  Russ.  112,  32 

V.  Tibbetts,  57  Mo.  358,  294 

Fielding  v.  Corry,  67  L.  J.  Q.  B. 

N.   S.  7,  563 

Fields  V.  Carney,  4  Baxt.  (Tenn.) 

137,  606 

Fifth  Ward  Sav.  Bank  v.  First 
Nat.  Bank,  48  N.  J.  L.  513, 

120,  476 
Filler  v.  Gallantcheck,  66  N.  Y. 

Supp.  509,  502 

Finch  V.  Gregg,  126  N.  C.  176,       236 
V.  Skilton,    29    N.    Y.    Supp. 

925,  512 

Findley  v.  Richardson,  46  Iowa 

103,  263 

Fine  v.  Stewart,  48  S.  W.  371,        232 
Fink  V.  Chambers,  95  Mich.  508, 

186,  310,  322 
V.  Cox,  18  Johns.  (N.  Y.)  145, 

198,  214 
V.  Farmers'    Bank,    178-    Pa. 

154,  194 

Finnell    v.    Nesbit,    16    B.    Mon. 

(Ky.)   351,  604 

Finney    v.     Pennsylvania     Iron 

Works  Co.,  22  App.  D.  C.  476,     411 

V.  Moore,  9  Idaho  284,  302 

Firman  v.  Blood,  2  Kan.  496',        627 


First      Ecclesiastical      Soc.      v. 

Loomis,  42  Conn.  570,  302 

First    National   Bank   v.   Adam, 
138  111.  483,  120,  121 

V.  Adamson,  24  R.  I.  73,  504,  524 
V.  Albertson  (N.  J.  Ch.  1900), 

47  Atl.  818,  40 

V.  Badger    Lumber     Co.,     54 

Mo.  App.  327,  74 

V.  Beach    (Ind.  App.),   72  N. 

E.  287,  447 

V.  Beck,  2  Tex.  App.  Civ.  Cas. 

§  832,  394 

V.  Bentley,  27  Minn.  87,  303 

V.  Bonner    (Tex.  Civ.  App.), 

27  S.  W.  698,  512 

V.  Briggs,  70  Vt.  599,  542 

V.  Bryan,  62  Iowa  42,  112 

V.  Buchan,  79  Minn.  322,  473 

V.  Buckhanson  Bank,  80  Md. 

475,  574,  578 

V.  Bynum,  84  N.  C.  24,  446,  679 
V.  Campo  Board  Mfg.  Co.,  61 

Minn.  274,  307 

V.  Carson,  60  Mich.  432,  169,  170 
V.  Cleaver,  Fed.  Cas.  No.  4800.  342 
V.  Commercial  Traveler  s' 

Home  Assn.    (N.  Y.) 

1906),  78  N.  E.  1103,  aff' g 

108  App.   Div.   78,  95   N. 

Y.  S.  454,  74,  80 

V.  Coughron     (Tenn.     1898), 

52  S.  W.  1112,  79 

V.  Crittenden,  2  Thomp.  &  C. 

118,  534 

V.  Currie  (Mich.),  110  N.  W. 

499,  585 

V.  Dawson,  78  Ala.  67,  315 

v.  Deal,  55  Mich.  592,  28,  120 

V.  Dick,    22    Pa.    Super.    Ct. 

Rep.  445,  270 

V.  Drew,  93  111.  App.  630,  503 

V.  Eureka    Lumber   Co.,   123 

N.  C.  24,  504 

V.  Farmers'      &     Merchants' 

Bank    (Neb.),  95  N.  W. 

1062,  474 

V.  Felt,  100  Iowa  680,  125 

V.  Fitts,  67  Vt.  57,  121 

V.  Forsyth,  67  Minn.  257,  468 
V.  Fowler,  36  Ohio  St.  524, 

307,  384.  390 
V.  Fricke.  75  Mo.  178,  135,  172 
V.  German    Bank,    107    Iowa 

543,  564 

V.  Gillilan.  72  Mo.  77,  85,  95,  671 
V.  Getz.  96  Iowa  139.  288 

V.  Glenn,  10  Idaho  224,  302 


Ixii 


TABLE    OF    CASES. 


[References  are  to  Sections.l 


First  Nat.  Bank  v.  Gridley,  93 

N.  Y.  Supp.  445,     158,  480,  483,  688 

V.  Hanscom,  104  Mich.  67,  44 
V.  Haulenbeck,    65    Hun    (N. 

Y.)   54,  380 

V.  Henry,  156  Ind.  7,  422 

V.  Hirschkowitz,  46  Fla.  588,  30 

V.  Howe,  1  Mont.  604,  122,  263 
V.  Jennings,   89   N.  Y.   Supp. 

995,  44  Misc.  374,  418 

V.  Johns,  22  W.  Va.  520,  26 

V.  Johnson,  97  Ala.  655,  247 

V.  Lasater,  196  U.  S.  115,  306 
V.  Laughlin,  4  N.  D.  391, 

135,  147,  160 

V.  Latton,  67  Ind.  256,  119 
V.  Ledbetter,  34  S.  W.  1042, 

211,  306 
V.  Lewinson  (N.  M.),  76  Pac. 

288,  679 

V.  Lierman,  5  Neb.  247,  27 
V.  Linn    County    Nat.    Bank, 

30  Oreg.  296,  586 

V.  Marshall,  73  Me.  79,      680,  685 

V.  Martin,  56  Kan.  247,  73 
V.  McCarthy   (S.  D.),  100  N. 

W.  14,  306 
V.  McCord   fTex.  Civ.  App.), 

39  S.  W.  1003,  540 

v.  McKibben,  50  Neb.  513,  402 

V.  Miller,  37  Neb.  500,  585 

V.  Morgan,  73  N.  Y.  593,  131 

V.  Nelson,  105  Ala.  180,  199,  52 
V.  Nordstom  (Kan.  1904),  78 

Pac.  804,  137 

V.  O'Connell,  84  Iowa  377,  613 

V.  Peek,  8  Kan.  660,  262 

V.  Pennington,  57  Neb.  404,  439 

V.  Pierson,  24  Minn.  140,  79 
V.  Portland    &    0.    R.    Co.,    2 

Fed.  831,  350 
V.  Reid  (Tenn.  Ch.  App.),  58 

S.  W.  1124,          554,  558,  565 

V.  Ruhl,  122  Ind.  279,  238 
V.  San   Antonio   &   A.    P.   R. 

Co.,  97  Tex.  201,  414 

V.  Sargent,  65  Neb.  594,  105 
V.  Schnurr,  57  Mo.  App.  176,  354 
V.  Schuyler,  39  N.  Y.  Super. 

Ct.  440,  270,  272,  443 

V.  Security    Nat.    Bank,     34 

Neb.  71,  427 

V.  Shaw,  109  Tenn.  237,  60 

V.  Skeen,  101  Mo.  683,  238 

V.  Smith,  8  S.  D.  7,  418 

V.  Spear.  12  S.  D.  108,  183 

V.  Stanley,  46  Mo.  App.  440,  28 

V.  Stockell,  1  Pick.  252,  359 


First  Nat.  Bank  v.  Stone,  106 
Mich.  367,  581 

V.  Strang,  72  111.  559,  419 

V.  Tappan,  6  Kan.  456,  100 

V.  Turner,    3    Kan.    352,    42 

Pac.  936,  306,  614 

V.  Watkins,  154  Mass.  385,  679 
V.  Weidenbeck,  97  Fed.  896,  182 
V.  Werst,  52  Iowa  284,  432 

V.  Weston,    49    N.    Y.    Supp. 

542,  540 

V.  Whitmore,  94  U.  S.  343,  102 
V.  Wilmington,  77  Fed.  401,  583 
V.  Wisdom's    Exr's,    23    Ky. 

Law  Rep.  530,  536,  96 

V.  Wood,  128  N.  Y.  35, 

246,  249,  391 
V.  Wood,    8    Tex.    Civ.    App. 

554,  386,  388 

V.  Worst,  52  Iowa  684,      376,  378 
V.  Zeims,  93  Iowa  140,         23,  26 
First    Nat.    Bank    of    Arkansas 

City  V.  Hasie,  57  Kan.  754,  597 
First  Nat.  Bank  of  Bingham- 
ton  V.  Commercial  Trav.  Home 
Assn.,  108  N.  Y.  App.  Div.  78,  486 
First  Nat.  Bank  of  Bridgeport 
V.  Perris  Irrigation  District, 
107  Cal.  62,  ■        437 

First  Nat.  Bank  of  Brooklyn  v. 
Gridlev,  112  App    Div.  298,         572 
V.  Wallis,  150  N.  Y.  455,  663 

First  Nat.  Bank  of  Columbus  v. 
Garlinghouse,  33  Ohio  St.  492, 

302,  306 
First  Nat.  Bank  of  Council  Bluffs 

V.  Moore,  137  Fed.  505,       447,  452 
First  Nat.  Bank  of  Crown  Point 
V.   First   Nat.   Bank  of   Rich- 
mond, 76  Ind.  561,  583 
First  Nat.  Bank  of  Hastings  v. 
Farmers'  &  Merchants'   Bank 
(Neb.),  95  N.  W.  1062,  457 
First  Nat.  Bank  of  Indianapolis 

V.  New,  146  Ind.  411,  680 

First  Nat.  Bank  of  Jersey  City 

V.  Leach,  52. N.  Y.  350,  581 

First    Nat.    Bank    of    Joliet    v. 

Adam,  138  111.  483,  246,  370 

First  Nat.  Bank  of  Lancaster  v. 

Hartman,  110  Pa.  St.  196,  539 

First  Nat.  Bank  of  Lebanon  v. 

Bachman,  3  Pa.  Dist.  460,  256 

First  Nat.  Bank  of  Lisbon  v. 
Bank  of  Wyndmere  (N.  D. 
1906),  108  N.  W.  546,  481 

First  Nat.  Bank  of  Massillon  v. 
Coughron,  52  S.  W.  1112,  288 


TABLE   OF    CASES. 


Ixiii 


[References  are  to  Sections.'i 


First  Nat.  Bank  of  Mauch  Chunk 
V.  Rohrer,  138  Mo.  369,  366 

First  National  Bank  of  McPher- 
son  V.  Bradley,  61  Kan.  615,        681 

First  Nat.  Bank  of  Meridian  v. 
Strauss,  66  Miss.  479,  246 

First  Nat.  Bank  of  New  Castle 
V.  Nugen,  99  Ind.  160,  629 

First  Nat.  Bank  of  New  York  v. 
Morris,  1  Hun  (N.  Y.)  680, 

272,  277,  306 

First  Nat.  Bank  of  North  Ben- 
nington V.  Wood,  51  Vt.  473, 

553,  558,  568 

First  Nat.  Bank  of  Rapid  City 
V.  Security  Nat.  Bank  of 
Sioux  City,  34  Neb.  71,  635 

First  Nat.  Bank  of  Rochester  v. 

Pierson,  24  Minn.  140,  671 

First    Nat.    Bank    of    Salem    v. 

Grant,  71  Me.  374,  282 

First  Nat   Bank  of  Salisbury  v. 

Michael,  96  N.  C.  53,  699 

First   Nat.   Bank   of    Seattle  v. 

Harris,  7  Wash.  139,  688 

First  Nat.  Bank  of  St.  Cloud  v. 

Lang,  102  N.  W.  700,  270 

First  Nat    Bank  of  Union  Mills 

V.  Clark,  134  N.  Y.  368,  581 

First  Nat.  Bank  of  Whitehall  v. 

Lamb,  50  N.  Y.  95,  306 

First  State  Bank  v.  Hammond, 

104  Mo.  App.  403,  475 

Fish  V  De  Wolf,  17  N.  Y.  Super. 

Ct.  573,  304 

V.  French.  15  Gray  520,  289 

V.  Jacobsohn,  1  Keyes  539,        230 

Fisher  v.  Beckwith,  19  Vt.  31,         513 

V.  Dennis,  6  Cal.  577,  23 

V.  Diehl,  94  Md.  112,  15 

V.  Fisher,  98  Mass.  303,    377,  679 

V.  Leland,  4  Cush.  456,  472 

V.  Salmon,  1  Cal.  413,  263 

V.  Von  Behren,  70  Ind.  19,    27,  28 

Fisherdick   v.   Hutton,   44   Neb. 

1'22,  135 

Fisk  V.  Collins,  9  Mo.  137,  116 

V.  Kenosha,  26  Wis.  23,  87 

Fitch  V.  Frazer,  82  N.  Y.  Supp. 

138,  194 

V.  Jones,  5  El.  &  Bl.  238,    291 

Fitchburg  Bank  v.   Greenwood, 

2  Allen   (Mass.)   434,  348 

Fitts  V.  Hall.  9  N.  H.  444,  450,        63 
Fitz  V.  Bynum,  55  Cal.  459,  210 

Fitzgerald  v.  Barker,  96  Mo.  661, 

125,  129,  241 
Fitzmaurice  v.  Mosier,  116  Ind. 
363,  17 


Fitzpatrick   v.    School    Commis- 
sioners, 7  Humph.  (Tenn.)  224,  74 
Flagge  V.  Locke,  38  Mass.  241,     213 
Flanagan  v.  Hambleton,  54  Md. 

222,  375 

Flanigan    v.    Phelps,    42    Minn. 

186,  154,  155,  188 

Flannagan    v.    National    Union 

Bank,  2  N.  Y.  Supp.  488,  165 

Flanner  v.  Butler,  131  N.  C.  150,  214 
Fleckner  v.  United  States  Bank, 

8  Wheat.  (U.  S.)  339,  303,  367 

Fleischman  v.  Stern,  90   N.   Y. 

110,  653 

Fleitman   v.   Ashley,  172   N.   Y. 

628,  271 

Fleming  v.  Greene,  48  Kan.  646,  122 

Fletcher   v.    Arkansas   National 

Bank,  62  Ark.  265,  542 

V.  Chase,  16  N.  H.  38,  208 

V.  Fletcher,  29  Vt.  98,  418 

V.  Great    Western    Elevator 

Co..  12  S.  D.  643,  120 

V.  Gusbie,  32  Me.  587,  119 

V.  Pierson,  69  Ind.  281,  586 

Fleury  v.   Roget,  5   Sandf.    (N. 

Y.)  646,  339 

Flewellin     v.     Hale,     6     Yerg. 

(Tenn.)  515,  327 

Flight  V.  Reed,  1  Hurl.  &  C.  703,  305 
Flint  V.  Phipps,  16  Oreg.  437,  183 
Florence  Mining  Co.  v.   Brown, 

124  U.  S.  385,  581 

Florence    R.    R.    Imp.    Co.    v. 

Chase  Nat.  Bank,  106  Ala.  364,     85 
Flour  City  Bank  v.  Connery,  12 

Man.  R.  365,  317 

Flour  City  Nat.  Bank  v.  Shire, 
84  N.  Y.  Supp.  810,  243 

V.  Traders'     Nat.    Bank,     35 

Hun  (N.  Y.)  241,  627 

Flournoy     v.     First     National 

Bank,  79  Ga.  814,        199,  203,  272 
Flower   v.   Noble,    38    La.    Ann. 

938,  fi99 

Floyd  V.  Rust,  58  Tex.  503,  620 

Fotaerts  v.  Sholes,  144  Mich.  215, 

107  N.  W.  904,  116 

Fogg  V.  Stickney,  Fed.  Cas.  No. 

4898,  238 

Foley  V.  Greene,  14  R.  I.  618,        106 
V.  Smith,  6  Wall.  (U.  S.)  492, 

436,  467 

Follain  v.  Dupre,  11  Rob.  (La.) 

454,  126 

Follett  V.  Buver,  4  Ohio  St.  586,  594 

V.  Eastman,  16  Vt.  19,  333 

Folmar  v.  Siler,  132  Ala.  297,  185 


Ixiv 


TABLE   OF    CASES. 


IReferences  are  to  Sections.'\ 


Folsom  V.  Bartlett,  2  Cal.  163, 

239,  419 
V.  Mussey,  8  Greenlf.    (Me.) 

400,  185,  208 

Foltier  v.  Schroeder,  19  La.  Ann. 

17,  102 

Foltz  V.  Mey,  1  Bay  (S.  C.)  303,  486 
Fonner  v.  Smith,  31  Neb.  107,  581 
Fontaine  v.  Sunter,  31  Ala.  258,  136 
Foote  V.  Bragg,  5  Blackf.  (Ind.) 

363,  180 

Forbes  v.  Espy,  21  Ohio  St.  474,  673 
V.  Williams,  13  Bradw.  (111.) 

280,  242,  329 

Ford  V.  Angelrodt,  37  Me.  50,        347 
V.  Bank  (Tex.  Civ.  App.),  34 

S.  W.  684,  174 

V.  Dosson,  1  Rob.  (La.)  39,    419 
V.  H.    C.    Brown   &   Co.,    114 
Tenn.  467,  1  L.  R.  A.  N. 
S.  188,  88  S.  W.  1036, 

465,  474 
V.  Phillips,  83  Mo.  530,  436 

V.  "Washington    Bldg.    Assn., 

10  Idaho  30,  302 

Ford  &  Co.  V.  People's  Bank  of 
Orangeburg,  74  S.  C.  180,  54  S. 
E.  204,  100 

Ford's    Adm'r     v.     Thorton,     3 

Leigh    (Va.)    695,  605 

Fordville  Banking  Co.  v.  Thomp- 
son, 26  Ky.  L.  Rep.  534,  702 
Fordyce  v.  Kosminski,  49  Ark. 

40,  136,  146,  165 

Foreman  v.  Ahl,  55  Pa.  St.  325,       29 
V.  Beckwith,  73  Ind.  515,  456 

Forestville  Soc.  v.  Farnham,  15 

Hun   (N.  Y.)   381,  240 

Forkner  v.  Dinuiddie.  3  Ind.  34,  629 
Forstall  v.  Fussell,  50  La.  Ann. 

249,  378 

Forsythe   v.   Kimball,    91   U.    S. 

291,  307 

Fortune    v.    Stockton,    182    111. 

454,  698 

Fossitt  &  Co.  V.  Bell,  4  McLean 

427,  419,  439,  593 

Foster  v.  Bush,  104  Ala.  662,  599 

V.  Mackinnon   L.  R.  4  C.   P. 

704,  28 

V.  Metz,  55  Miss.  77,  196 

V.  Pearson,  1  Cromp.  M.  &  R. 

849,  359 

V.  Shattuck,  2  N.  H.  446,  24 

V.  Walker,  32  N.  S.  156,  214 

Fotheringham   v.    Price,    1    Bay 

291,  525 

Fourth  Nat.  Bank  v.  Altheimer, 
91  Mo.  190,  560 


Fourth  Nat.  Bank  v.  Henscher, 
52   Mo.  207,  520 

V.  Snow,  3  Daly  167,  376 

Fourth    Nat.    Bank   of   Cadiz  v. 

Craig,  96  N.  W.  185,  241 

Fowle  V.  Outcalt,  64  Kan.  352,       699 
Fowler  v.  Allen,  32  S.  C.  229,        318 
V.  Brantley,  14  Pet.  318, 

420,  467,  472,  483 
V.  Brooks,  13  N.  H.  240,  650 

V.  Strickland,  107  Mass.  552,    376 
Fox  V.  Blackstone,  32  111.  538, 

241,  307,  314,  320 
V.  Rural  Home  Co.,  90  Hun 

(N.  Y.)  365,  271 

V.  Whitney,  16  Mass.  118,         302 
Fraker  v.  Cullum,  21  Kan.  555, 

135,  152,  168 
Fraley  v.  Kelly,  79  N.  C.  348,  651 
Franc  v.  Dickinson,  52  Hun  (N. 

Y  )  373  333 

Frank  v.  Bank,  84  N.  Y.  209,  100 

V.  Quast,  86  Ky.  644,        273,  286, 

287,  307,  383,  388 

Frank  &  Sons  v.  Quast,  86  Ky. 

649,  241 

Frankenstein  v.  Levim,  65  N.  Y. 

Supp.  562,  402 

Franki  v.  Bailey,  31  Oreg.  235,     232 
Franklin     v.     Browning     (Ind. 
Terr   1901),  64  S.  W.  563,  344 

V.  Vanderpool,  1  Hall.  78,        523 
V.  Verbois,  6  La.  727,  570 

Franklin    Bank   v.    Cooper,    36 
Me.  221,  603 

V.  Steward,  37  Me.  519,  581 

Franklin  Life  Ins.  Co.  v.  Court- 
ney, 60  Ind.  134,  139,  146,  168 
Franklin    Sav.    Inst.    v.    Heins- 

man,  1  Mo.  App.  336,  394 

Fraser  v.  Armstrong,  10  U.  C.  C. 

P.  506,  682 

V.  McConnell,  23  Ga.  368,  3 

V.  Stuart,  46  Iowa  15,  345 

Frazee  v.  McFarland,  43  Up.  Can. 

Q.  B.  281,  47 

Frazer  v.  Boss,  66  Ind.  1,  143 

V.  Edwards,    5    Dana    (Ky.) 

538,  421 

V.  Jordan,  8  El.  &  B.  303,         341 
Frazier  v.  Gains,  2  Baxt.  (Tenn.) 

92,  22 

V.  Gilson,  7  Mo.  271,  592 

V.  Massey,  14  Ind.  382,  68 

V.  Warfield,  17  Miss.  220,         277 

Frederick   v.    Clemens,    60    Mo. 

313,  28 

V.  Winans,  51  Wis.  472,  240 

Free  v.  Hawkins,  8  Taunt.  92,      320 


TABLE    OF    CASES. 


Ixv 


[References  are  to  Sections.l 


Freeman    v.    Boynton,    7    Mass. 

483,  513 

Freese  v.  Brownell,  35  N.  J.  L. 

285.  306,  514 

Freittenberg  v.  Rubel,  23  Iowa 

154,  239 

Frence  v.  Gordon,  10  Kan.  370,     258 

French  v.  Bank  of  Columbia,  4 

Cranch  141,  523,  570 

V.  Carr,  7  111.  664,  263 

V.  French,  84  Iowa  655,  195 

V.  Hoffmire,  43  N.   Y.  Supp. 

496,  304 

V.  Irwin,  4  Baxt.  401,        591,  642 
V.  Talbot    Paving    Co.,    100 

Mich.  443,  105,  288 

V.  Wallack,  12  N.  Y.   St.  R. 

159,  314 

Freund  v.  Importers'  &  Traders' 

Nat.  Bank,  76  N.  Y.  352,  413 

Frick  V.  Moore,  82  Ga.  163,  288 

Fridenberg  v.  Robinson,  14  Fla. 

130,  341 

Friedlander  v.  Texas  &  Pac.  Ry. 

Co.,  130  U.  S.  416,  414 

Friedman  v.  Johnson,  21  Minn. 

12,  186 

Friend   v.   Harrison,   2  Carr.   & 

P.  584,  300 

Frissell  v.  Mayer,  13   Mo.  App. 

331,  342 

Fritz  V.  Kennedy,  119  Iowa  628,  585 
Frum   V.   Keeney    (Iowa  1899), 

80  N.  W.  507,  661 

Fry  V.  Hammer,  50  Ala.  52,  30 

V.  Hill,  7  Taunt.  397,  496 

Ft.  Dearborn  Nat.  Bank  v.  Ber- 
rott  (Tex.  Civ.  App.),  57  S.  W. 
340,  467 

V  Carter,  152  Mass.  34,  119 

V.  Seymour,  71  Minn.  81,         581 
Fudge  V.  Marquell,  164  Ind.  447, 

135,  165 

Fugitt  V.  Nixon,  44  Mo.  295, 

503,  523,  564 
Fulford  V.  Block,  8  111.  App.  284, 

28,  133 
Fuller  V.  Bean,  30  N.  H.  181,  288 

V.  Green.  64  Wis.  159,  177 

V.  Hutchings,  10  CaJ.  523, 

183,  419 
V.  Law,  207  Pa.  St.  101,  334 

V.  Quesnel,  63  Minn.  302,  65 

N.  W.  634,  474 

V.  Wilde,  151  Mass.  412,  343 

Fuller  Buggy  Co.  v.  Walden,  99 

N.  Y.  Supp.  561,  688 

Fullerton  v.  Andres,  70  Minn. 
445,  73  N.  W.  256,  473 

Joyce  Defenses — ^v 


Fullerton  v.  Sturges,  4  Ohio  St. 

529,  22,  176 

Fulton  V.  Loughlin,  118  Ind.  286, 

194,  241 
V.  McCracken,  18  Md.  528,        531 
Furber  v.  Fogler,  97  Me.  585, 

188,  266,  702 
Furmish  v.  Burge  (Tenn.  1899), 

54  S.  W.  90,  673 

Furniss   v.    Gilchrist,    1    Sandf. 

(N.  Y.)  53,  246,  249,  391,  593 

Furth  V.  Baxter,  24  Wash.  608,     573 
Fury  V.  Kempin,  79  Mo.  477,        125 


G 


Gaar  v.  Hulse,  90  111.  App.  548,      72 
Gabbert    v.    Schwartz,    69    Ind. 

450,  366 

Gage  V.  Kendall,  15  Wend.  640, 

95,  418 
V.  Mechanics'  Nat.  Bank,  79 

111.  62,  504 

V.  Punchard,  6  Daly  229,  369 

V.  Sharp,  24  Iowa  15, 

19,  307,  314 
Gage   Hotel   Co.   v.   Union   Nat. 

Bank,  171  111.  531,  581 

Gaillard  v.   Le  Seigneur,  1  Mc- 

Mullan  (S.  C.)   225,  302 

Gaines  v.  Bank  (Ky.),  39  S.  W. 

438,  446 

Galbraith  v.  City  of  Knoxville, 
105  Tenn.  453,  86 

V.  Shepard   (Wash.  1906).  86 

Pac.  1114,  502,  544,  545 

Gale  V.   Birmingham,  64  Minn. 
555,  439 

V.  Harp,  64  Ark.  462,  322 

V.  Miller,  54  N.  Y.  536,  94 

Gallagher  v.  Brewster,  153  N.  Y. 
364,  192 

V.  Donahy,  65  Kan.  341,  214 

Gallaudet  v.  Sykes,  1  McArthur 

(D.  C.)  489,  277 

Galloway    v.    Bartholomew,    44 
Greg.  75,  136,  181 

V.  Merchants'  Bank,  42  Neb. 

259,  127 

Galusha  v.   Sherman,   105   Wis. 

263,  106,  237 

Galvin  v.   Syfers,   22    Ind.   App. 

43.  314 

Gamacke  v.  Grimm,  23  Mo.  38.     208 
Gammon  v.   Plaisted,   51   N.   H. 

444,  288 

Gandy  v.  Bissell  (Neb.),  100  N. 
W.  803,  240,  317,  402 


ixvi 


TABLE   OF    CASES. 


[References  are  to  Sections.'] 


Gano  V.  Farmers'  Bank,  103  Ky. 
508,  318 

v.  Finnell,  13  B.  Mon.  390,       307 
V.  Samuel,  14  Ohio  592,  119 

Gansevoort     v.      Williams,      14 

Wend.  133,  91 

Ganz    V.    Lancaster,    169    N.    Y. 
357,  305 

V.  Weisenberger,  66  Mo.  App. 

110,  109 

Garber  v.  Breese,  96  Va.  644,        117 
Garden   Citv   Nat.  Bank  v.   Fit- 

ler,  155  Pa.  St.  210,     270,  392,  528 

Gardner    v.    Beacon    Trust    Co., 

190  Mass.  27,  467 

V.  Burch,  101  Mich.  261,  345 

V.  Gager,  1  Allen  502,  382 

V.  Maxwell,  27  La.  Ann.  561, 

376,  439 

V.  Walsh,  5  El.  &  Bl.  63, 

137,  174,  182 
V.  Wiley  (Oreg.),  79  Pac.  286,    75 
Garfield   Nat.   Bank  v.    Colwell, 

57  Hun  169,  342,  385 

Garfield  Tp.  v.  Crocker,  63  Kan. 

272,  232 

Garland  v.  Lane,  46  N.  H.  245,       288 
V.  West,  68  West  315,  505 

Garlock   v.    Geortner,    7   Wend. 

198,  695 

Garner  v.  Fite,  93  Ala.  405,  307 

Garnett  v.  Myers  (Neb.),  94  N. 

W.  400,  699 

Garrard  v.   Hadden,  67   Pa.   St. 
82,  144,  146 

V.  Pittsburgh  &  C.  R.  Co.,  29 

Pa.  154,  483 

Garrett  v.  Campbell,  2  Ind.  Ty. 

301,  317 

Garrison  v.  King,  35  Tex.  183,       263 
V.  Nelson,    (Tex.),   19   S.  W. 

248,  314 

Garrott  v.  Jaffray,  10  Bush  413,    447 
V.  Ratcliff,  83  Ky.  384,  73 

Garthwaite   v.  Bank  of  Tulare, 

134  Cal.  237,  577,  588,  702 

Gaskill   V.   Huffaker,   20  Ky.  L. 

Rep.  1555,  474 

Gaskin  v.  Peck,  N.  B.  Eq.  Cas. 

40,  44,  46 

Gasquet  v.  Pechin,  143  Cal.  516,       20 
Gates  V.  Beecher,  60  N.  Y.  518, 

520,  560 
V.  Morton       Hardware       Co. 

(Ala.  1906),  40  So.  509,     241 
V.  Renfroe.  7  La.  Ann.  569,     231 
Gatzmer  v.  Pierce,  6  Wkly.  Not. 

Cas.  (Pa.)  433,  222 

Gaul  V.  Willis,  26  Pa.  St.  259,        304 


Gavin  v.  Burton.  8  Ind.  69,  65 

Gay  V.  Rainey,  86  111.  221,  277 

Gaylord     v.     Nebraska    Sav.    & 

Exch.  Bank,  54  Neb.  104,    447,  456 
Gazzam   v.   Armstrong,   3   Dana 

(Ky.)  554,  282 

Gebhart  v.    Sorrels,   9   Ohio   St. 

461,  217 

Geddes  v.   Blackmore,   132   Ind. 

551,  175 

Geisreiter  v.  Sevier,  33  Ark.  522, 

236,  240 
Gelpecke  v.  City  of  Dubuque,  1 

Wall.  175,  487 

General  Electric  Co.  v.  Nassau 

Electric    Co.,    36    N.    Y.    App. 

Div.  510,  194 

Genesee    County    Sav.    Bank   v. 

Michigan  Barge  Co.,  52  Mich. 

438,  85 

Geo.  N.  Fletcher  &  Sons  v.  Al- 
pena   Cir.    Judge,    136    Mich. 

511,  302 

George  v.  Cutting,  46  N.  H.  130,    52 
V.  Gillespie,     1     G.     Greene 

(Iowa)  421,  202 

Georgia  v.  Lewin,  45  Barb.   (N. 

Y.)   340,  277 

Georgia   Nat.   Bank   v.   Hender- 
son, 46  Ga.  487,  583 
Georgian    Bay    Lumber    Co.    v. 

Thompson,  35  Up.  Can.  Q.  B. 

64,  208 

Gerding  v.  Welch,  51  N.  Y.  Supp. 

1064,  418 

German-American    Bank   v.    At- 

water,  165  N.  Y.  36,  563,  564 

V.  Mills,  91  N.  Y.  Supp.  142,     554 
German-American  Nat.  Bank  v. 

People's  Gas  &  Elect.  Co.,  63 

Minn.  12,  314 

German-American  Sav.  Bank  v. 

Burlington  &  Hanna   (Iowa), 

100  N.  W.  56,  367 

V.  Hanna,  124  Iowa  374, 

247,  354,  538 

German-American  Security  Co. 
V.  McCulloch  (Ky.),  89  S.  W. 
5,  229,  322 

German  Bank  v.  De  Shon,  41 
Ark.  331,  304 

V.  Dunn,  62  Mo.  79,  158 

Germania  Bank  v.  La  Follette, 
72  Fed.  145,  392,  473 

V.  Michaud,  62  Minn.  459,        183 
German  Nat.  Bank  v.  Beatrice, 
63  Neb.  246,  587 

V.  Louisville  Co.,  97  Ky.  34,      85 


TABLE   OP   CASES. 


Ixvii 


[References  are  to  Sections.'] 


German  Savings  Bank  v.  Drake 
(Iowa),  79  N.  W.  121,  681 

Germans'  National  Bank  v. 
Butchers'  Hide  &  T.  Co.,  97 
Ky.  34,  514 

Gerrish  v.  Glines,  56  N.  H.  9,       171 

Getty  V.  Schantz,  101  Wis.  292,     681 

Gettysburg  Nat.  Bank  v.  Chisolm, 
169  Pa.  St.  564,  136,  168,  170 

Geysor  Mfg.  Co.  v.  Jones,  90  Ga. 
307,  460 

Giavanovitch  v.  Citizens'  Bank 
of  Louisiana,  26  La.  Ann.  15, 

21,  246 

Gibbs  V.  Linabury,  22  Mich.  478,     25 

Gibson  v.  Allen,  104  N.  W.  275,     217 

V.  Hutchins,  43  S.  C.  287,  419 

V.  Miller,  29  Mich.  355,     315,  456 

V.  Newman,  1  How.   (Miss.) 

341,  324 

Gifford  V.  Fox,  95  N.  W.  1066,       185 

V.  Harden,  88  Wis.  538,    574,  585 

Gilbert  v.  Brown  (Ky.  1906),  97 

S.  W.  40.  36,  222 

V.  Nelson,  5  Kan.  App.  528,     366 

V.  Sharp,  2  Lans.  412, 

102,  103,  428 

Gildersleeve  v.  Caraway,  19  Ala. 
246,  453,  492 

V.  Pelham  Ry.  Co.,  11   Daly 

257,  343 

Giles  V.  Canary,  99  Ind.  116,  679 

Gill  V.  Creed,  3  Coldw.  (Tenn.) 
295,  293 

V.  Cubitt,   3   Barn.   &   Cress. 

466,  476 

V.  Morris,  11  Heisk.  (Tenn.) 

614,  290 

Glllam  V.  Boynton,  36  Mich.  235,     55 
Gillespie  v.  Battle,  15  Ala.  276,     210 
V.  Campbell,  39  Fed.  724, 

272,  383 

V.  Planters'  Oil  Mill  &  Mfg. 

Co.,  76  Miss.  406,         402,  536 
V.  Simpson  (Ark.),  18  S.  W. 

1050,  107 
V.  Torrance,  7  Abb.  Pr.  462,  280 
Gillett    V.    Ballou,    3    Williams 
(Vt.)   296,  342 
V.  Sweat,  6  111.  475,  172 
Gilliam  v.  Brown,  43  Miss.  641,  293 
V.  Myers,  31  111.  525,  199 
•  Gillispie  v.  Ft.  Wayne  &  South- 
ern R.  Co.,  12  Ind.  398,  409 
Gillman  v.  Henry,  53  Wis.  465,  307 
Gilman  v.  Pillsbury,  16  La.  Ann. 
51,  203 
V.  Railroad  Co.,  72  Ala.  566,  472 


Gilman  v.  Township  of  Gilby,  8 

N.  Dak.  627,  232 

Gilman  Sons  &  Co.  v.  New  Or- 
leans &  Selma  R.  Co.,  72  Ala. 
566,  476 

Gilmore  v.  Allen,  118  Mass.  94,     262 
V.  German  Sav.  Bank,  89  111. 

App.  442,  240 

V.  Wilbur,  12  Pick.  124,  496 

Gilson  V.  Gilson,  16  Vt.  464,  336 

Girard   Fire  &  Marine   Ins.   Co. 

V.  Marr,  46  Pa.  St.  504,  369 

Giselman  v.  Starr,  106  Cal.  651, 

403,  416 
Gist  V.  Cans,  30  Ark.  285,  155 

Givens  v.  Merchants'  Nat.  Bank, 

85  111.  442,  525 
Gladstone  v.  Dew,  9  Up.  Can.  C. 

P.  439,  147,  152 

Gladstone     Baptist     Church     v. 

Scott,  25  Ky.  L.  Rep.  237,  407 

Glaser  v.  Rounds,  16  R.  I.  235,  525 
Glasgow  &  Harrison  v.  Copeland, 

8  Mo.  268,  544,  570 

Glass  V.  Adone  (Tex.  Civ.  App.), 

86  S.  W.  798,  310,  339 
Glasscock  v.  Balls,  24  Q.  B.  Div. 

13  699 

v'.  Smith,  25  Ala.  474,         282,  436 
Glaze  V.  Ferguson,  48  Kan.  157, 

524,  540,  573 

Gleaser   v.   Rounds,    6   N.    Eng. 

Rep.  500,  522 

Gleason  v.  Henry,  71  111.  109,  74 

V.  Saunders,   121   Mass.   436, 

333,  343 
Glengall  v.  Edwards,  2  Younge 

&  C.  Exch.  125,  445 

Glenn     v.     Farmers'     Bank     of 
North  Carolina,  70  N.  C.  191, 

288,  291,  293 
V.  Porter,  49  Ind.  500,  28 

Glens  Falls  Ins.  Co.  v.  Temple, 

51  N.  Y.  Supp.  948,  681 

Glicksman  v.  Earley,  78  Wis.  223, 

530,  553,  554,  555 
Glidden     v.     Chamberlain,     167 
Mass.  486,  95,  525,  573 

v.  Massachusetts  Hospital  L. 

I.  Co.,  187  Mass.  538,   320,  343 

Glover  v.  Green,  96  Ga.  127,  135 

V.  Jennings.  6  Blackf.  10,  449 

v.  Robbins,  49  Ala.  219,    139,  170 

Goad  V.  Hart's  Admr's,  8  Sm.  & 

M.  787,  22 

V.  Moulton,  67  Cal.  536,  34 

Goddard  v.  Cutts,  11  Me.  440,        312 

V.  Pratt,  33  Mass.  412,  94 

Godfrey  v.  Megahan,  38  Neb.  748,   59 


Ixviii 


TABLE   OF    CASES. 


[References  are  to  8ections.'\ 


Godin     V.     Bank     of    Common- 
wealth, 6  Duer  76,  490 
Goetter  v.  Pickett,  61  Ala.  387,        28 
Goetting  v.  Day,  87  N.  Y.  Supp. 

510,  402,  475 

Goetz  V.  Bank  of  Kansas  City, 
119  U.  S.  551,  483 

V.  Goldbaum   (Cal.),  37  Pac. 

646,  74 

Gold  V.  Eddy,  1  Mass.  1,  419 

Golden  v.  Vyse,  115  Iowa  726,      702 
Goldthwait  v.  Bradford,  36  Ind. 

149,  333 

Goodell  V.  Sinclair,  112  111.  App. 

594,  75 

Goodenow  v.  Curtis,  33  Mich.  505,  161 
V.  Curtis,  18  Mich.  298,  •    367 

Goodfellow  V.   Stillwell,  73  Mo. 

17,  699 

Goodhue  v.  Barnwell,  Rice's  Eq. 

S.  C.  198,  30 

Goodman  v.  Eastman,  4  N.  H. 
455,  138 

V.  Fleming,  57  Ga.  350,  314 

V.  Harvey,  4  A.  &  E.  870,         476 
V.  Norton,  17  Me.  381,  566 

V.  Simonds,  20  How.   (U.  S.) 

343,  119,  288, 

359,   439,   442,   476 
V.  Simonds,   19  Mo.  107,  359 

Goodnow  V.  Warren,  122  Mass. 

79,  519 

Goodrich  v.  Reynolds,  31  111.  490,  238 

V.  Stanley,  23  Conn.  79,  307 

V.  Stanley,  24  Conn.  613,  691 

Goodsell  V.  Myers,  3  Wend.  479,        64 

Goodson  V.  Johnson,  35  Tex.  622,  419 

Goodwin  v.  Kent,  201  Pa.  St.  41,    125 

V.  Morse,    9    Mete.     (Mass.) 

278,  208 

V.  Nickerson,  51  Cal.  166,  310,  322 

Gordan  v.  Decker,  19  Wash.  188,  467 

Gordon  v.  Bank,  144  U.  S.  97,        143 

V.  Mulhare,  13  Wis.  22,  682 

Gore  Bank  v.  Eaton,  27  Up.  Can. 

Q.  B.   332,  682 

V.  Gibson,  9  Jur.  140,  69,  70 

V.  McWhirter,    18    Up.    Can. 

C.  P.  293,  682 

Gorgier  v.   Mieville,   3   Barn.   & 

C.  45.  308 

Gorham  v.  Keyes,  137  Mass.  583,   109 

V.  Peyton,  3  111.  363,  328 

Cornell  v.  Nebeker,  58  Ind.  425,    171 

Gorrell  v.  Home  Jjife  Ins.   Co., 

63  Fed.  371,  309,  320,  333 

V.  Ins.  Co..  11  C.  C.  A.  240,        85 

Gorsuth    V.    Butterfield,   2   Wis. 

237,  288 


Goshen  Nat.  Bank  v.  Bingham, 

118  N.  Y.  349,  581 

V.  State,  141  N.  Y.  379,  485 
Gosling  V.  Griffin,  85  Tenn.  737, 

246,  359,  699 
Gothrupt  V.  Williamson,  61  Ind. 

599,  22 
Gotzian  &  Co.  v.  Heine,  87  Minn. 

429,  680 

Gough  V.  Staats,  13  Wend.  549,  585 

Gould  V.  Armstrong,  2  Hall.  (N. 

Y.)   266,  288 

V.  Leavitt,  92  Me.  416,      241,  289 

V.  March,  1  Hun  566,  366 

V.  Robinson,  8  East  576,  688 

V.  Sigel,  5  Duer  (N.  Y.)  260,  240 

V.  Stevens,  43  Vt.  125,  191 

Goupy  V.  Harden,  7  Taunt.  159,  496 

Gowen  v.  Shute,  4  Baxt.  57,    288,  291 

V.  Wentworth,  5  Shep.  66,  376 

Gower  v.  Moore,  25  Me.  16,  519 

Grady  v.  Campbell,  78  Mo.  App. 

502,  47 
Graf  V.  Smith,  62  Hun   (N.  Y.) 

621,  284 
Graff  V.  Logue,  61  Iowa  704, 

307,  314,  317 

Grafton  Bank  v.  Kent,  4  N.  H. 

221,  3 

Graham  v.  Alexander,  123  Mich. 

168,  231 

V.  Cambel,  105  Ga.  839,  364 

V.  Marks,  98  Ga.  67,  115,  288 

V.  Morstadt,  40  Mo.  App.  333, 

5,  582 

V.  Remmel   (Ark.),  88  S,  W. 

899,  313 

V,  Rush,  73  Iowa  451,  182 

V.  Troth,  69  Kan.  861,  411 

V.  Wilson,  6  Kan.  489,  446 

Grandin  v.  Le  Roy,  2  Paige  (N. 

Y.)    509,  246,  249,  353,  391 

Grand    Island    Bkg.    v,    Wright, 

53  Neb.  574,  37,  59 

Grange  v.   Reigh,   93  Wis.   552, 

574,  576 

Granger  v.  Roll,  6  S.  D.  611,  41 

Grant  v.  Alt,  17  Kan.  444,  294 

V.  Gaughan,  3  Burrow  1516,      394 
V.  Ellicott,  7  Wend.    (N.  Y.) 

227,  199,  270,  272 

V.  Kidwell.  30  Mo.  455,  699 

V.  MacNutt,  33  N.  Y.  Supp.  62,   583 
V.  Norway,  10  C.  B.  665,  414 

V.  Ryan,  37  Tex.  37,  293 

V.  Treadwell  Co.,  82  Hun  591, 

80,  81 

V.  Vaughan,  3  Burrows  1516,   404 


TABLE  OF  CASES. 


Ixix 


[References  are  to  Sections.'\ 


Grant  &  Kelly  v.  Chambers,  30 
N.  J.  L.  323,  197 

Graphic  Co.  v.  Marcy,  12  Phila. 
218,  418 

Graul  V.  Strutzel,  53  Iowa  712, 

503,  563 

Graves  v.  American,  17  N.  Y. 
205,  470 

V.  Mining  Co.,  81  Cal.  303,        446 
Gray  v.   Bank  of   Kentucky,  29 
Pa.  St.  356,  119,  134,  240,  273,  456 
V.  Matthias,  5  Ves.  Jr.  286,      300 
V.  Real  Estate  Bank,  5  Pike 

93,  410 

Grayson  County  Nat.  Bank  v. 
Nashville  C.  &  St.  L.  R.  (Tex. 
Civ.  App.),  79  S.  W.  1094,  414 

Gray  Tie  Lumber  Co  v.  Farm- 
ers' Bank,  22  Ky.  L.  Rep.  1333,  237 
Great  Palls  Bank  v.  Farmington, 

41  N.  H.  32,  294 

Greatly  v.  Noble,  3  Madd.  79,        31 
Greeley  v.   Whitehead,   35    Fla. 

523,  502,  525 

Green  v.  Bickford,  60  N.  H.  159, 

260,  262 
V.  Brown,  49  N.  Y.  Supp.  163,  442 
V.  Davis,  4  B.  &  C.  235,  19,  178 
V.  Grant,  134  Mich.  462,  302 

V.  Kennedy,  6  Mo.  App.  577,      22 
V.  Lake,  2  Mackey  162,  305 

V.  Louthain,  49  Ind.  139, 

422,  436,  529 
V.  Lowry,  38  Ga.  548,  193 

■V,  McAuley   (Kan.),  79  Pac. 

133,  417 

V.  McDonald,  21  Miss.  445,        260 
V,  Sarmiento,  3  Wash.  17,  254 

V.  Wilkie,  98  Iowa  74,  27 

Greenfield  Bank  v.  Crafts,  86 
Allen  447,  74 

V.  Stowell,  123  Mass.  196,        165 
Greenleaf  v.  Cook,  2  Wheat  (U. 
S.)   13,  208 

v.  Watson,  83  Me.  266,  515 

Greenwell  v.  Haydon,  78  Ky.  332,    419 
Greer  v.  Bentley,  19  Ky.  L.  Rep. 

1251,  320 

Gregg  V.  Bank  of  Columbia,  72 
S.  C.  458,  581 

V.  Beane,  69  Vt.  22,    574.  576,  583 
V.  Union  County  Nat.  Bank, 

87  Ind.  238,  441 

Gregory   v.   Harrington,   33   Vt. 

241,  125 

V.  Hart,  7  Wis.  532.  332 

V.  Pierce,  4  Mete.  478,  37,  43 

Greneaux  v.  Wheeler,  6  Tex.  515,  394 

Grew  V.  Bevan,  3  Starkie  134,       116 


Grew  V.  Burditt,  26  Mass.  265,      248 

Grey  v.  Cooper,  3  Doug.  54,  68 

V.  Kentucky    Bank,    2    Litt. 

(Ky.)   378,  238 

Gridley  v.  Bane,  57  111.  326,  120,  121 
Grier  v.  Hinman,  9  Mo.  App.  213,  431 
Grieves'    Syndics    v.    Sagory;    3 

Mart.  O.  S.   (La.)  599,  224 

Griffey     v.     Payne,     1     Morris 

(Iowa)  68,  208 

Griffin  v.  Hasty,  94  N.  C.  438,        419 
V.  Kemp,  46  Ind.  172,  576 

v.  Ketchum,    8    Peck     (111.) 

392,  239,  419 

V.  Simons,  61  Tenn.  19,  201 

Griffith  V.  Clark,  18  Md.  566,  30 

V.  Collier,  1  Ky.  L.  Rep.  260,      23 

V.  Cox,  1  Overt.  210,  152 

V.  Shipley,  74  Md.  591,  323 

Griffiths  V.  Kellogg,  39  Wis.  290,      25 

Grigby  v.  Cox,  1  Ves.  Sr.  517,  33 

Griggs  v.  Day,  136  N.  Y.  152,         373 

V.  Howe,  31  Barb.  100,  22 

V.  Woodruff,  14  Ala.  9,  472 

Grim  v.   Grim,   65   N.  Y.   Supp. 

1134,  699 

Grimball  v.  Marshall,  3  Smedes 

&  M.  359,  534 

Grimes    v.    Grimes,    28    Ky.    L. 
Rep.  549,  688 

V.  Hillenbrand,  6   Thomp.  & 

C.  620,  291 

V.  Piersol,  25  Ind.  246,  158 

Grimmerson  v.  Russell,  20  Neb. 

337,  343 

Grimsted  v.  Briggs,  4  Iowa  559,  149 
Grissom  v.  Fife,  38  Tenn.  331,  23 
Grist  V.  Grist,  1  Ind.  570,  417 

Griswold  v.  Bueckle,  72  Mo.  App. 

53,  489 

Groatman  v.  Delheim,  6  Me.  476,  505 
Grocers'    Bank    v.    Murphy,    9 
Daly  510,  117 

V.  Penfield,  69  N.  Y.  504, 

246,  249,  284,  285,  353, 

390,  391 

Groff  V.  Groff,  209  Pa.  St.  603,        96 

Grooms    v.    Lieurance,    98    111. 

App.  394,  695 

V.  Oliff,  93  Ga.  789,  240 

Gross  V.  Funk,  30  Kan.  655,  303 

V.  Kellard,    26    N.    Y.    Supp. 

69,  212 

Groves  v.  Clark,  21  La.  Ann.  567, 

291,  292 

Grymes    v.    Blofield,    Cro.    Eliz. 

541,  697 

Guelich    v.    National    Bank    of 

Burlington,  56  Iowa  434,  583 


Ixx 


TABLE    OF    CASES, 


[References  are  to  Sections.'] 


Guenther  v.  Wisdom,  27  Ky.  L. 

Rep.  230,  302 

Guerguin  v.  Boone,  33  Tex.  Civ. 

App.  622,  680 

Guernsey    v.    Burns,    25    Wend. 

(N.  Y.)  411,  418 

Guignon  v.  Union  Trust  Co.,  156 

111.  135,  509,  515,  531,  534,  545 

Guild  V.  Butler,  127  Mass.  386,  686 
Gulicli  V.  Gulick,  16  N.  J.  L.  186,  307 
Gullatt  V.  Thrasher,  42  Ga.  429,  293 
Gumaer  v.  Sowers,  31  Colo.  126, 

240,  402,  404 
Gunnis  Barrett  &  Co.  v.  Weig. 

ley,  114  Pa.  St.  191,  10,  281 

Gunnison  County  v.  E.  H.  Rol- 
lins &  Sons,  173  U.  S.  255,  489 
Gushee  v.  Leavitt,  5  Cal.  160,        416 
Guthrie  v.  Howard,  32  Iowa  341,     62 
V.  Reid,  107  Pa.  St.  251,  306 
Guy  V.  Bibend,  41  Cal.  322,  361 
V.  Liberenz,    160    Ind.    524, 

44,  45,  49 
Gwathney  v.  McLane,  3  McLean 

U.  S.  371,  419 

Gwin  V.  Anderson,  91  Ga.  827,  145 
Gwyn  V.  Patterson,  72  N.  C.  189,  316 
Gwynn  v.  Lee,  9  Gill  (Md.)  137, 

121,  288,  303,  359 


H 


Haas    V.    American    Nat.    Bank 
(Tex.  Civ.  App.),  94  S.  W.  439, 

36,  482 
V.  Bank     of     Commerce,     41 

Neb.  754,  369,  688 

V.  Hall    &   Farley,    111    Ala. 

442,  288 

Haber  v:  Brown,  101  Cal.  445, 

503,  515,  570 
Habenicht  v.  Rawls,  24  S.  C.  461,  44 
Hackensack    Water    Co.    v.    De 

Kay,  36  N.  J.  Eq.  548,  487 

Hacker  v.  Brown,  81  Mo.  68,         263 

Hackett  v.   City   of   Ottawa,  99 

U.  S.  86,  488 

V.  Kendall,  23  Vt.  275,  416 

V.  Reynolds,  114  Pa.  St.  328,       622 

Hackettstown  v.  Wing,  52  N.  J. 

Eq.  156,  476,  662 

Hackley  v.    Sprague,   10   Wend. 

(N.  Y.)  113,  302,  303 

Hadden  v.  Rodkey,  17  Kan.  429, 

419,  463 
Haden  v.  Lehman,  83  Ala.  243,  246 
Hadley  v.  Wray,  76  Ind.  476,  592 
Haescig  v.  Brown,  34  Mich.  503,   240 


Haeussler  v.  Greene,  8  Mo.  App. 

451,  431 

Hagan  v.  Bigler,  5  Okla.  575, 

198,  208 
Hagen  v.  Bank,  6  Lans.  (N.  Y.) 
490,  642 

V.  Bowery  National  Bank,  64 

Barb.  (N.  Y.)  197,  101 

V.  Caldwell,  15  La.  380,  439 

Hagerman    v.    Hagermann,    188 
111.  363,  214 

V.  Sutton,  91  Mo.  519,  56,  366 
Haggerty  v.  Walker,  21  Neb.  596,  635 
Haight  V.  Joyce,  2  Cal.  64,  296 

Haines  v.  Dennett,  11  N.  H.  180,   161 
V.  Dubois,  30  N.  J.  L.  259,        307 
V.  Nance,  52  111.  App.  406,         347 
Hair  v.  Edwards,  104  Mo.  App. 
213,  402 

v.  La  Brouse,  10  Ala.  548, 

307,  333 
Halcraft  v.  Wellott,  57  Ind.  519,  614 
Halcrow  v.   Kelly,   28  Up.   Can. 

C.  P.  551,  135,  169,  170 

Halderman  v.   Bank  of  Middle- 
ton,  28  Pa.  St.  440,  89 
Hale  V.  Aldaffer,  5  Kan.  App,  40,  198 
v.  Christy,  8  Neb.  264,  56 
V.  Dressen,  76  Minn.  183,         681 
V.  Harris,    28    Ky.    L.    Rep. 

1172,  91  S.  W.  660,  194 

V.  Kimball,  77  111.  161,  592 

Haley  v.  Congdon,  56  Vt.  65, 

635,  637 
V.  Harvey,  1  White  &  W.  Civ. 
Cas.      (Tex.     Ct.     App.) 
1096,  333 

Halifax  v.  Lyle,  3  Exch.  446,         95 
Hall    V.    Auburn    Turnpike    Co., 
27  Cal.  256,  257,  80 

V.  Bank,  5  Dana.  (Ky.)  258,    166 
V.  Bank,  13  III.  234,  270 

V.  Campbell,  5  Ky.  Law  Rep. 

247,  52 

V.  Carev,  5  Ga.  239,  416 

V.  Clofton,  56  Miss.  555,  116 

V.  Commonwealth     Bank,     5 

Dana  (Ky.)  258,  105 

V.  Cordell,  142  U.  S.  116,  277 

V.  Freeman,    2    Nott.    &   Me. 

479,  525 

V.  Fuller,  5  Barn.  &  C.  750,     165 
V.  Hale,  8  Conn.  336,  179 

V.  Huse,  10  Mass.  39,  73 

V.  Parker,  37  Mich.  590,  29 

V.  Rodgers,  26  Tenn.  540,  212 

V.  Smith,  15  Iowa  584,  691 

V.  Wilson,  16  Barb.    (N.  Y.) 

548,  394 


TABLE    OF    CASES. 


Ixsi 


{References  are  to  Gections.l 


Halliday   v.   Atkinson,   5    Barn. 

&  Cr.  501,  186 

Hallock  V.  Young,  72  N.  H.  416,    476 
Halloway    v.    Quinn,    18    Wkly. 

Not.  Cas.  (Pa.)  386,  270 

Hallowell    &    Augusta    Bank    v. 

Howard,  13  Mass.  235,  612 

Hall's    Adm'x    v.    McHenry,    19 

Iowa  521,  181 

Halstead  v.  Colvin,  51  N.  J.  Eq. 
387,  380,  402 

V.  Mayor  of  City  of  New 
York,  5  Bark  (N.  Y.) 
218,  84 

V.  New  York,  3  N.  Y.  430,  87 

Haly  V.  Lane,  2  Atk.  181,  61,  68 

Ham  V.  Smith,  87  Pa.  St.  63,  288 

Haman  v.  Bannon,  71  Md.  424,      599 
Hamburger  v.  Miller,  48  Md.  317, 

185,  200,  204,  279 

Hamelin  v.  Bruck,  9  Q.  B.  306,      641 

Hamer  v.  Brainerd,  7  Utah  245,     522 

V.  Johnson,  6  How.  698,  202 

V.  Johnston,  5  Miss.  698, 

198,  237,  240 
Hamill  v.   First  Nat.   Bank,   14 

Colo.  1,  629 

Hamilton  v.  Catchings,  58  Miss. 
92,  272 

V.  Fowler,  99  Fed.  18,       288,  303 
V.  Hooper,  46  Iowa  515, 

16,  141,  174,  175 
V.  La  Grange,  2  H.  Bl.  144,  302 
V.  Marks,  63  Mo.  167,  476 

V.  Pleasants,  31  Tex.  638, 

78,  335 

V.  Vought,  34  N.  J.  L.  187,        476 
V.  Winona  Salt  &  L.  Co.,  95 

Mich.  436,  583 

V.  Wood,  70  Ind.  306,  153 

Hamilton    Nat.     Bank    v.    Nye 

(Ind.  App.  1906),  77  N.  B.  295,     73 
Hamlin    v.    Simpson,    105    Iowa 

125,  523,  583 

Hammett  v.  Trueworthy,  51  Mo. 

App.  281,  524,  539 

Hammond  v.  Aiken,  3  Rich.  Eq. 
(S.  C.)   119,  94 

V.  Kingsley,  12  111.  343,  236 

Hampton  v.  Mayes,  3  Ind.  Terr. 
65,  135 

V.  Miller  78  Conn.  267,      505,  506 
V.  Shehan,  7  Ala.  295.  409 

Hanauer  v.  Doane,  12  Wall.  (U. 
S.)  342,  293 

V.  Woodruff,     15    Wall.     (U. 

S.)   439,  293 

Hanbury  v.  Lovett,  18  Law  T. 
N.  S.  366,  164 


Hance  v.  Holiman,  69  Ark.  57,        682 
Hanchett  v.  Birge,  12  Mete.  545,    685 
Hancock  v.  Chicot  Co.,  32  Ark. 
575,  87 

V.  Joy,  41  Me.  568,  51 

Hand  v.  Feld,  Anth.  N.  P.    (N. 
Y.)   87,  262 

V.  Pantagraph    Co.,    1    Colo. 

App.   270,  238 

Handy  v.  Tracy,  150  Mass.  524,      682 
V.  Wilson,   75   Ga.    840,  328 

Handy   Brothers   Hardware   Co. 

V.  Brownstone,  123  Cal.  643,       613 
Hank  v.  Deal,  3  McCord  (S.  C.) 

257,  66 

Hankins  v.  Shoup,  2  Ind.  342, 

238,  431,  465,  637 
Hanks  v.  Brown,  79  Iowa  560,       288 
V.  Dunlap,   10  Rich.  Eq.    (S. 

C.  139,  121 

Hanna  v.  Stroud,  13  S.  Dak.  352,  681 
Hannahs   v.    Sheldon,   20    Mich. 

278,  72 

Hannum  v.  Richardson,  48  Vt. 

508,  348 
Hanover    Bank    v.    Johnson,    90 

Ala.  549,  291,  295 

Hanover  Nat.  Bank  v.  American 

D.  &  T.  Co.,  148  N.  Y.  612,  75 

V.  Howell,  114  N.  C.  271,  60 

Hansard  v.  Robinson,  7  Barn.  & 

C.  90,  513 

Hansford  v.  Mills,  9  Port.  (Ala.) 

509,  209 
Hanson  v.  Heard  (N.  H.)  38  Atl. 

788,  581 

Hanston  v.  Fellows,  27  Vt.  634^     595 

Hapgood    V.    Needham,    59    Me. 

442,  288,  294 

v.  Watson,  65  Mass.  510,      '       92 

Harbaugh   v.    Tanner,   163    Ind. 

574,  303 

Harbeck  v.   Craft,  4  Duer     (N. 
Y.)  122,  307 

V.  Craft,  4  Duer  (N.  Y.)  122,  307 
Harcrow  v.  Gardiner,  69  Ark.  6,  125 
Hardie  v.  Wright,  83  Tex.  345,  361 
Rardie  &  Co.,  In  re,  143  Fed.  553,  439 
Hardin  v.  McKitrich,  5  J.  J. 
Marsh.    (Ky.)    667,  329 

V.  Pelan,  41  Miss.  112,  183 

Harding    v.    Commercial    Loan 

Co.,  84  111.  251,  312 

Hardy  v.  Corliss,  21  N.  H.  356,      592 
V.  First  Nat.  Bank,  56  Kan. 

493,  473 

V.  Norton,   66  Barb.    (N.  Y.) 

527,  160 

V.  Waddell,  58  N.  H.  460,         659 


Ixxii 


TABLE   OF    CASES. 


[References  are  to  Sections.'] 


Hardy  v,  Walters,  38  Me.  450,   63,  68 
Hare  v.  Hooper,  56  Neb.  480,  302 

Hargrave  v.  Dusenberry,  9  N.  C. 

326,  645 

Harigs  v.  Louisville  Trust  Co., 

30  S.  W.  637,  243 

Harker  v.  Brown,  81  Mo.  68,  262 

Harlan  v.  Reid,  3  Ham.  (Ohio) 

285,  122 

Harlem  v.  Read,  3  Ham.  (Ohio) 

285,  193 

Harlow  v.  Boswell,  5  Peck.  56,      270 
V.  Boswell,  15  111.  57,  320 

Harmon  v.  Adams,  120  U.  S.  263, 

333,  685 
V.  Haggerty,  88  Tenn.  705,  292 
V.  Hale,  1  Wash.  T.  422,  c 

Harner  v.  Batford,  35  Ohio  St. 

113,  690,  691 

Harness  v.  Home,  20  Ind.  App. 

134,  266 

Harnett     v.      Holdrege      (Neb. 

1903),  97  N.  W.  443,  180 

Harp  V.  Osgood,  2  Hill   (N.  Y.) 

216,  288 

Harpening  v.  Gray,  76  Hun  351,   699 
Harper     v.     Calhoun,     7     How. 
(Miss.)  203,  596 

V.  Middle   States   Loan,  etc., 

Co.,  55  W.  Va.  149,  302 

V.  Stroud,  41  Tex.  367,  174 

V.  Wrigley,  48  Ga.  495,  333 

V.  Young,  112  Pa.  St.  419,         297 

Harpham  v.  Haynes,  30  111.  404,    240 

Harphane  v.  Haynes,  33  111.  405,   237 

Harrell  v.  Broxton,  78  Ga.  129, 

419,  484 

V.  Citizens'  Bkg  Co.,  Ill  Ga. 

846,  467 

Harrigan  v.  Advance  Thresher 

Co.,  26  Ky.  L.  Rep.  317,      265,  447 
Harrington  v.   Butte   &   Boston 
Min.  Co.  (Mont),  83  Pac.  467, 

465,  475 
V.  Claflin,  91  Tex.  295,  423 

v.  Dorr,  3  Rob.  (N.  Y.)  275,     282 
V.  Lee,  33  Vt.  249,  210 

v.  Wilcox,  8  Jones  Law  (N. 

C.)  349,  635 

Harris  v.  Berger,  15  N.  Y.  St. 
R.  389,  391,  22,  23 

v.  Bressler,  119  111.  467,  614 

V.  Brooks,  21   Pick.    (Mass.) 

195  342 

V.  Burw'ell.  65  N.  C.  584,  624 

v.  Clark,  10  Ohio  6,  520 

V.  Finberg,  46  Tex.  79,  41 

V.  Galbraith,  43  111.  309,  351 

V.  Robinson,  4  How.  336,  549,  570 


Harris  v.  Runnels,  12  How.  (U. 

S.)    79,  292 

Harrisburg  Nat.  Bank  v.  Brad- 
shaw,  178  Pa.  St.  180,  45 

v.  Moffitt,  10  Pa.  Dist.  R.  22, 

505,  506,  545,  564 
Harrisburg    Trust    Co.    v.    Shu- 

feldt,  31  C.  C.  A.  190,  594 

Harrison     v.     Black,     10     Lea. 
(Tenn.)    117,  77 

v.  Copeland,  8  Mo.  268,  495 

V.  Edwards,  12  Vt.  648,  254 

V.  Henderson,  4  Ga.  198,  632 

V.  Morrison,  39  Minn.  319,        332 
V.  Nicollet     Nat.     Bank,     41 

Minn.  488,  577 

V.  Pike,  48  Miss.  46,  238 

V.  Powers,  76  Ga.  218,  29 

V.  Remington  Paper  Co.,  140 

Fed.  385,  679 

V.  Wortham,   8  Leigh    (Va.) 

296,  597 

V.  V/right,  100  Ind.  515,  581 

Harrisonburg  Bank  v.  Meyer,  6 

Serg.  &  R.  537,  449 

Harsh  v.  Klepper,  28  Ohio  St. 

200,  169 

Hart  V.  Adler,  109  Ala.  467,  366 

V.  Boston  &  M.  R.,  72  N.  H. 

410,  56  Atl.  920,  414 

V.  Clouser,  30  Ind.  210,  170 

V.  Grigsby,  14  Bush  (Ky.)  542,    47 
V.  Harrison  Wire  Co.,  91  Mo. 

414,  186 

V.  Livermore  Foundry  &  Ma- 
chine Co.,  72  Miss.  809, 

79,  134,  288 
V.  Long,  1  Rob.  83,  525 

V.  McLellan,  80  Me.  95,      555,  564 
V.  Smith,  15  Ala.  807,  496 

V.  Stickney,  41  Wis.  630,  468 

V.  Strong,  183  111.  349,        194,  685 
V.  Taylor,  70  Miss.  655,  307 

V.  U.  S.  Trust  Co.,  118  Pa.  St. 

565,  353 

V.  West,   16   Tex.    Civ.   App. 

395,  403 

Harter  v.  Johnson,  16  Ind.  271,     301 

Hartford     Bank    v.    Barry,    17 

Mass.  94,  511 

V.  Stedman,  3  Conn.  489,  514 

Hartman  v.  Shaffer,  71  Pa.  St. 

312,  183 

Hartness  v.  Thompson,  5  Johns. 

R.  N.  Y.  160,  68 

Hartwell  v.  Chandler,  5  Blackf. 
215,  502,  514 

V.  McBeth,    1    Harr.     (Del.) 

363,  253 


TABLE   OF    CASES, 


Isxiii 


[References  are  to  Sections.'] 


Hartzell  v.  McClurg,  54  Neb.  316,     403 
Harvard  Pub.  Co.  v.  Benjamin, 

84  Md.  333,  40 

Harvey  v.  First  Nat.  Bank,  56 
Neb.  320,  681 

v.  Johnson,  133  N.  C.  352,  357,  33 
V.  Nelson,    31   La.  Ann.   434, 

524,  539 

v.  Smith,  55  111.  224,  661 

Harwell  v.  Martin,  115  Ga.  156,     122 

V.  Steel,  17  Ala.  373,  610 

Harwood  v.  Brown,  23  Mo.  App. 

69,  185,  186,  198,  202 

Hascall  v.  Whltmore,  19  Me.  102, 

238,  241 
Haseltine  v.  Central  Nat.  Bank, 

183  U.  S.  131,  306,  615 

Haskell  v.  Avery,  181  Mass.  106,    447 
V.  Brown,  65  111.  29, 

365,  367,  446,  447,  472 

V.  Jones,  86  Pa.  St.  173,  292 

Haskins  v.  Throne,  101  Ga.  126,    439 

Hassam  v.  Dompier,  28  Vt.  32,     208 

Hastings  v.  Dollarhide,  24  Cal. 

195,  208,  63,  64,  68 

Hastings  First  Nat.  Bank  v.  Mc- 
Allister, 50  N.  W.  1040,  510 
Hatch  V.  Barrett,  34  Kan.  223,        113 
v.  Burroughs,   1   Woods   439, 

291,  293 

V.  Hydes,  14  Vt.  25,  320 

V.  Reid,  112  Mich.  430,  288 

V.  Trayes,  11  Adol.  &  E.  702,    186 

Hatchett  v.  Baddeley,  2  Sir  W. 

Black.  1079,  42 

Hathaway  v.  Delaware  County, 
93  N.  Y.  Supp.  436,  103  App. 
Div.  179,  474,  485 

Hathorn  v.  Wheelwright,  99  Me. 

351,  208,  264,  292 

Hauck  Clothing  Co.  v.   Sharpe, 

83  Mo.  App.  385,  391,  393 

Haug  V.  Riley,  101  Ga.  372,  439 

Haugan    v.    Surwall,    60    Minn. 

367,  246,  412 

Hauptman  v.  Pike  (Neb.  1906), 

108  N.  W.  163,  116 

Hausbrandt   v.    Hofler    (Iowa), 

90  N.  W.  494,  445 

Havens  v.  Hintington,  1  Cow. 
(N.  Y.)   387.  419 

v.  Potts,  86  N.  C.  31,  446 

Havorka    v.    Heminer,    108    111. 

App.  443,  96 

Hawes    v.    Mulholland,    78    Mo. 

App.  493.  460 

Hawk  V.  Johnson  (Pa.),  6  Atl. 
725,  679 


Hawkell    v.    Champion,    30   Mo. 

136,  172 

Hawkins  v.  Baker,  14  R.  I.  139,      689 
V.  Fourth     Nat.     Bank,     150 

Ind.  117,  49  N.  E.  957,  662 

V.  Neal,  60  Miss.  256,  270 

V.  Wilson,  71  Iowa  761,  119 

Hawks    V.    Truesdell,    12    Allen 

(Mass.)    564,  322 

Hawley  v.  Bibb,  69  Ala.  52,  298 

V.  Brownstone,  23  Cal.  643,       613 
V.  Foote,  19  Wend.  516,  686 

V.  Hirsch,     2     Woodw.     Dec. 

(Pa.)  158,  122,  260 

V.  Jette,  10  Oreg.  31,  523,  570 

Hawley  Bros.  Hardware  Co.  v. 
Brownstone  (Cal.),  56  Pac. 
468,  373 

Haxtun  v.  Bishop,  3  Wend.    (N. 

Y.)   13,  612 

Hay  V.  Ayling,  16  Q.  B.  423,  291 

V.  Jaeckle,   90   Hun    (N.   Y.) 

114,  386,  388 

Haycock  v.  Rand,  59  Mass.    (5 

Cush.)  26,  127 

Hayden  v.  Lincoln  City  Elec. 
Ry.  Co.,  43  Neb.  680,  359 

V.  Davis,   3  McLean    (U.   S.) 

276,  Fed.  Cas.  No.  6259,      79 
Haydenville     Saving     Bank     v. 

Parsons,  138  Mass.  53,  341 

Haydon    v.    Nicoletti,,    18    Nev. 

290,  376,  466 

Hayes  v.  Allen,  160  Mass.  286,        689 

V.  Gorham,  2  Scam.  (111.)  429,  239 

V.  Matthews,  63  Ind.  412,  173 

Haynes   v.   Foster,   2   Cromp.   & 

M.  237,  380 

V.  Gay,  37  Wash.  230,  302 

V.  Rudd,  30  Hun  (N.  Y.)  237,  112 

V.  Thorn,  8  Fost.    (N.  H.)   386, 

198 
Havs  V.  Citizens'  Sav.  Bank,  101 
Ky.  201,  541,  560,  561 

V.  Hathorn,  74  N.  Y.  486,  418 

V.  Kingston,  16  Atl.  745,  265 

V.  McFarlan,  32  Ga.  699,  301 

V.  Southgate,  10  Hun  511,         418 
V.  Walker,    25    Ky.    L.    Rep. 

1045,  292 

Hayward  v.  Barker,  52  Vt.  429,        43 
V.  Empire  State  Sugar  Co.,  93 

N.  Y.  Supp.  449.  524,  539 

V.  Minger,  14  Iowa  516,  419 

V.  Stearns,  39  Cal.  58,        419,  436 
Haywood   v.   McNair,  2   Dev.   & 

Bat.    (N.  C.)   283,  419 

Hazard  v.  Spencer,  17  R.  I.  561. 

514,  dl7 


Ixxiv 


TABLE   OF    CASES. 


[References  are  to  Sections.'] 


Hazard  v.  White,  26  Ark.  155,  525 
Hazelton  v.  Batchelder,  44  N.  H. 

40,  74 

Hazlett  V.  Bragdon,  7  Pa.  Super. 

Ct.  581,  522,  564,  570 

H.  B.  Claflin  Co.  v.  Feibelman, 

44  La.  Ann.  518,  514 

Head  v.  Baldwin,  83  Ala.  132,  214 
Headley  v.  Good,  24  Tex.  232,  329 
Healey  v.  Gilman,  1  Bosw.  235,  523 
Heaps  V.  Dunham,  95  111.  583,  108 
Heard  v.  De  Loach,  105  Ga.  500, 

257,  404 
V.  Dubuque  County  Bank,  8 

Neb.  10,  367 

Heath  v.  Blake,  28  S.  C.  406,  157,  174 
V.  Derry  Bank,  44  N.  H.  174,  3 
Heath,  Ex  parte,  2  Ves.  &  B.  240,  523 
Heatley  v.  Thomas,  15  Ves.  596,  33 
Heaton  v.  Knowlton,  53  Ind.  357, 

210,  662 

Heaverin  v.  Donnell,  7  Sm.  &  M. 

(Miss.)   244,  347 

Hebberd  v.   Southwestern  Land 

&  Cattle  Co.,  55  N.  J.  Eq.  29,      476 
Hecker   v.   Boylan    (Iowa),   101 

N.  W.  755,  447 

Hedge  v.  Gibson,  58  Iowa  656,  419 
Heffington  v.  Jackson  (Tex.  Civ. 

App.  1906),  96  S.  W.  108,  63 

Hefiierman    v.    Pennington 

County,  3  S.  D.  162,  402 

Heffner  v.  Wenrich,  32  Pa.  St. 

423,  152 

Heffron  v.  Cunningham,  76  Tex. 

312,  307 

V.  Daly,  133  Mich.  613,  288 

Hefner  v.  Dawson,  63  111.  403,    74,  674 

V.  Vandolah,  62  111.  483,      74,  674 

Heirn  v.  Carron,  11  S.  &  M.  361,    691 

Heist  V.  Hart,  73  Pa.  St.  286,        123 

Helena  Nat.  Bank  v.  Rocky  Mt. 

Teleg.  Co.,  20  Mont.  379,  447 

Helfenstein,    In    re,    77    Pa.    St. 

328,  317 

Helmer  v.  Commercial  Bank,  28 
Neb.  474,  359,  460 

V.  Krolick,  36  Mich.  371,  366 

Helms    V.    Wayne    Agricultural 

Co.,  73  Ind.  325,  104,  673 

Helwege  v.  Hibernia  Nat.  Bank, 

28  La.  Ann.  520,  642 

Hemenway    v.    Cropsey,    37    111. 
357,  302,  303 

V.  Hickes,  21  Mass.  497,  183 

Hemings    v.    Robinson,    Barnes 

436,  657 

Hemming  v.  Trenery,  9  Adol.  & 
El.  926,  171 


Hemminguay    v.    Mathews,    10 

Tex.  207,  12,  54 

Hempler   v.    Schneider,   17    Mo. 

258,  343 

Hendershot    v.    Nebraska    Nat. 

Bank,  25  Neb.  127,  565 

Henderson  v.  Anderson,  3  How. 

(U.  S.)  73,  121 

V.  Benson,  8  Price  281,   291,  303 

V.  Case,  31  La.  Ann.  215,    419 

V.  Davisson,  157   III.  379,  41 

N.  E.  560,  402 

V.  Fox,  5  Ind.  489,  63,  68 

V.  Glass,  16  Tex.  559,  183 

V.  Lewis,  9  Serg.  &  R.  (Pa.) 

379,  629 

V.  Shafer,  110  La.  Ann.  481,     696 
V.  Waggoner,  2  Lea   (Tenn.) 

133,  288 

V.  Wilson,  7  Miss.   (6  How.) 

65,  152,  153 

Hendrick  v.  Foote,  57  Miss.  117,     56 
Hendricks    v.    Judah,    1    Johns. 

(N.  Y.)  319,  627,  635 

Hendrie    v.    Berkowitz,    37    Cal. 

113,  116,  73 

Henke  v.   Eureka  End.   Assoc, 

100  Cal.  429,  183 

Henley  v.   Helzer,  19  Mo.  App. 

245,  431 

Henly  v.  Lanier,  75  N.  C.  172,       651 
Hennesey  Bros.   &  Co.  v.  Mem- 
phis National  Bank,  129  Fed. 
557,  81 

Henniger  v.  Wager,  4  Ohio  Dec. 

242,  237 

Henriette    Nat.    Bank   v.    State 

Bank,  80  Tex.  648,  581 

Henriques  v.   Ypsilanti  Savings 

Bank,  84  Mich.  168,  126 

Henry  v.  Coats,  17  Ind.  161,  174 

V.  Coleman,  5  Vt.  402,  343 

V.  Galliland,   103    Ind.   177, 

446,  651 

V.  McAllister,  99  Ga.  557,  26 

S.  E.  469,  653 

V.  Scott,  3  Ind.  412,  447,  623 

V.  Spengler,    12    Ohio    C.    C. 

153,  558,  567 

V.  State  Bank  of  Laurend 
(Iowa),  107  N.  W.  1034, 

112,  194,  288 

Henry  Wood's  Sons  Co.  v.  Schae- 

fer,  173  Mass.  443,  689 

Henshaw  v.  Dutton,  59  Mo.  139, 

307,  312,  314,  320 
Hentz  V.  Jewell,  20  Fed.  592,  298 

Hepler  v.  Bank,  97  Pa.  St.  420,      135 


TABLE    OF    CASES. 


Ixxv 


[References  are  to  Sections."] 


Herbert  v.  Ford,  33  Me.  90, 

206,  208,  211 
V.  Hule,  1  Ala.  18,  22 

Herdon  v.  Henderson,  41  Miss. 
584,  338 

Hereth  v.  Bank,  34  Ind.  380,    120,  193 

Herider  v.  Phoenix  Loan  Assoc, 
82  Mo.  App.  427,  582 

Herman  v.  Gunter,  83  Tex.  66,      241 
V.  HecM,  116  Cal.  553,      416,  560 

Hermann  Furniture  &  Plumbers' 
Cabinet  Works  v.  German  Ex- 
change Bank,  87  N.  Y.  Supp. 
462,  581 

Hermen  v.  Bourgeat,  12  Bab. 
(La.)    522,  95 

Herndon  v.  Bremond,  17  Tex. 
432,  238 

Herod   v.    Snyder,    48    Ind.    480, 

261,  446 

Herrick  v.  Baldwin,  17  Minn. 
209,  179,  515,  542 

V.  Carman,  10  Johns.  224,  408 

V.  Edwards,     106     Mo.     App. 

633,  505,  545 

V.  Swomley,  56  Md.  439,   295,  419 
V.  Whitney,    15     Johns.     (N. 

Y.)   240,  645 

V.  Woolverton,  41  N.  Y.  581,     507 
Herriman  v.  Mulhellan,  1  Mart. 

N.  S.  (La.)  605,  419 

Herrington  v.   Butte  &  B.   Min. 

Co.,  27  Mont.  1,  119 

Hershizer  v.   Florence,  39  Ohio 

St.   516,  524,  59 

Hert  V.  Ford  (Mo.  1896),  36  S. 
W.  671,  312 

V.  Oehler,  80  Ind.  83,        136,  168 
Herter  v.  Goss  &  Edsall  Co.,  57 

N.  J.  L.  42,  347 

Hervey  v.  Hervey,  15  Me.  357, 

152,  154 
Heslau  v.  Bergeren,  94  Me.  395, 

505,  512 
Heuertematte  v.  Morris,  101  N. 

Y.  63,  123,  240 

Heugh  V.  Jones,  32  Pa.  St.  432,        56 
Hewett  V.  Goodrick,  2  Car.  &  P. 

468,  341 

Hewins  v.  Cargill,  67  Me.  554,        165 
Hewitt  V.  Johnson,  72  111.  513,        25 
V.  Jones,  72  111.  218,  25,  120 

Heyman  v.  Dooley,  77  Md.  162,     681 
Heysham   v.   Oeltre,    89    Pa.    St. 

506,  107 

Hibbs  V.  Brown,  98  N.  Y.  Supp. 

353,  476 

Hibernia  Bank  &  Trust  Co.  v. 
Smith  (Miss.),  42  So.  345,  516 


Hibernian  Bank  v.  Everman,  52 

Miss.  500,  89,  131,  437 

Hibernia  Sav.  &  Loan  Assoc,  v. 

Thornton,  109  Cal.  427,  364 

Hickerson  v.  McFadden,  1  Swan 
(Tenn.)    258,  606 

V.  Raiguel    &    Co.,    49    Tenn. 

329,  287,  389 

V.  Marvin,  31  Barb.  297,  688 

Hickman  v.  Bayl,  55  Ind.  551, 

310,  324 
Hickok    V.    Bunting,    92    N.    Y. 

App.  Div.  167,  183 

Hicks     V.     Randolph,     3     Baxt. 

(Tenn.)   352,  61 

Hidden  v.  Bishop,  5  R.  I.  29,  379 

V.  Waldo,  55  N.  Y.  294,  199 

Higgenbotham  v.  McGready,  183 

Mo.  96,  296,  297 

Higgins   V.   McPherson,   118   111. 
App.   464,  680 

V.  Ridgway,    153    N.    Y.    130, 

198,  269,  342 
V.  Worthington,  90  Hun    (N. 

Y.)    436,  604 

High  V.  Cox,  55  Ga.  662,  340 

Highbaugh  v.  Hubbard,  6  Ky.  L. 

Rep.  511,  447 

Higley    v.    Dennis     (Tex.     Civ. 

App.),  88  S.  W.  400,  699 

Hilbert    v.     Burry,     111     Mich. 

698,  194 

Hildeburn  v.  Turner,  5  How.  69,    517 
Hill  V.  Bank,  56  Vt.  582,  306 

V.  Buckminster,  22  Mass.  391, 

186,  198,  222 
V.  Galvin,  15  Miss.  (4  How.) 

231,  135 

V.  Enders,  19  111.  163, 

208,  322,  338 
V.  Heap,  1  Dowl.  &  Ry.  57, 

523,  573 
V.  Huntress,   43    N.   H.   480, 

309,  310,  322,  333,  367 
V.  Northrup,  1  Hun   (N.  Y.) 

612,  295 

V.  O'Neill,  101  Ga.  832,  136,  139 
V.  Ryan,    8   Up.    Can.    Q.    B. 

443,  208 

V.  Shields,  81  N.  C.  250.  342,  348 
V.  Southwick,  9  R.  I.  299,  599 
V.  Thixton,  94  Ky.  96,  23  S. 

W.  947,  654 

Hlllard   v.    Taylor,   38    So.    549, 

240,  442,  489 
V.  Walker,  11  111.  644,  630 

Hillhouse    v.    Adams,    57    Conn. 

153,  441,  623 

Hills  V.  Place,  48  N.  Y.  520,    502,  517 


Ixxvi 


TABLE   OF    CASES. 


[References  are  to  Sections.'] 


Hillsdale  College  v.  Thomas,  40 

Wis.  661,  212 

Hinckley  v.  Bank,  131  Mass.  147, 

425,  426 
Hindostan  v.  Smith,  36  Law  J. 

C.  P.  241,  1'72 

Hinds   V.    Chamberlin,    6   N.   H. 

225,  288 

Hiner  v.  Newton,  30  Wis,  640,       601 
Hinsey    v.    Studebaker,    73    111. 

App.  278,  528 

Hintermister   v.    Bank,    3    Hun 

345,  306 

Hintington  v.  Shute,  180  Mass. 

371,  186 

Hinton  v.  Scott,  Dud.  (Ga.)  245,  208 
Hirschfield  v.  Smith,  L.  R.  1  C. 

P.  340,  138,  146 

Hirschman    v.    Budd,    L.    R.    8 

Exch.  171,  152 

Hirshfield    v.    Ft.    Worth    Nat. 

Bank,  83  Tex.  452,  510 

Hirt  V.  Vincent,  29  N.  Y.  Supp. 

61  563 

Hitchcock  V.  Hogan,  99  Mich. 
124,  510,  564 

V.  'way,  6  Adol.  &  E.  943,  291 

Hitchings  v.  Edmands,  132  Mass. 

338,  506 

Hoadley  v.  Bliss,  9  Ga.  303,  538 

V.  Good,  24  Tex.  232,  329 

Hoag  V.  Parr,  13  Hun    (N.  Y.) 

95,  257,  310,  327 

Hoare  v.   Graham,  3   Camp,  57, 

307,  339 
Hoats  V.  Aschbach,  160  Pa.  St. 

6.  120 

Hobart  v.  Penny,  70  Me.  248, 

439,  440 

Hobaugh  v.  Murphy,  114  Pa.  St. 
358,  7  Atl.  139,  11  East  Rep. 
12  651 

Hobble  V.  Zaepffell,  17  Neb.  537,    288 
Hobbs  V.   Chemical   Nat.   Bank, 
97  Ga.  524,  543 

V.  Straine,  149  Mass.  212, 

525,  569,  573 
Hochmark  v.  Richler,   16  Colo. 

263,  175,  679 

Hockenbury  v.  Myers,  34  N.  J.  L. 

346,  213 

Hocksher  v.  Shoemaker,  47  Pa. 

St.  249,  699 

Hodge  V.  Babk,  7  Ind.  App.  94,     158 
V.  Mason.  21  D.  C.  181,  262 

V.  Smith  (Wis.  1907),  110  N. 

W.  192,  116 

V.  Wallace  (Wis.),  108  N.  W. 

212  424,  468 


Hodges  V.   Cole,  2  Dana    (Ky.) 
396,  343 

V.  Hunt,    22    Barb.    (N.    Y.) 

150,  64 

V.  Nash,  43  111.  App.  638,  270 

V.  Nash,  141  111.  391,  307 

V.  Price,  18  Fla.  342,  30 

V.  Terrey,  28  Mo.  99,  117 

Hodson  V.  Davis,  43  Ind.  258,    30,  59 
Hofer  V.   Cawan   Co.    (Ky.),   68 

S.  W.  438,  •  29 

Hoff  V.  Jasper  Co.,  110  U.  S.  53,     87 
Hoffman  v.  Bank  of  Milwaukee, 
12  Wall.  (U.  S.)  181,  99 

V.  Foster,  45  Pa.  St.  137, 

282,  419 

V.  Planters'    National    Bank, 

99  Va.  480,  158 

V.  Shupp,  80  Md.  611,  62 

V.  Zollinger,  39  Ind.  461,  630 

Hofrichter   v.    Enyeart    (Neb.), 

99  N.  W.  638,  511,  533,  549 

Hogan  V.  Kaiser,  113  Mo.  App. 

711,  680,  688 

V. 'Moore,  48  Ga.  156,  114 

Hogdon  V.  Colder,  75  Me.  293,       208 

Hoge  V.  Lansing,  35  N.  Y.  136,     340 

Hogg  V.  Shun,  34  L.  J.  C.  P.  153,     93 

Hoit  V.  Cooper,  41  N.  H.  Ill,  301 

Holbrook  v.  Burt,  22  Pick.  555,     496 

V.  Mix,    1   E.    D.    Smith    (N. 

Y.)   154,  270,  472 

Holcomb  V.  Wycoff,  35  N.  J.  L. 

35,  119,  240 

Holden  v.  Clark,  16  Kan.  346,        439 
V.  Cosgrove,  12  Gray  (Mass.) 

216,  296 

V.  Kirby,  21  Wis.  449,       130,  240 
Holder  v.  Western  German  Bank, 

132  Fed.  187,  583 

Holeman  v.  Hobson,  8  Humph. 

127,  119.  376 

Holland  v.  Hoyt,  14  Mich.  238,      268 
V.  Makepeace,    8    Mass.    418, 

419,  591,  608 

V.  Smit,  11  Mo.  App.  6,  699 

Hollandsworth  v.  Squires  (Tenn.), 

56  S.  W.  1044,  628 

Holland  Trust  Co.  v.  Waddell,  75 

Hun  (N.  Y.)  104,  270 

Holley  V.  Younge,  27  Ala.  203,        603 
Holliman   v.   Karger,   71    S.   W. 

299,  250,  489 

Hollis  V.  Vandergrift,  5  Houst. 

(Del.)  521.  149 

Hollister  v.  Bell,  107  Wis.  198,       46 
V.  Hopkins,  13  Hun   (N.  Y.) 

210,  199 


TABLE   OF   CASES. 


Ixxvii 


IReferences  are  to  Sections.l 


Holm  V.  Atlas  Nat.  Bank,  84  Fed. 
119,  476,  486 

V.  Jamieson,  173  111.  295,  460 

Holman  v.  Creagmiles,  14   Ind. 
177,  422,  602 

Holmer  v.  Commercial  Bank,  28 
Neb.  474,  376 

Holmes  y.  Bank,  53  Minn.  350,  303 
V.  Bemis,  25  111.  App.  232,  271 
V.  Briggs,  131  Pa.  233,  570 

V.  Carman,     1     Freem.     Ch. 

(Miss.)  408,  242 

V.  French,  68  Me.  525,  292 

V.  Goldsmith,  147  U.  S.  150,  447 
V.  Harris,  97  Mo.  App.  305,  268 
V.  Holmes,  36  Vt.  525,  369 

V.  Kerrison,  2  Taunt.  323,  490 
V.  Kid,  3  Hurl.  &  N.  891,  637 

V.  Roe,  62  Mich.  199, 

514,    576,    579 
V.  Trumper,  22  Mich.  427, 

136,  170 
V.  Williams,  10  Paige  (N.  H.) 

326,  303 

Holt  V.  Mclntire,  50  Minn.  466,  312 
V.  Nevassa  Guano  Co.,  114  Ga. 

666,  291 

V.  Ross,  54  N.  Y.  472,  13  Am. 

Rep.  615,  673 

Holtgreve    v.    Wuntker,    85    111. 
470,  94 

Holton  V.  Alley,  15  Ky.  L.  Rep. 
529,  24  S.  W.  113,  402 

Holtz  V.  Boppe,  37  N.  Y.  684,  570 

Holzworth  V.  Koch,  26  Ohio  St. 
33,  241 

Home  Bank  v.  Drumgoole,  109 
N.  Y.  63,  15  N.  E.  747,  659 

Home  National  Bank  v.  Hill,  165 
Ind.  226,  74  N.  E.  1086,    14,  26,  28 

Home    Security    Bldg.    &    Loan 
Ass'n  V.  George,  57  Cal.  363,      639 

Homer  v.  Wallis,  11  Mass.  309,     177 

Homes  v.  Bennett  (Me.  1886),  3 

Atl.  661,  34 

V.  Hale,  71  111.  552,  28 

V.  Smith,  20  Me.  264,  510 

V.  Smyth,  16  Me.  177,  241 

Home  Savings  Bank  v.  Hosie,  119 
Mich.  116,  505,  506 

Honingford  v.  Vehman,   2  Ohio 
Dec.  151,  576 

Hood     V.     Nicholas     (Ohio),    1 
Wkly.  Law  Bui.  227,  74 

Hooker  v.  Forrester  (Fla.  1907), 
43  So.  241,  616 

Hooper  v.  Spicer,  2  Swan  (Tenn.) 
494,  436,  624,  635 


Hoopes  V.  Collingwood,  10  Colo. 
107,  170 

V.  Northern    National    Bank, 

102  Fed.  448,  265,  281 

Hopkins  v.  Boyd,  11  Md.  107, 

131,  222,  223 
V.  Hawkeye  Ins.  Co.,  57  Iowa 

203,  28 

Hopkirk  v.  Page,  Fed.  Cas.  No. 

6697,  523,  572 

Hopper  V.  Eiland,  21  Ala.  714,        309 

Horn  V.  Bank,  32  Kan.  518,    138,  158 

V.  Fuller,  6  N.  H.  511,  183 

V.  Newton     City     Bank,     32 

Kan.  518,  136 

Horner   v.    Speed,    2   Pat.   &   H. 

(Va.)   616,  651 

Horst  V.  Wagner,  43  Iowa  373,      143 
Horstman  v.  Henshaw,  11  How. 

(U.  S.)  177,  199 

Horton  v.  Arnold,  18  Wis.  212,       664 
V.  Horton's  Estate,  71   Iowa 

448,  166 

Hosier  v.  Beard,  54  Ohio  St.  398,    71 

Host  V.  Bender,  25  Mich.  515,  433 

Hotchkiss  V.  Fitzgerald  Co.,  41 

W.  Va.  357,  246 

V.  National    Bank,    21    Wall. 

354,  476,  483 

V.  Roehm,  181  Pa.  St.  65,  595 

Hough  V.  Gearen,  110  Iowa  240,    585 
Houghton     V.     First     National 
Bank,  26  Wis.  663,  280,  581 

V.  Houghton,  37  Me.  72,  595 

Housatonic  National  Bank  v.  Fos- 
ter. 85  Hun   (N.  Y.)   376,  195 
House  V.  Adams  &  Co.,  48  Pa. 
St.  261,                             494,  521,  572 
V.  Davis,  60  111.  367,          222,  614 
V.  Martin,  125  Ga.  642,  54  S. 

E.  735.  116 

V.  Vinton  National  Bank,  43 

Ohio  St.  346,  502 

Houser  v.  Bank,  57  Ga.  95,  305 

Housum    V.   Rogers,    40    Pa.    St. 

190,  359,  670 

Houts  V.  Sioux  City  Brass  Works 

(Iowa  1907),  110  N.  W.  166,        81 
Hovorka  v.  Hemmer,  108  111.  App. 

443,  136 

Howard  v.  Ames,  3  Mete.  308, 

365,  436 
V.  Fletcher,  59  N.  H.  151,  341 

V.  Gresham,  27  Ga.  347,  419 

V.  Kitchens.  31  S.  C.  490.  56 

V.  Mississippi  Val.  Bank,  28 
La.  Ann.  727,  26  Am. 
Rep.  105,  641 


Ixxviii 


TABLE   OF    CASES. 


[References  are  to  Sections.'] 


Howard  v.  Palmer,  64  Me.  86,  664 
V.  Simpkins,  70  Ga.  322,  44,  48,  63 
V.  Stratton,  64  Cal.  487,  336 

V.  Van  Gieson,  61  N.  Y.  Supp. 

349,  555 

V.  Witham,  2  Greenlf.   (Me.) 

390,  208 

Howden    v.    Haigh,   11   Adol.   & 

E.  1033,  125 

Howe    V.    Potter,   61    Barb.    (N. 
Y.)   356,  260 

V.  Raymond,  74  Conn.  68,  266 
V.  Taggart,  133  Mass.  284,  75 
V.  Thompson,  11  Me.  152,  179 

V.  Wildes,  34  Me.  566,  30,  51 

Howell   V.   Crane,   12   La.   Ann. 
126,  433 

V.  Pennington,  118  Ga.  494,      302 
Howes  V.  Austin,  35  111.  396,  581 

Howie  V.  Lewis,   14   Pa.   Super. 

Ct.  23,  237 

Rowland  v.  Bates,  48  N.  Y.  St. 
Rep.  642,  418 

V.  Edmonds,  24  N.  Y.  307,        311 
Howry    v.    Eppinger,    34    Mich 

29,  75 

Hoye   V.   Kalishian    (R.    L),   46 

Atl.  271,  489 

Hoyt  V.  Jaffray,  29  111.  104,  186 

V.  Macon,  2  Colo.  502,  288 

V.  McNally,  60  Vt.  38,  211 

y.  Quint,  105  Iowa  443,  681 

V.  Seeley,  18  Conn.  352,  575 

Hubbard  v.  Callahan,  42  Conn. 

524,  292 

V.  Exchange   Bank,    72   Fed. 

234,  267 

V.  Freiburger,  133  Mich.  139, 

201,  202,  208 
V.  Fulton,     7     Mart.     0.     S. 

241,  439 

V.  Galusha,  23  Wis.  398,  327 

V.  Gurney,  64  N.  Y.  457,  340 

V.  Matthews,  54  N.  Y.  43,  520,  660 
V.  Rankin,  71  111.  129, 

25,  28,  120,  211 
V.  Williams,  27  N.  C.  397,         179 
Hubbell  V.  City  of  So.  Hutchin- 
son, 64  Kan.  645,  68  Pac.  52,      653 
V.  Town    of   Coster   City,    15 

S.  D.  55,  232 

Hubbersty    v.    Ward,    8    Exch. 

330,  414 

Hubble  V.  Fogartie,  3  Rich.  413, 

183,  186,  523 
V.  Murphy,  1  Duv.  (Ky.)  278,  315 
Huber  v.  Egner,  22  Ky.  L.  Rep. 
1800,  447,  623 


Huber  v.  German  Congregation, 

16  Ohio  St.  371,  288 

Hubler  v.  Tomney,  5  Watts  (Pa.) 

51,  599 

Huck  V.  Craus,  99  N.  Y.  Supp. 

490,  407 

Huddleston  v.  Kempner,  3  Tex. 

Civ.  App.  252,  419 

Hudle  V.  Hanner,  50  N.  C.  360, 

633,  635 

Hudson  V.  Best,  104  Ga.  131,  212,  473 

V.  Busby,  48  Mo.  35,  263 

V.  Hanson,  75  111.  198,  22 

V.  Walcott,  4  Ohio  Dec.  459, 

406,  502,  503,  545 
Hudson     River    Nat.     Bank    v. 

Reynolds,  10  N.  Y.  Supp.  669,     540 
Huertematte  v.   Morris,   101    N. 

J.  63,  199 

Huff  v.  Wagner,  63  Barb.  215,      377 
Huffman  v.  Johns  (Pa.  Sup.),  6 

Atl.  205,  10  East  Rep.  729,         651 
Huggins    V.    Strong,    4    Blackf. 

(Ind.)   182,  262 

Hughes  V.  Bowen,  15  Iowa  446, 

525,  538 

V.  Heyman,  4  App.  D.  C.  444,  681 

V.  Large,  2  Pa.  St.  103,     431,  637 

V.  Tindall,  1  Stew.  &  P.  237,    447 

V.  Wilcox,  17  Misc.  32,  418 

Hulbut  V.  Hall,  39  Neb.  889,  170 

Hull  V.  Myers,  90  Ga.  674,  570 

Hulley  V.  Chedic,  22  Nev.  127,      412 

Hullhorst  V.   Scharner,  15   Neb. 

57,  112 

Hulme  V.   Tenant,  1  Bro.   C.  C. 

16,  33 

Humberger  v.  Golden,  99  Pa.  St. 

34,  341 

Humble  v.  Curtis,  160  111.  193, 

359,  365,  366 
Humboldt    State    Bank    v.    Ros- 

sing,  95  Iowa  1,  695 

Hummellstown  Brownstone  Co. 
V.  Knerr,  25  Pa.  Super.  Ct. 
465,  680 

Humphreays    v.    Crane,    5    Cal. 

173,  137 

Humphrey  v.  Clark,  27  Conn. 
381.  123 

V.  Finch,  97  N.  C.  303,  23 

Humphrey  Hardware  Co.  v.  Her- 
rick  (Neb.  1904),  101  N.  W. 
1016,  144 

Humphreys  v.  Guillow,  13  N.  H. 

385,  150.  157 

Hungerford  v.  O'B/ien,  37  Minn. 
306,  504 


TABLE  OF   CASES. 


Ixxix 


[References  are  to  Sections.'] 


Hungerford's  Bank  v.  Dodge,  30 

Barb.  626,  306 

Hungerfords'  Bank  v.  Potsdam 

&  W.  R.  Co.,  10  Abb.  Prac.  24,  306 
Hunleath  v.  Leahy,  146  Mo.  408,  467 
Hunnicutt  v.  Perot,  100  Ga.  170, 

504,  529,  545 

Hunt  V.  Adams,  6  Mass.  519,        137 

V.  Aldrich,  27  N.  H.  31,  387 

V.  Bessey,  96  Me.  429,  699 

V.  Bridgham,  2  Pick.  (Mass.) 

581,  341 

V.  Brown,  146  Mass.  253,  679 

V.  Divine,  37  III.  137,  512 

V.  Gray,  35  N.  J.  L.  227,  135,  148 
V.  Johnson,  96  Ala.  130,  502,  503 
V.  Martin,  2  Litt.  (Ky.)  82,  594 
V.  Miss.  Cent.  R.  Co.,  29  La. 

Ann.  446,  414 

V.  Rumsey,  83  Mich.  136,  288 

V.  Sandford,  14  Tenn.  387,        191 

Hunter  v.  Allen,  94  N.  Y.  Supp. 

880,  415 

V.  Blodget,    2    Yeates    (Pa.) 

480,  24 

V.  Clarke,  184  111.  158,  699 

V.  Fitzmaurice,  102  Ind.  449,  129 
V.  Henniger,  93  Pa.  St.  373,  292 
V.  Parsons,  22  Mich.  96,  240 

V.  Reilly,  36  Pa.  St.  509,  73 

Huntington  v.  Finch,  3  Ohio  St. 
445,  135,  181 

V.  Harvey,  4  Conn.  124,  525 

V.  Lyman,   1  D.   Chip.    (Vt.) 

438,  91,  448 

V.  Shute,  180  Mass.  371,  183 

Huntley  v.  Hutchinson,  91  Minn. 

244,  240,  402 

Hurlbut  V.  Hall,  39  Neb.  889,  170 

Hurt  V.  Cook,  151  Mo.  416,        52,  53 
V.  Wallace  (Tex.  1899),  49  S. 

W.  675,  646 

Huston  V.  Bank,  85  Ind.  21,  635 

V.  Young,  33  Me.  85,  17 

Hutch  V.  Johnson  Loan  &  T.  Co;, 

79  Fed.  828,  473 

Hutchings  V.  Renalte  (R.  I.),  51 

Atl.  429,  409 

Hutch  ins  v.  Langley,  27  App.  D. 
C.  234,  1 

V.  Nichols,  10  Cush.  (Mass.) 

299,  338 

Hutchinson  v.  Brown,  19  Dist. 
Col.  136,  317 

V.  Mitchell,  15  La.  Ann.  326,     383 
Hutchison  v.  Crutcher,  98  Tenn. 

421,  517,  518 

Huthoff  V.  Moje,  20  Misc.  R.  (N. 
Y.)  632,  28 


Hyde  v.  Lawrence,  49  Vt.  361,       409 
V,  Stone,  20  How.  170,      558,  663 
V.  Tenwinkel,  26  Mich.  85,        320 
Hyer  v.  Hyatt,  3  Cranch  C.  C. 

276,  Fed.  Cas.  No.  6977,  64 

Hynes    v.    Winston    (Tex.    Civ. 
App.),  40  S.  W.  1025,  475 


Iberia  Cypress  Co.  v.  Cristen,  112 

La.  451,  695 

Ingells  V.  Sutcliff,  36  Kan.  444,     680 
Iglehart  v.  Gibson,  56  111.  81,  350 

Imhoff  V.  Brown,  3  Phila.  (Pa.) 

45,  44 

Importers'  &  Traders'  Nat.  Bank 

V.  Littell,  47  N.  J.  L.  233,    304,  306 
V.  Shaw,  144  Mass.  421,     562,  569 
Independent  Brewing  Assoc,  v. 

Kleit,  114  111.  App.  1,  198 

Indiana  Nat.  Bank  v.  Weckerly, 

67  Ind.  345,  28 

Indiana    Novelty    Mfg.    Co.    v. 

McGill,  15  Ind.  App.  1,  635 

Industrial  Bank   v.   Bowes,   165 

111.  70,  544,  564,  574,  582 

Industrial   Trust  &  Sav.   Co.  v. 

Weakley,  103  Ala.  458,  583 

Ingersoll  v.  Martin,   58  Md.  67, 

183,  184,  202 
Ingerson  v.  Starkweather,  Walk. 

Ch.    (Mich.)    346,  242 

Ingham  v.  Primrose,  7  C.  B.  N. 

S.  82,  20,  661 

Inglis  v.  Kennedy,  6  Abb.  Prac. 

32,  353 

Inglish    V.    Breneman,    5    Pike 

(Ark.)  377,  145 

Ingram  v.  Jordan,  55  Ga.  356,      117 
V.  Morgan,  23  Tenn.  66, 

240,  242,  456 
Inney  v.  Kimpton,  46  Vt.  80,  340 

In  re  Babcock,  3  Story  (U.  S.) 

393,  273 

In  re  Great  Western  Tel.  Co.,  5 

Biss.  363,  240 

International   Bank   v.    German 

Bank.  71  Mo.  183,  95,  376 

.  v.  Vankirk,  39  111.  App.  23,        297 
Iowa   College   Trustees   v.   Hill, 

12  Iowa  462,  22,  383 

Iowa  Nat.  Bank  of  Ottumwa  v. 

Sherman  &  Bratiger,  17  S.  D. 

396,  241,  245,  486 

Iowa  State  Bank  v.  Mason  Hand 

Lathe  Co.    (Iowa),  90  N.  W. 

612,  354,  367 


Ixxx 


TABLE   OF    CASES. 


{References  are  to  Sections.l 


Iowa    State    Savings    Bartk    v. 

Black,  91  Iowa  490,  581 

Iowa  Valley  State  Bank  v.  Sig- 

stad,  96  Iowa  491,        524,  538,  573 
Iron    City    Nat.    Bank    v.    Fort 

Pitt  Nat.  Bank,  159  Pa.  St.  46,   100 
Iron  Mountain  Bank  v.  Murdock, 

62  Mo.  70,  22,  23,  170 

Irons  V.  Sayles,  5  R.  I.  264,  620 

V.  Woodfill,  32  Ind.  40,  339 

Irving  V.  Guthrie  (Ind.  App.),  62 

N.  E.  709,  473 

Irving  Bank  v.  Wetherall,  36  N. 

Y.  335,  585 

Irving  Nat.  Bank  v.  Duryea,  1 

City  Ct.  R.  317,  359 

Irwin  V.    Bailey,    8    Biss.   C.   C. 
523,  Fed.  Cas.  No.  7079,  80 

V.  Guthrie,  28  Ind.  App.  341,    116 
V.  Marquet,  26  Ind.  App.  383, 

.  291,  297 
V.  Webster,  56  Ohio  St.  9,  194 

Isbell  V.  Lewis,  98  Ala.  550, 

514,  569,  570,  573 
Iselin  V.  Chemical  Nat.  Bank,  16 

Misc.  Rep.  437,  272 

Isham  V.  Davidson,  1  Hun   (N. 

Y.)  114,  649 

Island  Sav.  Bank  v.  Galvin,  20 

R.  I.  158,  37  Atl.  809,  659 

Isnard   v.   Torres,   10   La.  Ann. 

103,  •  146,  661 

Israel  v.  Ayer,  2  Rich.    (S.  C.) 
344,  272 

V.  Gale,  77  Fed.  532,  270,  471 

Italo    French     Produce    Co.     v. 

Thomas,  31  Pa.  Super.  Ct.  503,    41 
Ives  V.  Bank,  84  Mass.  (2  Allen) 
236,  154 

V.  Bank  of  Lansingburgh,  12 

Mich.  361,  690 

V.  Bosley,  35  Md.  262,       305,  341 
V.  Farmers'  Bank,   84  Mass. 

236  22    241 

V.  Jacobs,  21  Abb.  N.  C.  (n! 

Y.)  151,  384 

Ivey  V.  Nicks,  14  Ala.  564,  297 


Jacand  v.  French,  12  East  322,  "89 
Jaccard  v.  Shands,  27  Mo.  440,  119 
Jack  V.  Hosmer,  97  Iowa  17, 

237,  465 

Jackson  v.  Adamson,  7   Blackf. 

(Ind.)  597,  623 

V.  Allen,  4  Colo.  263,  112 

V.  Boyles,  64  Iowa  428,  171 


Jackson  v.  Cooper,  19  Ky.  Law 
Rep.  9,  158 

V.  Decker,  43  N.  Y.  Supp.  957,   681 
V.  Fassit,   33   Barb.    (N.   Y.) 

645,  302,  641,  654 

V.  Finney,  33  Ga.  512,  301 

V.  First    National    Bank,    42 

N.  J.  L.  177,  386 

V.  Foote,  12  Fed.  37,  461 

V.  Hulse,  6  Mackey   (D.  C.) 

548,  30 

V.  Lalicker  (Neb.),  99  N.  W. 

32,  684 

V.  Mclnnis,  33  Oreg.  529,  518 

V.  Packer,  13  Conn.  342,  502 

V.  Richards,  2  Caines  343,        510 
V.  Stockbridge,  29  Tex.  394,     117 
Jackson    County    Bank   v.    Par- 
sons, 112  Wis.  265,  685 
Jackson  Paper  Mfg.  Co.  v.  Com- 
mercial  Nat.    Bank,    199    111. 
151,  581 
Jacobs  V.  Gibson,  77   Mo.  App. 
244,                                    524,  538,  573 
v.  Gilreath,  45  S.  C.  46,     149,  169 
V.  Mitchell,  46  Ohio  St.  601, 

296,  310,  339,  472 
Jacobs  Pharmacy  Co.  v.  Southern 

Banking  &  T.  Co.,  97  Ga.  573,      85 
Jacoby  v.  Ross,  12  Mo.  App.  577,   107 
Jagger  v.   Nat.   German  Ameri- 
can Bank,  53  Minn.  386,  552 
James  v.  Blackman,  68  Kan.  723,  240 
V.  Dalbey,  107  Iowa  463,  170,  646 
V.  Wade,  21  La.  Ann.  548,  525 
Jameson  v.  Heim  (Wash.  1906), 

86  Pac.  165,  119 

Janin  v.  London  &  San  Francisco 

Bank,  92  Cal.  14,  27  Pac.  1100,   676 
Jarington  v.  Stratton,  95  Tenn. 

619,  561 

Jarrat  v.  Martin,  70  N.  C.  459,      639 
Jarratt  v.  Wilson,  70  N.  C.  401,      690 
Jarvis  v.  Campbell,  23  Kan.  370,    288 
v.  Rogers,  3  Vt.  336,  312 

V.  Wilson,  46  Conn.  90,  199 

Jay  V.  Reed,  56  111.  130,  472 

J.  C.  Stevenson  &  Co.  v.  Bethea, 

68  S.  C.  246,  407 

Jefferson  v.  Hewitt,  103  Cal.  624, 

311,  345 
Jefferson  Co.  Bank  v.  Chapman, 

19  Johns.    (N.  Y.)   322,  592 

Jefferson  County  Board  of  Su- 
pervisors V.  Arrghi,  51  Miss. 
667,  232 

.Jeffries  v.  Lamb,  73  Ind.  202,        322 
Jemison  v.  Parker,  7  Mich.  355,    373 


TABLE  OF   CASES. 


Ixxxi 


[References  are  to  Sections.} 


Jeneson  v.  Jeneson,  66  111.  259, 

71,  447 

Jenkins  v.  Forbes  (Ga.  1904),  49 

S.  E.  284,  400 

V,  Jones,  108  Ga.  556.        439,  441 

V.  Levis,  25  Kan.  479,  648 

V.  White,  147  Pa.  303,  540 

Jenness  v.  Cutler,  12  Kan.  500,    302 

V.  Parker,    11    Shep.     (Me.) 

289,  208,  266 

Jennings  v.  Carlucci,  87   N.  Y. 
Supp.  475,  489 

V.  Chase,  10  Allen    (Mass.) 

526,  341 

V.  Davis,  31  Conn.  134,  693 

V.  Moore,  189  Mass.  197, 

212,  213,  613,  680,  684 
V.  Shriver,  5  Blackf.    (Ind.) 

37,  633 

V.  Throgmorton,  21   Eng.  C. 

Law  744,  301 

V.  Todd,  118  Mo.   296, 

307,  314,  322 
Jennison    v.    Stafford,    1    Cush. 

(Mass.)  168,  322 

Jenz  V.  Gugel,  26  Ohio  St.  527,       56 
Jerome  v.  Whiting,  7  Johns.  (N. 

Y.)  321,  186 

Jessel  V.  Bath,  L.  R.   2  Exch. 

267,  414 

Jessup    V.    Dennison,    2    Disney 
(Ohio)    150,  137,  153 

V.  Trout,  77  Ind.  194.  327 

Jewell  V.  Wright,  30  N.  Y.  259.      277 
Jewett  V.   Hone,   1   Woods    (U. 
S.)   530.  241.  272.  287 

V.  Salisbury,  16  Ind.  370, 

334,  342 
V.  West  Somerville  Co-opera- 
tive    Bank,     173     Mass. 
54,  581 

J.  H.  Mohlman  Co.  v.  McKane, 

69  N.  Y.  Supp.  1046,  548,  554,  558 
Joest  V.  Williams,  42  Ind.  565,  69 
John  V.  City  Nat.  Bank  of  Selma, 

62  Ala.  529,  553 

John  Hancock  Mut.  L.  I.  Co.  v. 

City  of  Huron,  80  Fed.  652,        476 
Johnson  v.  Amana  Lodge  No.  82, 
Independent  Order  of  Odd  Fel- 
lows, 92  Ind.  150,  593,  594 
V.  Bank,  74  N.  Y.  329,  306 
V.  Bank,    2    B.    Mon.    (Ky.) 

310,  161 

V.  Bloodgood,   1   Johns.   Cas. 

(N.  Y.)  51,  420.  626 

V.  Bloodgood.  2  Cai.  Cas.  (N. 

Y.)  302.  419 

V.  Brown,  154  Mass.  105,  556 

Joyce  Defenses — vi 


Johnson  v.  Conklin,  119  Ind.  109, 
21  N.  E.  462,  12  Am.  St.  Rep. 
371,  417 

V.  First   National    Bank,    24 

111.  App.  352,  311,  328 

V.  Franklin    Bank,    173    Mo. 

171,  680 

V.  Gallagher,  1  De  G..  F.  &  J. 

494,  42 

V.  Garnett,  2  Chit.  122,  149 

V.  Gibb,  2  Chit.  123,  138 

V.  Haight,  13  Johns.  470,  502 

V.  Heagan,  23  Me.  329.  171 

V.  Joyce.  90  Minn.  377,  302 

V.  Lewis,  6  Fed.  27,  439 

V.  Marshall.    4    Rob.     (La.) 

157,  6,  213 

V.  Meeker,  1  Wis.  436,  439 

V.  Parsons,  140  Mass.  173, 

524,  539 

V.  Redwine,  98  Ga.  112.  195 

V.  Sutherland,  39  Mich.  579, 

30,  34 
V.  Washburn,  98  Ala.  258,  330 
V.  Watt,  15  La.  Ann.  428,  682 

V.  Way,  27  Ohio  St.  374,  439 

V.  Williard,  83  Wis.  420,  342 

V.  Wright,  2  App.  Cas.  16,        183 
Johnson  Berger  &  Co.  v.  Dow- 

ing  (Ark.),  88  S.  W.  825,     503,  573 
Johnson    County    Sav.    Bank   v. 

Lowe,  47  Mo.  App.  151,  539 

Johnston  v.   Dickson,  1  Blackf. 
(Ind.)  256,  288 

v.  Gulledge,  115  Ga.  981,  699 

V.  Hay,  76  Ind.  293, 

135,  179,  379,  385 
V.  Humphrey,  91  Wis.  76,  637 

Johnston  Harvester  Co.   v.   Mc- 
Lean, 57  Wis.  258,  264,    22,  23,  166 
Joliffe  V.  Collins,  21  Mo.  338,  262 

Jones  V.  Bank,  9  Heisk.  (Tenn.) 
455,  293 

V.  Bank  of  New  York,  90  Ga. 

334,  270 

V.  Banks,  40  Ohio  St.  139,  170 
V.  Bradwell,  84  Ga.  309,  39 

V.  Broadhurst,  9  C.  B.  (O.  S.) 

173,  679 

V.  Camden,  44  N.  C.  319,  87 

V.  Caswell,  3  Johns.  Cas.  (N. 

Y.)   29,  288 

V.  Cavanaugh,  149  Mass.  124,  288 
V.  Craigmiles,  114  N.  C.  613,  30 
V.  Crosthwaite.  17  Iowa  393,  30 
V.  Dana,    24    Barb.    (N.    Y.) 

395,  122 

V.  Deggs,  84  Va.  685,  193 

V.  Gordon,  2  App.  Cas.  616,      191 


Ixxxii 


TABLE    OF    CASES. 


Sneed 


Jones     V.     Hamlet, 

(Tenn.)    256,  74 

V.  Hawkins,  17  Ind.  550,  606 

V.  Hibbert,  2  Starkie  304,  274 

V.  Holt.  64  N.  H.  546,  47 

V.  Houghton,  61  N.  H.  51,  110 

V.  Insurance     Co.,     1     Mete. 

(Mass.)  58,  181 

V.  People's    State    Bank,    32 

Ind.  App.  119,  292 

V.  Primm,  6  Texas  170,  23 

V.  Nellis,  41  111.  482,  240 

V.  New   York   Bank,    90    Ga. 

334,  271 

V.  Nicholl,  82  Cal.  32,  502 

V.  Robinson,  11  Ark.  504,  502 

V.  Robinson,  6  Bosw.  627,         604 
V.  Ryde,  5  Taunt.  488,  645 

V.  Sennott,  57  Vt.  355,  651 

V.  Shaw,  67  Mo.  667,  312,  320 

V.  Snow,  64  Cal.  456,  687 

V.  Stoddart.  8  Idaho  210,  67 

Pac.  650,  80 

V.  Swan,  6  Wend.  (N.  Y.)  589, 

202,   203,  208 
V.  Thayer,  12  Gray    (Mass.) 

443,  461 

V.  Tumour,  4  Car.  &  P.  204,     641 
V.  AViesen,  50  Neb.  243,  489 

V.  Young,  19  La.  553,  439 

Jordan  v.  Downes,  9  Rob.  (La.) 
265,  635 

V.  Jordan,    10    Lea    (Tenn.) 

124,  20,  176,  317,  318,  385 

V.  Keeble,  85  Tenn.  412,       41,  59 
V.  Long,  109  Ala.  414,  532 

V.  National    Shoe  &   Leather 

Bank,  74  N.  Y.  467,  581 

V.  Sharlock,  84  Pa.  St.  366,      604 
V.  Tarkington,  15  N.  C.  357,     199 
Jordon   v.    Jordon,    Dud.    (Ga.) 

181,  208 

Jordon  &  Son  v.  Thompson,  117 

Ala.  468,  242 

Josiah    Morris    Co.   v.    Alabama 

Carbon  Co.,  139  Ala.  620,  583 

Journal  Printing  Co.  v.  Maxwell, 
1  Pennew.    (Del.)    511. 

119,  122,  208 

Joyce  V.  Spafford,  101  111.  App. 

422,  679 

Judah  V.  Potter,  18  Ind.  224,  635 

Judd  V.  Dennison,  10  "Wend.  (N. 

Y.)  512,  208 

Juggar    V.    Winslow,    30    Minn. 

263,  117 

Julllard  V.  Chaffee,  92  N.  Y.  529, 

309,  322,  336 
Julian  V.  Calkins,  85  Mo.  202,         436 


[References  are  to  8ections.'\ 

Jump  V.  Leon  (Mass.),  78  N.  E. 
532,  447,  607 

Jurden  v.  Ming,  98  Mo.  App. 
205,  699 

Justh  V.  National  Bank  of  Com- 
monwealth, 56  N.  Y.  478,  124 


K 


Kagel  V.  Totten,  59  Md.  447,  25 

Kahn,    Jr.,   v.    Walton,    46   Ohio 

St.  195,  .  288 

Kaiser    v.    First    Nat.    Bank    of 

Brandon,  78  Fed.  281,  476 

Kaiser  &  Brother  v.  United  States 

Nat.  Bank,  99  Ga.  258,  246 

Kalamazoo  Nat.  Bank  v.  Clark, 
52  Mo.  App.  593,  25,  28 

V.  Sides,  28  S.  W.  918,  240 

Kampmann  v.  Williams,  70  Tex. 

568,  529 

Kane  v.  Kerman,  109  Wis.  33,        149 
Karns  v.  Moore,  5  Pa.  Super.  Ct. 

381,  57 

Kaskaskia  Bridge   Co.  v.   Shan- 
non, 6  111.  15,  600 
Kassing   v.    Ordway,    100    Iowa 

611,  305 

Kaufman  v.  Barbour,  107  N.  W. 
1128,  254 

V.  Barringer,     20     La.     Ann. 

419,  225 

Kaufmann  &  Runge  v.  Robey,  60 

Tex.  308,  359 

Kavanaugh    v.    Brown,    1    Tex. 

481,  484,  30,  36 

Kearney  v.  Metropolitan  Trust 
Co.,  110  App.  Div.  236,  97  N. 
Y.  S.  274,  100 

Kearslake  v.  Morgan,  5  Term  R. 

513,  688 

Keaton  v.  Read,  32  Ga.  493,  311 

Keegan  v.  Rock   (Iowa),  102  N. 

W.  805,  441,  465 

Keeler  v.  Bartine,  12  Wend.  110,    679 
Keene  v.  Behan,  40  Wash.  505, 

465,  475 
V.  Weeks,  19  R.  I.  309,      148,  169 
Keene's  Adm'r  v.  Miller,  103  Ky. 

628,  137,  170 

Keim  v.  Vette,  167  Mo.  389,  302 

Keith  V.  Fork,  31  S.  E.  240,   238,  440 
V.  Thisler,  61  Pac.  758,  260 

Keller  v.  Schmidt.  104  Wis.  596,   114 
V.  Vowell.  17  Ark.  445,  122 

Kelley  v.  Guy,  116  Mich.  43, 

198,  202,   231 
V.  Pember,  35  Vt.   183,  457 


TABLE   OF    CASES, 


Ixxxiii 


[References  are  to  Sections.l 


Kelly  V.  Theiss,  72  N.  Y.  Supp. 

467,  502,  544,  553 

Kellogg  V.  Barton,  94  Mas?.  527, 

282,  419 
V.  Curtis,  65  Me.  59,  28 

V.  Douglass     Co.     Bank,     58 

Kan.   43,  86 

V.  Fancher,   23   Wis.  21,  89 

V.  Olmsted,  28  Barb.  (N.  Y.) 

96,  341 

V.  Schnaake,  56  Mo.   136,         419 

V.  Steiner,  29  Wis.  626,       25,  26 

Kellogg,  In  re,  113  Fed.  120,  302,  303 

Kells  V.  Northwestern  Live  Stock 

Ins.  Co.,  64  Minn.  390,  67  N.  W. 

215,  402 

Kelly  V.  Allen,  34  Ala.  663,  665 

V.  Ferguson,    46    How.    Pr. 

411, 
V.  Garrett,    1    Oilman    (111.) 

649, 
V.  Lawrence  Bros.,  79  N.  Y. 

Supp.  914, 
V.  Lynch,  22  Cal.  661, 
V.  Pember,  35  Vt.  183, 
V.  Smith,  1  Mete.    (Ky.)   313, 

237,  238,   243,  277,  465 

V.  Webb,  27  Tex.  368.  310 

Kelly,  Ex  parte,   1  Low.   394,       376 

Kemble  v.   Lull,  3  McLean    (U. 

S.)  272, 

V.  Mills,   1   Man.   &   O.   757, 
Kemp  V.  Balls,  10  Exch.  607, 
V.  Northern    Trust    Co.,    108 

111.   App.   242,  413 

Kempner  v.  Huddleston,  90  Tex. 

182,  37  S.  W.  1066,  420,  646 

Kemp's  Estate,  49  Misc.  R.  396, 

100  N.  Y.  Supp.  221,  194 

Kendall  v.  Galvin,  15  Me.  131 

186,  199 
V.  Robertson,  12  Cush.  156, 

291,  302 

Kennedy  v.  Bank,  18  Pa.  St.  347, 

152 
V.  Crandell,  3  Lans.   (N.  Y.) 

1,  147 

V.  Gibbes,  2  Desaus.   (S.  C.) 

380,  3 

V.  Goodman,    14   Neb.    585,         17 
V.  Jones  (Miss.),  29  So.  819, 

119,  447,  455 
V.  Manship,  1  Ala.  43,  624,  635 
V.  Moore,  17  S.  C.  464,  168 

V.  Rosier.  71  Iowa  671,     503,  570 
V.  Wells,  23  Ind.  App.  490,     326 
Kennon  v.  M'Rea,  7  Port.  175, 

180,    525 
Kent  V.  Lowen,  1  Camp.  177,        657 


351 


592 


192 
116 


199 
523 
697 


Kent  V.  Quicksilver  Min.  Co.,  78 
U.  S.  159,  486 

V.  Walton,   7  Wend.   256,  305 

Kenton  Ins.  Co.  v.  McClellan,  43 

Mich.   564,  30,   34 

Kentucky  Loan  Co.  v.  Merchants' 
Nat.    Bank    (Ky.),    13    S.    W. 
910,  605 

Kentucky  Nat.  Bank  v.  Martin, 

15  Ky.  L.  Rep.  646,  355 

Kenworthy  v.  Hopkins,  1  Johns. 
Cas.    (N.  Y.)    107,  286 

V.  Merritt,  2  Wash.  Terr.  155, 

7  Pac.  62,  662 

V.  Sawyer,  125   Mass.   28, 

53,  61,  270,  337 

Keokuk  County  Bank  v.  Eunice 

Hall,   106   Iowa  540,  246 

Kepley  v.  Schmidt,  21  111.  App. 

402,  238 

Kernion    v.    Jumonville   de   Vil- 

lier,  8  La.  547,  202,  257 

Kern's  Estate,  In  re,  171  Pa.  St. 

55,  214 

Kerr  v.  Cowen,  17  N.  C.  356,         376 
v.  Hereford,  17   Up.   Can.   Q. 

B.  158,  682 

V.  Stripp,  40  U.  C.  Q.  B.  215,     41 

V.  Topping,    109    Iowa    150,      691 

Kerrison  v.  Cooke,  3  Camp.  362,    650 

Kersey  v.  Fuaqua,  75  S.  W.  56, 

191,  473 
Kershaw  v.  Cox,  3  Esp.  246,   149,  161 
V.  Ladd,  34  Oreg.  375,  583 

Kervan    v.    Townsend,    25    App. 

Div.  256,  307 

Kerwodle    v.    Hunt,    4    Blackf. 

(Ind.)  57,  262,  263 

Kessler  Co.  v.  Perilloux,  132  Fed. 

903,  339 

Ketchum  v.  Barber,  4  Hill    (N. 

Y.)   224,  302 

Keuka    College   v.    Ray,    167   N. 

Y.  96,  185 

Key  V.  Fielding,  32  Ark.  56,  341 

v.  Hanson,    17    Ark.    254,  324 

Keys   V.    Cleburne    (Tex.   Civ. 

App.),  25   S.  W.   809,  305 

Keystone  Mfg.  Co.  v.  Forsythe, 

126   Mich.   98,  257 

Kibbv's  Admr.  v.  Kibby,  Wright 

(Ohio)   607,  102 

Kidder  v.  Blake,  45  N.  H.  530,  288 
Kiel  V.  Reay,  50  Cal.  61,  121 

Kilbowin   v.   Brown,    56   Conn. 

149,  41 

Kilcrease  v.  White,  6  Fla.  45,  431 
Kilgore  v.  Bruce,  166  Mass.  136,  131 
Kilkelly  v.  Martin,  34  Wis.  525,   170 


Ixxxiv: 


TABLE  OF   CASES. 


[References  are  to  8ections.'\ 


Kilroy  v.  Simpkins,  26  Up.  Can. 

C.  P.  281,  208 

Kimball  v.  Bryan,  56  Iowa  632,    523 
Kimball  Co.  v.  Mellow,  80  Wis. 

133,  366 

Kimble  v.  Christie,  55  Ind.  140, 

28»  120 
Kimbro  v.  Bullitt,  22  How.   (U. 
S.)  256,  266,  93,  133 

V.  Little,    10    Yerg.    (Tenn.) 

417,  390 

Kime  v.  Jesse,  52  Neb.  606,  135 

Kimmell  v.  Bittmer,  62  Pa.  St. 
203,  256 

V.  Wiel,  95  111.  App.  15, 

502,  506,  524,  544,  545 
King  V.  Conn,  25  Ind.  425,     593,  606 
V.  Crowell,  61  Me.  244, 

513,  514,   563 
V.  Doane,  139  U.  S.  166,  476 

V.  Doolittle,  38  Tenn.  77,  242 
V.  Faber,  22  Pa.  St.  21,  89 

V.  Fowler,  16  Mass.  398,  617 

V.  Gayoso,  8  Mart.  N.  S.  370,  359 
V.  Hoare,  13  Mees.  &  W.  494,  679 
V.  Hunt,  13  Mo.  97,  149,  154 

V.  Hurley,  85  Me.  525,  552 

V.  Johnson,  3  McCord  365, 

303,  439 
V.  Mechlenburg,  17  Colo.  App. 

312,  119 

V.  Rea,  13  Colo.  69,  173 

V.  Sparks,  77  Ga.  285,  75 

Kingman   v.    Shawley,   61   Mo. 

App.  54,  25 

Kingsbury  v.  Fleming,  66  N.  C. 

524,  293 

V.  Gooch,   64  N.  C.  528,  293 

V.  Suit,  66  N.  C.  601,  293 

Kingston  Savings  Bank  v.  Bos- 

serman,   52  Mo.  App.   269,         137 
Kingston's    (Dutchess   of)    Case 

3  Smith's  Lead.  Cas.  729,  343 

Kinkel  v.  Harper,  7  Colo.  App. 

45,  307 

Kinne  v.  Kinne,  45  How.  Pr.  (N. 

Y.)  61,  30 

Kinney    v.    Hinds     (Wyo.),    49 
Pac.  403,  473 

V.  Kruse,  28  Wis.  183, 

130,  376,  380 
Kinsman    v.    Birdsall,    2    E.    D. 

Smith  395,  186,  216 

Kinyon  v.  Stanton,  44  Wis.  479,    583 
V.  Wohlford,   17   Minn.  239,       20 
Kinzie  v.  Chicago,  2  Scam.  (111.) 

187,  262 

Kipp  V.  McChesney,  66  111.  460,       92 
Kirby  v.  Berguin,  15  S.  D.  44,      116 


Kirby    v.    Huntsvllle,    etc.,    105 

Ala.  529,  291 

Kirkland  v.  Benjamin,  67  Ark. 

480,  295 

Kirkpatrick   v.    Howk,   41    Neb. 
754,  369 

V.  Muirhead,  16  Pa.  St.  117, 

664,  679 
V.  Oldham,  38  La.  Ann.  553,    353 
V.  Puryear,   95   Tenn.   409,       585 
Kissam  v.  Anderson,  145  U.  S. 
435,  36  L.  Ed.  765,  12  Sup.  Ct. 
960,  476 

Kitchel    V.    Schenck,    29    N.    Y. 

515,  280,   303,   659 

Kitchen  v.  Loudenback,  48  Ohio 
St.   177,  191,  439,   440,   441 

V.  Place,    41    Barb.    (N.    Y.) 

465,  145 

Kittle   V.   De   Lamater,   3   Neb. 

325,  292,  419 

Klamouth  County  v.  Leavitt,  32 

Oreg.   437,  232 

Kleeman  v.  Frisbie,  63  111.  482,  302 
Klein  v.  Keys,  17  Mo.  326,  201 

Klett  V.  Claridge,  31  Pa.  St.  106,  325 
Kline  v.  Spahr,  56  Ind.  296,  238 
Kline's  Estate,  In  re,  9  Pa.  Dist. 

R.  286,  214 

Knapp  V.  Briggs,  2  Allen  551, 

303,  614 
V.  McBride,  7  Ala.  19,  89 

Knappen  v.  Freeman,  47  Minn. 

491,  210 

Kneeland    v.    Miles    (Tex.    Civ. 
App.),  24  S.  W.  1113,  679 

V.  Pennell,    96    N.    Y.    Supp. 

403,  616 

Knickerbocker  Life  Ins.  Co.  v. 

Pendleton.  112  U.  S.  696,  523 

Knight  V.  Hurlbut,  74  111.  133,     315 
V.  Walker  Brick  Co.,  23  App. 

D.  C.  519,  524,  332 

Knights    V.    Putnam,    3    Pick. 

184,  304 

Knill  V.  Williams,  10  East.  431,  156 
Knipper  v.  Chase,  7  Iowa  145, 

344,  367 
Kniss  V.  Holbrook,  16  Ind.  App. 

229,  44  N.  E.   563,  659 

Knott  V.  Tidyman,  86  Wis.  164, 

116,    472 
V.  Venable,  42  Ala.  186, 

496.  528,  566 
V.  Whitfield,  99  N.  C.  76,  503 

Knotts  V.  Preble,  50  111.  226,  116 
Knox  V.  Clifford,  38  Wis.  651, 

241,   330 
V.  Reside,  1  Miles    (Pa.)    294,  95 


TABLE    OF    CASES. 


Ixxxv 


[References  are  to  8ections.'\ 


Knox  V.  Whalley,  1  Esp.  159,        648 
V.  White,   20   La.   Ann.   326,     288 
Knox  County  Bank  v.  Lloyd,  18 

Ohio  St.   353,  368 

Knoxville    National    Bank   v. 

Clark,  51  Iowa  264,     136,  146,  165 
Koehler  v.  Dodge,  31  Neb.  328, 

366,  433,  434 

Kohlman  v.  Ludwig,  5  La.  Ann. 

33,  439 

Kohn  V.  Consolidated  Butter  & 
Egg  Co.,  63  N.  Y.  Supp.  265,     446 
V.  Watkins,  26  Kan.  691,  102 

Kolp    V.    Specht,    11    Tex.    Civ. 

App.  685,  33  S.  W.  714,  668 

Koppel  V.  Hatch,  98  N.  Y.  Supp. 

619,  472 

Kortepeter  v.  List,  16  Ind.  295,  199 
Kost  V.  Bender,  25  Mich.  515,  457 
Koster  v.  Seney,  99  Iowa  584,  ,  297 
Kottwitz  V.  Alexander,  34  Tex. 

689,  523 

Kountz  V.  Hart,  17  Ind.  329,  170 

V.  Kennedy,  63  Pa.  St.  187,      137 

V.  Price,  40  Miss.  341,  29 

Kramer    v.    Kramer,    90    N.    Y. 

App.  Div.  176,  186,  234,  335 

V.  Sandford,  4  Watts  &  S. 

328,  525 

Krebs  v.  O'Grady,  23  Cal.  726,  52 
Krouskop    V.    Shoutz,    51    Wis. 

204,  179 

Kruger  v.  Persons,  66  N.  Y.  Supp. 

1135,  548 

Krumbar   v.   Ludeling,   3    Mart. 

O.  S.  (La.)  641,  183 

Krumbieg  v.   Missouri   K.  &  T. 

Trust  Co.,  71  Fed.  350,  302 

Krumhaar  v.  Ludeling,  3  Mart. 

O.  S.  (La.)  641,  198 

Kuder  v.  Greene    (Ark.),  82   S. 

W.  836,  583 

Kugler  V.   Taylor,   19   La.   Ann. 

100,  447 

Kuhl  V.  Galley  Universal  Press 
Co.,  123  Ala.  452,  288 

V.  Press  Co.,  123  Ala.  452,         291 
Kuhns    V.    Gettysburg    National 

Bank,  68  Pa.  St.  445,  394,  401 

Kuriger    v.    Joest     (Ind.    App. 

1899),  52  N.  E.  764,  674 

Kurz  V.   Fish,   58  Hun    (N  .Y.) 

602,  288 

V.  Holbrook,  13  Iowa  562,  419 

Kyle  V.  Thompson,  11  Ohio  St. 

616,  208 


La  Banque  Jacques  Cartier  v. 
La  Corporation  de  Limoilon, 
17  Rap.  Jud.  Queb.  C.  S.  211, 

581,  587 
Lackey  v.  Boruff,  152  Ind.  371, 

30,  60,  61 
Lacoste  v.  Harper,  3  La.  Ann. 

385,  523 

Lacroix  v.  Derbigny,  18  La.  Ann. 

27,  606 

La  Due  v.  First  Nat.  Bank,  31 

Minn.  33,  431,  435,  636 

Lafayette  Sav.  Bank  v.  St.  Louis 
Stoneware  Co.,  4  Mo.  App. 
276,  240 

Lafflin   &   Rand    Powder    Co.    v. 

Simsheimer,  48  Md.  411,  272 

Lagonda  Nat.  Bank  v.  Portner, 

46  Ohio  St.  380,  '  297 

La   Grange   Collegiate    Institute 

V.  Anderson,  63  Ind.  367,  64 

Laib  V.  Lanagan,  2  Leg.  Chron. 

(Pa.)  386,  270 

Lake  v.  Streeter,  34  Iowa  601,      288 
Lamar  v.  Brown,  56  Ala.  157,        170 
Lamb  v.  Pannell,  28  W.  Va.  663,   595 
V.  Matthews,  41  Vt.  42,  407 

Lambert  v.  Ghiselin,  9  How.  552,   555 
Lamberton  v.  Windom,  12  Minn. 

232,  373 

Lambeth  v.  Caldwell,  1  Rob.  01,   530 
V.  Kerr,  3  Rob.   (La.)  144,        650 
Lamkin    v.   Edgerly,    151    Mass. 

348,  569 

Lamon  v.  French,  25  Wis.  37,        347 
Lamoile    County    Nat.    Bank    v. 

Bingham,  50  Vt.  105,  302 

Lamourieux  v.  Hewitt,  5  Wend. 

307,  460 

Lamson  Consol.  Store  Service  Co. 
V.  Conynhan,  32  N.   Y.  Supp. 
129,  512 

Lanati  v.  Bayhi,  31  La.  Ann.  229, 

192,  419 
Lancaster  v.  Collins,  7  Fed.  338,  336 
Lancaster   Bank   v.   Huver,   114 

Pa.  St.  216,  447 

Lancaster  County  Nat.  Bank  v. 
Garber,  178  Pa.  91,  475 

V.  Moore,    78   Pa.    St.   407,  71 

Lanclos  v.  Robertson,  3  La.  259,    439 
Land  v.  Lacoste,  5  Miss.  471,  260 

Landauer  v.   Improvement   Co., 

10  S.  D.  205,  149 

Landon  v.  Bryant,  69  Vt.  303, 

502,  503,  545 


Ixxxvi 


TABLE    OF    CASES. 


[References  are  to  Sections.'] 


Landrum  v.  Trowbridge,  2  Mete. 

Land 'Title  &  Trust  Co.  v.  North- 
western Nat.  Bank,  211  Pa. 
j^2i  470,  644 

V  Northwestern    Nat.  Banli, 

196  Pa.  230,  470 

Landwirth  v.  Shaphran,  47  La. 

Ann.  336,  ^  1°^ 

Lane  v.  Krekle,  22  Iowa  399,  ^4 

V.  Manning,  8  Yerg.  (Tenn.) 

435,  III 

V.  Price,  5  Mo.  67,  332 

V  Schlemmer,  114    Ind.   297, 

15  N.  E.  454,  57,  645 

V  Steward,  20  Me.  98,  538 
Lang   V.    Metzger,    86    111.    App. 

117,  474 

Langenberger  v.  Kroeger,  48  Cal. 

147^  148,  167 

Langley  v.  Wadsworth,  91  N.  Y. 

61,  ^^^ 

Lanham  v.  Bank,  46  Neb.  663, 

306,  bio 

Lanier  v.  McCabe,  2  Fla.  32,  91 

V.  Cox,  65  Ga.  265,  302 

V    Union   Mortgage   Banking 

Co.,  64  Ark.  39,  120 

Lanning  v.  Burns,  36  Neb.  236,      208 
Lansing  v.  Gaine,  2  Johns.   (N. 
Y.)   300,  94,  419 

V.  Lansing,  8  Johns.   (N.  Y.) 
354, 
Lapha  v.  Barnes,  2  Vt.  213, 
Lapice  v.  Clifton,  17  La.  152, 
Laramore  v.  Bank,  69  Ga.  722, 
Laraway  v.   Harvey,   Rap.  Jud. 

Quebec,  14  C.  S.  97, 
Larkin  v.  Hardenbrook,  90  N.  Y. 

333, 
Larrabee  v.  Fairbanks,  11  Shep. 

(Me.)    363, 
Lasher  v.  Union   Central  L.   I. 

Co.,  115  Iowa  231, 
Lashmett  v.  Prall,  96  N.  W.  152, 

Laster  v.  Stewart,  89  Ga.  181, 

44,   48,   246,   376 

Latham  v.  Smith,  45  111.  25,  25 

Lathrop  v.  Donaldson,  22  Iowa 

234,  ^99 

V.  Morris,  5  Sand.  7,  353 

Lattin  V.  Vail,  17  Wend.  (N.  Y.) 

188  "^4 

Lau   V.  Blomberg,  3  Neb.    (Un- 

offic.)  124,  1J9 

Laub  V.  Paine,  46  Iowa  550,  136,  l»i 

V.  Rudd,  37  Iowa  617,       137,  380 


568 
64 
395 
680 
340 

698 


419 
686 
419 
303 

186 

695 

200 

343 


Laubach  v.  Pinswell,  35  N.  J.  L. 

434,  133 

Lauter  v.  Jarvis  Conklin  Mtg. 
Trust  Co.,  29  C.  C.  A.  473,  85 
Fed.   894,  671 

Lauve  v.  Bell,  1  La.  73.  408 

Laux  V.  Gildersleeve,  23  N.  Y. 

App.  Div.  352,  302 

Law  V.  Brinker,  6  Colo.  555, 

199,  277,  641 
V  Crawford,  67  Mo.  App.  150,    25 
Lawrence  v.  Clark,  36  N.  Y.  128, 

242,  467 
V.  Miller,  16  N.  Y.  235,  544,  549 
V.  Stonington,  6  Conn.  521, 

184,  198,  201 

Lawson  v.  Dunn  (N.  J.  Eq.),  49 
AU.  1087,  .     ^^    701 

V.  Farmers'  Bank,  1  Ohio  St. 

206, 
V.  Lovejoy,  8  Me.  405, 
V.  Weston,  4  Esp.  56, 
Laxell  V.  Miller,  40  Oreg.  549, 
Laxton  v.  Reat,  2  Camp.  185, 
Lay  V.' Honey  (Neb.),  89  N.  W. 
998, 
V.  Wissman,  36  Iowa  305, 

119,  193,  240 

Lazarus  v.  Cowle,  3  Q.  B.  459,        282 

Lazear  v.  Bank,  52  Md.  78,  79 

Leach  v.  Bank,  2  Ind.  488,  89 

V.  Buchanan,  4  Esp.  226,  674 

V.  Funk,  97  Iowa  576,      419,  688 

V.  Hill,  106  Iowa  171,  581 

V    Lewis,  1  McArthur  (D.  C.) 

■       112,  241,   246,  386 

Leaf  V.  GiblDS,  4  Car.  &  P.  466,        315 

Leahy  v.  Haworth,  141  Fed.  850, 

451,  4dU 
Leary  v.  Blanchard,  48  Me.  269,  348 
Leas  V.  Walls,   101  Pa.  St.   57, 

146,  165 

Leask  V.  Dew,  184  N.  Y.  599,  700 

Leather  man    v.    Hecksher    (Pa. 

188),  12  Atl.  485.  89 

Leavitt  V.  Peabody,  62  N.  H.  185,     627 
Lebcher  v.  Lambert,  23  Utah  1, 

237,  463 
Le  Blanc  v.  Sinclair,  12   Mart. 

O.  S.  402,  ,^        439 

Lee    V.    Alexander,    9    B.    Mon. 
(Ky  )  25,  1'*'^'  1^'^ 

V.  Butler,  167  Mass.  427,  390 

V.  Field,  9  N.  M.  435,  697 

V.  Melby,  93  Minn.  4,  302 

V.  Newell,  107  Pa.  St.  283,        214 
V.  Pile,  37  Ind.  107,  236,  255 

V.  Ryder,  1  Kan.  App.  293,        211 
V    Smead,  1  Mete.  628,  355 


TABLE   OF    CASES. 


Ixxxvii 


[References  are  to  Sections.li 


Leev.  Starbird,  55Me.  491,  135,  170 
V.  Turner,  89  Mo.  489,  95,  359 
V.  Ware,  3  Rich.  L.  193,  418 

V.  White,      4     Stew.     &     P. 

(Ala.)    178,  208 

V.  Whitney,  149  Mass.  447,       362 
V.  Zagury,  8  Taunt.  114,  419 

Lee  Bank  v.  Satterlee,  24  N.  Y. 

Super.  Ct.  1,  30,  50,  51,  53 

Leeds  v.  County  Bank,  11  Q.  B. 
34,  151 

V.  Hamilton  Paint  &  G.  Co. 
(Tex.  Civ.  App.),  35  S. 
W.  77,  524,  518,  473 

Leeke  v.  Hancock,  76  Cal.  127,  281 
Legare     v.     Arcaud,     9     Quebec 

Repp.  Fud.  122,  574,  581 

Legg  V.  Vinal,  165  Mass.  555, 

502,  513,  542,  545,  552 
Legge  V.  Thorpe,  2  Camp.  310,      523 
Lehigh    Val.    Coal    Co.    v.   West 
Depere    Agricultural     Works, 
63  Wis.  45,  85 

Lehman  v.  City  of  San  Diego, 
83   Fed.   669,  87 

V.  Press,  106  Iowa  389,  76  N. 

W.   818,  475 

Leicester  v.  Biggs,  1  Taunt.  367,  52 
Leightman  v.  Kadetska,  58  Iowa 

676,  29,  421 

Leighton  v.  Grant,  20  Minn.  345,  208 
Leitner  v.  Miller,  49  Ga.  489,  61,  95 
Lemmert    v.    Guthrie    Bros.,    69 

Neb.  499,  681 

Lemmon  v.  Whitman,  75  Ind. 
318,  302 

Lenhart   v.   Ramey,   2    Ohio    C. 

D.  77,  564 

Lenheim  v.  Fay,  27  Mich.  70,        116 

Lenoir  v.  Moore,  61  Miss.  400,     629 

Leonard    v.    Draper,    187    Mass. 

536,  271 

V.  Olson,  99  Iowa  162, 

506,  507,  515,  523,  545,  564 
V.  Phillips,   39   Mich.   182,  168 

V.  Vredenburgh,  8  Johns.  29,    212 
Leonhardt  v.  Citizens'  Bank,  56 

Neb.  38,  681 

Lerch  Hardware  Co.  v.  First 
Nat.  Bank  (Pa.  1886),  5  Atl. 
778,  89 

Lescherr  v.  Guy,  149  Ind.  17,  48,  49 
Lesslie    v.    Bassett,    59    N.    Y. 

Super.  Ca.  403,  285 

Levy  V.  Ford,  41  La.  Ann.  473,  246 
V.  Germillion,    21    La.    Ann. 

635,  292 

V.  Rose,  17  La.  Ann.  113,  55 


Levy    &    Co.    v.    Kaufman,    114 

Fed.  170,  272 

Lewin  v.  Greig,  115  Ga.  127,  199 

Lewis  v.  Brehune,  33  Md.  412,       525 
v.  Brooks,    9    Mete.    (Mass.) 

367,  625 

v.  Clay,  67  L.  J.  Q.  B.  224,  25 
V.  Clay,  77  Law  T.  Rep.  653,  465 
V.  Davison,  29  Gratt.  216,  688 
V.  Dunlap,  72  Mo.  174,  342,  348 
V.  Faber,   65  Ala.  460,  594 

V.  Hodgdon,    5    Shep.     (Me.) 

267,  238,  241,  650 

V.  Jewett,  51  Vt.  378,  614 

V.  Kramer,  3  Md.  265,  152,  350 
V.  Latham,  74  N.  C.  283,  293 

V.  Long.  102  N.  C.  206,  308,  433 
V.  North,  62  Neb.  552,  702 

V.  Parker,  33  Tex.  121,  274 

V.  Pickering,  58  Neb.  63,  591 

V.  Sheamen,  28  Ind.  427,  623 

V.  Shepherd,    1    Mackey    (D. 

C.)    46,  170 

V.  Westover,    29   Mich.   14,       679 
V.  Woods,  4  Daly  (N.  Y.)  241,   55 
V.  Woodworth,  2  N.  Y.  512,      657 
Lewis,  Hubbard  &  Co.  v.  Mont- 
gomery Supply  Co.,  59  W.  Va. 

IS,  576 

Lewter  v.  Price,  25  Fla.  574,  184 

Liebig  Mfg.   Co.   v.    Hill,   9    Pa. 

Super.  Ct.  469,  489 

Liesmer  v.  Berg  (Mich.),  63  N. 

W.  999,  695 

Liggett  V.  Weed,  7  Kan.  273,  347 

V.  Wing,  1  Ohio  Dec.  277,         555 
Liggett  Spring  &  Axle  Co.,  Ap- 
peal  of.   111   Pa.   St.   291,  246 
Light  V.  Scott,  88  111.  239,  231 
Lightall  V.  Moore,  2  Colo.  App. 

554,  112 

Lightfoot  V.  West,  98  Ga.  546,        322 
Lighty  V.  Brenner,  14  Serg.  &  R. 

(Pa.)  127,  635 

Lilley  v.  Evans,  3  B.  Mon.  (Ky.) 

417,  16 

Lillie  V.  Bates,  3  Ohio  Cir.  Ct. 

R.  94,  635 

Lilly  V.  Petteway,  73  N;  C.  358,      525 
Limerick    Nat.    Bk.    v.    Adams, 

70  Vt.  133,  40  Atl.  166,  477 

Lincoln     v.     Bassett,     23    Pick. 
(Mass.)  154,  390 

V.  Fitch,  42  Me.  456,  380 

V.  Stevens,   7   Mete.    (Mass.) 

529.  270 

Lincoln  Nat.  Bank  v.  Butler,  74 
N.  Y.  S.  R.  116,  270,  280 

V.  Perry,  66  Fed.  887,  367 


Ixxxviii 


TABLE   OF    CASES. 


[References  are  to  Sections.l 


Lincoln    Savings   Bank   &   Safe 

Dep.  Co.  V.  Allen,  82  Fed.  148, 

683,  686 
Linden    v.    Beach,    6    Hun    (N. 

Y.)   200,  242,  347 

Lindenberger  v.  Beal,  6  Wheat. 

(U.  S.)   104,  558,  563 

Linderman    v.     Farquaharson, 

101  N.  Y.  434,  30 

Lindley  v.  Hofman,  22  Ind.  App. 

237,  26,  27 

Lindsey  v.  Casseoberry,  3  Wkly. 
Notes  Cas.  (Pa.)  42,  342 

V.  Rottaken,  32  Ark.  619,  87 

V.  Sellers,     4     Cushm.     (26 

Miss.)  169,  450 

Line  v.  Nelson,  38  N.  J.  L.  358,     679 
Lingg  V.   Blummer,   88   Pa.    St. 

518,  392 

Linn  v.  Horton,  17  Wis.  151,         568 
V.  Rugg,  19  Minn.  181,      593,  635 
Linthicum  v.  Caswell,  160  N.  Y. 

702,  525,  573 

Linton  v.  King,  4  Allen  (Mass.) 

562,  114 

V.  Porter,  31  111.  107,  263 

Linville  v.  Savage,  58  Mo.  248,      260 

Lintz   V.    Howard,    18   Huh    (N. 

Y.)   424,  '  284 

Lippincott  v.  Lawrie,  119  Wis. 

573,  185 

Lipsmeier  v.  Vehslage,  29  Fed. 

175,  419 

Lisle    V.    Rogers,    18    B.    Mon. 

(Ky.)    528,  136,  152,  154 

Litchfield  v.  Allen,  7  Ala.   779, 

211,  240,  262,  663 
V.  Dyer,  46  Me.  31,  .    79,  447 

Litchfield     Bank     v.     Peck,     29 

Conn.  384,  122,  198 

Lititz   Nat.   Bank   v.   Siple,   145 

Pa.   49,  537,  544 

Little   V.    Cooper,   11   N.   J.    Eq. 
224,  436 

V.  Dunlap,  44  N.  C.  40,  439 

V.  O'Brien,  9  Mass.  423,  447,  670 
V.  Phcenix  Bank,  2  Hill  425,  523 
V.  Sturgis,  127  Iowa  298,  422 

V.  Thurston,  53  Me.  86,  325 

Littlefield    v.    Coombs,    71    Me. 
110,  179 

V.  Dinguall,  71  Mich.  223,  44 
V.  Perkins,  60  Atl.  707,  226 

Little  Rock  Trust  Co.  v.  Martin, 

57  Ark.   277,  170 

Litton  V.   Baldwing,   8  Humph. 

(Tenn.)   209,  59 

Livermore  v.  Blood,  40  Mo.  48,    436 


Live     Stock     Remedy     Co.     v. 

White,  90  Mo.  App.  498,  116 

Livingston  v.  Brown  County,  15 
S.   D.   606,  232 

V.  Roosevelt,    '4    Johns.    (N. 

Y.)   251,  91 

Lizardi  v.  Cohen,  3  Gill   (Md.) 

430,  277 

Lloyd  V.  Davis,  3  L.  J.  K.  B.  38,    472 
V.  First   Nat.   Bank,   5   Kan, 

App.  512,  615 

V.  Jewell,    1    Greenl.     (Me.) 

352,  208 

V.  Johnson,  1  Bos.  &  P.  340,    301 
V.  Osborne,  92  Wis.  93,     576,  583 
Lloyd    &   Co.   V.    Matthews    (HI. 

1906),  79  N.  E.  172,  81 

Lock  V.  Fulford,  52  111.  166,  419 

Lockey  v.  Boruft',  152  Ind.  371,        30 
Lockner    v.    Holland,    81    N.   Y. 

Supp.  730,  222,  357 

Lockrow  V.  Clime,  4  Kan.  App. 

716,  366 

Lockwood  v.  Beckwith,  6  Mich. 
168,  607 

V.  Bock,  50  Minn.  142,       538,  573 
Lodge  V.   Lewis,  32  Wash.   191, 

72  Pac.  1009,  407 

Loeff   V.    Taussig,   102   111.  App. 

398,  •  681 

Loeween  v.  Forsee,  137  Mo.  29,     246 
Loffland     v.     Russell,      Wright 

(Ohio)   438,  116,  186,  198,  202 

Loftinv.  Hill,  131  N.C.  105,  119,    473 
Loftus  v.  Maloney,  89  Va.  576,      193 
Logan  V.  Hodges,  6  Ala.  699,         324 
V.  Plummer,  70  N.  C.  338,        293 
V.  Smith,  62  Mo.  455.  359 

Logan  County  Nat.  Bank  v.  Bar- 
clay, 20  Ky.  L.  Rep.  773,  679 
Loizeaux  v.  Fremder,  123  Wis. 

129,  698 

Lomax  v.  Picot,  2  Rand.   (Va.) 

247,  439 

Lombard  v.  Guillet,  11  Mart.  O. 

S.  581,  41 

Lombard    Lumber   Co.   v.   First 

Nat.  Bank,  86  Tex.  300,  534 

Londerman  v.  Judy,  48  Ohio  St. 

562,  217 

Long  v.  Bank  of  Commerce,  18 
Ky.  L.  Rep.  922,  583 

v.  Crosson,  119  Ind.  3,  21  N. 

E.  450,  645 

V.  Dismer,  71  Mo.  452,  650 

V.  Garnett.  59  Tex.  229,  94 

V.  Long,  208  Pa.  368,  418 

V.  Mason,  84  N.  C.  15,  170 

V.  Moore,  3  Esp.  155,  155 


TABLE   OF    CASES. 


Ixxxix 


[References  are  to  Sections.^ 


Long  V.  Rhawn,  75  Pa.  St.  128, 

282,  380,  431 
Long    Bros.    v.    Eckert,    1    Mo. 

App.  125,  582 

Longford     v.    Varner,     65     Mo. 

App.  370,  489 

Long   Island   Bank  v.  Boynton, 

105  N.  Y.  656,  303 

Long  Island  L.  &  T.  Co.  v. 
Columbus  C.  &  I.  C.  R.  Co.,  65 
Fed.  455,  121,  476 

Longmire  v.  Fain,  89  Tenn.  393, 

18  S.  W.  70,  125,  652 

Lookout  Bank  v.  Aull,  93  Tenn. 

645,  316 

Loomis  V.  Brown  Co.,  15  S.  D. 
606,  9  N.  W.  309,  83 

V.  Eagle  Bank  of  Rochester, 

1  Disn.   (Ohio)   285,  627 

V.  Eaton,  32  Conn.  550,  302 

V.  Metcalf,  30  Iowa  382,    119,  123 

V.  Ruck,  56  N.  Y.  462,  114 

Lord  V.  Appleton,  15  Me.  270, 

555,  566 
V.  Favorite,  29  111.  149, 

240,  419,  436,  685 
Lorentz  v.   Pinnell,    55   W.   Va. 

114,  302 

Loring  v.  Morrison,  15  (N,  Y.) 
App.   Div.   498,  601,  639,  640 

V.  Otis,  7  Gray  (Mass.)    563,  600 
Los  Angeles  Nat.  Bank  v.  Wal- 
lace, 101  Cal.  478,  523 
Loudermann    v.   Judy,   48   Ohio 

Cir.  Ct.  R.  351,  237 

Loudermilk  v.  Loudermilk,  93 
Ga.  443,  214 

V.  Loudermilk,  98  Ga.  780,  17 
Lough  V.  Bragg,  18  Minn.  121,  263 
Louis  V.  Triscony,  58  Cal.  304,  679 
Louisiana    Mutual    Ins.    Co.    v. 

Batt,  22  La.  Ann.  621,  328 

Louisiana  Nat.  Bank  v.  Citizens' 
Nat.    Bank    of    Louisiana,    28 
La.  Ann.  189,  26  Am.  Rep.  92,    642 
V.  Laveille,  52  Mo.  380,  414 

Louisiana  State  Bank  v.  Gaienne, 
21  La.  Ann.  555,  353,  359 

V.  Orleans    Nav.    Co.,    3    La. 

Ann.  294,  87 

Louisville  Banking  Co.  v.  Asher, 

23  Ky.  L.  Rep.  1180,  528 

Louisville,   Evansville   &   St.   L. 

R.    Co.    v.    Caldwell,    98    Ind. 

245,  183 

Loux  V.  Fox,  171  Pa.  68,  576 

Love  v.  Gibson.  13  N.  &  W.  623,      69 

V.  Lamar,  79  Ga.  323,  44 


Loveday  v.  Anderson,  18  Wash. 

322,  524,  538,  573 

Loving  V.  Dixon,  56  Tex.  75,  316 

Lovejoy    v.    Citizens'    Bank,    23 

Kan.  331,  255 

Lovell    V.    Everston,    11    Johns, 

52,  451 

Low  V.  Argrove,  30  Ga.  129,  156 

V.  Merrill,     1    Finn.     (Wis.) 

340,  152 

V.  Warren,  77  Cal.  94,  341 

Lowden    v.    National    Bank,    38 

Kan.  533,  22,  145 

Lowe  V.  Blair,  6  Blackf.   (Ind.) 
282,  338 

V.  Waler,  2  Doug.  736,  303 

Lowell   Trust  Co.  v.   Pratt,   183 

Mass.  379,  558 

Lowenstine    v.    Males,    3    Ohio 

Dec.  390,  208 

Loweree    v.     Babcock,     8     Abb. 

Prec.  N.  S.   (N.  Y.)   255,  54 

Lowes  V.  Mazzaredo,   1  Starkie 

385,  303 

Lowndes  v.  Anderson,   13   East 

130,  121 

Lowry  v.  Danforth,  95  Mo.  App. 

441,  183,  240,  447,  693 

Lubbering    v.    Kohlbrecher,    22 

Mo.  590,  ,  142,  168 

Lucas  V.  Kernoddle,  2  Ala.  199,     260 
V.  Pico,  55  Col.  126,  194 

V.  The  Bank,  28  P.  E.  Smith 

228,  615 

V.  Waul,    12    Smedes    &    M. 

(Miss.)    157,  297 

Luckett  V.   Triplett,  2   B.   Mon. 

39,  238 

Luddington    v.    Kirk,    16    Misc. 

Rep.  301,  306 

Ludington  v.  Bell,  77  N.  Y.  138,    679 
V.  Thompson,  38  N.  Y.  Supp. 

768,  541 

Luellen  v.  Hare,  32  Ind.  211,  22 

Luke  V.  Koenen,  120  Iowa  103,      183 
Lull  V.  Stone,  37  111.  224,  376 

Lulu,  The,  10  Wall.  192,  476 

Lum  V.  Robertson,  6  Wall.   (73 

U.  S.)  277.  •  417 

Luning  v.  Brady,  10  Cal.  265,  41 

V.  Wise,  64  Cal.  410,  240 

Lybrand  v.  Fuller,  30  Tex.  Civ. 

App.  116,  423 

Lyddane  v.  Owensboro  Banking 

Co.,  21  Ky.  L.  Rep.  320,       544,  549 
Lyle  V.  Winn,  45  'Fla.  419,  302 

Lyman  v.  Warner,  113  Fed.  87, 

404,  456 


sc 


TABLE   OF    CASES. 


[References  are  to  Sections.'] 


Lynch  v.  Bragg,  13  Ala.  773,  639 

V.  First  Nat.  Bank,  107  N.  Y. 

179,  581 

V.  Hicks,  80  Ga.  200,  181 

V.  Kennedy,  34  N.  Y.  151,  653 

Lynchburg  v.  Norvell,  20  Gratt. 

601,  303 

Lyncliburg  Nat.  Bank  v.  Scott, 

91  Va.  652,  240,  302,  303 

Lyndon    Sav.    Bank   v.    Interna- 
tional Co.,  78  Vt.  169,  702 
Lyndouville       Nat.       Bank      v. 

Fletcher,  68  Vt.  81,  34  Atl.  38,    654 

Lyon    V.    Bryant,    54    111.    App. 

331,  597 

V.  Ewings,  17  Wis.  61,  .359 

V.  Petty,  65  Cal.  322,  610 

V.  Phillips,  106  Pa.  St.  57,        665 

V.  Williamson,  27  Me.  149,       502 

Lyons  V.  Stills,  97  Tenn.  514,  320 

Lytle    V.    Crawford,    74    N.    Y. 

Supp.  660,  679 

V.  Lansing,  147  U.  S.  59,  476 


M 


Maas  V.  Chatfield,  90  N.  Y.  303, 

193,  307 
Mabie   v.   Johnson,   8   Hun    (N. 

Y.)  309,  601 

Mac,  see  Mc. 

Macfarlane    v.    Lowell,    9    Ha- 
waiian 438,  186 
Machado  v.  Fernandez,  74  Cal. 

362,  507 

Mack  V,  Clark,  42  Mass.  (Mete.) 

423,  1,  123 

V.  Prang,  104  Wis.  1,  114 

V.  Starr,  78  Conn.  184,  187,      475 
Mackall  v.  Gosler,  Fed.  Cas.  No. 

8835,  523 

Mackay  v.  Dodge,  5  Ala.  388,       135 
V.  Holland,  4   Mete.    (Mass.) 

69,  436,  650 

Mackey   v.    Peterson,    29    Minn. 

298,  27,  28 

Maclae  v.  Sutherland,  3  E.  &  B. 

132,  82 

Maclay  v.  Love,  25  Cal.  367,  379, 

33,  34 
MacLean  v.  O'Brien,  Rap.  Jud. 

Quebec,  12  C.  S.  110,  48 

Macomb  v.  Wilkinson,  83  Mich. 

486,  230,  288,  289 

Macon   Co.  v.   Shores,   97   U.   S. 

272,  120 

Macungie  Sav.  Bank  v.  Hotten- 

stein,  89  Pa.  St.  328,  305 


Macy  V.  Kendall,  33  Mo.  164,        270 
Madden  v.  Blair,  86  Ga.  780,  50 

Maddox    v.     Graham,     2     Mete. 

(Ky.)   56,  288 

V.  Maddox's  Exr.,  12  La.  13,  41 
Mader  v.  Cool,  14  Ind.  App.  299,  326 
Maderon    v.    Heath    &    M.    Mfg. 

Co.,  35  111.^ App.  588,  576,  583 

Magee  v.  Badger,  30  Barb.   (N. 

Y.)  246,  241,  484 

Magee    Furnace    Co.    v.   Boston 

Soapstone    Furnace    Co.,    124 

Mass.  409,  599 

Magel  V.  Milligan,  150  Ind.  582, 

50  N.  E.  564,  402 

Magoffin  V.  Boyle  Nat.  Bank,  24 

Ky.  L.  Rep.  585,  44 

Magoon  v.  Reber,  76  Wis.  392, 

105,  111,  113 

Magruder  v.  Union  Bank,  3  Pet. 

87,  502,  503,  519 

Maguire   v.    Donavan,    108    Mo. 

App.  511,  699 

Mahan  v.  Ross,  18  Mo.  121,  600 

Mahaska  Bank  v.  Crist,  87  Iowa 

415,  360,  376 

Maher  v.  Lanfrom,  86  111.  513,      302 
V.  Moore  (Del.),  42  Atl.  721, 

270,  684 
Mahler  v.  Merchants'  Nat.  Bank, 

65   Minn.   37,  302 

Mahon  v.  Gormley,  24  Pa.  St.  80,    34 
Mahoney    v.    Barber,    67    Minn. 

308,  194 

Mahuris  v.  Perason,  8  N.  H.  539,  "639 
Main  v.  Hilton,  54  Cal.  110,  3102 

Civil  Code,  670 

Maine   Bank  v.   Butts,   9   Mass. 

49,  306 

Maine  Mut.  Marine  Ins.  Co.  v. 

Blunt,  64  Me.  95,  664 

V.  Pickering,  66  Me.  130,  695 
Maine  T.  &  B.  Co.  v.  Butler,  45 

Minn.  506,  451 

Maitland    v.    Citizens'    National 

Bank,  40  Md.  540,       246,  270,  282, 
285,  353,  377,  383,  385,  386,  391, 

476 

Major  V.  Hansen,  2  Biss.  (U.  S.) 

195,  162 

V.  Holmes,  124  Mass.  108,  34 
Makepeace  v.  College,  10   Pick. 

27,  684 

Maledon  v.  Lefler,  62  Ark.  387,  17 
Mallard  v.  Aillet,  6  La.  Ann.  92,     2250 

Mallett  v.  Thompson,  5  Esp.  178,  270 
Manahan  v.   Hart,  24  Ohio  Cir. 

Ct.  R.  526,  33 


TABLE   OF    CASES. 


XCl 


[References  are  to  Sections.l 


Manawaring  v.  Keenan,  86  N.  Y. 

Supp.  262,  240,  402 

Manchester  v.  Van  Brunt,  40  N. 

Y.    St.   Rep.   56,  555,  556 

Mandeville  v.  Union  Bank  of 
Georgetown,  9  Cranch  (U.  S.) 
9,  618 

Maness  v.  Henry,  96  Ala.  454,        179 
Mangan    v.    Sunwall,    60    Minn. 

367,  126 

Manhattan  Life  Ins.  Co.  v.  First 
Nat.  Banlc  (Colo.  App.),  80 
Pac.  467,  583 

Manhattan   Liquor   Co.   v.    Ger- 
man National  Bank  (Tex.  Civ. 
App.  1906),  94  S.  W.  1120,    80,  458 
V.  Magnus  &  Co.    (Tex.  Civ. 
App.    1906),    94    S.    W. 
1117,  80 

Manhattan  Sav.  Inst.  v.  New- 
York  Nat.  Exch.  Bank,  170  N. 
Y.  58,  360,  376 

Manistee  National  Bank  v.  Sey- 
mour, 64  Mich.  59,  183 
Manley  v.  Park,  68  Kan.  400,        409 
Mann    v.     Merchants'     Loan    & 
Trust  Co.,   100    111.   App.   224, 

237,  240,  394,  395,  447 

Manning  v.  Lyon,  24  N.  Y.  Supp. 

265,  523,  570 

v.  Maroney,  87  Ala.  563,   591,  594 

v.  McClure,  36  111.  490,  241 

V.  Tyler,  21  N.  Y.  567,  442 

Manning    First    Nat.    Bank    v. 

Farneman,  93  Iowa  161,  563 

Manufacturers'     &     Merchants' 

Bank  v.  Follett,  11  R.  I.  92,        173 
Manufacturers'  Bank  of  Troy  v. 

Scofield,  39  Vt.  590,  655 

Manufacturers'  Nat.  Bank  v. 
Barnes,  65  111.  69,  73 

V.  Thompson,  129  Mass.  438,  8 
Many,  In  re.  Fed.  Cas.  No.  9054, 

653,  659 

Maples  V.  Browne,  48  Pa.  St.  458,  419 
Maquin  v.  Bennett,  24  Misc.  (N. 

Y.)   157,  73 

Marcal  v.   Melliet,  18  La.  Ann. 

223,  419 

March  v.  Bank,  4  Hun   (N.  Y.) 

466,  118 

V.  Marshall,  53  Pa.  St.  396,  419 
Marchand  v.  Griffon,  140  U.  S. 

516,  44 

Margesson  v.  Goble,  2  Chit.  364,  341 
Marine  Bank  v.  Clements,  31  N. 

Y.  33,  125 

Marine   Nat.   Bank  v.   National 

City  Bank,  59  N.  Y.  67,    581,       642 


Marion  &  Monroe  Gravel  Road 

Co.  V.  Kessinger,  16  Ind.  549,      195 
Marion  Mfg.  Co.  v.  Harding,  155 

Ind.  648,  327 

Marion   Nat.   Bank   v.   Phillips, 
16  Ky.  L.  Rep.  159,  504,  561 

v.  Thompson,   101  Ky.   277,     306 
Market  &  Fulton  National  Bank 

V.  Sargent,  85  Me.  349,  23 

Markey  v.  Corey,  108  Mich.  184,    451 
Markland  v.  McDanlel,  51  Kan. 

350,  525,  573 

Marks  v.  Boone,  24  Fla.  177,  565 

v.  First  Nat.   Bank,   79   Ala. 

550,  126,  241,  270,  285 

V.  Schram,  109  Wis.  452,  149 

Marling    v.    Milwaukee    Realty 

Co.  (Wis.),  106  N.  W.  844,  682 

Marlow  v.  Barlew,  53  Cal.  456,       34 

Marness  v.  Henry,  96  Ala.  454,      185 

Marsh  v.  Bank,  34  Barb.  (N.  Y.) 

298,  605 

V.  Griffin,  42  Iowa  403,      139,  168 

v.  Low,  55  Ind.  271,  258 

V.  Small,  3  La.  Ann.  402,  395 

V.  Wheeler,  77  Conn.  449,     91,  94 

Marshall  v.  Billings,  7  Ind.  250,    447 

V.  Conger,     10     Serg.     &     R. 

(Pa.)   164,  177 

V.  Freeman,  52  111.  App.  42,  582 
V.  Meyers,  96  Mo.  App.  643,  696 
V.  Mitchell,  34  Me.  227,  525 

V.  Perkins,  72  Me.  343,  679 

V.  Shiff  (Ala.),  30  So.  335,       467 
Marshall   Nat.   Bank   v.   O'Neal, 
11  Tex.  Civ.  App.  640,  85,  86 

V.  Smith,  33   Tex.  Civ.  App. 

555,  680 

Marston  v.  Allen,  8  Mees.  &  W. 

494,  20,  379,  645 

Martendale  v.  Follet,  1  N.  H.  95, 

147,  167 

Martin  v.  Bartow  Iron   Works, 
Fed.  Cas.  No.  9157,  208,  217 

V.  Brown,  75  Ala.  422,  553 

V.  Foster,  83  Ala.  213,  183 

V.  Home     Bank,     52     N,     Y. 

Supp.  464,  583 

V.  .lohnson,  34  Neh.  797,  241 

V.  Kercheval,  4  McLean    (U. 

S.)    117,  191,  200,  236 

V.  Martin,  174  111.  371,  51  N. 

E.  691,  aff'g  74  111.  App. 

215,  402 

V.  Martin,  89  111.  App.  147,  214 
V.  Monroe,  107  Ga.  330,  685 

V.  Muncy,  40  La.  Ann.  190,  272 
V.  Niagara  Falls   Paper  Co., 

122  N.  Y.  165,  486 


xcu 


TABLE   OF    CASES. 


[References  are  to  Sections.'] 


Martin  v.  Perqua,  20  N.  Y.  Supp. 
285,  503,  540 

V.  Richardson,  68  N.  C.  255,      636 
V.  Smith,  116  Ala.  639,  28 

V.  Smith,  108  Mich.  278,  517 

V.  Smylee,  55  Mo.  577,  25,  26 

V.  Stone,  67  N.  H.  367,       186,  198 
V.  Suber,  39  S.  C.  525,  34 

V.  Trobridge,  1  Vt.  477,  593 

V.  Winslow,    Fed.    Cas.    No. 

9172,  525 

V.  "Witty    (Mo.    1904),   78    S. 

W.  828,  317 

Martina  v.  Muhllie,  186  III.  327, 

222,  324 
Martindale   v.    Hudson,   25    Mo. 

422,  240 

Marvin  v.  McCullum,  20  Johns. 

(N.  Y.)    288,  456 

Mascolo  V.  Montesanto,  61  Conn. 

50,  110,  186 

Maslin's  Ex'rs  v.   Hiett,   37  W. 

Va.  15,  679 

Mason  v.  Anthony,  42  N.  Y.  609,    303 
V.  Bradley,    11    Mees.    &    W. 

590,  172 

V.  Dousay,  35  III.  424,  527 

V.  Eldred,  6  Wall.  231,  679 

V.  Jones,  7  App.  D.  C.  247,        119 
V.  Kilcourse,  71  N.  J.  472,  59 

V.  McCullock.  31  Me.  158.  610 

Maspero   v.   Pedesclaux,   22   La. 

Ann.  227,  559,  560 

Massachusetts    L.    &   T.    Co.    v. 

Twichell,  7  N.  Dak.  440,  446 

Massachusetts     Nat.     Bank     v. 

Snow,  187  Mass.  159,  136.  240, 

396,  402.  465,  472,  475 

V.  "Whicher.  173  Mass.  517,         40 

Massey  v.  Blair.  196  Pa.  St.  34,      311 

V.  Wallace,  32  S.  C.  149,  300 

Massie  v.  Byrd,  87  Ala.  672  507 

Massman  v.  Holscher,  49  Mo.  87,  312 

Master  v.  Miller,  4  Term  R.  320, 

136,  142,  152 
Masterson    v.    Grubbs,    70    Ala. 

406,  305 

Mastin   v.    Cochran,    25    Ky.    L. 

Rep.  712,  302 

Mastin  Bank  v.  Hammerslousrh, 

72  Mo.  274,  388.  393 

Mather     v.     Gordon     Bros.,     77 

Conn.  341.  59  Atl.  424.  414 

Mathes  v.  Shank.  94  Fed.  501,  53 

Mathewson  v.  Brouse,  1  U.  C.  Q. 

B.  272,  682 

Matson   v.   Alley,    141    111.    284, 

238,  433 


Matteson  v.  Ellsworth,  33  Wis. 

488,  148 

Matthews  v.  Crosby,  56  N.  H.  21,     307 
V.  Rutherford,    7    La.    Ann. 

225,  378 

Mattingley    v.    Bank    of    Com- 
merce, 21  Ky.  1029,  534,  542 
Mattingly  v.  Riley,  20  Ky.  Law 

Rep.  1621,  150 

Mattoon  v.  McDaniel,  34  Mo.  138,    419 
Matz  V.  Avick,  76  Conn.  388,  302 

Mauney  v.   Coit,   80   N.  C.   300, 

503,  541 
Maurin  v.  Chambers,  6  Rob.  62,  439 
Maury  v.  Coleman,  24  Ala.  381, 

60  Am.  Dec.  478,  656 

Maxfield  v.  Jones,  76  Me.  135,         691 
Max  Simons  &  Co.  v.  McDowell, 

125  Ga.  203,  53  S.  E.  1031,   135,  136 
Maxwell  v.  Akin,  89  Fed.  178,  85 

V.  CampbeJl.  8  Ohio  St.  265,  301 
V.  Jacksonville  Loan  &  Imp. 

Co.,  45  Fla.  425,  302 

May   V.   Cole,   8    Blackf.    (Ind.) 
479,  310,  327 

V.  Folsom,  113  Ala.  198,  302 

V.  Quimby,  3  Bush  (Ky.)  96, 

241,  246 
Mayberry  v.  Morris.  62  Ala.  113,  241 
Mavdole    v.    Peterson,    7    Idaho 

502,  322,  340 

Maver  v.  Columbia  Sav.  Bank, 

86  Mo.  App.  108,  467 

V.  Mode,  14  Hun  (N.  Y.)  155,  342 

V.  Thomas,  97  Ga.  772,      523,  570 

Mayes  v.  Robinson,  93  Mo.  114, 

366,  476 
Mayfield  Grocer  Co.  v.  Andrew 
Price  &  Co.  (Tex.  Civ.  App.), 
95   S.  W.   31,        370,  419,   420,   467 
Mavhew  v.  Crickett,   2   Swanst. 

190.  650 

Mavnard    v.    Davis,    127    Mich. 
571,  246 

V.  Nekervis,  9  Pa.  St.  81,  418 

McAdam  v.   Cooke,  6  Daly    (N. 

Y.)   101,  385 

McAfee  v.  Doremus,  5  How.  53,     542 

McAllister  v.  Pitts,  58  Neb.  424,     694 

McAlpin  V.  Lee,  12  Conn.  129,         208 

V.  Wingard,    2    Rich.    L.    (S. 

C.)  547,  431,  607 

McAndrew  v.  Radway,  34  N.  Y. 

511.  542 

McArthur  v.  Bloom,  2  Duer  (N. 

Y.)  151,  43 

V.  McLeod.  51  N.  C.  475,  22 

McAuley  v.  Reynolds,  64  Me.  136,    29 


TABLE   OF    CASES. 


XClll 


[References  are  to  Sectiotis.l 


McCaffrey  v.  Burkhardt,  97 
Minn.  1,  695 

V.  Dustin,  43  111.  App.  34,  419 

McCagg  V.  Woodman,  28  111.  84,  604 
McCall  V.  Corning,  3   La.  Ann. 

409,  99 

McCallum    v.    Driggs,    35    Fla. 

277,  183 

McCann  v.  Lewis,  9  Cal.  246,  679 
McCarthy  v.  Sleight  (Mich.),  72 

N.  W.  165,  630 

McCarty  v.  Lockwood,  6  Houst. 
(Del.)   451,  119 

V.  Louisville    Bkg.    Co.,    100 

Ky.  4,  475 

V.  Mewhinney,  8  Ind.  513,         628 
McCarville    v.    Lynch,    14    Misc. 

.R.  (N.  Y.)  174,  '       102 

McCasky  v.  Sherman,  24  Conn. 

605,  241 

McCaughey  v.  Smith,  27  N.  Y.  9,  182 
McCauley  v.  Gordon,  64  Ga.  221,     91 
V.  Murdock,  97  Ind.  229,  97 

McCIain  v.  Davis,  77  Ind.  419,  71 
McClair  v.  Wilson.  18  Colo.  82,  110 
McClelland  v.  Bartlett,  13  Bradw. 

236,  699 

McClintick    v.    Johnson,    1    Mc- 
Lean (U.  S.)  414,  240 
McClintock  v.  Central  Bank,  120 

127,  24  S.  W.  1052,  670 

McClure  v.  Litchfield,  11  Ala. 
337,  417 

V.  Little,  15  Utah  379,  148 

V.  Livermore,  78   Me.   390,   6 

Atl.  11,  663 

McComas  v.  Haas,  107  Ind.  512,     343 

McCord    V.    W.    U.    T.    Co.,    39 

Minn.  181,  414 

V.  Williams,  2  Ala.  81,  600 

McCormack  v.  Warren,  74  Conn. 

234,  230 

McCormack  Harvesting  Machine 
Co.  v.  Yoeman,  26  Ind.  App. 
415,  257 

McCormal   v.   Redden,    46    Neb. 

776,  194 

McCormick  v.  Holmes,  41  Kan. 
265,  21 

v.  Stockton  &  T.  C.  R.   Co., 

130  Cal.  100,  81 

V.  Williams,  54  Iowa  50,  419 

McCormick     Harvesting     Mach. 

Co.  v.  Faulkner,  7  S.  D.  363,      312 
McCosker  v.  Banks,  84  Md.  292,     474 
McCoy  V.  Gouvion,  19  Ky.  Law 
R.  1441,  28 

v.  Lockwood,  71   Ind.  319, 

23,  164 


McCrady  v.  Cann,  5  Harr.  (Del.) 
175,  239 

V.  Jones,  36  S.  C.  136, 

351,  359,  376 

McCramer     v.     Thompson,      21 

Iowa  244,  181 

McCrary  v.   Pritchard,   119    Ga. 

876,  266 

McCready     v.     Cann,     5     Harr. 

(Del.)  175,  198,  238 

McCreary    v.   Parsons,    31    Kan. 

447,  2  Pac.  570,  668 

McCrum  v.  Corby,  11  Kan.  464, 

376,  463 

McCullock  V.  Hoffman,  10  Hun 
(N.  Y.)  133,  185,  198 

V.  Houston,   1    Dall.    (U.   S.) 

441,  238.  419 

McCullough  V.  Cook,  34  Ind.  290,  502 
V.  Houston,   1   Dall.    (U.   S.) 

441,  238,  419 

V.  Pritchett,  120  Ga.  585,  684 

McDade  v.  Mead,  18  Ala.  214,        608 
McDaniel    v.    Chinski,    23    Tex. 
Civ.  App.  504,  57  S.  W.  922,         403 
V.  Whitsett,  96  Tenn.  10,  161 

McDonald   v.    Harrison,    12   Mo. 
447,  623 

v.  McDonald,   139   Cal.   246,     245 
V.  Mayer,  97   Ga.   281,   23    S. 

E.  72,  656 

V.  Mosher,  23  111.  App.  206, 

521,  576 
V.  Muscatine  Nat.   Bank,   27 

Iowa  319,  22,  28 

V.  Nalle     (Tex.     Civ.     App. 

1906),  91  S.  W.  632,  140 

V.  Randall,   139   Cal.    246,  72 

Pac.  997,  486 

McDonald  Mfg.  Co.  v.  Moran,  52 

Wis.  203,  281 

McDonough  v.  Goule,  8  La.  472,  255 
McDuffie  V.  Dame,  11  N.  H.  244,  419 
McEwin     V.     Humphrey      (Ind. 

Ty.),  45  S.  W.  114,  302 

McFadden  v.  Maxwell,  17  Johns. 

188,  472 

McFarland    v.    Sikes,    54    Conn. 
250,  312 

V.  State  Bank,   7  Kan.  App. 

722,  489 

McFatridge  v.  Williston,  25  N. 

S.  11,  525 

McFetrich  v.  Woodrow,  67  N.  H. 

174,  570 

McGarvey  v.  Hall,  23  Cal.  140,      446 
McGavack  v.  Whitfield,  45  Miss. 
452,  61 


XCIV 


TABLE   OF    CASES. 


McGowan  v.  Budlong,  79  Pa.  St. 

470,  608 

McGowen  v.  Bush,  17  Tex.  195,     115 

McGrath    v.    Barnes,    13    S.    C. 

ooc  320 

''v.' Clark,  56  N.  Y.  34,         146,  170 

V.  Perkins,    56    N.    Y.    Supp. 

398,  627 

McGrea  v.  Long,  83  Ga.  156,  614 

McGregor  v.  Bishop,  14  Ont.  7,     208 
McGruder  v.  Bank  of  Washing- 
ton, 9  Wheat.  598,  514 
McGue  V.  Rommell   (Col.  1906), 

83  Pac.  1000,  208 

McGuire  v.  Sinclair,  47  How.  Pr. 

(N.  Y.)  360,  391 

McHenry  v.  Davis,  10  L.  R.  Eq. 

88,  42 

Mclntire    v.    Preston,    5    Gilm. 
(111.)  48,  85 

V.  Yates,  104  111.  491,  392 

Mcintosh  V.  Rice,  13  Colo.  App. 

393,  307 

McKay  v.  Bellows,  8  Fla.  31,  238 

McKean  v.  Cook,  73  N.  H.  410,       682 

McKeen  v.  Page,  18  Me.  140,  325 

McKenzie  v.  British  Linen  Co., 

44  Law  T.  N.  S.  431,  675 

V.  Hunt,  32  Ala.  494,         624,  635 

V.  Linen  Co.,  6  App.  Cas.  82,    677 

McKesson  v.  Jones,  66  N.  C.  258,  293 

McKewer   v.   Kirtland,  33   Iowa 

348,  553 

McKinney  v.  Beeson,  7  La.  O.  S. 

254,  417,  530 

McKinnon  v.  Armstrong,  L.  R.  2 
App.  Cas.  531,  626 

V.  Armstrong  Bros.  &  Co.,  L. 

R.  2  App.  Cas.  531,  613 

McKirdy  v.  Hare,  7  Atl.  172,  273 

McKnight  v.  Wheeler,  6  Hill  (N. 

Y.)   492,  302,  303 

McKown  V.  Mathes,  19  La.  542,     419 
McLain  v.  Coulter,  5  Pike  (Ark.) 

13,  449,  653 

McLaren  v.  Pennington,  1  Paige 

102,  604 

McLaughlin  v.  Brady,   63   S.  C. 
433,  119 

V.  Clausen,  85  Cal.  322,     311,  345 
McLaurin  v.  Seguin   (Rap.  Jud. 

Queb.),  12  C.  S.  63,  539 

McLean  v.  Bryer,  24  R.  I.  599, 

464,  469 
V.  Clydesdale  Banking  Co.,  9 

App.  Cas.  95,  241 

V.  Fleming,  L.  R.  2  H.  L.  Sc. 

128,  414 


[References  are  to  Sections.'] 

McLean    v.    Lafayette    Bank,    2 


McLean  (U.  S.)  587,  302 

V.  Ryan,  55  N.  Y.  Supp.  232, 

532,  542,  554,  558 
McLellan    v.    File    Works,    56 

Mich.  579,  85 

McLemore  v.  Hawkins,  46  Miss. 
715  695 

v.'powell,  12  Weat.    (U.  S.) 

554,  341 

McLennan  v.  McMonies,  25  U.  C. 

Q.  B.  114,  679 

McLeod    V.    McKay,    20    U.    C. 
Q.  B.  258,  702 

V.  Williams,  122  N.  C.  451,         44 
McLin    V.    Marshall,    1    Heisk. 

(Tenn.)  678,  105,  106 

McMahon  v.  Thomas   (Cal.),  39 

Pac.  783,  119 

McManus  v.  Bark,  L.  R.  5  Exch. 

65,  341 

McMickey    v.    Safford,    197    111. 

540,  183 

McMillan  v.  Hefferlin,  18  Mont. 

385,  135,  152 

McMonigal    v.    Brown,    45    Ohio 

St.  333,  524,  540,  573 

McMurray  v.  Moran,   134  U.   S. 
150,  307 

V.  Sisters  of  Charity,   68   N. 

J.  L.  312,  199 

McMurtry   v.    Ramsey,    25   Ark. 

350,  293 

McNabh   v.   Tally,   27  La.  Ann. 

640,  272 

McNair  v.  Moore,  55  S.  C.  435,      502 
McNamara  v.  Gargett,  68  Mich. 
454,  296 

V.  Jose,  28  Wash.  461, 

191,  240,  440,  464,  465 
McNaught  V.  McClaughtry,  42  N. 

Y.  22,  212 

McNeel  v.  Smith,  106  Ga.  215, 

257,  669 
McNeil  V.  Tenth  Nat.  Bank,  46 

N.  Y.  325,  329,  95,  380 

McNeill  V.  Baird,  6  Munf.  316,       449 
V.  McDonald,  1  Hill    (S.  C.) 

1,  419 

McNitt  V.  Helm,  33  Iowa  342,        419 
McPeeters   v.    Blankenship,    123 

N.  C.  651,  232 

McPherson  v.  Boudreau,  48  La. 

Ann.  431,  359 

V.  Foster,  43  Iowa  48,  87 

V.  Weston,  64  Cal.  275,  255 

McQuade    v.    Irwin,    39    N.    Y. 

Super.  Ct.  396,  240 

595,  613 


TABLE   OF    CASES. 


xcv 


[References  are  to  Sections.l 


McQueen    v.    Mclntyre,    30    Up. 
Can.  C.  P.  426,  162 

V.  McQueen,    9    Up.    Can.    Q. 

B.  536,  339 

McQueen's  Appeal,   104   Pa.   St. 

595,  373,  613 

McRae  v.  McNair,  69  N.  C.  12,       333 
V.  Rhodes,  22  Ark.  315,  523 

McRaven    v.    Crisler,    53    Miss. 

542,  137 

McSmithee  v.  Feamster,  4  W.  Va. 

673,  600 

McSparran  v.  Neeley,  91  Pa.  St. 

17,  69,  119,  123 

McSpedon  v.  Troy,  41  N.  Y.  35, 

246,  249 
V.  Troy  City  Banlt,   2  Keyes 

(N.  Y.)  35,  391 

McVean  v.  Scott,  46  Barb.    (N. 

Y.)   379,  174 

McVey  v.  Cantrell,  70  N.  Y,  295, 

34,  58 
V.  Ely,  73  Tenn.  (5  Lea)  438, 

138,  170 

McVicker  v.  Shropshire,  6  J.  J. 

Marsh.  (Ky.)  328,  322 

McWilliams  v.  Mason,  31  N.  Y. 

294,  121,  123 

Meachem  v.  Dow,  32  Vt.  721,  288 

Meacher  v.  Fort,  3  Hill   (S.  C.) 

227,  24,  102,  673 

Mead   v.   Merrill,   10   Fost.    (N. 
H.)   472,  133 

V.  Munson,  60  111.  49,  28 

V.  Pawling    National    Bank, 

89  Hun   (N.  Y.)    102,         342 
V.  Young,  4  Term  R.  28,  470 

Meadow  v.  Bird,  22  Ga.  246,  288 

Meadows  v.   Smith,  7  Ired.  Eq. 

(N.  C.)  7,  108 

Mechanics'  and  Traders'  Bank  v. 
Barnett,   27   La.   Ann.   177,         376 
V.  Livingston,  6  Misc.  Rep.  81, 

353 
Mechanics'  Bank  v.  Fowler,  36 
Mo.  33,  35,  418 

V.  Hasard,    13    Johns.    352,      697 
Mechanics'  Bank  &c.  v.  Charda- 
voyne,  69  N.  J.  L.  256, 

241,  243,  391 
Mechanics'    Banking    Assoc,    v. 
New  York  &  Saugerties  White 
Lead  Co.,  35  N.  Y.  505, 

85,   270,   487,   505 
Mechanics'   Bank   of  New  York 

V.  Griswold.  7  Wend.  166,  573 

Mechanics'    Building    Assoc,    v. 
Ferguson,  29  La.  Ann.  548,  376 


Mechanics'  &c.  Bank  v.  Living- 
ston, 4  Misc.  257,  376 
Meeker  v.  Shanks,  112  Ind.  207, 

213,  635 
Meggett  v.  Baum,  57  Miss.  22, 

272,  275,  465 
Mehlherg  v.  Tisher,  24  Wis.  607,  523 
Mehlin  v.  Mutual  Reserve  Fund 

L.  A.,  2  Ind.  Terr.  R.  296,    307,  312 
Meise  v.   Doscher,   83   Hun    (N. 
Y.)  580,  170 

v.  Newman,  76  Hun  341, 

502,  542,  551 

Melancon   v.   Melancon,   4   Rob. 

33  439 

Melendy  v.  Keen,  89  111.  395,  419 

Melick  V.  Bank,  52  Iowa  94,  128 

Mellen    v.    Harvey,    6    Super.    & 

Com.  P.  Dec.  15,  210 

Melvin  v.  Hodges,  71  111.  422,  74 

Memphis    Bethel    v.    Bank,    101 

Tenn.  130,  359,  376,  402 

Memphis    Nat.    Bank   v.    Sneed, 

97  Tenn.  120,  72 

Menaugh    v.    Chandler,   89    Ind. 

94,  629,  646 

Mendenhall  v.  Lenwell,  5  Blackf. 

(Ind.)   125,  338 

V.  Ulrich    (Minn.  1905),   101 

N.  W.  1057,  312,  314 

Menenway    v.    Cropsey,    37    111. 

357,  288 

Menkens  v.  Heringhi,  17  Mo.  297,  52 
Menzie  v.  Smith,  63  Neb.  666,  88 

N.  W.  855,  402 

Mercantile    Bank   v.    Boggs,    48 

W.  Va.  289,  241 

Mercantile  Guaranty  Co.  v.  Hil- 
ton   (Mass.    1906),    77    N.    E. 

312,  390 

Mercer  v.  Clark,  3  Bibb.    (Ky.) 

224,  17 

V.  Woodward,  74  Conn.  589,       98 
Merchants'  &  Farmers'  Bank  v. 

Cleland,     25     Ky.     Law    Rep. 

1169,  116 

Merchants'      &      Manufacturers' 

Nat.  Bank  v.  Ohio  Valley  Fur- 
niture Co.   (W.  Va.),  50  S.  E. 

880,  .  473,  475 

Merchants'  &   Mechanics'   Bank 

V.  Evans,  9  W.  Va.  373.  179 

Merchants'  &  Planters'  Bank  v. 

Millsap,  71  Miss.  361,  15  S.  659, 

208,  222,  443,  465 
V.  Pentland,  101  Tenn.  445,       473 
Merchants'   Bank   v.   Cleveland, 

9  Colo.  608,  246 

V.  Easley,  44  Mo.  286,  523 


XCVl 


TABLE    OF    CASES. 


^References  are  to  Sections."} 


Merchants'  Bank  v.  McCall,  6 
Bosw.   (N.  Y.)   473,  80 

Merchants'  Bank  of  Canada  v. 
Brown,  86  App.  Div.    (N.  Y.) 

599,  aso 

Merchants'  Co.  v.  Jones,  95  Me. 

335,  375,  466 

Merchants'  &c.  Bank  v.  Hewitt, 

3  Clarke  93,  447 

Merchants'  Exchange  Bank  v. 
Fuldner,  92  Wis.  415,  612 

V.  Liickow,  37  Minn.  542,  315 

Merchants'  Exch.  Nat.  Bank  v. 

Bergen  Co.,  115  N.  S.  384,  87 

Merchants'  Loan  &  Trust  Co. 
V.  Metropolis  Bank,  7  Daly 
(N.  Y.)    137,  119,  642 

V.  Welter,  205  111.  647,      421,  467 
Merchants'     National     Bank    v. 
Baltimore,  C.  &  R.  Steamboat 
Co.,  102  Md.  573,  63  Atl.  108,     152 
V.  Comstock,  55  N.  Y.  24,  383 

V.  Hansom,   33   Minn.   40,   21 

N.  W.  849,  671 

V.  Standard    Wagon    Co.,    6 

Ohio  N.  P.  264,  528 

V.  State  Nat.  Bank,  10  Wall. 

604,  476,  581,  585 

V.  Sullivan,  63  Minn.  468,         473 
Merchants'  Sav.  Bank  v.  Cross, 

65  Minn.  154,  459 

Merchants'  State  Bank  v.  State 

Bank,  94  Wis.  444,  571 

Mercien  v.  Cotton,  34  Miss.  64, 

439    465 
Meredith  v.  Ladd,  2  N.  H.  517,    '  288 
Merriam    v.    Granite    Bank,    8 
Gray  (Mass.)  254,  394 

V.  Rockwood,  47  N.  H.  81, 

316,  318 
T.  Wolcott,   3   Allen    (Mass.) 
258,  645 

Merrick  v.  Boury,  4  Ohio  St.  60,     148 
V.  Butler,  2  Lans.  (N.  Y.  103, 

294  419 
V.  Phillips,  58  Mo.  436,  '  238 

Merrill  v.  Bank,  94  Cal.  59,  683 

V.  Carr,  60  N.  H.  114,  288 

V.  Mowry,  33  Me.  455,       333,  685 
V.  Packer,  80  Iowa  542,     288,  296 
Merriman  &  Co.  v.  Knox,  99  Ala. 

93,  291 

Merritt  v.  Bagwell,  70  Ga.  578, 

119,  123 
V.  Boyden,  93  111.  App.  613,  474 
V.  Duncan,  7  Heisk.   (Tenn.) 

156,  307,  380 

V.  Flemming,  42  Ala.  234,        301 


Merritt  v.  Gate  City  Nat.  Bank, 
100  Ga.  147,  502 

V.  Hurley,  6  S.  D.  593,  451 

V.  Jackson,  181  Mass.  69,  505 

V.  Pollys,   16  B.  Mon.    (Ky.) 

355,  94 

V.  Seaman,  6  N.  Y.  168,  620 

V.  Todd,   23  N.  Y.  28, 

502,  506,  507 
Mersick  v.  Alderman,  77  Conn. 

634,  267,  282 

Mersman  v.   Werges,  112  U.   S. 

139,  98,  102,  182 

Messmore  v.  Larson,  86  111.  278,    606 
V.  Morrison,  172  Pa.  St.  300,     186 
Metcalf  V.   Draper,  98   111.  App. 

399,  240,  475 

Metropolitan  Bank  v.  Bouny,  42 
La.  Ann.  439,  467 

V.  Engle,  72  N.  Y.  Supp.  691, 

516.  517,  558,  567 

N.  Y.  Supp.  691,  516,  517,  558,  567 
Y.  Jones.  137  111.  634,  581,  585 
V.  Merchants'  Nat.  Bank,  182 

111.  367,  307 

V.  Sieber   (Pa.),  33  Leg.  Int. 

193,  292 

Metropolitan     Printing     Co.     v. 

Springer,  90  N.  Y.  Supp.  376,     270 
Metz  V.  Winne   (Okla.),  79  Pac. 

223,  302 

Meuer  v.  Phoenix  Nat.  Bank,  88 

N.  Y.  Supp.  83,  446,  456,  581 

Meyer    v.    Beardsley,    30    N.   J. 

Law  236,  272 

V.  Brand,  102  Ind.  301,      198,  216 
V.  Brown,  65  Cal.  583,  80 

V.  Dresser,    16    C.    B.    N.    S. 

646,  414 

V.  Poster,  147  Cal.  166,     456,  563 

V.  Hibscher,  47  N.  Y.  265,  525 

V.  Huneke,  55  N.  Y.  412,    147,  170 

Meyer-Marx  Co.  v.  Ensley  City, 

141  Ala.  602,  288,  291 

Mevers  v.  Kasten,  9  Misc.  Rep. 
221,  280 

V.  Kessler,  142  Fed.  730,  296 

Michigan  Bank  v.  Eldred,  9  Wall. 

(N.  S.)    544,  89,  93 

Michigan    Mut.    L.    Ins.    Co.    v. 

Klatt.  92  N.  W.  325,  240 

Michigan    Sav.   Bank   v.   Miller, 

110  App.  Div.  670,  607 

Michigan  State  Bank  v.  Leaven- 
worth, 28  Vt.  209,  688 
Micklewait  v.  Noel,  69  Iowa  344,  316 
Middaugh  v.  Elliott,  61  Mo.  App. 
601,                                                    136 


1 


TABLE   OF    CASES. 


XCVH 


[References  are  to  Sections.^ 


Middleborough     Nat.     Bank     v. 

Cole,  191  Mass.  168,  53 

Middlebury  v.  Case,  6  Vt.  165,  240 
Middletown  Bank  v.  Jerome,  18 

Conn.  443,  191,  238,  653,  659 

Midland    Steel    Co.    v.    Citizens' 
Nat.  Bank,  72  N.  E.  290,  238 

V.  Citizens'  National  Bank  of 
Kokonao,   34   Ind.  App. 
107,  277 

Miers  v.  Coats,  57  111.  App.  216,  98 
Milberry  v.  Storer,  75  Me.  69,  177 
Miles  V.  Porter,  6  Blackf.  (Ind.) 

44,  200 

Milius   V.   Kauffman,    104    App. 

Div.  (N.  Y.)  442,  391 

Millard  v.  Barton,  13  R.  I.  601,      116 

Miller  v.  Bank,  8  Watts   (Pa.) 

192,  373 

V.  Bingham,  29  Vt.  82,  436 

V.  Butler,  Fed.  Cas.  No.  9565,     17 

V.  Clendenin,  42  W.  Va.  416, 

504,  529 
V.  Delameter,  12  Wend.    (N. 

Y.)  433,  51,  52 

V.  Filley,  26  Mich.  249, 

69,  174,  182 
V.  Gamble,   4   Barb.    (N.   Y.) 

146,  315,  350 

V.  Gettysburg  Bank,  8  Watts 

(Pa.)  192,  613 

V.  Gilleland,  19   Pa.   St.  119, 

124,  152 

V.  Holbrook,  1  Wend.  (N.  Y.) 

317,  341 

V.  Kreiter,  76  Pa.  St.  78,  446,  629 
V.  Larned,   103    111.   562, 

270,  271,  282,  285 
V.  Longacre,  26  Ohio  St.  291,  3 
V.  Lynch,  38  Miss.  344,  29 

V.  McKenzie,  95  N.  Y.  575,  192 
V.  Manice,  6  Hill  (N.  Y.)  114,  00 
V.  Meller,  59  Mo.  388,  279 

V.  Pollock,  99  Pa.  St.  202, 

354,  359 

V.  Race,  1  Burrows  452, 

394,  398,  404 
V.  Receiver,  1  Paige  444,  604 

V.  Reed,  27  Pa.  St.  244,  157 

V.  Stark,  148  Pa.  St.  164, 

148,  152 
V.  Wells,  46  111.  46,  351 

V.  Wisner,  22  La.  Ann.  457,       57 
Miller  &  Co.  v.  Boykin,  70  Ala. 

469,  359 

Millerd  v.  Thorn,  56  N.  Y.  402,      688 

Millish  V.  Rawdon,  9  Bing.  416,    496 

Millius  V.  Kaufmann,  93   N.  Y. 

Supp.  669,  241,  246,  249 

Joyce  Defenses— vii 


Millius  V.  Kauffmann,  104  App. 

Div.  442,  360 

Mills  V.  Bank  of  United  States, 
11  Wheat.  431,  509,  530,  552 

V.  Gilpin,  2  Harr.   (Del.)   32, 

202,  208 
V.  Lumpkin,    1    Kelly    (Ga.) 

511,  620 

V.  Rice,  6  Gray  (Mass.)  458,  671 
V.  Rosenbaum.  103  Ind.  152,  601 
V.  Starr,    2    Bailey     (S.    C.) 

359,  147,  165 

V.  Williams,  16  S.  C.  593,  317 
V.  Young,  23  Wend.    (N.  Y.) 

314,  105 

Miltenberger  v.  Cooke,  18  Wall. 

(U.  S.)  421,  672 

Milton  V.    Steward,   5    111.   App. 

533,  63 

Milwaukee  Trust  Co.  v.  Warren, 

112  Wis.  505,  702 

Miner  v.  Vedder,  66  Mich.  101,       232 
Mineral  Point  R.  Co.  v.  Barron, 

83  111.  365,  590 

Mining  Co.  v.  First  Nat.  Bank  of 

Hailey,  95  Fed.  23,  660 

Minneapolis  Sash  &  D.  Co.  v. 
Metropolitan  Bank,  76  Minn. 
136,  583 

Minor  v.  Minor's  Adm'r,  8  Grat. 

(Va.)   1,  .  620 

Minot  v.  Russ,  156  Mass.  458,        581 
Minzey   v.    Marcy   Mfg.    Co.,    25 

Ohio  Cir.  Ct.  R.  593,  310 

Miser  v.  Trovinger,  7  Ohio  St. 

281,  523 

Mishler  v.  Reed,  76  Pa.  St.  76,        307 
Missouri  K.  &  T.  Co.  v.  Krum- 

seig,  172  U.  S.  351,  302 

Missouri  Real  Estate  Syndicate 

V.  Sims,  179  Mo.  679,  302,  305 

Mitchell  V.  Bristol,  10  Wend. 
492,  699 

V.  Degrand,  1  Mason  176, 

544,  546 
V.  Donahey,  62  Jowa  376,  133 

V.  Easton,    37    Minn.    335,  505 

V.  Farrish,  69  Md.  235,  41 

V.  Kingman,  5  Pick.  (Mass.) 

431,  71 

V.  Lyon,  77  111.  525,  614 

V.  McCullough,  59  Ala.  179,  305 
V.  Oakley,    7    Paige    (N.   Y.) 

68,  387 

V.  Richmond,  164  Pa.  St.  566,     39 
Miller  v.  Purchase.  5  S.  D.  232,       41 
V.  Sellman.  5  Md.  376,  634 

V.  Smith,  32  Iowa  484,  57 

V.  Sullivan,  5  Md.  376,  336 


XCVlll 


TABLE   OF    CASES. 


[References  are  to  Sections.'] 


Miller  v.  Whaley,  29  Ky.  Law  R. 

125,  92  S.  W.  556,  73,  89 

V.  Wheeler,  122  Iowa  368,         680 
Mitcherson    v.    Dozier,    7    J.    J. 

Marsh.    (Ky.)    53,  53,  208,  329 

Mix  V.  National  Bank  of  Bloom- 

ington,  91  111.  20,  241,  246 

V.  White,  52  Vt.  284,  17 

Mobile  Bank  v.  Hall,  6  Ala.  639,  241 

V.  Poelnitz,  61  Ala.  147,  635 

Mobile  County  v.  Sand,  127  Ala. 

493,  400,  401 

Mobile  Life  Ins.  Co.  v.  Randall, 

71  Ala.  220,  688 

Mobile  R.  Co.  v.  Heirath,  67  Ala. 

189,  241 

Mobile   Sav.   Bank   v.   Board  of 

Sup'rs,  22  Fed.  580,  238 

V.  McDinnell,  83  Ala.  595,         512 
Mobley  v.  Ryan,  4  Peck.  51,  699 

Modlin    V.    Northwestern    Turn- 
pike Co.,  48  Ind.  492,  119 
Moeckel  v.   Heim,   46   Mo.   App. 

340,  47 

Moffett  V.  Bickle,  21  Graft.  (Va.) 

280,  302 

Mohawk  Bank  v.  Broderick,  10 

Wend.  304,  523,  585 

V.  Corey,  1  Hill  (N.  Y.)  513, 

353,  392 

Mohr  V.  Byrne,  135  Cal.  87,  437 

Molaka   v.   American    Fire    Ins. 

Co.,  29  Pa.  Super.  Ct.  149,  680 

Mollere    v.    Harp,    36    La.    Ann. 

471,  111 

Molson    V.    Hawlev,    1    Blatchf. 

(U.  S.)  409,  286,  354 

Monarch  v.  Farmers'  &  Drovers' 

Bank,  105  Ky.  430,  95 

Money  v.  Ricketts,  62  Miss.  209,  419 
Monroe  v.  Connor,  15  Me.  179,  93 
Monson   v.    Drakeley,   40    Conn. 

552.  213 

Montague  v.  Perkins,  22  Eng.  L. 

&  Eq.  516,  307 

Montclair  v.  Ramsdell,  107  U.  S. 

147,  476 

Montelius  v.  Charles,  76  111.  303, 

496,  503 
Montfort  v.  Americus  Guano  Co., 

108  Ga.  12,  33  S.  E.  636,  669 

Montgomery  v.  Albion  Nat.  Bank, 
50  Neb.  652,  306,  615 

V.  Brown,    1    Del.    Co.    Rep. 

(Pa.)   307,  63 

V.  Crosthwaite,  90  Ala.  553, 

524.  573 
V.  Elliott,  6  Ala.  701,  502,  516 
V.  Hunt,  93  Ga.  438,  310,  475 


Montgomery  Bank  v.  AValker,  9 

Serg.  &  R.   (Pa.)    229,  273 

Montgomery     Railroad     Co.     v. 

Hurst,  9  Ala.  518,  182 

Montross  v.  Clark,  2  Sandf.  (N. 

Y.)  115,  284 

Monument  Nat.   Bank  v.   Glove 
Works,  101  Mass.  57, 

85,  270,  271,  487 
Moody  V.  Keller,  127  Ala.  630,       523 
V.  Threlkeld,  13  Ga.  55,  22 

V.  Towle,     5     Greenl.     (Me.) 

415,  606 

Moore    v.    Alexander,    68    N.    Y. 
Supp.  888,  522,  523,  570 

V.  Andrews,   13   U.    C.   C.   P. 

405,  633 

V.  Baird,  30  Pa.  St.  138,  270 

V.  Beem,  83  Ind.  219,  342 

V.  Boyd,  95  Ind.  134, 

198,  201,  202 
V.  Britton,  22  La.  Ann.  64,  514 
V.  Buthin,  7  Adol.  &  SI.  595,  596 
V.  Cross,  19  N.  Y.  227,  280 

V.  Davidson,  18  Ala.  209,         331 
V.  Hershey,  90  Pa.  St.  196, 

200,  201 
V.  Hutchinson,  69  Mo.  429,  169 
V.  Metropolitan    Nat.    Bank, 

55  N.  Y.  41,  366 

V.  Miller,  6  Oreg.  254,  456 

V.  Miller,    6    Lans.    (N.    Y.) 

396,  307,  317 

V.  Mitchell,  1  Miss.  231,  183 

V.  Moore,   112   Ind.   152,   153, 

13  N.  E.  673,  123,  645 

V.  Moore.  39  Iowa  461.  210 

V.  Phillips,     13      Mont.     Co. 

Rep.  173,  198 

V.  Prussig,  165  111.  319,     333,  351 
V.  Steigel,  50  Mo.  App.  308, 

503,  527 

V.  Weir,    3     Sneed     (Tenn.) 

46,  600 

V.  Weston,  102  N.  W.  163,        288 
V.  Williams,     26     Tex.     Civ. 

App.  142,  62  S.  W.  977.       89 
Moore  &  Handley  Hardware  Co. 
V.   Towers   Hardware   Co.,    87 
Ala.  207,  288 

Mordecai  v.  Dawkins,  9  Rich.  L. 

(S.  C.)   262,  291,  297 

More  V.  Finger,  128  Cal.  313, 

211,  445,   472 

Morehead  v.  Parkersburg  Na- 
tional Bank,  5  W.  Va.  74,    160,  164 

Morehouse  &  Wells  Co.  v. 
Schwaber,  118  111.  App.  44,         549 


TABLE    OF    CASES. 


XCIX 


[References  are  to  Secti07is.1 


Moreland  v.  Citizens'  Sav.  Bank, 

97  Ky.  211,  243,  392,  533 

Morey  v.  Wiley,  100  111.  App.  75,  214 
Morgan  v.  Bailey,  59  Ga.  683,  29 

V.  Bean,  100  111.  App.  114, 

419,  467 
V.  Morgan,    20    Kv.    L.    Rep. 

1308,  61 

V.  Nowlin,  126  Mich.  105, 

116,  122 
V.  United    States,   113    U.    S. 

476,  151 

V.  Wolstencroft,     1     Super. 

Ct.  13,  525 

Morley  v.  Culverwell,  7  Mees.  & 

W.  174.  682 

Morningstar  v.  Hardwick,  3  Ind. 

App.  431,  47 

Mornyer  v.  Cooper,  35  Iowa  257,  238 
Moroney  v.  Coombes   (Tex.  Civ. 

App.),  88  S.  W.  430,  339,  680 

Morrill  v.  Goodenow,  65  Me.  178,  288 

V.  Nightingale,  93  Cal.  452,     112 

Morris  v.  Bailey,  10  S.  Dak.  507,  534 

V.  Bethell,  L.  R.  5  C.  P.  47,       673 

V.  Eufalia    Nat.     Bank,     122 

Ala.   580,  574,  576 

V.  First  Nat.   Bank,   201   Pa. 

158,  583 

V.  Morton,  14  Neb.  358, 

317,  386,  388 
v.  North,  21  C.  C.  A.  553,  194 

V.  Preston,  93  111.  215,  221, 

380,  390 
V.  White,  28  La.  Ann.  855,         238 
Morris  Canal  &  Banking  Co.  v. 
Fisher,  9  N.  J.  Eq.  667,  394 

V.  Van  Vorst,  21  N.  J.  L.  100,  688 
Morrison  v.  Currie,  4  Duer   (N. 
Y.)   79,  645 

V.  Farmers'      &      Merchants' 
Bank,  9  Okla.  697, 

123,  203,  445 
V.  Faulkner,  80  Tex.  128,  112 

V.  Fishel,  64  Ind.  177,        439,  679 
V.  Garth,  78  Mo.  434,  172 

V.  Hart,  122  Ga.  660,  189,  202 

V.  Huggins,  53  Iowa  76,  148 

V.  Jewel,  34  Me.  146,  208 

V.  Smith,  13  Mo.  234,  180 

V.  State  Bank,  3   Kan.  App. 

201,  614 

V.  Welty,  18  Md.  169,         148,  176 
Morris  Run  Coal  Co.  v.  Barclay 

Coal  Co.,  68  Pa.  St.  173,  288 

Morrow  v.  Bright,  20  Mo.  298,       626 

Morse  v.  Chamberlain,  144  Mass. 

406,  555,  556,  569 

V.  Chapman,  24  Ga.  249,  612 


Morse  v.  Welcome,  68  Minn.  210, 

302,  305 
Morton    v.    Fletcher,    2    A.    K. 

Marsh.   (Ky.)  137,  291 

V.  Provident  Nat.  Bank  of 
Waco  (Tex.),  93  S.  W. 
189,  297 

Mosely  v.  Hanford,   10  Barn.  & 

Cr.  729,  339 

Moses  V.  Comstock,  4  Neb.  516,     292 
V.  Lawrence   County,   149   U. 

S.  298,  186 

Mosher  v.  Carpenter,  13  Hun  (N. 

Y.)   602,  28,  645 

Moskowitz    V.    Deutsch     (N.    Y. 

App.     Div.     1905),    92     N.    Y. 

Supp.  721,  136 

Mosser  v.   Criswell,  150  Pa.  St. 

409,  281,  353 

Mosteller   v.    Bost,    7    Ired.    Eq. 

(N.  C.)  39,  419 

Mouchet  V.   Cason,   1   Brev.    (S. 

C.)   307,  158 

Moul  V.  Pfeiffer,   23  Pa.   Super. 

Ct.  280,  268 

Moule  V.  Brown,  4  Bing.  N.  C. 

266,  576 

Moulton  V.  Posten,  52  Wis.  169, 

270,  472 
Mount,  see  Mt. 

Mount  V.  Sholes,  120  111.  394,         679 
Mount  Morris  Bank  v.  Lawson, 

10  Misc.  R.   (N.  M.)    259,  136 

Moye  V.  Herndon,  30  Miss.  110,     137 

Moyer  v.  Brand,  102  Ind.  301,  S 

V.  Urtal,  9  N.  Y.  St.  Rep.  667,  353 

Moynihan  v.  McKeon,  74  N.  Y. 

St.  R.  316,  270 

Mt.    Pleasant    Branch    of    State 

Bank    v.    McLeran,    26    Iowa 

306,  511,  520 

Mt.  Vernon  Bridge  Co.  v.  Knox 

County  Sav.  Bank,  46  Ohio  L. 

J.  168,  517 

Mudge  V.  Bullock,  83  111.  22, 

30,  50,  51 
Mueller   v.    Buck    (N.    J.    S.    C. 

1904),  58  Atl.  1.092,  116 

V.  Wiese,  95  Wis.  381,  46 

Mueur  v.  Phoenix  Nat.  Bank,  88 

N.  Y.  Supp.  83,  413 

Muhlke  V.  Hegemess,  56  111.  App. 

322,  27 

Muilman  v.  D'Eguino,   2  H.  Bl. 

565,  496 

Muir  V.  Demaree,  12  Wend.   (N. 

Y.)  468,  175 

Mulberger  v.  Morgan  (Tex.  Civ. 

App.),  34  S.  W.  148,  119 


TABLE    OF    CASES. 


[References  are  to  Sections.} 


Mullen  V.  Hawkins,  141  Ind.  363,  263 
Mullendore    v.    Wertz,    75    Ind. 

431,  340 

Mullick  V.  Radakissen,  9  Moore 

P.  C.  66,  496 

Mullikem  v.  Latchen,  7  Blackf. 

(Ind.)    136,  262 

Mumford  v.  Tolman,  54  111.  App. 
471,  369 

V.  Tolman,  8  Nat.  Corp.  Rep. 

417,  512 

Munday  v.  Clements,  58  Mo.  577, 

447,  635 
Mundy    v.    Whitmore,    15    Neb. 

647,  114 

Munn  V.  Baldwin,  6  Mass.  316,       555 
V.  Commission  Co.,  15  Jolins. 

(N.  Y.)    44,  303 

V.  McDonald,  10  Watts  270,     359 

Munro  v.  King,  3  Colo.  238,  310 

Munroe  v.  Hass,  105  Ga.  468,  44 

Munson     v.     Cheeseborough,     6 

Blackf.   (Ind.)   17,  233,  270 

Muorhead  v.  Kirkpatrick,  21  Pa. 

St.  237,  222 

Murdock  v.  Arndt,  1  Pin.  (Wis.) 

70,  307 

Murphy  v.  Arkansas  &  L.  Ld.  & 
Improvement  Co.,  97  Feci-  723,  627 
V.  Barnard,  162  Mass  72,  472 

V.  Citizens'  Savings  Bank,  22 
Ky.  L.  Rep.  1672, 

528,  537,  544,  573 
V.  Gumaer,  12  Colo.  App.  472,  246 
V.  Gumaer,  18  Colo.  App.  183,  194 
V,  Hubble,  2  Duv.  (Ky.)  247,  315 
V.  Levy,  50  N.  Y.  Supp.  682, 

574,  576 
V.  Lucas,  58  Ind.  360,  219 

V.  Metropolitan  Nat.  Bank, 
191  Mass.  159,  77  N.  E. 
693,  100 

V.  Robbins,  17  Ind.  422,  338 

V.  Rogers,  151  Mass.  118,  296 
V.  Weems,  69  Ga.  687,  293 

Murray  v.   Gibson,   2  La.   Ann. 
311,  699 

V.  Graham,  29  Iowa  520,  3,  148 
V.  Judah,  6  Cow.  (N.  Y.)  490,  523 
V.  Jones,  50  Ga.  109,  125 

V.  Lardner,  2  Wall.  110,  122, 

394,  395,  401,  476 
V.  Miller,  1  Upp.  Can.  Q.  B. 

353,  682 

V.  Peterson,  6  Wash.  418,  142 

V.  Reed,  17  Wash.  1,         472,  688 
Murrell  v.  Jones,  40  Miss.  565, 

21,  23,  121 


Murto  V.  Lemon  (Colo.  App.),  75 

Pac.  160,  402 

Musselman  v.  Hays,  28  Ind.  App. 
360,  236 

V.  McElhenny,  23  Ind.  4 

240,  463,  659,  664 
Musson  V.  Lake,  4  How.  262, 

513,  532 
Muth  V.  St.  Louis  Trust  Co.,  88 

Mo.  App.  596,  581 

Mutual  Nat.  Bank  v.  Rotge,  28 

La.  Ann.  933,  443,  536,  581 

Muzzy  V.  Knight,  8  Kan.  456,         367 
M.   V.    Monarch   &  Co.   v.  First 
Nat.    Bank,    20    Ky.    L.    Rep. 
1223,  681 

M.  V.  Monarch  Co.  v.  Farmers* 
D.  Bank,  20  Ky.  L.  Rep.  1275, 

553,  554,  565 

Myer  v.  Hettinger,  94  Fed.  370,     260 

V.  Hibscher,  47  N.  Y.  265,         514 

v.  Reedy,  115  N.  C.  538,  681 

V.  Withman,  41  Mo.  App.  397,  560 

Myers  v.  Hazard,  50  Fed.  156,       365 

V.  Kessler,  142  Fed.  730,  439 

V.  Tumer,  17  111.  179,  262 

V.  Welles,  5  Hill  (N.  Y.)  463,  688 

Mynders  v.  Snook,  1  Lans.   (N. 

Y.)  488,  634 


N 


Nabb  V.  Koontz,  17  Md.  283,  61 

Nailor  v.  Daniel,  5  Houst.  (Del.) 

455,  270,  304 

Nance  v.   Gray    (Ala.  1905),  38 

So.  916,  137 

v.  Winship,  94  Ga.  649,  681 

Nash  V.  Brown,  165  Mass.  384,       517 

V.  Lull,  102  Mass.  60,  262 

Nashua  Fire  Ins.  Co.  v.  Moore, 

55  N.  H.  48,  95,  671 

Nashville  Trust  Co.  v.  Smythe, 

94  Tenn.  514,  365 

Nassau  Bank  v.  Broadway  Bank, 

54  Barb.   (N.  Y.)   236,  124 

Nassq.u  Trust  Co.  v.  Matherson, 

100  N.  Y.  Supp.  55,  481 

Natchez,    City    of,    v.    Trimble, 

Walker    (Miss.)   376,  288 

National   Bank  v.  Bradley,   117 
N.  C.  526,  562,  566,  570 

V.  Carlton,  96  Ga.  469,  47 

V.  Dakin,  54  Kan.  656,  380 

V.  Lutterloh,  95  N.  C.  495,  515 
V.  Mackey,  5  Kan.  App.  437,  116 
V.  Matthews,  98  U.  S.  621,  88 

V.  Texas,    20   Wall.    (U.    S.) 

72,  426 


I 


A 


TABLE   OF    CASES. 


CI 


[References  are  to  Sections.'] 


National  Bank  v.  Weil,  141  Pa. 
457,  '583 

V.  White,  30  Fed.  412,       439,  440 
V.  Whitney,  103  U.  S.  99,  88 

National    Bank    of    Auburn    v. 

Lewis,  75  N.  Y.  516,     302,  615,  623 
National  Bank  of  Bristol  v.  Bal- 
timore, 99  Md.  661,  414 
National  Bank  of  Commerce  v. 
American  Exchange  Bank,  151 
Mo.  320,  583 
V.  Chicago,  44  Minn.  224,  414 
V.  Guthrie,  11  S.  Dak.  517,       388 
V.  Kenney,  98  Tex.  293, 

247,  356,  447 
V.  National  Mechanics'  Bank- 
ing  Assoc,    of   N.   Y.,   55 
N.   Y.   211,  642 

V.  Pick  (N.  Dak.),  99  N.  W. 

63,  465 

V.  Teeney  (S.  Dak.),  80  N.  W. 

186,  602 

V.  Town  of  Granada,  54  Fed. 

100,  488 

National  Bank  of  Fayette  Co.  v. 

Dushane,  96  Pa.  St.  340,     306,  615 
National    Bank    of    Madison    v. 

Davis,  6  Biss.   (U.  S.)   100,        615 

National   Bank   of    Newbury    v. 

Sayer,   73   N.   H.   595,   64  Atl. 

189,  194 

National  Bank  of  North  Amer- 

'    ica  V.   White,    19    N.   Y.   App. 

Div.  390,  270 

National    Bank    of    Poultney    v. 

Lewis,  50  Vt.  622,  540 

National  Bank  of  Rahway  v. 
Brewster,  49  N.  J.  L.  231, 

30,  40,  44 
National    Bank    of    Republic    v. 
Delano,  185  Mass.  425,  70  N. 
E.  444,  40 

V.  Young,  41  N.  J.  Eq.  531, 

85,  270,  476,  487 
National  Bank  of  Rising  Sun  v. 
Brush,  10  Biss.   (U.  S.)  188, 

198,  281 
National  Bank  of  St.  Joseph  v. 

Dakin,  54  Kan.  656,  362,  390 

National  Bank  of  Washington  v. 

Texas,  20  Wall.  72,  476 

National   Bank  of  Winterset  v. 

Eyre,  52  Iowa  114,  305 

National  Citizens'  Bank  v.  Top- 

litz,  178  N.  Y.  464,  222 

National  Exch.  Bank  v.  Cumber- 
land Lumber  Co.,  100  Tenn. 
479,  59 

V.  Venemans,  4  N.  J.  St.  R. 

363,  26,  28 


National  Exch.  Bank  v.  White, 

30  Fed.  412,  22 

National  Granite  Bank  v.  Tyn- 

dale,  176  Mass.  547,  40 

National  Hudson  River  Bank  v. 
Kinderhook  &  H.  R.  Co.,  45  N. 
Y.  Supp.  588,  517,  534 

V.  Moffett,  162  N.  Y.  623,  517 

V.  Reynolds,  57  Hun.  307,        573 
National  Life  &  Trust  Co.  v.  Gif- 

ford,  90  Minn.  358,  402 

National  Loan  &  Inv.  Co.  v. 
Rockland  County,  36  C.  C.  A. 
370,  186 

National  Newark  Bkg.  Co.  v. 
Delaware  L.  &  W.  R.  Co.,  70 
N.  J.  L.  774,  414 

National  Park  Bank  v.  German- 
American  Mut.  W.  &  S.  Co., 
21  Jones  &  S.   (N.  Y.)   367,  80 

V.  German-American  Security 

Co.,  116  N.  Y.  281,  443 

National    Park    Bank    of    New 

York  V.  Remsen,  43  Fed.  226,     483 
National  Pemberton  Bank  v.  Por- 
ter, 125  Mass.  333,  79 
National  Revere  Bank  v.  Morse, 
163  Mass.  383,                                 246 
V.  National  Bank  of  the  Re- 
public,   66    N.    Y.    Supp. 
662,                                           583 
National   Salt  Co.  v.  Ingraham, 

143  Fed.  805,  459 

National  Sav.  Bank  v.  Cable,  73 

Conn.  568,  183 

National    Shoe    &    L.    Bank    v. 

Gooding,  87  Me.  337,  570 

National  Spraker  Bank  v.  Tread- 
well  Co.,  80  Hun  (N.  Y.)  363,       85 
National  State  Bank  v.  Rising, 

4  Hun  (N.  Y.)  793,  150 

National  State  Capitol  Bank  v. 

Noyes,  62  N.  H.  35,  359 

National  Union  Bank  v.  Hollings- 
worth  (N.  C.  1906),  55  S.  E. 
809,  80 

V.  Landon,  66  Barb.   (N.  Y.) 

189  93 

V.  Todd,'  132  Pa.  St.  312,  353 

Neal  V.  First  Nat.  Bank  (Ind. 
App.  1901),  60  N.  E.  164,  673 

V.  Parker   (Tenn.)   62  S.  W. 

170  98 

V.  Wood,  23  Ind.  523,  538 

Neale  v.  Head,  133  Cal.  42, 

446,  447 

Nebeker  v.  Cutsinger,  48  Ind. 
436,  28 


CIL 


TABLE  OF    CASES. 


IReferejices  are  to  Sections.l 


Nebraska  Mut.  Bond  Assn.  v. 
Klee  (Neb.  1903),  97  N.  W. 
476,  478,  105,  111 

Nebraska  National  Bank  v.  Lo- 
gan, 35  Neb.  182,  574,  585 
V.  Pennock,  55  Neb.  188,  328 
Needles  v.  Shaffer,  60  Iowa  65,      161 
Neel  V.  Harding,  2  Mete.   (Ky.) 

247,  3 

Neely  v.  Lewis,  10  111.  31,  312 

Neff  V.  Horner,  63  Pa.  St.  327,       138 
Neilsville    Bank    v.    Tuthill,    4 

Dak.  295,  30  N.  W.  154,  671 

Nelson  v.  Castle,  105  Mo.  App. 
187,  582 

V.  Eaton,  26  N.  Y.  410,  670 

V.  First    National    Bank,    69 

Fed.   798,  527,  533,  552 

V.  Flagg,  18  Wash.  39,  340 

V.  Fotteral,  7  Leigh.  179,  534 

V.  Grondahl    (N.    Dak.),   100 

N.  W.  1093,  515 

V.  Lovejoy,  14  Ala.  568,     194,  322 

V.  Miller,  52  Miss.  410,  55 

V.  White,  61  Ind.  139,  341 

Nephi   First   National   Bank   v. 

Foote,  12  Utah  157,  183 

Nethercutt  v.  Hopkins,  38  Wash. 

577,  116 

Nettles  V.   Huggins,   8  Rich.   L. 

(S.  C.)  273,  626 

Neuhoff  V.  O'Reilly,  93  Mo.  164,      95 
Nevada  v.  Cleaveland,  6  Nev. 

181,  24 

Neverman     v.     Bank     of     Cass 

County,  14  Okla.  417,  320 

Nevill  V.  Hancock,  15  Ark.  511,        1 
Nevins   v.   De   Grand,    15   Mass. 

436,  143 

New  V.  Walker,  108  Ind.  365, 

262,  292 

New  Bedford   Savings  Bank  v. 

Union  Mill  Co.,  128  Mass.  27,     390 
Newbold  v.  Boraef,   155  Pa.  St. 

227,  270,  354,  521,  554,  564 

New  Central   Coal  Co.  v.  Cum- 

ings,  66  Hun  (N.  Y.)  626,  386 

Newcomb  v.  Gibson,   127   Mass. 

396,  354 

Newell  V.   First  Nat.   Bank,    13 

Ky.  Law  Rep.  775,  23 

V.  Gregg,  51  Barb.  263,      419,  468 
V.  Salmons,  32  Barb.  (N.  Y.) 

647,  640 

New  England   Fire   Ins.   Co.   v. 

Haynes.  71  Vt.  306,  45  Atl.  221,     652 
New  England  Trust  Co.  v.  New 

York  Belting  &  Pack.  Co.,  166 

Mass.  42,  447 


Newgrass   v.    City   of   New   Or- 
leans, 42  La.  Ann.  163,  412 
New    Haven    Mfg.    Co.   v.    New 
Haven   Pulp   &   Bond   Co.,   76 
Conn.    126,            240,  260,  402,  403 
Newkirk  v.  Neild,  19  Ind.  194,      341 
Newman    v.    Kaufman,    28    La. 
Ann.  865,                         •        504,  584 
V.  King,  54  Ohio  St.  273,  152 
V.  Williams,  29  Miss.  212,        304 
New  Orleans  Canal  &  Bkg.  Co. 
V.   Montgomery,   95   U.   S.   16, 
24  L.  Ed.  346,  402 
Newport  Nat.  Bank  v.  Tweed,  4 

Ploust.    (Del.)    225,  302 

Newsom  v.  Russell,  77  N.  C.  277,  130 
Newton  v.  Wilson,  31  Ark.  484,     292 
V.  Woodley,  55  S.  C.  132,  302 

New  York  &  Alabama  Con.  Co. 
V.  Selma  Sav.  Bank,  51  Ala. 
305,  560 

New  York  Belting  &  P.  Co.  v. 

Ela,  61  N.  H.  352,  564 

New  York  County  Bank  v.  Mas- 

sey,  24  Sup.  Ct.  199,  243 

New  York  etc.,  v.  Smith,  11  N. 

Y.  Super.  Ct.  362,  241 

New    York    Iron    Mine    v.    Citi- 
zens' Bank,  44  Mich.  344,    '        490 
New  York  Life  Ins.  Co.  v.  Mar- 
tindale    (Kan.   1907),  88  Pac. 
559,  135,  169 

V.  Smucker  (Mo.  App.  1904), 

80  S.  W.  27,  336 

New  York  National  Bank  v. 
Coydendall,  58  Hun  (N.  Y.) 
205,  390 

V.  Crowell,  177  Pa.  313,  475 

New  York  Security  &  Trust  Co. 
V.  City  of  Tacoma,  21  Wash. 
303,  232 

Nexsen  v.  Lyell,  5  Hill  466,  369 

Nezro  v.  Fuller,   24  Wend.    (N. 

Y.)   374,  164 

Niagara   Bank    v.    Roosevelt,    9 

Cow.   (N.  Y.)   409,  612 

Niagara  Co.  Bank  v.  Baker,  15 

Ohio  St.  68,  306 

Niblack  v.  Champeny,  10  S.  D. 
165,  183,  305 

V.  Park   Nat.    Bank,   169   111. 

317,  576 

Nicholls  V.  Webb,  8  Wheat.  326,    511 
Nichols  V.  Alsop,  6. Conn.  477,        208 
V.  Baker,  75  Me.  334,        116,  122 
V.  Blackmore,  27  Tex.  587,       496 
V.  Fearson,  7  Pet.  103,  304 

V.  Gee.  30  Ark.  135,  292 

V.  Goldsmith,  7  Wend.  160,      514 


TABLE    OF    CASES. 


em 


[References  are  to  Sections.'\ 


Nichols  V.  Holt,  9  Gray  202,  685 

V.  Hunton,  45  N.  H.  470,  208 

V.  Levins,  15  Iowa  362,  412 

V.  Parsons,  6  N.  H.  30,  340 

V.  Sober,  38  Mich.  678,        90,  131 
Nichols  &  Shepard  Co.  v.  Soder- 

quist,  77  Minn.  509,  208,  216 

Nicholson  v.  Barnes,  11  Neb.  452,  514 
V.  Combs,  90  Ind.  215,  174 

V.  Gouthit,  2  H.  Bl.  609,  503 

V.  National  Bank,  92  Ky.  251,    11 
V.  Revill,   4   Adol.   &  E.  675, 

172,  679 
Nicker'son   v.   Gilliam,   29    Mo. 
456, 

V.  Ruger,  76  N.  Y.  279, 
Nicklewait  v.  Noel,  69  Iowa  344, 
Nicolay  v.  Pritschie,  40  Mo.  67, 
Nicrosi  v.  Walker,  139  Ala.  369, 
Nielson  v.  Schulkman,  53  Wis. 

638, 
Nightingale  v.  Meginnis,  34  N. 
J.  L.  461, 
V.  Withington,  15  Mass.  272, 

63,  68 
Niles  V.  Porter,  6  Blackf.  (Ind.) 

44, 
Nimocks  v.  Woody,  97  N.  C.  1, 
Nisbet  V.  Lawson,  1  Kelly,  275, 
Nispel  V.  Laparle,  74  111.  306, 
Nixon  V.  English,  3  McCord  (S. 
C.)  549,  436,  635 

V.  Whitely  Co.,  120  Ind.  360       45 
Noble    V.    Anniston    Nat.    Bank 
(Ala.  1906),  41  So.  136,  639 

V.  Carey,  64  Hun  (N.  Y.)  635,    240 
V.  Cornell,  1  Hilt  98,  291 

V.  Daughton,    72    Kan.    336, 

578,  580 
V.  Eades,  51  Me.  34,  687 

V.  Smith,     Quincy      (Mass.) 

(Mass.)  254,  208 

Noel  V.  Clark,  25  Tex.  Civ.  App. 

136,  60  S.  W.  356,  36 

V.  Harding,  2  Mete.  (Ky.)  247,    3 

V.  Kinney,  106  N.  Y.  74,  41 

Nolan  V.  Bank  of  New  York,  67 

Barb.   (N.  Y.)   24,        394,  395,  401 

Noll  V.  Smith,  64  Ind.  511,      171,  661 

Norfolk    Nat.    Bank    v.    Griffin, 

107  N.  C.  173,  270 

v.  Schwenk,  46  Neb.  381,    306,  615 

Norris  v.  Langley,  19  N.  H.  423, 

291,  294 

V.  Scott,  6  Ind.  App.  18,  210 

V.  Ward,  59  N.  H.  487,  525 

North    American     Coal    Co.    v. 

Dyett,  7  Paiger   (N.  Y.)   9,  33 


618 
381 
318 
404 
305 

27 

340 


280 

491 

416 

55 


Northampton  Nat.  Bank  v.  Kid- 
der, 106  N.  Y.  221,  419 

North  Atcheson  Bank  v.  Gay, 
114  Mo.  203,  316,  318 

North  Ave.  Sav.  Bank  v.  Hays, 
188  Mass.  135,  680 

North  Bank  v.  Kyle,  7  How. 
(Miss.)    360,  593 

North  Bridgewater  Bank  v. 
Copeland,  7  Allen  (Mass.) 
139,  292,  302,  303 

North  Carolina  Corp.  Commis- 
sioners V.  Merchants  &  Farm- 
ers' Bank,  137  N.  C.  697,  688 

Northern  Liberty  Market  v. 
Keily,  113  U.  S.  199,  195,  688 

Northern  Liberty  Market  Co.  v. 
Steubner,  4  Mackey  (D.  C.) 
301,  195 

Northern  Nat.  Bank  v.  Arnold, 
187  Pa.  356,  298,  439 

Northern  Pacific  Ry.  Co.  v. 
Holmes,  88  Minn.  389,  195 

Northern  Trust  Co.  v.  Hiltgen, 
62  Minn.  311,  361 

North  River  Bank  v.  Aymer,  3 
Hill   (N.  Y.)    262,  75 

Northrup  v.  Cheney,  50  N.  Y. 
Supp.  389,  552 

V.    Minturn,    13    Johns.     (N. 

Y.)    35,  288 

North  Trust  Co.  v.  Hiltgen,  62 
Minn.  361,  592 

Northwestern  Coal  Co.  v.  Bow- 
man, 69  Iowa  150,  555,  569, 
574,  576 

Northwestern  Creamery  Co.  v. 
Lanning,  83  Minn.  19,  185 

Northwestern  Iron  &  Metal  Co. 
V.  National  Bank,  70  111.  App. 
245,  574,  576 

Norton  v.  Foster,  12  Kan.  44, 

635,  636 
v.  Pickens,  21  La.  Ann.  575, 

230,  456 
V.  Waite,  20  Me.  175,  241 

Norton  &  Macauley  v.  Pickens, 
21  La.  Ann.  575,  289 

Norwalk  Bank  v.  Adams  Ex- 
press Co.,  4  Blatchf.  (U.  S.) 
345,  154 

Norwood  V.  Pettis,  10  La.  Ann. 
259,  594 

Noteboom  v.  Watkins,  103  Iowa 
580,  245 

Notes  to  Duchess  of  Kingston's 
Case,  3  Smith's  Lead.  Cas. 
729,  343 


CIV 


TABLE   OF    CASES. 


[References  are  to  Sections."] 


Nott  V.  Thompson,  35  S.  C.  461, 

14  S.  E.  940,  59,  646 

Novel  V.  Hittle,  23  Ind.  346,  503 
Nowack  V.  Lehmann,  102  N.  W. 

992,  198,  231 

Nowak  V.  Excelsior  Stone   Co., 

78   111.   307,  199,  237,  272 

Noyes  v.  Gilman,  65  Me.  589,  186 

V.  Landon,  59  Vt.  569,      302,  351 
Nutter  V.  Stover,  48  Me.  169, 

246,  288,  380,  383 
Nye  V.  Chace,  138  Mass.  379,  31 

N.  E.  736,  653 
V.  Moseley,  6  Barn.  &  Cr.  133, 

300 


O 


Oakland  Cemetery  Assn.  v.  La- 
kins   (Iowa  1904),  101  N.  W. 

778,  312 

Oakley  v.  Carr,  66  Neb.  751,   567,  568 
Oates  V.  Montgomery  Bank,  100 

U.  S.  239,  465,  627 

V.  National  Bank,  100  U.   S. 

247,  359,  476 

Oberle   v.    Schmidt,    86   Pa.    St. 

221,  406 

O'Brien    v.    McDonald,    78    Hun 

(N.  Y.)    420,  322 

O'Bryne  v.  City  of  Savannah,  41 

Ga.  331,  293 

O'Callaghan  v.  Sawyer,  5  Johns. 

(N.  Y.)   118,  419 

Ocean    Nat.   Bank   v.   Williams, 

102  Mass.  141.  511 

Ockington  v.  Law,  66  Me.  551,     339 
O'Connor    v.    Mechanics'    Bank, 

124  N.  Y.  324,  581 

O'Daily  v.  Morris,  31  Ind.  Ill,         30 
Odell    V.    Greenly,    4    Duer    (N. 

Y.)  358,  303,  305 

Oden  V.  Andre,  4  Bosw.  583,  359 

V.  Blydenburgh,   1   Hilt.    (N. 

Y.)  182,  61 

V.  County  of  Daviess,  102  U. 

S.  634,  87 

v.  Marchand,  29  La.  Ann.  61,   130 
Odiorne    v.    Howard,    10    N.    H. 

343,  419 

V.  Sargent,  6  N.  H.  401,  333 

Offut  V.  Stout,  4  J.  J.  Marsh.  332,     510 
Ogilvie    V.    Mortgage    Co.,   App. 

Cas.  257,  677 

Ohio  Thresher  &  Engine  Co.  v. 

Hensel,  9  Ind.  App.  326,  257 

Oishel  V.   Craven,  11  Misc.    (N. 

Y.)  139,  236 

O'Kane  v.  Riser,  25  Ind.  168,       257 


O'Keefe  v.  Frankfort  First  Nat. 

Bank,  49  Kan.  347,  402 

V.  Handy,  31  La.  Ann.  832,     114 
Olcott  V.  Tioga  Railroad  Co.,  27 

N.  Y.  546,  81 

Oldham  v.  Wallace,  4  Pike  559,    447 
Oldhausen   v.   Lewis,    Fed.   Cas. 

No.  10507,  523 

Old     National     Bank     of    Fort 

Wayne  v.  Marcy  (Ark.),  95  S. 

W.  145,  472,  473 

Olds  V.  Cummings,  31  111.  188,       365 
Olds  Wagon  Works  v.  Bank  of 

Louisville,  10  Ky.  L.  Rep.  235, 

385,  392 
Oliphant  v.   Markham,   79    Tex. 

543,  ■  109 

Oliver  v.  Andry,  7  La.  496,  104 

Olmstead   v.   Winsted  Bank,   32 

Conn.  278,  394,  398 

Olpherts  v.  Kelly,  61  N.  Y.  Supp. 

1107,  693 

Omaha       National       Bank      v. 

Walker,  5  Fed.  399,  212,  447 

O'Malley  v.  Ruddy,  79  Wis.  147, 

30,  41 
O'Neal  V.  Bacon,  1  Houst.  (Del.) 

215,  363 

Oneida  Bank  v.  Ontario  Bank, 

21  N.  Y.  490,  292 

O'Neill    V.    Meighan,    66    N.    Y. 

Supp.   313,  506,  523 

Onondaga    County    Bank   v.    De 

Duy,  17  Wend.  (N.  Y.)  47,  89 

Ontario    Bank    v.    Worthington, 

12  Wend.  (N.  Y.)  593,  242 

Oppenheimer  v.  Kruckman    (N. 

Y.  App.   Div.   1903),   84  N.  Y. 

Supp.  129,  320 

Orear  v.  McSinald,  9  Gill  350,        523 
Oregon  National  Bank  v.  Gard- 
ner, 13  Wash.  154,  128 
Orme  v.  Young,  1  Holt's  N.  P. 

87,  341 

Ormsbee  v.  Howe,  54  Vt.  182,        477 
V.  Kidder,  48  Vt.  361,    92,  95,  418 
O'Rourke  v.  Hanchett,  35  N.  Y. 

Supp.  328,  525 

v.  Mahl,  109  Fed.  276,  119 

Orr  V.  Maginnis,  7  East  359, 

523,  527,  545,  570 
V.  South  Amboy  Terra  Cotta 
Co.,  113   App.   Div.   103, 

473,  485 
V.  Sparkman,  120  Ala.  9, 

28,  303,  464 
Orrick  v.  Dunham,  79  Mo.  174,  679 
Ort  v.   Fov/ler,   31  Kan.    478,    2 

Pac.   589,  24,  28,   641 


TABLE   OF    CASES. 


CT 


[References  are  to  Sections.1 


Osborn   v.   Kistler,   35   Ohio   St. 
99,  463 

V.  Payne,  111  Mo.  App.  29,     302 
V.  Robbins,  36  N.  Y.  365, 

108,  109,  114,  115 
V.  Taylor,  58  Conn.  439,    310,  320 
Osborne  v.  Brice,  23  Fed.  171, 

1,  259,  601 
V.  McQueen,  67  Wis.  392,  29 

N.  W.  636,  646 

Osgood  V.  Artt,  17  Fed.  575,  478 

Oster  V.  Mickley,  35  Minn.  245,       365 
Ostrow  V.  Tarver,  28  S.  W.  701,    195 
Oswald  V.  Moran,  8  N.  D.  Ill,      288 
Oswego     County     Sav.     Bk.     v. 
Town  of  Genoa,  72  N.  Y.  Supp. 
786,  441 

Otis  V.  Barton,  10  N.  H.  433,  502 

Otto  V.  Belden,  28  La.  Ann.  302,    502 
V.  Halff.  89  Tex.  384,  168 

V.  Surgee,  14  Wis.  571,  303 

Ot.well  V.  Cock,  9  B.  Mon.  (Ky.) 

357,  606 

Outhwite  V.  Porter,  13  Mich.  533,  241 
Overend,   Gurney   &  Co.,   In  re, 

6  L.  R.  Eq.  344,  282 

Overhalt  v.  The  Bank,  1  Norris 

(Pa.)   490,  615 

Overman  v.  Hoboken  City  Bank, 

30  N.  J.  L.  61,  8 

Overstreet    v.    Dunlap,    56    111. 

App.  486,  105 

Overton   v.    Matthews,    35    Ark. 

146,  135,  136,  145 

Outhwaite  v.  Luntley,  4  Camp. 

179,  135,  136,  152,  154 

Owen  V.  Hall,  70  Md.  97,  170 

V.  Van  Uster,  10  C.  B.  318,        500 

Owens    V.    Dickerson,   1    Cr.    & 

Ph.  54,  33 

V.  Mynatt,  1  Heisk.    (Tenn.) 

675,  111 

Owings  V.  Arnot,  33  Mo.  406,        152 
V.  Grimes,  5  Litt.  (Ky.)    331,   303 
Owsley    V.     Beasley,     4     Bibb 

(Ky.)    277,  208 

V.  Phillips.  78  Ky.  517,  74 

Oxford    Iron    Co.    v.    Quinchett, 

44  Ala.  487,  293 

V.  Spradley,  46  Ala.  98,  293 

Oxford  State  Bank  v.  Holscher, 

115  Iowa  196,  702 

Oxman  v.  Garwood,  80  111.  App. 

658,  502 

Oxnard  v.  Varnum,  111  Pa.  193, 

525,  573 

Oyster  v.  Short,  177  Pa.  St.  589,    626 


Pace  v.  Gilbert  School  (Mo. 
App.),  93  S.  W.  1124,  698 

v.  Martin,  2  Duv.  (Ky.)  522,    297 
Packer  v.  Taylor,  12  Pa.  Co.  Ct. 

521,  57 

Packwood  v.  Clark,  2  Sawy.  (U. 

S.)  13,  208 

v.  Gridley,  39  111.  388,  603 

Page  v.  Danaher,  43  Wis.  221,        168 

Page  Woven  Wire  Fence  Co.  v. 

Pool,  133  Mich.  323,  698 

Pahlman  v.  Taylor,  75  111.  629,      164 
Paige  v.  Bradfoot,  100  Ala.  613,    402 
v.  Cagwin,    7    Hill    (N.    Y.) 

361,  657 

V.  Chapman,  58  N.  H.  333,        119 
Paine  v.  (Central  Vermont  R.  R. 

Co.,  118  U.  S.  152,  422 

Painter  v.  Weatherford,  1  Iowa 

97,  43 

Palm   V.   Watt,  7   Hun    (N.  Y.) 

317,  109-  673 

Palmer  v.  Call,  2  McCrary  (U. 
S.)   522,  303,  305 

V.  Carpenter,  53  Neb.  394,         305 
V.  Hawes,  73  Wis.  46,  126 

V.  Marshall.   60  111.  289,  23 

V.  Poor,  121  Ind.  135,    13,  111,  119 
V.  Sargent,  5  Neb.  223,  171 

V.  Whitney,  21  Ind.  58,  570 

Palo  Alto  Stock  Farm  v. 
Brooker  (Iowa  1906),  108  N. 
W.  307,  25,  116 

Pana  v.  Bowler,  107  U.  S.  529,      402 
Pancoast  v.  Ruffin,  1  Ham.  (Ohio) 

381,  449,  594 

Pankey  v.  Mitchell,  1  111.  383,        135 
Pardee  v.  Fish,  60  N.  Y.  265, 

502,  507 
Pardoe  v.  State  Nat.  Bank,  106 

Iowa  345,  302,  305 

Parish  v.  Stone,  31  Mass.  198. 

186,  193,  198,  201.  208,  214 
Park  Bank  v.  Watson,  42  N.  Y. 

490,  380,  441 

Parker  v.  Bond,  121  Ala.  529,  684 
V.  Burgess,  5  R.  I.  277,  89.  131 
V.  Gilmore,  10  Kan.  App.  527,  240 
V.  Kellogg,  158  Mass.  90,  515 

V.  Kendall,  3  Vt.  540,  593 

V.  McCrea,  7  U.  C.  C.  P.  124,    682 
V.  McDowell,  95  N.  C.  219, 

387,  388 
V.  McLean,  134  N.  Y.  255,  392 
V.  Morton,  29  Ind.  89,  184,  200 
V.  Pitts,  73  Ind.  597,  29 


CVl 


TABLE    OF    CASES. 


[References  are  to  Sectionh.'i 


Parker  v.  Reddick,  65  Miss.  249, 

574,  585 
V.  Stroud,  98  N.  Y.  379,  502,  507 
V.  Sutton,  103  N.  C.  191,  193, 

387,  388 
Parkersburg    First    Nat.    Bank 

V.  Johns,  22  W.  Va.  520,  28 

Parkinson  v.  Boddiker,  10  Colo. 

503,  449 

Parks  V.   Hughes,  19  Ind.  App. 
266,  524 

V.  Smith,  155  Mass.  26,  525 

V.  Zeek,  53  Ind.  221,  591 

Parlin  &  Orendorff  Co.  v.  Hud- 
son, 198  111.  389,  680 
Parmelee  v.  Williams,  72  Ga.  42,   340 
Parr  v.  Eliason,  1  East  92,  304 
V.  Erickson,  115  Ga.  873, 

238,  292,  442 

V.  Jewell,  16  C.  B.  684,  282 

Parshley  v.  Heath,  69  Me.  90,       524 

Parsons  v.   Alexander,   5   El.  & 

Bl.  263,  291 

V.  Dickinson,  23  Mich.  56,        525 

V.  Gaylord,  3  Johns.   (N.  Y.) 

463,  5 

V.  Jones,  16  Up.  Can.  Q.  B. 

274,  183 

V.  Parsons,  17  Colo.  App.  154,   238 
V.  Randolph,     21     Mo.     App. 

553,  288 

Parston  v.  Petit,  1  Camp.  82,        173 

Partee  v.  Silliman,  44  Miss.  272,     60 

Partridge  v.  Davis,  20  Vt.  499,      460 

V.  Williams,  72  Ga.  807, 

359,  375,  376 

Passumpsic  Bank  v.  Goss,  31  Vt. 

315,  31G 

Pastene  v.  Pardein,  135  Cal.  431,    183 
Pate  V.  Gray,   Hempst.    (U.  S.) 

155,  630 

Patience  v.  Townley,  2  Smith's 

Rep.  224,  572 

Paton  V.  Lund,  114  Iowa  201,  97 

v.  Winter,  1  Taunt.  420, 

135,  154 

Patrick  v.  Pettv.  83  Ala.  420,        336 

V.  Smith,  165  Pa.  St.  526,  45 

Patten  v.  Gleason,  106  Mass.  439,  307 

V.  Pearson.  57  Me.  428,  255 

Patterson  v.  Cave,  61  Mo.  439,         68 

V.  Higgins,  58  111.  App.  268,     142 

V.  McNeely,  16  Ohio  St.  348,    168 

V.  Wright,  64  Wis.  289. 

441,  472,  627 
Pattillo  V.  Alexander,  96  Ga.  60, 

528,  564 
Patton  V.  Bank  of  Lafayette,  124 
Ga.  965,  509,  533,  542 


Patton  V.  Carr,  117  N.  C.  176,        274 
Paul  V.  Berry,  78  111.  158,  74 

Pauly  V.  Wilson,  57  Fed.  548,        683 
Pavey  v.   Stauffer,  45  La.  Ann. 

353,         246,  404,  428,  440,  478,  627 
Pawcatuck  National  Bank  v.  Bar- 
ber (R.  I.),  46  Atl.  1095,  517 
Payne  v.  Eden,  3  Caines  (N.  Y.) 
91 Q  288 
V.  Ladue,  1  Hill  (N.  Y.)  116,   208 
V.  Raubinek,  82  Iowa  587, 

288,  296 
V,  Trexevant,  2  Bay  23,  303 

V.  Waterston,    16    La.    Ann. 

239  184 

V.  Weibie,  30  111.  166,  341 

V.  Zell,  98  Va.  294,     238,  241,  246 
Peabody  v.  Citizens'  State  Bank 
of  St.  Charles  (Minn.),  108  N. 
W.    272,  526,  582 

V.  King,    12    Johns.    (N.  Y.) 

426,  338 

V.  Munson,  211  111.  324,     185,  240 
Peabody  Ins.  Co.  v.  Wilson,  29 
W.  Va.  528, 

514,  516,  532,  543,  553,  566 
Peacock  v.  Monk,  2  Ves.  Sr.  190,     33 
V.  Rhodes,  2  Doug.  633, 

394,  404 

Peake  v.  La  Baw,  21  N.  J.  Eq. 

269,  44 

Peale  v.  Addicks,  174  Pa.  St.  549,   282 

Pearce  v.  Dill,  149  Ind.  136,  288 

V.  Langfit,  101  Pa.  St.  507,        556 

V.  Rice,  142  U.  S.  28,  297 

Pearce    &    Miller    Eng.    Co.    v. 

Brouer,  10  Misc.  502,  359,  376 

Pearl  v.  Wells,  6  Wend.  (N.  Y.) 

291,  338 

Pearson  v.  Bailey,  23  Ala.  537,  303 
V.  Cummings,  28  Iowa  344,  447 
V.  Pearson,  7  Johns.  (N.  Y.) 

26,  198 

Pease  v.  Cornish,  19  Me.  191,  503 
v.  Horst,  10  Barn.  &  Cr.  122,  274 
V.  McClelland,    2   Bond    (U. 

S.)  42,  238 

Peaslee  v.  Robbins,  44  Mass.   (3 

Mete.)   164,  2,  72 

Peasley  v.  Boatwright,  2  Leigh. 

(Va.)  195,  183 

Peck  V.  Bligh,  37  111.  317,  449 

Pecker  v.  Sawyer,  24  Vt.  459,       635 
Peckham  v.  Hendren,  76  Ind.  47, 

110,  114 
Peddie  v.  Donnelly,  1  Colo.  421, 

423,  310 

Peden   v.  Moore,   1   Stew.   &  P. 
(Ala.)  71,  208 


TABLE   OF    CASES. 


CYll 


[References  are  to  Sections.'] 


Pegrau  v.  American  Alkali  Co., 

122   Fed.  1000,  292 

Pelton  V.  Lumber  Co.,  113  Cal. 
21,  163.  164 

V.  Spider    Lake    Sawmill    & 
Lumber    Co.,    117    Wis. 
569,  94  N.  W.  293,      474,  487 
V.  Prescott,  13  Iowa  567,  150 

Pence  v.  Arbuckle,  22  Minn.  417,   380 
Pendar  v.  Kelley,  48  Vt.  27,  292 

Pendleton  v.  Fay,  2  Paige  202,      483 
V.  Galbreath,  45  Miss.  43,  57 

V.  Insurance  Co.,  5  Fed.  238,    505 
V.  Smissart,  1  Colo.  App.  508,   270 
Penn    Bank    v.    Farmers'    Nat. 

Bank,  130  Pa.  St.  209,  606 

Pennsylvania  Safe  Deposit  &  T. 
Co.  V.  Kennedy,  175   Pa.  164, 

270,  342 

Pennsylvania   Trust   Co.   v.   Mc- 

Elroy,  112  Fed.  509,  97 

Penny  v.  Graves,  12  111.  287,         322 
People,  V.  Bank  of  North.  Amer- 
ica, 75  N.  Y.  547,  144,  673 
V.  Bradner,  108  N.  Y.  659,  15 
N.  E.  445,  15  Cent.  Rep. 
474,  402 
V.  Call,    1    Denio     (N.    Y.) 

120,  172 

V.  Cromwell,  102  N.  Y.  477,     585 
V.  Grant  (Mich.),  11  Det.  L. 

News   474,  680 

V.  Hall,  8  Colo.  485,  232 

V.  Hayes,    70    Hun    (N.    Y.) 

Ill,  300 

V.  Johnson,  100  111.  537,  232 

V.  St.  Nicholas  Bank,  77  Hun 

157,  581 

V.  Supervisors    of    Eldorado, 

11  Cal.  171,  87 

People's  Bank  v.  Brooke,  31  Md. 

7,  514,  532,   542 

V.  Keech,  26  Md.  521,  561 

V.  Nat.  Bank.  101  U.  S.  181.      662 

V.  Pearsons.  30  Vt.  711,  3 

People's  Bank  of  New  Orleans 

V.  Tredeau.  38  La.  Ann.  898,     260 
People's   Bldg.,   etc.,   v.    Palmer 

(Neb.),  89  N.  W.  316,  302 

PeoDle's  Bldg.,  etc.,  Co.  v.  Pick- 

ard   (Neb.),  96  N.  W.  337,  302 

People's  Nat.  Bank  v.  Clayton, 
66  Vt.  541,  246 

V.  Dibrell,  91  Tenn.  301, 

525.   551,  573 
V.  Lutterloh,  95  N.  C.  495. 

498.   528,   545 
People's   Sav.   Bank  v.  Gifford, 
108  Iowa  277,  296 


Peoria  v.  Neill,  6  Peck  (111.)  269, 

237 

Peoria  R.  Co.  v.  Thompson,  103 

111.  187,  85 

Pepoon  V.  Stagg,  1  Nott  &  McC. 

(S.  C.)   102,  161 

Percival-Porter  Co.  v.  Oaks,  106 

N.  W.  626,  214 

Perdew  v.  Tillma,  62  Neb.  865,     694 
Perkins  v.  Anent,  2  Head  110,     389 
V.  Bumford,  3  N.  H.  522,         263 
V.  Chains,  1  N.  H.  254,  119 

V.  Elliott,  23  N.  J.  Eq.  526,         33 
V.  Oilman,    8    Pick.    (Mass.) 

229,  322,  338 

V.  Rowland,  69  Ga.  661,        30,  59 
V.  Trinka,    30   Minn.   241,         109 
Perkins   Windmill   &  A.   Co.   v. 

Tillman.  55  Neb.  652,  142 

Perley  v.  Perley,  144  Mass.  104,   313 
Perot  v.   Cooper,   17   Colo.   80, 

183,   402 

Perring  v.  Hone,  2  Car.  &  P. 
401,  138 

V.  Hone,  4  Bing.  28,  157 

Perris  Irrigation  Dist.  v.  Thomp- 
son, 116  Fed.  832,  476,  488 
Perry   v.   Armstrong,   39   N.    H. 
583,  386 
V.  Connell,  31  S.  W.  685,  222 
V.  Crammond,    1    Wash.    (C. 

C.)    100,  270 

V.  Friend.  57  Ark.  437,  523 

V.  Green,  19  N.  J.  L.  61,         506 
V.  Mays,    2    Bailey    (S.    C.) 

354,  436,    635 

Ferryman  v.  Pope,  94  Ga.  672,     110 
Perry  State  Bank  v.  Elledge,  109 

111.  App.  179,  240 

Persons  v.  Kruger,  60  N.  Y.  Supp. 

1071,  542,  548 

Perth-Amboy  Mut.  L.  H.  &  B. 
Assn.  V.  Chapman.  78  N.  Y. 
558,  439,  476,  488 

Peters  v.  Hobbs.  25  Ark.  67,         521 
V.  Gay,  9  Wash.  383. 

246,  359,   380,  383 

Peterson  v.  Berry,  125  Fed.  902,   302 

Petillo  V.  Hopson,  23  Ark.  196,      208 

Petrie  v.   Clark,  11  Serg.  &  R. 

(Pa.)    377,  242 

V.  Miller,   57    App.   Div.    (N. 

Y.)  17  627 

Pettee  v.  Prout,  3  Gray  (Mass.) 

502,  439,   621,   621 

Pettigrew  v.  Chave,  2  Hilt.  (N. 
Y.)   546.  270 

V.  Dix,  33  Tex.  277,  447,  691 


cvm 


TABLE    OF    CASES. 


[References  are  to  Sections.'] 


Petty   V.    Young,    43    N.    J.    Eq. 

654,  194 

Pettyjohn  v.   Liebscher,   92   Ga. 

149,  213 

Peyton  v.  Compress  Co.,  63  Miss. 

410,  630 

Phelan  v.  Moss,  67  Pa.  St.  59, 

119,  441,  661 
Phelps  V.  Mayers,  126  Cal.  549,     367 
V.  Stocking,  21  Neb.  443, 

510,    564,    566 
V.  Zusching,  34  Tex.  371, 

105,   113 
Philbrick    v.    Dallett,    34    N.   Y. 

Super.  Ct.  370,  242 

Philbrook  v.  Superior  Court,  111 

Cal.  31,  416 

Philler  v.  Jewett  &  Co.,  166  Pa. 
St.  456,  360 

V.      Patterson,    168    Pa.    St. 

468,  270,  271 

Phillip  &  William  Ebling  Brew- 
ing Co.  V.  Reinheimer,  66  N. 
Y.  Supp.  458,  569 

Phillips  V.  Bank  of  Lewiston,  18 
Pa.  St.  (6  Harris)  394,  594 

V.  Dippo,  93  Iowa  35,  573 

V.  Im  Thurm,  18  C.  B.  N.  S. 
694,  L.  R.  1  C.  P.  463, 

24,  641,  673 
V.  Lawrence,    6   Watts   &   S. 

(Pa.)    150,  600 

T.  Runnels,  1  Morris  (Iowa) 

391,  420 

Phipps  V.  Harding,  70  Fed.  468, 

561,  570 
V.  Shegogg,  30  Miss.  241, 

616,  635 

Phoenix  v.  Church,  56  How.  Pr. 

(N.  Y.)  29,  240,  242,  244 

Phoenix    Ins.    Co.    v.    Allen,    7 

Cooley  501,  496 

V.  Fiquet,   7   Johns.    (N.  Y.) 

384,  208 

Phoenix    Iron    Works    v.    Rhea 

(Tenn.    Ch.    App.),    38    S.   W. 

1079,  601,   639 

Pickaway  Co.  Bank  v.  Prather, 

12  Ohio  St.  497,  79,  303 

Pickel  V.  St.  Louis  Chamber  of 

Com.  Assoc,  80  Mo.  65,  195 

Pickens  Tp.  v.  Post,  99  Fed.  659,  476 
Picket  V.  Picket,  6  Ohio  St.  525,  208 
Pickle  V.  Muse,  88  Tenn.  381,  102 
Pier  V.  Heinrichshoffen,  67  Mo. 

163,  522 

Pierce  v.  Indseth,  106  U.  S.  546,    542 

V.  Kibbee,  51  Vt.  559,  472 

V.  Schaden,  55  Cal.  406,  553 


Pierce  v.  Tresch,  40  Ohio  St.  168,  601 
Piercy's  Heir  v.  Piercy,  5  W.  Va. 

199,  172,  176 

Piersol  v.  Grimes,  30  Ind.  129, 

142,  158,  180 

Pierson  v.  Boyd,  2  Duer  (N.  Y.) 

33,  270 

Pike  V.  Street  Moody  &  M.,  226,   337 
V.  Taylor,  49  N.  H.  124,  208 

Pindar  v.  Barlow,  31  Vt.  529,  294 
Piner  v.  Clary,  17  B.  Mon.  645,  527 
Pine  River  Bank  v.  Hodsdon,  46 

N.  H.  114,  671,  672 

Pink   Front   Bankrupt   Store  v. 

G.  A.  Mistrot  &  Co.  (Tex.  Civ. 

App.),  90  S.  W.  75,  583 

Pinney  v.  First  National  Bank, 

68  Kan.  223,  292 

v.  Kimpton,  46  Vt.  80,      353,  359 
Pintard  v.  Davis,  20  N.  J.  L.  205, 

340 

Pioneer  Press  Co.  v.  Cossage,  13 

S.  D.  624,  334 

Pippen  v.  Wesson,  74  N.  C.  437,  56 
Piscataqua  Exchange  Bank  v. 

Carter,  20  N.  H.  246,  502 

Pitcher    v.    Barrows,    17    Pick. 

(Mass.)    361,   363,  92 

Pitts  v.  Congdon,  2  N.  Y.  352,       369 
v.  Foglesong,  37  Ohio  St.  676, 

246,  270,  284,  354 
v.  Holmes,  10  Cush.   (Mass.) 

92,  600 

Pittsburg  Railway  Co.  v.  Lynde, 

55  Ohio  St.  23,  85,  121 

Placer  County  Bank  v.  Freeman, 

126  Cal.  90,  194 

Plank  V.  Johnson,  128  Ind.  424,  288 
Planters'  Bank  v.  Keese,  7  Heisk. 

200,  523 

Planters'  Bank  of  Ft.  Valley  v. 

Houser,  57  Ga.  140,  653 

Planters'  Bank   &  Trust  Co.  v. 

Major,  25  Ky.  Law  Rep.  702,        49 
Planters'  Ins.  Co.  v.  Tunstall,  72 

Ala.  142,  241 

Plato  V.  Reynolds,  27  N.  Y.  586,  493 
Piatt  V.  Beebe,  57  N.  Y.  339,  388 
Plawt  V.  Storey,  131  Ind.  46,  45 

Pleasant  Val.  Dist.  Tp.  v.  Calvin, 

59  Iowa  189,  13  N.  W.  80,         670 
Plets  v.  Johnson,  3  Hill  (N.  Y.) 

112,  630 

Plover    Sav.    Bank    v.    Moodie 

(Iowa),  110  N.  W.  29,  575 

Plumb  V.  Niles,  34  Vt.  230,  324 

Plummer  v.  Bank,  90  Ind.  386,     653 

V.  Lyman,  49  Me.  229,  491 


TABLE   OF    CASES. 


cix 


[References  are  to  8ections.'\ 


Plummer  v.  Smith,  5  N.  H.  553,  288 
Plyler  v.  Elliott,  19  S.  C.  257,  170 
Pocock  V.  Billing,  2  Bing.  269,  658 
Poe  V.  Justice  of  the  Peace,  Dud- 
ley (Ga.)  249,  .  288 
Poess  V.  Twelfth  Ward  Bank,  43 

Misc.  45,  240,  402 

Poindexter   v.    Davis,    67    N.    C. 

112,  293 

Polhemus    v.    Ann    Arbor    Sav. 

Bank,  27  Mich.  44,  238 

Pollacek  v.  Scholl,  51  App.  Div. 

(N.  Y.)   319,  618 

Pollard  V.  Vinton,  105  U.  S.  7,     414 
Pollen  V.  James,  45  Miss.  129,        205 
Pollock  V.   Carolina  Interstate 
Bldg.  &  L.  Assoc,  51  S.  C.  420, 

581 

Poncin  v.  Furth,  15  Wash.  201,     183 
Pond  V.  Agricultural  Works,  50 
Iowa  596,  121 

V.  Home,  65  N.  C.  84,  292 

V.  Kidd   (Ga.  1905),  50  S.  E. 

934,  105 

V.  Lockwood,   8  Ala.   669,         439 
Poock    V.    Association,    71    Ind. 

357,  670 

Pool  V.  Alexander,  26  La.  Ann. 
669,  17 

V.  Anderson,    116    Ind.    88,      524 
Pooley  V.  Harradine,  7  El.  &  Bl. 

430,  340 

Poor's  Exr.  v.  Scott,  24  Ky.  L. 

Rep.  239,  690 

Pope  V.  Hanke,  52  111.  App.  453, 

297,  298 

V.  Havs,  19  Tex.  375,  338 

V.  Linn,  50  Me.  83,  29 

Port  V.  Pulaski  Co.,  49  Fed.  628,   488 

Porter  v.  Andrus,  10  N.  D.  558, 

562,  20.  246,   359,  390 

V.  Doby,  2  Rich.  Eq.   (S.  C.) 

49,  176 

V.  Hardy,  10  N.  D.  551,  96 

V.  Jones,   52   Mo.   399.  288 

V.  Knapp,    6    Lans.    (N.    Y.) 

125,  663 

V.  Pierce,  22  N.  H.  275,  312 

V.  Roseman,    165    Ind.    255,      698 
V.  Thom,  57  N.  Y.  Supp.  479, 

511,  513,  573 
V.  Vaughn,  26  Vt.  624,  325 

V.  Webb,    22    Ky.    Law    Rep. 

917,  342 

V.  White,  39   Md.  613,  89 

Port  Huron  Engine  &  Thresher 
Co.  V.  Sherman,  14  S.  D.  461, 

141,  142,  162 
Portis  V.  Green,  25  Ark.  376,       293 


Portland  Bank  v.  Fox,  19  Me. 

99,  663 

Portsmouth  Sav.  Bank  v.  Wilson 

(D.  C),  22  Wash.  L.  Rep.  817, 

524,  538,  573 

Posey    V.    Denver    Nat.    Bk.,    24 

Colo.  199,  44  Pac.  282,  474 

Post  v.  Abbeville  &  W.  R.   Co., 

99  Ga.  232,  25  S.  E.  405.  474 

V.  Bank,  159  111.  421,  683 

V.  LQsey,  111  Ind.  74,  169 

V.  Tradesman's      Bank,      28 

Conn  420,  280 

Potter  V.  Belden,  105  Mass.  11,     120 

V.  Earnest,  45  Ind.  418,  332 

V.  Green,   6  Allen  442,  679 

V.  New   Wheaton,    20    Wash. 

589,  232 

V.  Sheets,  5  Ind.  App.  506,         41 
V.  Sheets,  5  Ind.  521,         238,  463 
Potter  &  Son  v.  Gracie,  58  Ala. 

303,  300 

Potts  V.  Dublin,  125  N.  C.  413,        307 

V.  Mayer,  74  N.  Y.  594,  246 

V.  Taylor,  140  Pa.  St.  601,         89 

Powe  V.  ipowe,  42  Ala.  113,  333 

Powell    V.    Hogue,    8    B.    Mon. 

(Ky.)   443,  629 

V.  Inman,  52  N.  C.  28,  125 

V.  Smith,  66  N.  C.  401,  293 

V.  Waters,  17  Johns.  (N.  Y.) 

176,  280 

V.  Waters,    8   Cow.    (N.   Y.) 

669,  270,  303,  305,  472 

Power  V.  Hambrick.   25  Ky.   L. 

Rep.  30,         183,  195,  237,  447,  702 

Powers  V.  Ball,  1  Williams  (Vt.) 

662,  119,  238 

V.  Heath,  20  Mo.  319,  449 

V.  Nash,  37  Me.  322,  150 

V.  Nelson,  19  Mo.  190,  240 

Prall  V.  Hinchman,  6  Duer  (N. 

Y.)    351,  270,  472 

Pralon  v.  Aymard,  12  Rob.  486,    439 

Prather    v.    Gammon,    25    Kan. 

379,  680 

v.  Smith,  101  Ga.  283,  302 

v.  Weisiger,  10   Bush    (Ky.) 

117,  394,  616 

V.  Zulauf,  38  Ind.  155,        149,  152 
Pratt  V.  Adams,  7  Paige  715,  304 

V.  Lamson,  128  Mass.  529,        679 
V.  Menkins,  18  Mo.  158,  600 

V.  Short,  53  How.  Prac.    (N. 

Y.)   506,  671 

Prentice  v.  Zane,  Fed.  Cas.  No. 

11383,  242 

Prentice  &  Weissinger  v.  Zane,  2 
Gratt.  (Va.)  262,  246 


ex 


TABLE    OF    CASES. 


[References  are  to  Sections.} 


Prentiss  v.  Graves,  33  Barb.  621, 

319    354 
V.  Strand,  116  Wis.  647,    25o!  489 
Presbrey  v.  Thomas,  1  App.  D. 

C.  171,  525,  560 

Presbury  v.  Michael,  33  Mo.  542,   135 
Presbyterian  Board  of  Pub.  &  S. 
S.   Work   V.   Gilliford    (Ind.), 
38  N.  E.  404,  681 

Prescott  V.  Johnson,  8  Fla.  391,     400 
Prescott  Bank  v.  Caverly,  7  Gray 

(Mass.)    221,  217,  496 

Prescott  Nat.  Bank  v.  Butler,  157 

Mass.  548,  95 

Press  Co.  v.  City  Bank,  58  Fed. 

321,  79 

Preston  v.  Bacon,  4  Conn.  471,      108 
V.  Breedlove,  36  Tex.  96,  432 

V.  Cutler,  64  N.  H.  461,  412 

Prestwich  v.  Marshall,  4  C.  &  P. 
594,  52 

V.  Marshall,  1  Bing.  565,  52 

Price  V.  Edmunds,  10  Barn.  & 
Cr.  578,  341 

V.  Kean,  40  N.  J.  L.  332, 

11,  429,  627 
V.  Neal,  1  W.  Bl.  390,  3  Bur- 
rows, 1354,  99,  101,  641 
V.  Sanders,  60  Ind.  310,  63 
V.  Young,  1  Nott.  &  McC.  (S. 

C.)   438,  519 

V.  Winnebago,   14   Okla.   268, 

116,  240,  402 
Price  County  Bank  v.  McKenzie, 

91  Wis.  658,  281 

Prideaux  v.  Collier,  2  Stark.  57,   492 

V.  Criddle,  L.  R.  4  Q.  B.  455,    576 

Pridgen  v.  Buchanon,  27  Tex.  589,    3 

Prim  V.  Hammel,  134  Ala.  652, 

22,  145,  699 
Prior  V.  Jacocks,  1  Johns.  Cas. 
169,  699 

V.  Lindsay,  3  Bibb.  (Ky.)  76,   183 
Pritchard    v.    Johnson,    60    Ga. 
288  327 

V.  Norton,  106  U.  S.  124,  254 

V.  Sharp,  51  Mich.  432,  108 

V.  Smith,  77  Ga.  463,         135,  529 
Proctor  V.  Baldwin,  82  Ind.  370, 

11,  238,  241,  246,  627 
V.  Cole,    104    Ind.    373, 

591,  608,  630 
V.  Whitcomb,  137  Mass.  303, 

386,  388 
Produce  Bank  v.  Bache,  30  Hun 

(N.  Y.)  351,  281 

Produce  Exchange  Trust  Co.  v. 
Bieberbach,  176  Mass.  577, 

102,  175 


Prosser  v.  Leatherman,  5  Miss. 

(4  How.)  237,  132 

Proul  V.  Dorner,  79  111.  331,  369 

Prouty  V.  Adams,  141  Cal.  304, 

310,  320 
V.  Roberts,      60     Mass.      (6 

Cush.)  19,  133 

V.  Wilson,  123  Mass.  297,  150 

Providence      Machine      Co.      v. 

Browning,  70  S.  C.  148,  681 

Provost  V.   McEnroe,  102  N.  Y. 

650,  298 

Pryor  v.  Wright,  14  Ark.  189,         502 
Puffer  V.  Smith,  57  111.  527,      25,  27 
Pugh  V.  Durfee,  1  Blatchf.    (C. 
C.)  412,  287 

V.  Grant,  86  N.  C.  39,  419 

Pullen  V.   Placer  County  Bank, 
138  Cal.  169,  214,  215 

V.  Ward,  60  Ark.  90,  368 

Pulliam  V.  Owen,  25  Ala.  492,        597 
V.  Taylor,  50  Miss.  251,  691 

V.  Withers,  8  Dana  (Ky.)  98,   149 
Pulsifer  v.  Hotchkiss,  12  Conn. 

234,  208 

Purchase    v.    Mattison,    6    Duer 

(N.  Y.)   587,  241,  284 

Pursell  V.  Allemong  &  Son,  22 

Grat.  739,  576 

Puryear  v.  McGavock,  9  Heisk. 

(Tenn.)  461,  293 

Putman  v.  Schyler,  4  Hun    (N. 

Y.)  166,  134 

Putnam  v.  Sullivan,  4  Mass.  45, 

21,  22,  645 


Q 


Quachita  County  v.  Wolcott,  103 

U.  S.  559,  232 

Quackenbush  v.  Miller,  4  Strob. 

(S.  C.)   235,  635 

Quaintance  v.  Goodrow,  16  Mont. 

376,  525,  573 

Quaker  City  Bank  v.  Showacre, 

26  W.  Va.  48,  439,  646 

Quebec    Bank    v.    Hellmah,    110 

U.  S.  178,  312,  385 

Queen  City  Bank  v.  Brown,  75 

Hun   (N.  Y.)    259,  639 

Quimby  v.    Stoddard,   67   N.   H. 

283,  467 

V.  Varnum,  190  Mass.  211, 

699,  701 
Quincy  Union   Bank  v.   Tutt,   8 

Mo.  App.  342,  253 

Quinn   v.   Aldrich,   70  Hun    (N. 

Y.)   205,  343 

v.  Hard,  43  Vt.  375,  383 


TABLE   OF    CASES. 


CXI 


[References  are  to  Sections.] 


R 


Raatz  V.  Gordon,  51  S.  W.  651,  241 
Rabberman     v.     Muchlausen,     3 

Bradw.   (111.)  326,  463 

Racine    Co.    Bank    v.    Keep,    13 

Wis.  209,  612 

Radcliff  V.  Biles,  94  Ga.  480,  28,  198 
Radican  v.  Radican,  22  R.  I.  405,  30 
Raesser    v.    National    Exchange 

Bank,  112  Wis.  591,  581 

Ragsdale  v.  Gresham,  141  Ala. 

308,  198,  199 

Rainbolt  v.  Eddy,  34  Iowa  440, 

23,  144,  170 
Rains  v.  Lee,  18  Ky.  L.  Rep.  285,  195 
Raleigh  &  G.  R.  Co.  v.  Lowe,  101 

Ga.  320,  414 

Rambo  v.  Metz,  5  Strob.  (S.  C.) 

108,  104 

Ramsbotham  v.  Cator,  1  Starkie 

228,  21,  308 

Ramsey    v.     Clark,    4    Humph. 

(Tenn.)  244,  303 

Ran  V.  Latham,  11  La.  Ann.  276, 

417,  445 
Rand  v.  Pantagraph  Co.,  1  Colo. 

App.  270,  440 

Randall  v.  Rhode  Island  Lumber 

Co.,  20  R.  I.  625,  246,  370 

R.   &  W.   Jenkinson   Co.   v.   Eg- 

gers,  28  Pa.  Super.  Ct.  151,        540 
Ransom  v.  McClees,  64  N.  C.  17, 

620,  635 
V.  Turley,  50  Ind.  273,  385 

Rapid  City  First  National  Bank 
V.  Security  National  Bank,  34 
Neb.  71,  512 

Rapp  V.  Bank,  136  Pa.  St.  426, 

20  Atl.  508,  645 

Rasberry  v.  Moye,  23  Miss.  320, 

208,  211 

Ratcliffe   v.    Planters'    Bank,    2 

Sneed  425,  149,  152,  570 

Rave  V.  Kohle,  4  Cal.  285,  30 

Ravenswood    Bank    v.   Reneker, 

18  Pa.  Sup.  Ct.  192,  199 

Rawlings  v.  Fisher,  24  Ind.  52,  379 
Rawlinson  v.  Stone,  3  Wils.  5,  51 
Rawson    v.    Walker,    1    Starkie 

161,  320 

Ray  V.  Anderson,  119  Ga.  926, 

240,  260.  331.  416 
V.  Baker  (Ind.),  74  N.  E.  619, 

28,  237 
V.  Banks,  6  Jones  L.  (N.  C.) 

118,  383 

V.  McMurtrv,  20  Ind.  307,         651 
V.  Moore,  24  Ind.  App.  480,      326 


Ray  V.  Morgan,  112  Ga.  923,  199 

V.  Smith,  17  Wall.  411,     521,  571 
V.  Tubbs,  50  Vt.  688,  66 

Raymond  v.  People,  2  Colo.  App. 
529,  232 

V.  Sellick,  10  Conn.  480,   186,  198 
Read  v.  Buffalo,  67  Barb.  (N.Y.) 
526,  232 

V.  Eastman,  50  Vt.  67,  302 

V.  Wilkinson,   Fed.   Cas.  No. 

11611,  347,  523 

Reading,  Town   of,  v.  Town  of 

Weston,  7  Conn.  409,  302 

Reagan  v.  First  National  Bank, 

157  Ind.  623,  392 

Reakert  v.   Sanford,  5  Watts  & 

S.   (Pa.)   164,  419 

Receiver     of     Middle     District 

Bank,  1  Paige  585,  604 

Reddick   v.    Jones,    6    Ired.    (N. 
C.)  107,  241,  439 

V.  Mickler,  23  Fla.  335,  208 

Reddin   v.   First  Nat.   Bank,   66 

Kan.  747,  679 

Redding  v.  Redding,  69  Vt.  500,    186 
Reddish  v.  Ritchie,  17  Fla.  867, 

446,  448 

Redington  v.  Woods,  45  Cal.  406, 

99,  100 

Redlon  v.  Churchill,  73  Me.  146,    131 

Reece  v.  Knott,  3  Utah  451,  448 

Reed     v.     Batchelder,     1     Mete. 

(Mass.)  559,  64 

V.  Gulp,  63  Kan.  595,        137,  169 

V.  First    National    Bank,    23 

Colo.  380,  183,  194,  402 

V.  Fleming,  102  111.  App.  668,   689 
V.  Litsev,  17  Ky.  L.  Rep.  1125, 

33   S.  W.  827,  646 

V.  Mitchell.  18  Pa.  St.  405,        472 
V.  Newcomb,   59  Vt.   630,  34 

V.  Nicholson,    37    Mo.    App. 

646,  342 

V.  Prentiss,  1  N.  H.  174,  262 

V.  Roark,  14  Tex.  329,  137 

V.  Sidener,  32  Ind.  373,  117 

V.  Spear,  94  N.  Y.  Supp.  1007, 

544,  553,  559 

V.  Spear,  107  N.  Y.  App.  Div. 

144,  519 

V.  Stapp.  9  U.  S.  App.  34,  441 

V.  Trentman,  53  Ind.  438, 

270,  387 

V.  Vancleve,  27  N.  J.  L.  352,  658 
V.  Warner,  5   Paige    (N.  Y.) 

650.  419 

V.  Wheeler,  Lo.  Tenn.  50,  183 

V.  Wilson,  41  N.  J.  L.  29,  510 


cxu 


TABLE   OF    CASES. 


[References  are  to  Sections.'] 


Reedy  v.  Brunner  &  Co.,  60  Ga. 

107,  653 

Rees  V.  Sessions,  41  Ohio  St.  234,   260 
Reese  v.  Bell,  138  Cal.  xix,  428 

V.  Bell    (Cal.),  71  Pac.  87, 

465,  467 

V.  Gordan,  19  Cal.  147,  208 

V.  Teagarden,  31  Tex.  642,       636 

Reeve  v.  Pack,  6  Mich.  240,  502 

Reeves  v.  Butcher,  31  N.  J.  L. 

224,  29,  288 

V.  Graffling,  67  Ga.  512,  291 

V.  Pierson,   23   Hun    (N.  Y.) 

185,  135 

Re  Freeman,  116  N.  C.  199,  38 

Regan  v.  Williams,  185  Mo.  620,    680 
Regener    v.    Warner,    56    N.    Y. 

Supp.  310,  349 

Reich    V.    Cochran,    85    N.    Y. 

Supp.  247,  302 

Reichert  v.  Koerner,  54  111.  306,   419 

Reid  V.  Bank,  70  Ala.  199,  121 

V.  Cain,  3  Ky.  L.  Rep.  329,        449 

V.  Field,   83  Va.  26,  1  S.  E. 

395,  648 

Reier  v.  Strauss.  54  Md.  278,        535 
Reigel  v.  Cunningham,  9  Phila. 

177,  282 

Reilly  v.  Rucker,  16  Ind.  303,        611 
Reinke  v.  Wright,  93  Wis.  368, 

515,  523 
Remington  v.  Wright,  43  N.  J.  L. 

451,  107 

Remy  v.  Graves,  12  111.  287,  320 

Renner  v.  Bank  of  Columbia,  9 

Wheat.  581.  509 

Renwick  v.  Williams,  2  Md.  336, 

239,  282,  431 
Repplier  v.  Bloodgood,  1  Sweeny 

(N.  Y.)  34,  288 

Revell  V.  Thrash,  113  N.  C.  803,    680 
Reynolds     v.     Bird,     1     Root 
(Conn.)    305,  116 

V.  Dechaums,    24    Tex.    174, 

69,  315 
V.  Roth,  61  Ark.  317,  95,  671 

Rhea  v.  Allison,  40  Tenn.  176,        242 
Rhett  V.  Poe,  2  How.  457, 

454,  529,  570 
Rhoades  v.  Frederick,  8  Watts 
(Pa.)   448,  143 

V.  Patrick,  27  Pa.  St.  323,        262 
Rhodes  v.  Beall,  73  Ga.  641, 

288,  289,  292 

V.  Gent,  5  Barn.  &  Aid.  244,      502 

V.  Pray,  36  Minn.  392,  343 

Rice    V.    Ahbles(Pa.),    1    Wkly. 

Not.  Cas.  38,  418 

V.  Brantley,  5  Ala.  184,  3 


Rice  V.  Catlin,  14  Pick.  221,  691 

V.  Doane,  164  Mass.  136,  91 

V.  Grange,  131  N.  Y.  149, 

1,  227,  606 
V.  Groff,  56  Pa.  St.  116,  679 

V.  Jones,  103  N.  C.  226,  9  S. 

E.  571,  656 

V.  Peet,    15    Johns.    (N.    Y.) 

503,  71 

V.  Porter,  16  N.  J.  L.  440,        347 
V.  Ragland,      10      Humph. 

(Tenn.)  545,  342 

V.  Raitt,  17  N.  H.  166,  246 

V.  Rice,  106  Ala.  636,        193,  214 
Rich  V.  Goldman,  90  N.  Y.  Supp. 

364,  697 

Richards  v.  Daly,  34  Iowa  427, 
429,  430 

v.  Harrison,  71  Mo.  App.  224,  539 
V.  James,  2  Exch.  471,  607 

V.  Monroe,  85  Iowa  359,  465 

Richardson   v.   Ashby,    132    Mo. 
238,  613 

V.  Comstock,  21  Ark.  69, 

183.  186,  195 
V.  Fenner,  10  La.  Ann.  600,  496 
V.  Lemore,  5  Baxt.  586,  679 

V.  McFadden,  46  Iowa  103,       263 
V.  Sanborn,  33  Vt.  75,  208 

V.  Schirtz,  59  111.  313,  25 

V.  Stephens,  114  Ala.  238,  45 

V.  Thomas,  28  Ark.  387,  391,    310 
Richardson    &    Morgan    Co.    v. 

Gudewill,  61  N.  Y.  Supp.  1120,   329 
Richmond  Bank  v.  Robinson,  42 

Me.  589,  671 

Richmond  R.  &  E.  Co.  v.  Dick, 

52  Fed.  379,  483 

Ricketts  v.  Harvey,  106  Ind.  564,   288 

Riddell  v.  Stevens,  32  Conn.  378,    22 

Riddle  v.  Gage,  37  N.  H.  519,  208 

V.  McKinney,    67    Tex.    29, 

597,  598 
V.  Russell,  117  Iowa  533,   696,  697 
Rider    v.    Johnson,    20    Pa.    St. 

(8  Harris)  190,  606 

Ridgway  v.  Davenport,  37  Wash. 

134,  302 

Ridley  v.  Taylor,  13  East.  175, 

89,  131 

Riegel  v.  Ormsby  (Iowa),  82  N. 

W.  432,  489 

Riggs  V.  Hatch,  16  Fed.  838,  241 

Rightor  V.  Aleman,  4  Rob.  (La.) 

45,  192,  321 

Rigley  v.  Watts,  15  Ohio  C.  C. 

645,  512 

Riley  v.  Johnson,  8  Ham.  (Ohio) 

526,  242 


TABLE    OF    CASES. 


cxin 


[References  are  to  Sections.'] 


Riley  v.  Loughrey,  22  111.  97,       405 
V.  Reifert   (Tex.  Civ.  App.), 

32   S.  W.  185,  129 

V.  Schawacker,  50  Ind.  592,      119 
Rill  V.  Logan,  8  Dana  134,  502 

Rindge    v.    Kimball,    124    Mass. 

209,  525,  538 

Rindskopf  v.   Dornan,   28   Ohio 

St.  516,  128,  659 

Ringling  v.   Kohn,  4   Mo.  App. 

59,  23 

Risley  v.  Gray,  98  Cal.  40,  239 

Risloy  V.  Smith,  64  N.  Y.  576,        347 

Ritchie  v.   Cralle,  108  Ky.  483, 

56  S.  W.  963,  666 

V.  Moore,  5  Munf.  (Va.)  388, 

594,  629 

V.     Safe   Deposit   &   T.    Co., 

189  Pa.  410,  183 

Ritter   v.    Bruss,    116    Wis.    55, 

92   N.   W.   361,  46 

Roach     V.     Davis     (Tex.     App. 

1900),  54  S.  W.  1070,  329 

V.  Woodall,  91  Tenn.  206,  102 

Robb  V.  Mudge,  14  Gray  534,         472 

V.  Victory,  6   Blackf.    (Ind.) 

47,  .  312 

Robbins  v.  Blodgett,  124  Mass. 
279,  343 

V.  Brooks,  42  Mich.  62,  629 

v.  Richardson,   2   Bosw.    (N. 

Y.)   253,  285 

V.  Swinburne      Print     Co. 

(Minn.),  98  N.  W.  331,       475 
Roberts     v.     Adams,     8     Port. 
(Ala.)   297,  22 

V.  Grath,  38  Wis.  52,         20,  317 
V.  Hall,  37  Conn.  205,  441 

V.  Hawkins,   70  Mich.  566,       681 
V.  Jones,   1  Murph.    (N.   C.) 

353,  591,  608 

V.  Lane,  64  Me.  108,     11,  22,  119 
V.  Mason,  1  Ala.  373,  517 

V.  Miles,  12  Mich.  297,  655 

V.  Pepple,  55  Mich.  367,  91 

V.  Wood,  38  Wis.  60,  317 

Robertshaw  v.  Britton,  74  Miss. 

873,  238,  465 

Robertson     v.     Allen,    3     Baxt. 
(Tenn.)  233,  341 

V.  Angle  (Tex.  Civ.  App.),  76 

S.  W.  317,  680 

V.  Bank,  41  Mich.  356,  688 

V.  Breedlove,  7  Port.    (Ala.) 

541,  419,  431,  637 

V.  Bruner,  24  Miss.  242,  30,  36,  37 
V.  Case,   8   Ohio  S.  D.  C.  P. 

Dec.  386,  696,  697 

Joyce  Defenses — viii 


Robertson  v.  Coleman,  141  Mass. 
231,  119,  288 

V.  Kensington,  4  Taunt.  30,  348 
v.  Parks,  2  Md.  Ch.  65,  630 

V.  Rowell,  158  Mass.  94,  271 

V.  Smith,  18  Ala.  220,  22 

V.  Williams,   5   Munf.    (Va.) 

582,  238,  387 

Roberts,  Thorp  &  Co.  v.  Laugh- 

lin,  4  N.  D.  167,  681 

Robins  v.  Gibson,  3  Camp.  334,  523 
Robinson  v.  Aird,  43  Fla.  30, 

544,  547 
V.  Ames,  20  Johns.  146, 

496,  523,  566 
V.  Bank    of    Darien,    18    Ga. 

65,  120,  398 

V.  Barnett,  19  Fla.  670,  537 

V.  Berryman,    22    Mo.    App. 

509,  158 

V.  Crenshaw,  2   Stew.  &  P. 

276,  463 

V.  Eames,  20  Johns.  146,  523 
V.  Insurance    Co.,    25     Iowa 

430,  137 

V.  Keyes,  9  Humphr.  144,  447 
V.  Lair,  31  Iowa  9,  19,  241,  460 
V.  Lyman,  10  Conn.  30, 

420,  422,  431,  637 
V.  Hanson,  37  Ga.  66,  119 

V.  Perry,  73  Me.  168,  635,  637 

V.  Reed,  46  Iowa  219,  180 

V.  Reynolds,  2  Ad.  &  Ell.  (N. 

S.)    196,  199 

V.  Shelton,   2  Rob.  277,  439 

V.  Sims,   85   Minn.  242,  302 

V.  Smith,  14  Cal.  94,  246,  339 
V.  Smith,  62  Min.  62,  303,  402 

Roblee  v.  Union  Stockyards  Nat. 

Bank  (Neb.),  95  N.  W.  61,         367 

Robson  V.  Bennett,  2  Taunt.  389,   585 

Roby    V.    Sharp,    6    T.    B.    Mon. 

(Ky.)  375,  193,  303,  307 

V.  Phelon,    118    Mass.    541,         40 

Roche  V.  Roanoke  Seminary,  56 

Ind.  198,  312 

Rochester    v.    Taylor,    23    Barb 

(N.   Y.)    18,  385 

Rochester  Co.  v.  Loomis,  45  Hun 

(N.  Y.)   93,  242 

Rock  V.  Nichols,  85  Mass.  343,     263 
Rockiord  v.  McGee,  16.  S.  D.  606, 

94  N.  W.  695,  474,  480 

Rockville  Nat.  Bank  v.  Citizens' 
Gas  Light  Co.,  72  Conn.  576, 

241,  246,  475 

Rockwell  v.  Charles,  2  Hill  499,    288 
Rodecker  v.  Littauer,  8  C.  C.  A. 
320,  303,  304 


CXIT 


TABLE   OF    CASES. 


\_References  are  to  Sections.'] 


Rodemeyer  v.  Rodman,  5   Iowa 

426,  34,  37 

Rodgers  v.  Jewel  Belting  Co.,  56 

N.   E.   1017,  194 

Roe  V.  Jerome,  18  Conn.  138,         28 

Roehl  V.  Pleasants,  31  Tex.  45,     263 

Rogers  v.  Batchelor,  12  Pet.  (U. 

S.)   221,  121 

V.  Blythe,  51  Ark.  519,  295 

V.  Broadnax,   24   Tex.   538,       322 

V.  Burr,  97  Ga.  10,  681 

V.  Corre,  6  Ohio  Cir.  Dec.  602, 

288 
V.  Donovan,  13  Phila.    (Pa.) 

51,  320 

V.  Hackett,  21   N.  H.   100,       525 
V.  Insurance    Co.,    Ill    Ind. 

343,  12  N.  E.  495,  645 

V.  Mercantile  Adjuster  Rub. 
Co.  (Mo.  App.  1906),  93 
S.  W.  328,  198 

V.  Morton,    95    N.    Y.    Supp. 

49,  379,  439,  442 

V.  Poston,  1  Mete.  (Ky.)  643,  145 
V.  Priest,  74  Wis.  538,  43  N. 

W.  510,  662 

y.  Schulenberg,  111  Cal.  281,   183 
V.  Sipley,  35  N.  J.  L.  86,  386 

V.  Smith,   47   N.  Y.   324,  310 

V.  Stephens,  2  Term  R.  713,     523 
V.  Vosburg,  87  N.  Y.  228,  152 

Rogge  V.  Cassidy,  10  Ky.  L.  Rep. 

396,  13  S.  W.  716,  388,  447 

Rohde  V.  Lodge,  15  Tex.  446,        372 
Rohrbacher  v.  Aitkem,  145  Cal. 

485,  194,  195 

Rohrer  v.  Morningstar,  18  Ohio 

579,  68 

Roland  v.  Logan,  18  Ala.  307, 

43   51    52 
Rolfe  V.  Wyatt,  5  Car.  &  P.  181,    679 
Rollins  V.  Bartlett,  20  Me.  319,    177 
V.  Russell,  46  Wis.   594,  89 

Rolls  V.  Learce,  5  Ch.  Div.  730,    214 
Rome  Sav.  Bank  v.  Kremer,  32 

Hun   (N.  Y.)   270,  670 

Ronehill  v.  Lofguist,  46  111.  App. 

442,  635 

Rood  V.  Wright,  124  Ga.  849,         58 
Rooker  v.  Rooker,  29  Ohio  St.  1,   191 
Root  V.  Godard,  3  McLean   (U. 
S.)  102  (Fed.  Cas.  Mo.  12037), 

79,  84 
V.  Irwin,  18  111.  147,  239.  436,  635 
V.  Merriam,   27   Fed.   909, 

291    298 
V.   Strang,  77  Hun     (N.  Y.) 

14,  193 

V.  Wallace,  4  McLean  8,  292 


Roquemore  v.  Alloway,  33  Tex. 

461,  293 

Rosa  V.  Butterfield,  33  N.  Y.  665,  306 
Rose  V.  Hurley,  39  Ind.  77,  653 

V.  Johnson,   1   Handy    (Ohio 

388),  607 

V.  Teeple,  16  Ind.  37,  653 

Rosemond  v.  Graham,  54  Minn. 

323  119,  246 

Rosenplanter  v.  Toof,  99  Tenn. 

92,  650 

Rosenthal  v.  Ehrlicher,  154  Pa. 
396,  576 

V.  Rambo,  28  Ind.  App.  285, 

236,  446 
Ross  V.  Barker,  58  Neb.  402,         376 
V.  Doland,  29  Ohio  St.  473, 

22,   28 
V.  Drinkard,  35  Ala.  434,  117 

V.  Hurd,  71  N.  Y.  14, 

524,  525,  538,  573 
V.  Saron,  93  N.  Y.  Supp.  553, 

198,  588 
V.  Walker,  31  Mich.  120,  34 

V.  Webster,  63  Conn.  64,  123,  649 
V.  Western  Loan  &  Trust  Co., 
Rap.    Jud.    Queb.   11   R. 
R.  292,  221 

Rossiter  v.  Loeber,  18  Mont.  372, 

111 
Rosson  V.  Carroll,  90  Tenn.  90, 

503,  534,  544,  545,  563,  573 
Rotan  V.  Maedgen  (Tex.),  59  S. 

W.  585,  439,  440 

Roth  V.  Colvin,  32  Vt.  125,       89,  131 

V.  Reiter,  213  Pa.  St.  400,  597 

Rothchild  v.  Gorney,  9  Barn.  & 

C.   388,  425 

V.  Raab,  93  Ind.  488,  57 

Rothermal  v.  Hughes,  134  Pa.  St. 

510,  121,  129 

Rouligny  v.  Fortier,  17  La.  Ann. 

121,  365 

Rouse  V.  Wooten,  140  N.  C.  557, 

504,  545 
Rouss  V.  King,  69  S.  C.  168,  680 

Rowe  V.  Barnes,  101  Iowa  302, 

194,  195 

V.  Blanchard.   18  Mo.  441,       262 
V.  Gohlman    (Tex.  Civ.  App. 
1907),   98   S.   W.   1077, 

241,  286 
V.  Kohle,  4  Cal.  285,  36 

V.  Putnam,  131  Mass.  281,       102 
V.  Young,   2   Bli.   391,   395,       502 
Rowland    v.    Fowler,    47    Conn. 
347,  25,  123 

V.  Harris,  55  Ga.  141,  183 


TABLE    OF    CASES. 


CXV 


[References  are  to  Sections.} 


Roxborough  v.  Mesick,  6  Ohio  St. 

St.  448,  246,  352,  359 

Royce  v.  Bank,  50  Neb.  16,  182 

V.  Barnes,  11  Mete.    (Mass.) 

276,  621 

Royer  v.   Keystone   Nat.  Bank, 

82  Pa.  St.  248,  353 

Royland  v.  Harris,  55  Ga.  141,     222 
Rozelle   v.    Dicherson,    63    Miss. 

538,  302 
Rucker  v.   Hiller,   16  East  43,     523. 
Rudd  V.  Deposit  Bank,  20  Ky.  L. 

Rep.   1276,  530 

V.  Matthews,  79  Ky.  479,         674 
Ruddell  V.  Dillman,  73  Ind.  518, 

27,  28,  123 

V.  Landers,  25  Ark.  238,  293 

V.  Phalor,  72  Ind.  533,  28 

V.  Walker,  7  Ark.  457,  502 

Ruddick  v.  Lloyd,  15  Iowa  441,    352 

Rudolph  V.  Brewer,  96  Ala.  189, 

16,   174,   270,   666 
Ruffner  v.  Luther,  19  Pa.  Co.  Ct. 

349,  45 

Ruggles  V.  Patten,  8  Mass.  480,    679 
V.  Swanwick,  6  Minn.  526, 

198,  309 
Rugland  v.  Thompson,  48  Minn. 

539,  601 
Ruiz   V.    Campbell,    6   Tex.   Cir. 

App.  714,  41 

Rumley  Co.  v.  Wilcher,  23  Ky. 

L4w  R.  1745,  174,  341 

Rumney    v.    Coville,    51    Mich. 

186,  361 

Rumsey  v.  Leek,  5  Wend.  (N.  Y.) 

20,  38 

Russ  V.  George,  45  N.  H.  647,    52 

V.  Hobbs,  61  N.  H.  93,       341 

V.  Sadler,  197  Pa.  St.  51,         618 

Russell  V.  Ball,  2  Johns  (N.  Y.) 

50,  348 

V.  Cornwell,   2   Root   122,         679 

V.  People's     Sav.     Bank,     39 

Mich.  671,  34 

V.  Pyland,  2  Humph.  (Tenn.) 

131,  288 

V.  Rice,    19    Ky.    Law    Rep. 

1613,  44 

V.  Rood,  72  Vt.  238,  208 

V.  Russell,  1  MacArthur   (D. 

C.)   263,  78 

V.  Splater,  47  Vt.  273,  241 

Russell  &  Irwin  Mfg.  Co.  v.  Car- 
penter, 5  Hun  162,  679 
Russ  Lumber  &  Mill  Co.  v.  Mus- 
cupiable,   120    Cal.    521, 

122,  123,  202,  208,  211,  573 


Rutherford    v.    Neuson,    30    Ga. 

Ga.  728,  457 

Rutland  Bank  v.  Buck,  5  Wend. 

66,  353 

Ruzeoski  v.  Wildrodt  (Tex.  Civ. 

App.   1906),  94   S.  W.   142,         591 
Ryan  v.  Bank,  148  111.  349,  181 

V.  Chew,  13  Iowa  589,       591,  635 
V.  Great  Northern  R.  Co.,  90 

Minn.  12,  414 

V.  Illinois  Ti'ust  &  Sav.  Bank, 

100  111.  App.  251,  240 

V.  West,  63  Neb.  894,  402 

Ryland     v.     Brown,      2     Head 
(Tenn.)    270,  472 


S 


Sachleben    v.    Hentze,    117    Mo. 

520,  118 

Sachs  V.  Fuller  Bros.  Toll,  Lum- 
ber &  Box  Co.,  69  Ark.  270, 

503,  545 
Sackett  v.  Johnson,  54  Cal.  107,   241 

V.  Kellar,   22   Ohio  St.   554,     654 

V.  Montgomery,  57  Neb.  424,    679 
Saco  Nat.  Bank  v.  Sanborn,  63 

Me.  340,  564 

Safe   Deposit   &   Trust   Co.    v. 

Wright,  105  Fed.  155,  241 

Saffer  v.  Lambert,  111  111.  App. 

410,  333 

Safford  v.  Wyckoff,  1  Hill  11,        549 
Sage  V.  Fargo,  107  Fed.  383,  87 

Saint,  see  St. 

Salazar  v.  Taylor,  18  Colo.  538,    186 
Salem  Bank  v.  Gloucester  Bank, 

17  Mass.  1,  98 

Salen  v.  Bank  of  State  of  New 

York,  97  N.  Y.  Supp.  361,  486 

Salina    Bank    v.    Babcock,    21 

Wend.    (N.  Y.)    499,  243,  443 

Salisbury  v.  Bartleson,  39  Minn. 

365,  515 

Salley  v.  Terrill,  95  Me.  553,  394 

Salmon  v.  Grosvenor,  66  Barb. 

160,  507 

Saloman  v.  Pfeister   (N.  J.),  31 

Atl.  602,  552,  554 

Saloy  v.  Bank,  39  La.  Ann.  90,     246 
Saltmarsh    v.    Tuthill,    13    Ala. 

390.  119.    288 

Salt  Springs  Bank  v.  Burton,  58 

N.  Y.  430,  511,  516 

Sample  v.  Geiyer  (Ala  1904),  42 

So.  106,  44 

Samson   v.   Yager,   4   Up.    Can. 

Q.  B.  0.  S.  3,  157 


CXVl 


TABLE  OF   CASES. 


[References  are  to  Sections.'] 


Samuel  Wilde's  Sons,  In  re,  133 

Fed.  562,  302 

Sanborn  v.  Little,  3  N.  H.  539, 

44,  623 

Sanders  v.  Atkinson,  1  Tex.  Ct. 
App.  Civ.  Cas.  (W.  &  W.) 
§  1326,  418 

Sanders   v.   Bagwell,   32   S.   C. 
238,  139,  170 

V.  Bagwell,  37  S.  C.  145, 

139,  169,  179 

V.  Howe,    1    D.    Chip.    (Vt.) 

363,  336 

V.  Whitesides,  10  Cal.  89,  343 
San  Diego  Bank  v.  Babcock,  94 

Cal.  96,  503,  570 

San  Diego  Nat.  Bank  v.  Falken- 

han,  94  Cal.  141.  524,  539 

Sandilands  v.  Marsh,  2  B.  &  A. 

678,  93 

Sandford,     etc.,     Co.     v.     Hull, 

Brayt.  (Vt.)  231,  447 

San  Jose  Ranch  Co.  v.  San  Jose 

Land  &  W.  Co.,  132  Cal.  582,  446 
Sanner  v.  Smith,  89  111.  123,  302 
Santa  Cruz  County  Bank  v.  Bart- 

lett,  78  Cal.  301,  232 

Sapp  V.  Cobb,  60  Ark.  367,  302 

Saratoga  County  Bank  v.  Prujoi, 

90  N.  y.  250,  256,  59 

Sard  V.  Rhodes,  1  Mees.  &  W. 

153,  688 

Sargeant   v.   Kellogg,    5   Gilm. 
(111.)  273,  239 

V.  Sargeant,  18  Vt.  371,  376 

Sargent    v.    Southgate,    5    Pick. 
Pick.  (Mass.)  312, 

420,  422,  436,  635 
Sarraile  v.  Calmon,  142  Cal.  651,  688 
Sater  v.  Hunt,  66  Mo.  App.  527,  47 
Sathre  v.  Rolfe,  77  Pac.  431,  247 
Satterfield   v.   Compton,   6  Rob. 

(La.)  120,  6 

Saunders  v.  Richardson,  2  Sm. 

&  M.  (Miss.)  90,  336 

Saunderson  v.  Brooksbank,  4  C. 

&  P.  286,  75 

Savage  v.  Aldren,  2  Starkie  232,   310 

V.  Bank,  62  Miss.  586,       624,  635 

V.  Fox,  60  N.  H.  17,  302 

V.  Gamey    (Tenn.),  47  S.  W. 

571.  610 

V.  King,  17  Me.  301,  51,  428 

V.    Laclede    Bank,    62    Minn. 

586,  465 

Savings  Bank  V.  Fisher  (Cal.), 
41  Pac.  490,  524,  573 


V. 
V. 
V. 


Savings  Bank  of  Kansas  v.  Na- 
tional Bank  of  Commerce,  38 
Fed.  800,  297 

Savings   Bank   of   San   Diego 
County  V.  Central  Market  Co., 
122  Cal.  28,  364 

Sawyer  v.  Chambers,  44  Barb. 
(N.  Y.)   42,  6,  202,  208 

V.  Chambers,    43    Barb.    (N. 

Y.)    622,  6 

Child,   66   Vt.   360,  345 

Cutting,  23  Vt.  486,  376 

Equitable  Accident  Ins.  Co. 
of    Cincinnati,    42    Fed. 
30,  476 

V.  Hill,  12  Ala.  575,  333,  627 

V.  Hoovey,  5  La.  Ann.  153,      419 
V.  McLouth,  46  Barb.  (N.  Y.) 

350,  183,   186,   190,   198, 

201,  202,  208 
V.  Phaley,  38  Ct.  69,  361 

V.  Prickett  &  Wife,  19  Wall. 

146,  476 

V.  Wiswell,  91  Mass.    (9  Al- 
len), 39,  116,600 
Sawyers  v.  Campbell,  107  Iowa 

397  135 

Saxto'n  V.  Dodge,  57  Barb.  (N.  Y.) 

84  216,  466 

Sayl'es  v.  Sayles,  21  N.  H.  312,     288 
Saylor  v.  Daniels,  37  111.  339,      303 
V.  Merchants'  Exch.  Bank,  1 

Walk.    (Pa.)    328,  89 

Sayre  v.  Mohney,  30  Oreg.  238, 

310,  322 

V.  Wheeler,  31  Iowa  112,  447 

Sayres  v.  Linkhart,  25  Ind.  145,    237 

Schaller    v.    Borger,    47    Minn. 

357 
Scheie  v.  Wagner,  163  Ind.  20, 
Schellbeck  v.  Studebaker,  13  Ind. 

App.  438, 
Schepp  V.  Carpenter,  51  N.  Y. 

602,  284,  285,  353 

Schiei  V.  Baumel,  75  Wis.  75,        525 
Schleissman    v.   Kallenberg,   72 

Iowa  338, 
Schlesinger  v.  Kelly,  99  N.  Y. 
Supp.  1083, 
V.  Kurzrok,  94  N.  Y.  Supp. 

442, 
V.  Lehmeier,  99  N.  Y.  Supp. 

819,  306,  472 

V.  Schultz,    96    N.    Y.    Supp. 

383,  505,  507,  518,  542 

Schmelz  v.  Rix,  95  Va.  509,  149 

Schmueckle  v.  Waters,  125  Ind. 
265,  288,  296 


116 
91 

91 


449 
306 
581 


TABLE  OF   CASES. 


CXVll 


[References  are  to  Sections."] 


Schnabel    v.    German-American 

Title    Co.,    21    Ky.    Law    Rep. 

1063,  324 

Sclinitzer   v.    Gordon,    28    App. 

Div.  342,  442 

Schofield    V.    Bayard,    3    Wend. 

488  523 

V.  'Palmer,  134  Fed.  753,   543,  549 
School    Directors  v.    Fogelman, 

76  111.  189,  83,  87 

School  District  No.  16  v.  State 

Bank,  8  Neb.  168,  21 

Schoolfield    v.    Moon,    9    Heisk. 

(Tenn.)  171,  576 

Schooner   Freeman  v.  Bucking- 
ham, 18  How.  182,  414 
Schoonmaker  v.  Roosa,  17  Johns. 

(N.  Y.)  301,  184,  186 

Schroder   v.   Webster,    88    Iowa 

627,  161 

Schroeder  v.   Nielson,    39    Neb. 

335,  262 

V.  Seittz,  68  Mo.  App.  233,        475 
Schryver  v.  Hawkes,  22  Ohio  St. 

308,  166 

Schuchardt  v.  Hall  &  Loney,  36 

Md.  590,  494 

Schuckmann  v.  Knoebel,  27  111. 

175,  208 

Schuler  v.  Gillette,  12  Hun  (N. 

Y.)  278,  164 

Schultz  V.  Catlin,  78  Wis.  611, 

112,  113 
V.  Culbertson,  46  Wis.  313,     112 
Schuster  v.  Marsden,   34   Iowa 

181,  419 

Schwartz   v.   Oppold,   74   N.   Y. 

307,  170 

V.  Wilmer,  90  Md.  136, 

136,  270,  573 
Schwind  v.  Hacket,  54  Ind.  248,  138 
Scionneaux   v.   Wahuespack,   32 

La.  Ann.  283,  417 

Scofleld  V.  Ford,  56  Iowa  370,        171 
Scollans    v.    Flynn,    120    Mass. 

271,  296 

V.  Robbins,  179  Mass.  346,        380 
Scotland  County  Bank  v.  O'Con- 

nel,  23  Mo.  App.  165,  144 

Scott   V.  Armstrong,   146  U.   S. 

499,  604 

V.  Bankers'     Union      (Kan. 

1906),  85  Pac.  604,  84 

V.  Betts,  1  Hill  &  Den.  Supp. 

363-  241 

V.  Collier   (Ind.  1906),  78  N. 

E.  184,  aff' g  77  N.  E.  666,    57 
V.  Cooper,    Ga.    Dec,    pt.    2, 

163.  238,  239 


Scott  V.  Johnson,  5  Bosw.  213,       359 
V.  Kennedy,  201  Pa.  462,  302 

V.  Ocean  Bank,  23  N.  Y.  289,  242 
V.  Otis,  25  Hun  (N.  Y.)  33,  58 
V.  Searles,    7    Smedes    &    M. 

498,  447 

V.  Taul,  115  Ala.  529,  533,    38,  48 

Scribner  v.  Hanke,  116  Cal.  613,  183 

Scudder  v.  Andrews,  2  McLean 

(U.  S.)    464,  202,  208 

V.  Gori,  3  Barb.  (N.  Y.)  661, 

30,  36,  44 
V.  Union  National   Bank,  91 

U.  S.  106,  277 

Search  v.  Miller,  9  Neb.  26,  183 

Searles  v.  Seipp,  6  S.  D.  472, 

146,  447 

Sears  v.  Lang,  47  Iowa  658,  451 

V.  Wingate,  3  Allen  103,  414 

Seaton  v.  Scovill,  18  Kan.  433,      566 

Seattle  v.  Griffith  Realty  &  Bkg. 

Co.,  28  Wash.  605,  315 

V.  Powles,  33  Wash.  21,  414 

Seattle    Shoe    Co.    v.    Packard 

(Wash.  1906),  86  Pac.  845,         73 
Sebree    Deposit   Bank   v.   More- 
land,  96  Ky.  150,  525 
Second  Nat.  Bank  v.  Brady,  96 
Ind.  498,  447 
V.  Dunn,  151  Pa.  St.  228,          353 
V.  Fitzpatrick,  27  Ky.  L.  Rep. 

483,>  306 

V.  Hemingway,   31    Ohio   St. 

168,  439,  590 

V.  Hewitt,  59  N.  J.  L.  57, 

104,  119,  476 
V.  Merchants'  Nat.  Bank,  23 

Ky.  L.  Rep.  1255,  583 

V.  Miller,  63  N.  Y.  639,  59 

V.  Morgan,  165  Pa.  St.  199,  119 
V.  Morrison,  3  Ohio  Dec.  534,  270 
V.  Smith,  118  Wis.  18,  530,  542 
V.  Weston,  172  N.  Y.  250,  484 

V.  Wheeler,  75  Mich.  546,  328 

V.  Woodruff,  118  111.  App.  6.     348 
Second  National  Bank  of  Balti- 
more V.  Western  Nat.  Bank  of 
Baltimore,  51  Md.  128,  581 

Second  National  Bank  of  Cin- 
cinnati V.  Hemingway,  34 
Ohio  St.  381,  377 

Secor  V.  Witter,  39  Ohio  St.  208,    246 
Security     Bank    v.    Kingsland, 
5  N.  D.  263,  359 

V.  National  Bank  of  the  Re- 
public, 67  N.  Y.  458,  581 
Securities  Co,  v.  Talbert,  49  La. 

Ann.  1393,  365 

Sedgwick  v.  Dixon,  18  Neb.  445,  303 


CXVIU 


TABLE   OF    CASES. 


[References  are  to  Sections.'] 


Sedgwick  v.  Lewis,  70  Pa.  St.  217,  89 
Seebold  v.  Tatlie,  76  Minn.  131,  155 
Seeley  v.  Reed,  28  Fed.  164,  348 

Sefton  V.  Hargett,  113  Ind.  592,  639 
Sehring    v.    Rathbun,    1    Jolins. 

Cas.  (N.  Y.)  331,  419 

Seibel  v.  Vaughan,  69  111.  257,  661 
Seiger  v.  Allentown,  132  Pa.  307,  525 
Selby  V.  Brinkley  (Tenn.),  17  S. 

W.  479,  525 

Seldner  v.  Mt.  Jackson  Nat. 
Bank,  66  Md.  488, 

525,  537,  540,  573 
Selkirk  v.   McCormick,   33   Tex. 

136,  627,  650 

Sellers   v.    Hembaugh,    117    Pa. 

St.  218,  56 

Selover  v.  Snively,  24  Kan.  672,  502 
Selser  v.  Brock,  3  Obio  St.  302, 

128,  302,  645,  673 
Sentance  v.  Poole,  3  Car.  &  P.  1,  71 
Serviss  v.  Stockstill,  30  Ohio  St. 

4'18,  322 

Setzer  Russell  v.   Deal,   135  N. 

C.  428,  475 

Seventh  Ward  Nat.  Bank  v. 
Newbold,  2  City  Ct.  Rep.  (N. 
Y.)  125,  288 

Seybel    v.     National     Currency 

Bank,  54  N.  Y.  288,  394 

Seybold  v.  Bank,  5  N.  Dak.  460,  416 
Sevfert  v.   Edison,   45    N.  J.  L. 

343,  282 

Seymour  v.  Cowing,  4  Abb.  Dec. 
(N.  Y.)  200,  312 

V.  Francisco,  4  Ohio  Dec.  12, 

524,  539 
V.  McDonal   Lumber  Co.,   58 

Fed.  957,  119 

V.  Malcolm,  16  U.  S.  App.  245,  199 

V.  Prescott,  69  Me.  376,  113 

Shabata  v.  Johnson,  53  Neb.  12,    467 

Shackleford  v.  Hooker,  54  Miss. 

716,  347 

Shade  v.  Creviston,  93  Ind.  591, 

658,  679 
Shakespear    v.    Smith,    77    Cal. 

638,  232 

Shamokin    Bank    v.    Street,    16 

Ohio  St.  1,  441 

Shane  v.  Lowry,  48  Ind.  205, 

236,  447 

Shank  v.  Albert,  47  Ind.  461,         169 

V.  Bank,  124  Ga.  508,  291 

Shanklin    v.    Cooper,    8    Blackf. 

(Ind.)  41.  200 

V.  Moodv,   23  Ky.  Law  Rep. 

2063,   66   S.  W.   502,  62 


Shannon   v.   Canney,    44   N.   H. 

592,  56 

Sharp  V.  Allgood,  100  Ala.  183,     318 
V.  BoWie,  142  Cal.  462,  194 

V.  Smith,  7  Rich.  L.    (S.  C.) 

3,  658 

Sharpe  v.  Bagwell,  16  N.  C.  115, 

147,  177 
V.  Drew,  9  Ind.  281,  499,  566 

Sharps  v.  Eccles,  5  T.  B.  Mon. 

69,  699 

Shaw  V.  Clark,  49  Mich.  384,  298 

V.  Crawford,  16  Up.  Can.  Q. 

B.   101,  341 

V.  Fortine,  98  Mich.  254,  41 

V.  McNeill,  95  N.  C.  535, 

524,  525,  527,  528,  539,  573 
V.  Pratt,  22  Pick.  305,  679 

V.  Railroad  Co.,  101  U.  S.  557,  476 
V.  Shaw,  60  N.  H.  565,  183 

V.  Spencer,  100  Mass.  388,       483 
V.  Spooner,  9  N.  H.  197,  109 

V.  Stein,  79  Mich.  77,         116,  126 
Shawmut  Nat.  Bank  v.  Mauson, 

168  Mass.  425,  574 

Sheary    v.    O'Brien,    77    N.    Y. 

Supp.  378,  288 

Shed  V.  Miller,  12  Me.  318,  346 

V.  Pierce,  17  Mass.  623,  332 

Shedd  V.  Brett,  1  Pick.  413,  511 

Shedden  v.  Heard,  110  Ga.  461, 

230,  473 
Sheffield   School  v.  Andress,  56 

Ind.  157,  447 

Shelburne    Falls    Nat.    Bank    v. 

Townsley,  102  Mass.  177,  567 

Sheldon  v.  Horton,  43  N.  Y.  93, 

524,  538,  573 
Sheller  v.  McKenney,  17  111.  App. 

185,  674 

Sheneberger  v.  Union  Ins.  Co., 

114  Iowa  678,  28 

Shenk  v.  Mingle,  13  Serg.  &  R. 
(Pa.)   29,  301 

V.  Phelps,  6   111.  App.  612, 

109,  113 

Shepard  v.  Citizens'  Ins.  Co.,  8 

Mo.  272,  570 

V.  Hansor,  9  N.  D.  249,  402 

V.  Hawley,  1  Conn.  368,  561 

V.  "Whetstone,  51  Iowa  457, 

135,  137,  170 
Shepherd   v.   Merrill,    20   N.   H. 
415,  325 

V.  Richland  Dist.  Tp.,  22  Iowa 

595  232 

V.  Temple,  8  N.  H.  455,  322 

Shepp  V.  Carpenter,  51  N.  Y.  602,  353 


TABLE    OF    CASES. 


CXIX 


[References  are 

Sheppard  v.   Stites,  7  N.  J.   L. 

90,  606 

Sheridan  v.  Carpenter,  61  Me. 
83,  172 

V.  Mayor,  etc.,  of  New  York, 

68  N.  Y.  30,  418 

Sheridan  Elec.  L.  Co.  v.  Chat- 
ham Nat.  Bank,  127  N.  Y. 
517,  486 

Sherman  v.  Barnard,  19  Barb. 
(N.  Y.)  291,  262 

V.  Blackman,  24  111.  347,  303 

V.  Rollberg,  11  Cal.  38,  419 

Sherrington  v.   Jermyn,   3  Car. 

&  P.  374,  149 

Sherrod  v.  Rhodes,  5  Ala.  683,      523 
Sherwin  v.  Brigham,  39  Ohio  St. 

137,  199 

Sherwood  v.  Barton,  36  Barb. 
(N.  Y.)   284,  635 

V.  Francis,  11  Vt.  204,      593,  627 
V.  Haney,  63  Ark.  249,  302 

V.  Meadow  Valley  Mining  Co., 

50  Cal.  412,  397 

V.  Snow,  46  Iowa  481,  89,  91 

Shields     v.     Stark     (Tex.     Civ. 

App.),  51  S.  W.  540,  616,  629 

Shillito  V.  Theed,  7  Bing.  405,       291 

Shinn  v.  ^oard  of  Education,  39 

W.  Va.  497,  232 

V.  Fredericks,  56  111.  439,         679 

Shipley  v.  Carroll,  45  111.  285,  13,  20 

V.  Reasoner,  87  Iowa  555,  54 

N.  W.  470,  653 

Shipman    v.    Robbins,    10    Iowa 

208,  419.  431,  591 

Shipp  V.  Stacker,  8  Mo.  145,  436 

Shipp's      Adm'r     v.      Suggett's 

Adm'r,  9  B.  Mon.  (Ky.)  5,  174 
Shiretzki  v.  Kessler,  37  So.  422,  266 
Shirk  V.  North,  138  Ind.  210, 

308,  465,  645 
Shirley  v.  Fellows,  9  Port.  300,     523 
V.  Howard,  53  111.  455,  296 

V.  Todd,  9  Me.  83.  635 

Shirts  V.  Overjohn,  60  Mo.  305,      28 
Shober  v.  Jack,  3  Mont.  351,  658 

Shoe  &  Leather  Bank  v.  Woo.d, 

142  Mass.  563,  '  257.  312,  322,  465 
Shook    V.    Brinkerhoff,    2    Hall 

459,  496 

Shore  v.  Martine.  85  Minn.  29,  .  333 

Short  V.  Post,  58  N.  J.  Bq.  130,      302 

V.  Pullen,  63  Ark.  385,  302 

Sboulters    v,    Allen,    51    Mich. 

529  71 

Shove  V.  Martine.  85  Minn.  29,     702 
Shreve  v.  Olds,  2  A.  K.  Marsh. 
(Ky.)  141,  288 


to  Sections.'\ 

Shriner  v.  Keller,  25  Pa.  St.  61,  523 
Shriver  v.  Lovejoy,  32  Cal.  574,  3 
Shropshire  v.  Kennedy,  84  Ind. 

111.  117 

Shufeldt  V.  Gillilan,  124  111.  460, 

314,  342 

Shugart  v.   Shugart,  111   Tenn. 

179,  194,  214 

Shule'r  v.  Hummel  (Neb.),  5  N. 

W.  350,  680 

Shute  V.  Bank,  136  Mass.  487,        606 
V.  Pacific     Nat.     Bank,     136 

Mass.  487,  441 

V.  Robins,  3  Carr.  &  P.  80,        496 
Shutts  V.  Fingar,  100  N.  Y.  39,     520 
Sibley    v.    American    Exchange 
Nat.   Bank,    97   Ga.   126, 

504,  529,  545 

v.  Robinson,  10  Shep.   (Me.) 

70,  247 

Sibree  v.  Tripp,  15  Mees.  &  "W. 

23,  688 

Sice  V.  Cunningham,  1  Cow.  (N. 
Y.)   397,  ,  339,  507 

V.  Hilleary,     6     Har.     &     J. 

(Md.)  86,  118 

Sidle  V.  Anderson,  45  Pa.  St.  464,  183 
Sidway  v.  Nichol,  62  Ark.  146,  58 
Siebe   v.    Joshua    Handy    Mach. 

Works,  86  Cal.  390,  260 

Sieger  v.  Allentown  Second  Nat. 

Bank,  132  Pa.  307,  573 

Slewing  v.  Tacke,  112  Mo.  App. 

414,  702 

Sigerson  v.  Matthews,  20  How. 

496,  525 

Sigourney  v.  Lloyd,  8  Barn.  & 

Cr.  622,  348 

Silfer  v.  Howell's  Adm'r,  W.  Va. 

391,  293 

Sill  V.  Rood,  15  Johns.   (N.  Y.) 

230,  262 

Silver  v.  Kent.  105  Fed.  840,  646 

Silverman  v.  Bulloc,  98  111.  11,  121 
Silvers  v.  Reynolds,  17  N.  J.  L. 

275,  695 

Silverstri  v.  Savieriano,  95  N.  Y. 

Supp.  580,  695 

Simmons  v.  Atkinson  &  Hamp- 
ton Co.,  69  Miss.  862,    146,  161,  164 
V.  Thompson,    29    App.    Div. 

(N.  Y.)   559,  337 

Simms  v.  Clark.  11  111.  137,  100 

V.  Field,   1   Cleve.  Law  Rep. 

(Ohio)    337,  281 

Simon  v.  Windt,  84  Ky.  157,  409 

Simons  v.  Fisher,  17  U.  S.  App. 

1,  281 


cxx 


TABLE    OF    CASES. 


[References  are  to  Sections.'\ 


Simons  v.  Morris,  53  Mich.  155, 

282,  419,  436 

V.  Steele,  36  N.  H.  73,  212 

Simpers  v.  Sloan,  5  Cal.  457,  30 

Simpson  v.  Board,  74  Pa.  St.  351,    22 

V.  Hefter,    87    N.    Y.    Supp. 

243  304 

V.  Ins.  Co.,  44  Cal.  139,  576 

Simpson  College  v.  Bryan,  50 
Iowa  293,  322 

V.  Tuttle,  71   Iowa  596, 

185,  198,  214 

Sims  V.  Bice,  67  111.  88, 

26,  28,  116,  120,  260,  447 
V.  Hundley,  6  How.  1,  542 

V.  Lyles,  1  Hill  (S.  C.)  39,        119 
V.  National   Commercial 

Bank,  73  Ala.  250,  516 

V.  Rice,  67  111.  88,   26,  28,  116,  120 
V.  Squires,  80  Ind.  42,  614 

V.  Wilson,  47  Ind.  226,  456 

Sinclair  v.  Johnson,  85  Ind.  527,    503 
V.  Piercy,     5     J.     J.     Marsh. 

(Ky.)  63,  398 

Singer  Mfg.  Co.  v.  Summers  (N. 

C.  1906),  55  S.  E.  522.  241 

Singleton  v.  Bank  of  Monticello, 
113  Ga.  527,  288 

V.  Bremar,  Harp.  (S.  C.)  201, 

187,  300 

V.  McQuerry,  85  Ky.  41,  174 

Singluff  V.  Tindale,  40  S.  C.  504,    34 

Sinklar  v.  Siljan,  136  Cal.  356,       475 

Sinnot  v.  Schlater,  22  La.  Ann. 

201,  457 

Sioux  City  &  Pac.  R.  Co.  v.  First 

Nat.  Bank,  10  Neb.  556,  414 

Sistare   v.    Hecksher,    18    N.    Y. 

Supp.  475,  106 

Sixth  Nat.  Bank  v.  Lorillard 
Brickworks  Co.,  18  N.  Y. 
Supp.  861,  243 

Skiles   V.   Houston,   110   Pa.   St. 

254,  604 

Skiles'  Est,  In  re,  211  Pa.  631,      680 
Skiller   v.    Richmond,    48   Barb. 

(N.  Y.)    428,  339 

Skinner  v.  Carr,  51  S.  W,  799, 
21  Ky.  Law  Rep.  525,  47 

V.  Church,  36  Iowa  91,      307,  348 
V.  Lynn,    21    Ky.    Law    Rep. 

185,  44,  46 

Slacum   V.   Pomeroy,   2    Cranch 

221,  297 

Slade'  V.   Halstead,   7  Cow.    (N. 

Y.)   322.  198 

Slater  v.  Foster,  62  Minn.  150, 

262,  322 


Slaton  V.   Fowler,   124  Ga.  955, 

53  S.  E.  567,  202,  217 

Slaughter  v.  Bank,  109  Ala.  157, 

306 
Slayback  v.  Jones,  9  Ind.  470, 

639,  640 
Slevin    v.    Reynolds,    1    Handy 

(Ohio)    37,  1 

Slifer  V.  Howell's  Admr.,  9  W. 

Va.   391,  87 

Sloan  V.  Gibbes,  56  S.  C.  480,       541 
V.  Johnson,     20     Pa.     Super. 

Ct.  643,  456 

Sloane    v.    Lucas     (Wash.),    79 

Pac.  949,  302 

Sloman  v.  Cox,  1  Cromp.  M.  & 

R.  471,  148 

Small  V.  Older,  57   Iowa  326,  3 

V.  Smith,    1    Denio    (N.    Y.) 

583,  270,  322,  472 

Smalley  v.  Doughty,  6  Bosw.  66, 

305 

Smart  v.  Breckinridge  Bank 
(Ky.  1905),  90  S.  W.  5,  91  S. 
W.  697,  659 

Smedes    v.    Bank    of    Utica,    20 

Johns.  372,  549 

Smith  V.  Adams,  14  La.  Ann. 
409  ,  199.  619 

V.  'Applegate,  23  N.  J.  L.'352,    288 
V.  Bartholomew,  1  Mete.  276, 

342,  679 
V.  Bayer     (Oreg.),    79     Pac. 

497,  403 

V.  Bibber,  82  Me.  34,  246 

V.  Bing,  3  Ohio  85,  3 

V.  Bond,  56  Neb.  529,  49 

V.  Boruff,   75   Ind.  412, 

185,  196,   198 
V.  Boyer    (Oreg.    1905),    79 

Pac.   497,   498,  348 

V.  Bryan,  33  N.  C.  416,  418 

V.  Busby,  15  Mo.  388,  446 

V.  Capital  Elevator  Co.  (Kan. 

1899),  58  Pac.  483,  81 

V.  Carter,  25  Wis.  283,  322 

V.  Clopton,  48  Miss.  66,  682 

V.  Corn,  3  Head   (Tenn.)   116, 

344 
V.  Cromer,  66  Miss.  157,  503 

V.  Coulton,   5   111.   App.   422,       28 
V.  Curtis,  38  Mich.  393,  679 

V.  De  Witts,  6   Dowl.  &  Ry. 

120,  273 

V.  Dunham,  8  Pick.    (Mass.) 

246,  177 

V.  Ewer,  22  Pa.  St.  116,  618 

V.  First  National  Bank,  21 

Ky.  Law  Rep.  953,  379 


TABLE   OF    CASES. 


CXXl 


[References  are  to  Sections.'] 


Smith  V.  Fox,  48  N.  Y.  674,  604 

V.  Framel,  68   Iowa  488,  73 

V.  Giegrick,  36  Mo.  369,  208,  260 
V.  Glanton,  39  Tex.  365,  292 

V.  Grabill,  15  Ind.  267,  338 

V.  Greer,  31  Cal.  476,  34 

V.  Hardman,  99  Ga.  381,  44 

V.  Harrison,  33  Ala.  706,  404 

V.  Hine,  179  Pa.  St.  260,  353 

V.  Hiscox,  14  Me.  449,  246,  376 
V.  Hogeland,  78  Pa.  St.  252,  359 
V.  Hunter,  33  Ind.  106,  679 

V.  Isaacs,  23  La.  Ann.  454,  376 
V.  Jansen,  12  Neb.  125,  191 

V.  Jennings,  974  Ga.  551,  358 

V.  Johnson,    5    Harr.    (Del.) 

40,  628 

V.  Judson,  4  U.  C.  Q.  B.  (0. 

S.)    134,  682 

V.    Kelton,  43  N.  Y.  419,  604 

V.  Kennedy,  13  Hun  (N.  Y.) 

9,  58 

V.  Kinney,  32  Neb.  162,  246 

V.  Knox,  3  Esp.  46,  270,  272 

V.  Lac  County,  11  Wall.  139,  476 
V.  Lawson,  18  W.  Va.  212,  419 
V.  Livingston,  111  Mass.  342, 

119,  476 

439 


419 


Loyd,  Charlt.    (Ga.)    253, 
Lloyd,    Charlt.    T.    U.    P. 

(Ga.)  253, 
Lockridge,  8  Bush    (Ky.) 

423,  23,  137,  175 

Lownsdale,  6  Oreg.  78,  525 

Lurry,  Cooke  (Tenn.)  325,  419 
Lusher,    5    Cow.    (N.    Y.) 

688,  709,  89 

Mace,  44  N.  H.  553,  147 

McDonald     (Mich.     1905), 

103  N.  W.  738,  116 

McLennan,    101    111.    App. 

196,  194 

McMillan,  46  W.  Va.  577,    302 
McNair,  19  Kan.  330,  645 

Mercer,  6  Taunt.  76,  99 

Miller,  52  N.  Y.  545,  573 

Miller,  43  N.  Y.  171,  583 

Milton,  133  Mass.  369,  500 

Mississippi  &  A.  R.  Co.,  6 

Sm.  &  M.  (Miss.)  179,        79 
Missouri  P.  R.  Co.,  74  Mo. 

App.  48,  414 

Moberly,  10  B.  Mon.  (Ky.) 

266,  316 

V.  Mulock.    24    N.    Y,    Super. 

Ct.  569,  280 

V.  Mussetter,   58   Minn.    159, 

312,  313 


Smith  V.  National  Bank,  21  Ky. 
Law  Rep.  953,  128 

V.  Paris,  70  Mo.  615,  107 

V.  Pettus,     1     Stew.     &     P. 

(Ala.)  107,  447 

V.  Pickman,  8  Tex.  Civ.  App. 

■     326,  573 

V.  Poillon,  87  N.  Y.  590,  567 

V.  Popular     Loan     &     Bldg. 

Ass'n,  93  Pa.  St.  19,  381 

V.  Rawson,   61  Ga.  208,  238 

V.  Richards,  29  Conn.  232,        301 
V.  Scott,  106  Ind.  145,  183 

V.  Sheldon,  35  Mich.  42,  688 

V.  Silence,  4  Iowa  321,  43 

V.  Smith,  80  Ind.  267,  679 

V.  Smith,  1  Ind.  476,  600 

V.  Smith,  1  R.  I.  398,  166 

V.  Smith,  30  Vt.  139, 

210,  211,  262 
V.  Spalding,  40  Neb.  339,  47 

V.  Spengler,  83  Mo.  408,  604 

V.  Stone,   17   B.   Mon.    (Ky.) 

170,  653 

V.  Taylor,  39  Me.  242,        195,  222 
V.  Thomas.  29  Mo.  307,  332 

V.  Thompson,  93  N.  W.  678,      241 
V.  Turney,  32  Tex.  143,  627 

V.  Unangst,    46    N.   Y.    Supp. 

340,  502,  545 

V.  Van  Loan,  16  Wend.    (N. 

Y.)    659,  284,  465,  627 

V.  Van  Loan,  16  Wend.  492,      699 
V.  Weld,  2  -Pa.  St.  54,  172 

V.  Weston,  88  Hun  25,      439,  472 
V,  White    (Tex.    Civ.    App.), 

25  S.  W.  809,  305 

V.  Williamson,  8  Utah  219,        69 
V.  Willing    (Wis.    1904),   101 

N.   W.    692,  391 

V.  Wilson     (Tex.    Civ.    App. 

1895),  32  S.  W.  434,  62 

Wood,  111  Gei^  221,  292 

Worman,  19  Ohio  St.  148,  359 
Smock  V.  Pierson,  68  Ind.  405,  262 
Smyth  V.   Strader,  4   How.    (U. 

S.)   404,  419 

Sneed    v.   Milling   Co.,    73   Fed. 

925,  158 

Snoddv  V.  American  Nat.  Bank, 

88  fenn.  572,        291,  297,  298,  465 

Snow  V.  Holmes,  71  Cal.  142,         599 

Snyder  v.  Braden,  58  Ind.  143,      110 

V.  Elliot,  2  Penny.  (Pa.)  474,  284 

V.  Gruniger,  77   N.  Y.   Supp. 

234,  236,  449 

V.  Hargue,  26  Kan.  416,    122,  257 
V.  Jones,  36  Md.  542,  444 

V.  Koehler,  17  Kan.  432,  288 


V. 

V. 


CXXll 


TABLE   OF    CASES. 


[References  are  to  Sections."] 


Snyder    v.    Lauback,    7    Wkly. 
Notes  Cas.  464,  466,  72 

V.  Riley,  6  Pa.  St.  164,  419 

V.  Van  Doren,  46  Wis,  602, 

22,  175 
V.  Webb,  100  Ga.  793,  .   473 

Soloman    v.    Cohen,    94    N.    Y. 

Supp.  502,  565 

Solomans  v.  Bank  of  England, 
13  East.  135,  120,  412,  457 

V.  Jones,  3  Brev.  54,  303 

SoltykofE,   In   re    (1891),   12   B. 

413,  67 

Sondheim   v.   Gilbert,    117    Ind. 

71,    .  298 

Sonnentbiel  v.  Skinner,  67  Tex. 

453,  446 

Soper  V.  Peck,  51  Mich.  563,  25 

V.  St.    Regis    Paper    Co.,    38 

Misc.   (N.  Y.)   294,  122 

Soule  V.  Bonney,  37  Me.  128,  108 

Southard  v.  Porter,  43  N.  H.  379, 

419,  428 

South  Bend  Iron  Works  v.  Pad- 
dock, 37  Kan.  510,  446 
South  Boston  Iron  Co.  v.  Brown, 

63  Me.  139,  241,  329 

Souther   v.   McKenna,   20   R.    I. 

645,  525,  573 

Southern    Bank    of    Georgia   v. 

Williams,  25  Ga.  534,  79 

Southern    Ins.  Co.  v.  Lanier,  5 

Fla.  110,  192 

South  Ottawa  v.  Perkins,  94  N. 

S.  260,  87 

Southwark    Bank   v.    Cross,    35 

Pa.  St.  80,  164 

Southwick  V.  Sax,  9  Wend.  122,    369 
Sowders  v.  Citizens'  Nat.  Bank, 

12  Ky.  Law  Rep.  356,  22 

Spalding      v.      Vandercook,      2 

Wend.   (N.  Y.)   431,  208 

Spann  v.  Batzell,»l  Fla.  362,  517 

Spatz  V.  Martin,  46  Neb.  917,         49 
Spaulding  v.  Backus,  122  Mass. 

553,  607 

Spear  v.  Atkinson,  1  Ired.  262,      523 
Specht  V.  Howard,  16  Wall.  (U. 

S.)   564,  331 

Speers  v.  Sterrett,  29  Pa.  St.  192,     592 
Speight    V.     Porter,    4    Cushm. 

(Miss.)  286,  663 

Spence  v.  Railway  Co.,  79  Ala. 

576,  366 

Spencer  v.  Biggs,  2  Mete.  (Ky.) 

123,  237,  238,  465 

V.  Harvey.  17  Wend.  489,         525 

V.  Sloan,  108  Ind.  183,  246 

V.  Stockwell,  76  Vt.  176,       34,  53 


Spero  V.   Holoschutz,  74  N.  Y. 

Supp.  852,  474 

Spies    V.    National   City   Bank, 

174  N.  Y.  222,  702 

Spindler  v.  Grelley,  1  Exch.  384,  502 
Splivallo  V.  Patten,  38  Cal.  138,  238 
Spoor  V.  Spooner,  12  Met.  285,  496 
Sprague  v.  Fletcher,  8  Oreg.  367, 

524,  539 

V.  Graham,  29  Me.  160,     419,  436 

Spray  v.  Burk,  123  Ind.  565,  296,  654 

Sprigg  V.  Bank  of  Mt.  Pleasant, 

10  Pet.  (U.  S.)  257,  217 

V.  Bossier,    5    Wart.    N.     S. 

(La.)   54,  41,  57 

Spring  V.  Lovett,  11  Pick.  417,  465 
Sproule  V.  Merrill,  16  Shep.  260, 

291,  412 

Spurgin  v.  Pheeters,  42  Ind.  527,  272 
Stacy  V.  Kemp,  97  Mass.  166,  599 

V.  Ross,  27  Tex.  3,  •  27 

Stafford  v.  Fargo,  35  111.  481, 

239,  419 
V.  Staunton,  88  Ga.  298,  320 

V.  Yeates,  18  Johns.  327,  545 

St.     Albans     v.     Gulliland,     23 

Wend.  (N.  Y.)  311,  241 

Stalker  v.  McDonald,  6  Hill.  (N. 

Y.)    93,  242 

Stall  V.  Cassady,  57  Ind.  284,  94 
Stamford  v.  Coran,  26  Mont.  285,  681 
Standard  Cement  Co.  v.  Wind- 

aam,  71  Conn.  668,  80,  440 

Standard  Sewing  Machine  Co.  v. 
Smith,  1  Marv.  330,    544,  549.  551, 
553,  567 

Standford  v.  Marshall,  2  Atl.  69,  32 

Standley  v.  Miles,  36  Miss.  434,  212 

Stanford  v.  Pruet,  27  Ga.  243,  277 
Stanley    v.    McElrath,    86    Cal. 

449,                                             553,  545 
V.  Miles  &  Adams,  36  Miss. 

434,  259 
Stannus  v.  Stannus,  30  Iowa  448, 

419,  635 

Stanton   v.    Blossom,    14    Mass. 
116,  523 

Stark  V.  Alford,  49  Tex.  260,        203 
V.  Anderson,  30  Ala.  438,  263 

V.  Olsen,  44  Neb.  646,  367 

Starke  v.  Hill,  6  Ala.  785,  664 

Star  Kidney  Pad.  Co.  v.  Green- 
wood, 5  Ont.  28,  208 

Starr  v.  Yourtee,  17  Md.  341,        674 

Starrett  v.  Burkhalter,   86   Ind. 
439,  340,  341 

Star   Wagon    Co.   v.    Swezy,    59 
Iowa  609,  13  N.  W.  749,  670 


TABLE    OF    CASES. 


CXXlll 


[References  are  to  Sections.} 


State    (York   First   Nat.   Bank) 

V.  Cook,  43  Neb.  318,  232 

State  (Emerald  &  Brewing  Co.) 

V.  Foley,  61  N.  J.  L.  428,  506 

State  V.  Hart,  46  La.  Ann.  40,       83 
State  (Livesay)  v.  Harrison,  99 

Mo.  App.  57,  232 

State  V.  Hobbs,  40  N.  H.  229,  224 

V.  Huff,  63  Mo.  283,  232 

State    (Parks)    v.    Hughes,    19 

Ind.  App.   266,  573 

State    V.    Liberty    Tp.,    22    Ohio 

St.  144,  232 

State     (Grimm)    v.    Manhattan 

Mfg.  Co.,  149  Mo.  181,  183 

State  V.  Mason  Co.,  68  Mo.  29,       87 
V.  School   District,   10    Nebr. 

544,  98 

V.  Sutherland,  111  La.  381,      419 
State  Bank  v.  Ayres,  7  N.  J.  L. 
130,  568 

V.  Bartle,  114  Mo.  276, 

525,  552,  573 
V.  Burton,  14  Utah  420,  312 

V.  Fearing,  16  Pick.   (Mass.) 

533,  61,  645 

V.  Kahn,  98  N.  Y.  Supp.  858,    694 
V.  Kirk,  65  Atl.  932,  613 

V.  McCoy,  69  Pa.  St.  204,  69 

V.  Whitlow,  6  Ala.  135,  333 

V.  Wilson,  12  N.  C.  484,  655 

State  Bank  of  Indiana  v.  Cook, 


125  Iowa  111, 


330,  333 


V.  Mentzer    (Iowa),    100    N. 


417 


29 


W.  69, 
State   Capital   Bank   v.   Thomp- 
son, 42  N.  H.  369, 
State  Nat.  Bank  v.  Haylen,  14 

Neb.  480,  460 

V.  J.  J.  Hyatt  &  Co.,  75  Ark. 

170,  698 

State   Sav.   Assoc,  v.   Hunt,  17 

Kan.  532,  359 

State  Sav.  Bank  v.  Scott,  10  Neb. 

83,  46,  303 

V.  Shaffer,  9  Neb.  1,  148,  165 

Staylor  v.  Ball,  24  Md.  183,  570 

Stayner  v.  Joice,  82  Ind.  35,  154 

St.  Charles  First  Nat.  Bank  v. 

Hunt,  25  Mo.  App.  170,  570 

St.    Clairsville   Bank   v.    Smith, 

5  Ham.  (Ohio)  222,  21 

Stedwell  v.  Morris,  61  Ga.  67,  17 

Stebbins  v.  Goldthwait,  31  Ind, 

159,  417 

Steckbaner    v.    Leykorn     (Wis. 

1907),  110  N.  W.  217,  599 

Stedman   v.   Rochester    Loan   & 

Banking  Co.,  42  Neb.  641,  260 


Steed  V.  Groves,  103  Ga.  550,  467 
Steele   v.   Johnson    (Mo.   App.), 

69  S.  W.  1065,  680 

V.  Sellman,  79  Md.  1,  447 

Steere   v.    Benson,    2    111.    App. 

560,  376,  377 

Steers  v.  Lashley,  6  T.  R.  61,  296 
Steffen  v.  Smith,  159  Pa.  St.  207,  58 
Steiffel    V.     Tolhurst,    55     App. 

Div.  532,  442 

Stein  V.  Yglesias,  1   Cromp.  M. 

&  R.  565,  282 

Steinau  v.  Moody,  100  Ga.  136, 

154,  155 

Steiner  v.  Jeffries,  118  Ala.  573,    199 

V.  Ray,  84  Ala.  93,  291 

Steinhart  v.  Bank,  94  Cal.  362,      695 

Stephens  v.  Bank,  111  U.  S.  197,    306 

V.  Davis,  85  Tenn.  271, 

13,  135,-136,  171 
V.  Graham,     7     Serg.     &     R. 

(Pa.)  505,  506,  152 

v.  Monongahela  Bank,  111  U. 

S.  197,  615 

V.  Monongahela  Nat.  Bank,  7 
Wkly.  Notes  (Pa.)  Cas. 
491,  270 

V.  Stephens,  66  Ark.  356,  690 

Stephenson  v.  Primrose,  8  Port. 

155,  525 

Stern  v.  Bank,  34  La.  Ann.  1119,   436 
V.  Freeman,    4    Mete.     (Ky.) 

309,  64 

Sternburg  v.  Bowman,  103  Mass. 

325,  125 

Stetson   V.    Stackhouse,    18    La. 

119,  419 

Stettinus  v.  Myer,  4  Cranch  G. 

G.   (U.  S.)   349,  606 

Stevens  v.  Beals,   64  Mass.    (10 
Cush.)   291,  52 

V.  Campbell,  13   Wis.   375, 

241,  376 

V.  Deering,    10    Ky.    L.    Rep. 

393,  62 

V.  Gregg,  89  Ky.  461,  627 

V.  Hannan,  88  Mich.  13,  679 

V.  Jackson,  4  Camp.  164,  67 

V.  Johnson,  28  Minn.  172,  208 

V.  Llovd,  Moody  &  M.  292,       149 
V.  Lvnch.  12  East.  38,  650 

V.  Norris,  30  N.  H.  466,  254 

v.  Parker,    89    Mass.    (7    Al- 
len)  361,  125 
V.  Parker,  5  Allen  333,              447 
V.  Thacker,    1    Peake's    Cas. 

187,  336 

V.  Wood,  127  Mass.  123,  29 


exxiv 


TABLE   OF   CASES. 


[References  are  to  Sections.'] 


Stevenson  v.  Bethea,   68   S.   C. 

246,  217 

V.  Hyland,  11  Minn.  198,  241 

V.  Scofield,  70  111.  App.  299,     512 

V.  Short,  25  La.  Ann.  967,         685 

Stewart  v.  Anderson,  59  Ind. 
375,  312,  324 

V.  Anderson,    6    Cranch    (U. 

S.)  203,  593,  606 

V.  Bank,  40  Mich.  248,  150 

V.  Bramhall,  11  Hun  139, 

304,  306 
V.  Bramhall,  74  N.  Y.  85,  302 
V.  Desha,  11  Ala.  844,  523 

V.  Hidden,  13  Minn.  43,  695 

V.    Miller,    3    Wilson    (Tex. 

Civ.  App.)  292,  297 

V.  Moore,  12  Phil.  225,  272 

V.  Simpson,   2  Ohio  Cir.  Ct. 

R.  415,  296 

V.  Small,  2  Barb.  (N.  Y.)  559,    128 
V.  Smith,  17  Ohio  St.  83,  278 

V.  Tizzard,  3  Phil.  (Pa.)  362,  635 

Stickney  v.  Clement,  7  Gray 
(Mass.)  170,  606 

v.  Moore,  108  Ala.  590,  302 

Stigler  V.  Anderson  (Miss.),  12 
So.  831,  69,  202 

Stiles  V.  Farrar,  18  Vt.  444,  617 

V.  Hobhs,  2Disn.  (Ohio)  571,    601 

Still  V.  Snow,  66  Vt.  277,  122 

Stilwell  V.  Chaffell,  30  Ind.  72,       603 
V.  Kellogg,  14  Wis.  461,  238 

V.  Woodruff,  76  Ga.  347,  73 

Stiman  v.  Harrison,  42  Penn.  St. 
49,  491 

Stinson  v.  Lee,  68  Miss.  113,        503 

Stirling  v.  Gray  (Tex.  Civ.  App. 
1904),  81  S.  W.  789,-  323 

Stivers  v.  Prentice,  3  B.  Hon. 
461,  511 

St.  Joe  &  M.  F.  Consol.  Min.  Co. 
V.  First  Nat.  Bank,  10  Colo. 
App.  339,  85,  475 

St.  Joseph  Fire  &  Marine  Ins. 
Co.  V.  Hauck,  71  Mo.  465,  340,    671 

St.  Louis  &  Iron  Mt.  R.  Co.  V. 
Larned,  103  111.  293,  '  414 

St.  Louis,  etc.,  Ry.  Co.  v.  Knight, 
122  U.  S.  79,  414 

St.  Louis  National  Bank  v.  Flan- 
nagan.  129  Mo.  178,  213,  389 

St.  Louis  Perpetual  Ins.  Co.  v. 
Cohen,  9  Mo.  421,  80 

v.  Homer,    9    Mete.    (Mass.) 

39,  624 

Stoddard  v.  Kimball,  6  Cush. 
469,  376,  377,  384 


Stoddard  v.  Pehniman,  108  Mass. 

366,  135,  149,  158 

Stockdale  v.  Keyes,  79   Pa.   St. 

251,  91 

Stocking  V.  Tomlin,  3   Stew.  & 

P.   (Ala.)   35,  624 

Stocks  V.  Scott,  188  111.  266,  208 

Stockton  V.  Fortune,  82  111.  App. 
272,  698 

V.  Montgomery,  9  Kan.  App. 

104,  583 

Stockton   Savings  &  L.  Soc.  v. 
Giddings,  96  Cal.  84, 

322,  601,  639,  640 
Stokeley  v.  Buckler,  22  Ky.  L. 

Rep.  1740,  447 

Stokes    V.    Anderson,    118    Ind. 
533,  288 

V.  Brown,  4  Chand.  (Wis.)  39,    64 
V.  Winslow,   31   Miss.   518, 

208,  463,  465 
Stone  V.  Bond,  2  Heisk.  (Tenn.) 
425,  238 

V.  Dodge,  96  Mich.  514,  604 

V.  Peake,  16  Vt.  213,   198,  202,  210 
V.  Smith,  30  Tex.  138,  525 

V.  Vance,  6  Ohio  246,  270,  472 

V.  Wainwright,      147      Mass. 

201,  679 

V.  White,  74  Mass.  (8  Gray) 

589,  182 

V.  Wright,  83  Tex.  345,  238 

Stoner  v.  Brown,  18  Ind.  464, 

121,  380 
v.  Ellis,  6  Ind.  152,  658 

Stoney   v.    American    Life    Ins. 
Co.,  11  Paige  (N.  Y.)  635,  86 

V.  Joseph,    1    Rich.    Eq.    (S. 

C.)   352,  240 

Storrs  &  Co.  v.  Wingate,  67  N. 

H.  190,  45 

Story  V.  Kemp,  51  Ga.  399,  404 

v.  Kinzler,  73  App.  Div.   (N. 

Y.)  372,  334 

Stotts  V.  Byers,  17  Iowa  303,         352 
Stough   V.    Ponca   Mill    Co.,    54 

Neb.  500,  474 

Stout  V.  Watson,  45  Minn.  454,      350 
Stoutenberg  v.  Lybrand,  13  Ohio 

St.  228,  288 

Stowell  V.  Stowell,  45  Mich.  364,   345 
Stoy   V.    Bledsoe,   31    Ind.   App. 

643,  423 

St.  Paul  Grain  Co.  v.  Rudd,  102 

Iowa  748,  76,  365 

St.  Paul  Nat.  Bank  v.  Cannon, 

46  Minn.  95,  376 

Strachan  v.  Muxlow,  24  Wis.  21,  339 


TA3LE   OF    CASES. 


CX2V 


[References  are  to  Sections.'] 


Stratford  v.  Crosby,  8  Me.  154,     659 
Stratton   v.   Henser,    19    Ky.    L. 
Rep.  1019,  407 

V.  Stone,  15  Colo.  App.  237,     144 
Straughan  v.  Fairchild,  80  Ind. 

598,  368 

Strauss  v.  American   Exchange 
Nat.  Bank,  72  111.  App.  314,         581 
V.  Friend,  73  Ga.  782,  48,  282 

Strauthers  v.  Kendall,  41  P^,.  St. 

214,  173 

Streit  V.  Sanborn,  47  Vt.  702,        295 
Strieker  v.   McDonald,    213    Pa. 

108.  682 

Strickland  v.  Gray,  98  Ga.  667,      47 
V.  Graybill,  97  Va.  602,  596 

V.  Henry,    66    (N.    Y.)    App. 

Div.  23,  302,  306 

V.  Lee,  65  Md.  384,  685 

V.  Vance,  99  Ga.  531,  44,  48 

Stricklin  v.  Cunningham,  58  111. 

293,  314,  315,  419 

Stringer  v.  Adams,  98  Ind.  539, 

541,  317 

Stronach  v.   Bledsoe,   85   N.   C. 

473,  183,  186 

Strong  V.  Bowes,  102  Wis.  542,      375 
V.  Grannis,  26  Barb.   (N.  Y.) 

122,  108 

Strouffer   v.    Latshaw,    2    Watt. 

(Pa.)   165,  108 

Strough  V.  Gear,  48  Ind.  100, 

107,  123 
Struthers  v.  Kendall,  41  Pa.  St. 

214,  279 

Stryker  v.  Beekman,  8  N.  J.  L. 

209,  618 

Stuart  V.  Kirkwall,  3  Madd.  387, 

32,  33 
V.  Stonebraker,  63  Neb.  554,     699 
Studebacker   Bros.    Mfg.    Co.   v. 
Montgomery,  74  Mo.  101, 

80,  95,  671 
Sturges  V.  Setson,  1  Biss.  C.  Car. 
246,  Fed.  Cas.  No.  13586,  95 

V.  Williams,  9  Ohio  St.  443, 

135,  164 
Sturgis  V.  Baker,  43  Oreg.  236,     696 
V.  Miller,  80  111.  241, 

202,  240,  265 
Sturtevant  v.  Ford,  4  Man.  &  G. 
101,  282 

V.  Inhabitants  of  Liberty,  46 

Me.  457,  87 

Stutsman    v.    Thomas,    39    Ind. 

384,  655 

Stutzman  v.  Payne,  23  Iowa  17,      23 
Sudlpr     V.     Collins,     2     Houst. 
(Del.)   538,  136,  162,  164,  699 


Suffell  V.  Bank,  9  Q.  B.  555,  151 

Sugg  V.  Powell,  38  Tenn.  221,       241 

Sullivan  v.  Bonesteel,  79  N.  Y, 

631,  130 

V.  Collins,  18  Iowa  228,     116,  118 

V.  Field,  118  N.  C.  358,  681 

V.  German     Nat.     Bank,     18 

Colo.  App.  99,  298 

V.  Langley,  120  Mass.  437,        476 
V.  Rudisill,  63   Iowa  158, 

148,  182 
V.  Sullivan,  29  Ky.  Law  Rep. 

239,  92  S.  W.  966,  198 

V.  Sullivan    (Wis.    1904),    99 

N.   W.  1022,  89 

Sully  V.  Goldsmith,  a2  Iowa  397, 

119,  240 
Sulzbacher    Bros.    v.    Bank    of 

Charleston,  86  Tenn.  201,   535,  543 
Summerfeldt  v.  Worts,  12  Ont. 

48,  291 

Summers    v.    Hutson,    48    Ind. 
228,  448 

V.  Sander    (Tex.   Civ.  App.), 

28  S.  W.  1038,  183 

Supervisors  v.  Schenck,  5  Wall. 

772,  476,  487 

Supervisors  of  Jefferson  County 

V.  Arrighi,  54  Mass.  668,  87 

Sutherland   v.    Whitaker,   50   N, 

C.  5,  388 

Sussex  Bank  v.  Baldwin,  17  N. 

J.  L.  487,  511 

Sutherland  v.  Whitaker,   50   N. 

C.  5,  253 

Sutton    V.    Beckwith,    68    Mich. 
303,  310,  314,  322,  653 

V.  Gregory,  2  Peake.  Ad.  Cas. 

150,  131 

V.  Kautzman,  6  Ohio  St.  525, 

208,  376 
V.  Toomer,  7  Barn.  &  C.  516,    169 
Swan   V.    Craig    (Neb.),   102   N. 
W.  471,  699 

V.  Ewing,   1    Morris    (Iowa) 

344,  198,  257 

V.  Steele,  7  East.  210,  89 

Swanger   v.   Mayberry,    59    Cal. 

91,  288 

Swank  v.  Nichols,  24  Ind.  199,  332 
Swanwell  v.  Watson,  71  III.  456,  27 
Swanze  v.  Hull,  8  N.  J.  L.  54,  288 
Swasey     v.     Vanderheyden,     10 

Johns.   (N.  Y.)   33.     "  63 

Swayze  v.  Button,  17  Kan.  627,     550 

Sweet  v.  Powers,  72  Mich.  393,    522 

V.  Stevens,  7  R.  I.  375,  312 

V.  Swift,  65  Mich.  90,  503 


CSXVl 


TABLE    OF    CASES. 


^References  are  to  Sections.] 


Sweetser    v.    French,    2    Cush. 
(Mass.)   30,  380 

V.  French,  14  Mete.   (Mass.) 

262,  383 

Sweetzer  v.  First  Nat.  Bank,  73 

Miss.  96,  463 

Swenson  v.  Stolz,  36  Wash.  999, 

456,  460 

Swett  V.  Stark,  31  Fed.  858,  366 

Swift  V.  Barber,  28  Mich.  503,       150 

V.  Crocker,  38  Mass.  241,  213 

V.  Smith,  102  U.  S.  442,    380,  476 

V.  Tyson,  16  Pet.   (U.  S.)    1, 

241,  246 
Swift,  In  re,  106  Fed.  65,  525 

Swing  V.  Cider  &  Vinegar  Co., 

77  Mo.  App.  391,  288 

Swinney  v.  Edwards,  8  Wyo.  54,   297 
V.  Patterson   (Nev.),  62  Pac. 

1,  473 

V.  Patterson,  25  Nev.  411,         116 
Sydnor  v.  Boyd,  119  N.  C.  481, 

310,  322,  323 
Sykes    v.    Citizens'    Nat.    Bank 
(Kan.),  76  Pac.  393,  447 

V.  Lewis,  17  Ala.  261,  627 

Sylverstein     v.     Atkinson,     45 

Miss.  81,  89 

Sylvester  v.  Crohan,  138  N.  Y. 
494^  510,  564 

V.  Swan,  5  Allen  134,  303 

Symonds    v.    Riley,    188    Mass. 

470,  224,  471,  489 

Sypert    v.    Harrison,    11    S.    W. 
435,  10  Ky.  Law  Rep.  1052,  47 


Tabor  v.  Merchants'  Nat.  Bank, 

48  Ark.  454,  241,  316 

Taft    V.     Myerscough,    197     111. 
600,  211,  257 

V.  Sergeant,     18    Barb.     (N. 

Y.)   320,  64 

Tagg    V.    Bank,     56     Tenn.     (9 

Heisk.)  479,  133 

Talbot  V.  Bank  of  Rochester,  1 
Hill  (N.  Y.)  295.  102 

V,  National  Bank  of  the  Com- 
monwealth, 129  Mass. 
67,  515 

Tallapoosa  Lumber  Co.  v.  Hol- 

bert,  5  App.  Div.  (N.  Y.)  559,  79 
Tanner  v.  Hall,  1  Pa.  St.  417,  89,  91 
Tapley  v.  Herman,  95  Mo.  App. 

537  183 

Tappan    v.   Ely,    15    Wend.    (N. 
Y.)   362,  348 


Tarbell  v.  Sturtevant,  26  Vt.  513, 

1,  359,  376,  415   " 

Tardy  v.  Boyd,  26  Gratt.  637,        525 
Tarleton  v.  Allhusen,  2  Adol.  & 

E.  32,  679 

Tate  V.  Fletcher,  77  Ind.  102,       171 
Tatum  V.  Kelley,  25  Ark.  209, 

293,  447,  472 

Tausig  V.  Reid,  145  111.  488,  681 

Taylor    v.    American    Freehold 

Land  Mtg.  Co.,  160  Ga.  238,  57 

V.  Atchison,  54  111.  196,  27 

V.  Bank   of   Illinois,  7  T.  B. 

Mon.  576,  494,  515,  523, 

549,  570 
V.  Boardman,  92  111.  566,  30 

V.  Bowles,  28  La.  Ann.  294,  439 
V.  Burgess,  5  Hurl.  &  N.  1,  340 
V.  Croker,  4  Esp.  187,  68 

V.  Dansby,  24  Mich.  82,  68 

V.  Dudley,  5  Dana  (Ky.)  308, 

310,  71 

V.  Fletcher,  15  Ind.  80,  116 

V.  Ford,  131  Cal.  440,  117,  266 
V.  Gitt,  10  Pa.  St.  428,  119 

V.  Gribb,  100  Ga.  94,  123 

V.  Hearn,  131  Ind.  537,  402 

V.  Hillyet,    3    Blackf.    (Ind.) 

433,  91 

V.  Jerrell,  104  Ga.  169,  679 

V.  Littell,  21  La.  Ann.  665, 

.  415,  417 
V.  Mather,  3  Term.  R.  83,  419 
V.  Newman,  77  Mo.  257,  183,  186 
V.  Purcell,  60  Ark.  606,  69 

V.  Rhea  Minor  (Ala.)  414,  343 
V.  Sharp,  108  N.  C.  377,  60 

V.  Taylor,  80  Tenn.  (12  Lea) 

714,  138,  147,  154 

V.  Thomas,  22  Wall.    (U.  S.) 

279,  293 

V.  Thompson,  3  Bradw.  (111.) 

109,  238 

V.  Thompson,  3  111.  App.  109,'  119 
Taylor's  Appeal,  45  Pa.  St.  71,  244 
Tebbetts    v.    Dowd,     23    Wend. 

379  ^38 

Tellon  V.  City  Bank,  9  Ind.  119,    472 
Temple  v.   Carroll    (Neb.),   105 
N.  W.  989,  576 

V.  Hays,  1  Morris  (Iowa)  9,      22 
Temple  Nat.  Bank  v.  Louisville 
Cotton  Oil  Co.,  26  Ky.  L.  Rep. 
518,  ^'^^ 

Temp'leton  v.  Poole,  59  Cal.  286,    419 
Tennessee   Bank   v.   Johnson,   1 

Swan  217, 
Tennessee  Mfg.   Co.   v.   Haines, 
16  R.  I.  204,  343 


TABLE  OF  CASES. 


CXXVll 


[References  are  to  Sections.'] 


Tenney  v.  Foote,  4  III.  App.  594,   297 
V.  Turner    (Mo.   App.   1905), 

86  S.  W.  506,  116 

Terrell  v.  Gamblin,  10  La.  Ann. 

623,  448 

Terry  v.  Allis,  16  Wis.  478,  102 

V.  Ragsdale,  33  Gratt.   (Va.) 

342,  183 

Tescher  v.  Merea,  118  Ind.  586,     292 
Texarkana  First   Nat.   Bank  v. 

Wever  (Tex.),  15  S.  W.  41,        569 
Texas  v.  Hardenberg,  10  Wall. 
(U.  S.)  68,  426 

V.  White,  7  Wall.  (U.  S.)  700,    426 
Texas    Banking    &    Ins.    Co.    v. 

Turnley,  61  Tex.  365,  376 

Thaeher    v.    Stevens,    46    Conn. 

561,  280 

Thacker    v.    Thacker,    125    Ind. 

489,  41 

Thatcher    v.    West    River    Nat. 

Bank,  19  Mich.  196,  270 

Thayer  v.  Buffum,  11  Mete.  398, 

92,  465 
V.  Jewett,  9  Shep.   (Me.)  19,     134 
Theard  v.   Gueringer    (La.),   38 

So.  579,  447 

The  Lady  Franklin,  8  Wall.  325,  414 
Theopold      Mercantile      Co.      v. 

Deike,  76  Minn.  121,  179 

Theurer  v.  Schmidt,  10  La.  Ann. 

293,  52,  380 

Thiel    V.    Conrad,    21    La.    Ann. 

214,  502 

Thielman  v,  Gueble,  32  La.  Ann. 

260,  506,  507,  523 

Thimbledy  v.  Barron,  3  Mees.  & 

W.  210,  338 

Thing  v.  Libley,  16  Me.  55,  57,        64 
Third  Nat.  Bank  v.  Angell,  18  R. 
I.  1,  402 

V.  Harrison,    3    McCray    (U. 

S.)    316,  298,  476 

V.  Laboring  Man's  Mercan- 
tile &  M.  Co.  (W.  Va.) 
1904),  49  S.  E.  544,  81 

V.  Tinsley,  11  Mo.  App.  498, 

288,  298 

Third  National  Bank  of  Louis- 
ville V.  Vicksburg  Bank,  61 
Miss.  112,  583 

Thom  V.  Sinsheimer,  66  111.  App. 

555,  586 

Thomas  v.  Bagley  &  Co.,  119  Ga. 
778,  334 

V.  Exchange    Bank    (Iowa), 

68  N.  W.  780.  607 

V.  Kinsey,  8  Ga.  421,  436 

V.  Mayo,  56  Me.  40,  525 


Thomas  v.  Page,  3  McLean  (U. 
S.)  167,  310 

V.  Passage,   54    Ind.   106,  56 

V.  Ruddell,  66  Ind.  326,  240,  489 
V.  Shoemaker,    6    Watts    (S. 

Pa.)  179,  614 

V.  Todd,  6  Hill  (N.  Y.)  340,     100 
V.  Watkins,  16  Wis.  549,     20,  386 
Thomason  v.  Wilson  (Ga.  1906), 

56  S.  E.  302,  135 

Thompson  v.  Armstrong,  5  Ala. 

383,  183,  186,  383 

V.  Bank,  113  N.  Y.  325,     121,  291 

V.  Bank,  146  U.  S.  449,  291 

V.  Buehler   (Neb.),  95  N.  W. 

854,  698 

V.  DesMoines  Driv.  Park,  112 

Iowa  628,  81 

V.  Gibson,  1  Mart.  N.  S.  150,  439 
V.  Hale,  23  Mass.  259,  239 

V.  Hale,  6  Pick.  (Mass.(  259,  419 
V.  Hinds,  67  Me.  177,  112,  116 
V,  Hudgins,  116  Ala.  93,  209 

V.  Ketcham,  8  Johns.  (N.  Y.) 

190,  339 

V.  Lowe,  111  Ind.  272,  635 

v.  Maddox,  117  Ala.  468,  246,  366 
v.  Mansfield,  43  Me.  146,  208 

V.  Massie,  41  Ohio  St.  307, 

139,  140,  142 
V.  McClelland,  29  Pa.  St.475, 

425,  446,  635 
V.  McDonald,  17  Up.  Can.  Q. 

B.  304,  341 

V.  Moore,    4    T.   R.   B.   Mon. 

(Ky.)  79,  296 

V.  Niggley,  53  Ken.  664,  115 

V.  Oliver,  18  Iowa  417,  343 

V.  Boston,  62  Ky.  389,  274,  355 
V.  Poston,  1  Duv.  (Ky.)  389,  385 
V.  Rathbun,  18  Oreg.  202,  145 

V.  Rawles,  33  Ala.  29,  333 

V.  Roatcup,  27  Mo.  283,  447 

V.  Samuels   (Tex.),  14  S.  W. 

143,  296 

V.  S  h  e  p  h  e  r  d,      12      Mete. 

(Mass.)  311,  282 

V.  Sioux    Falls    Nat.    Bank, 

150  U.  S.  231,  243 

V.  Taylor,  66  N.  J.  L.  253,         60 
.     V.  Taylor,  65  N.  J.  L.  107,  60 

V.  Union  Trust  Co.,  130  Mich. 

508,  604 

Thomson  Co.  v.  Capital  Co.,  56 

Fed.  849,  457 

Thomson-Houston  Electric  Co. 
V.  Capitol  Electric  Co.,  65 
Fed.  341,  350,  476 

Thorn  v.  Pinkham,  84  Me.  101,    112 


CXXVlll 


TABLE  OF  CASES. 


[References  are  to  Sections.'] 


Thornburg  v.  Emmons,  23  W. 
Va.  325,  496 

V.  Harris,  3  Coldw.    (Tenn.) 

157,  293 

Thornton  v.  Appleton,  29  Me. 
298,  177 

V.  Maynard,  L.  R.   10  C.   P. 

695,  623 

V.  Wynn,   12   Wheat.   183,         525 
Thorp  V.  Goewey,  85  111.  611,  658 

V.  Mindeman,   123    Wis.    149, 

366,  439 
Thorpe  v.  Dickey,  51  Iowa  676,      102 
V.  White    (Mass.),   74   N.   E. 

592,  136 

Thrall  v.  Norton,  44  Vt.  386,  208 

Thurgood    v.    Spring,    139    Cal. 

596,  202,  268 

Thurman  v.  Burt,  53  111.  129,       109 
V.  Van  Brunt,  19  Barb.    (N. 

Y.)  409,  274 

Thurston  v.  James,  6  R.  I.  103,     341 
V.  McKeown,  6  Mass.  428,  119 

Tichenor  v.  Avensboro  Sav. 
Bank  &  Trust  Co.,  24  Ky.  Law 
R.  145,  68  S.  W.  127,  653 

Ticonic    Bank    v.    Stackpole,    41 

Me.  321,  553 

Tidmarch  v.  Grover,  1  Maule  & 

S.  735,  162 

Tierney   v.    Peerless    Shoe    Co., 

68  N.  Y.  Supp.  392,  618 

Tilden  v.  Blair,  21  Wall.  (U.  S.) 

241,  303 

Till  V.  Collier,  27  Ind.  App.  333,      58 
Tillinghast  v.  Craig,  9  Ohio  Cir. 

Dec.  459,  288 

Tillock  V.  Webb,  56  Me.  100,  29 

Tillottson  V.  Grapes,  4  N.  H.  444,  198 
Tillou  V.  Britton,  9  N.  J.  L.  120, 

627,  636 

Tilson  V.  Gatling,  60  Ark.  114,      262 
Timberlake  v.  Thayer,  76  Miss. 

76,  524,  539 

Timerson,  In  re,  80  N.  Y.  Supp. 

639,  214 

Tinker  v.  Babcock,  107  111.  App. 

78,  679 

Tinsdale  v.  Mallett  (Ark.  1904), 

88  S.  W.  481,  332 

V.  Murray,    9    Daly    (N.   Y.) 

446,      246,  249,  383,  390,  391 
Tinson  v.  Francis,  1  Camp.  19, 

282,  420 
Tischler  v.  Shurman,  97  N.  Y. 

Supp.  360,  472 

Titus  V.  Himrod,  39  Barb.    (N. 

Y.)  581,  431 

Tobey  v.  Berley,  26  111.  426,  525 


Tobey    v.    Chipman,    13    Allen 

(Mass.)  123,  653 

Tobias  v.   Sadler,  5  N.  Y.  Leg. 

Obs.  100,  271 

Tod    V.    Kentucky    Union    Land 

Co.,  57  Fed.  47,  85,  483 

V.  Wick,  36  Ohio  St.  370,  191 

Todd  V.  Bailey,  58  N.  J.  L.  10,        58 

V.  Cromer,  36  Neb.  430,  366 

V.  Roberts,  1  Tex.  Civ.  App. 

8,  342 

Toledo  &  Ann  Arbor  R.  R.  Co.  v. 

Johnson,  55   Mich.  456,  345 

Tollman  v.  Quincy,  129  Fed.  974,  285 
Tomblin  v.  Gallen,  69  Iowa  299, 

383,  390 

V.  Higgins,  53  Neb.  92,  306 

Tomlin  v.  Morris,  26  Ky.  L.  Rep. 

681,  302 

V.  Thornton,  99  Ga.  585,   574,  583 

Tompkins    v.    Garner,    8    N.    Y. 

Supp.  193,  199 

Toms  V.  Jones.  127  N.  C.  464,  73,  439 
Toner  v.  Wagner,  158  Ind.  447, 

137,  142 
Tooke  V.  Newman,  75  111.  215,  376 
Toole  V.  Crafts  (Mass.),  78  N.  E. 

775,  524,  538 

Topeka  Capital  Co.  v.  Merriam, 

60  Kan.  397,  241 

Torinus  v.  Buckham,  29  Minn. 

128,  208 

Torpey  v.  Tebo,  184  Mass.  307,      320 
Torrey  v.   Grant,   10   Smedes   & 

M.   89,  303,  636,  665,  668 

Totten  V.  Bucy,  57  Md.  452,    474,  476 
Tourtelot  v.  Bushnell,  66  Minn. 
1,  270 

V.  Reed,  62  Minn.  384,  475 

Towle  V.  American  Bldg.  L.  &  I. 
Co.,  78  Fed.  688,  689,  121 

V.  Starz,  67  Minn.  370,  507 

Towles  V.  Tanner,  21  App.  D.  C. 

530,  96,  183 

Towles  Excelsior  Co.  v.  Tuman, 

96  Ga.  506,  85 

Towne  v.  Rice,  122  Mass.  67, 

303,  367 
Towner  v.  McClelland,   110   111.     • 

542,  265 

Town  of  Northborough  v.  Wood, 

142  Mass.  551,  688 

Townsend    v.    Auld,    31    N.    Y. 

Supp.  29,  542 

V.  Bush.  1  Conn.  260,  303 

V.  Hagar,  72  Fed.  949,  89 

V.  Heer    Dry    Goods    Co.,    85 

Mo.  526,  514 

V.  Wagon  Co.,  10  Neb.  615,      164 


TABLE   OF    CASES. 


CXXIS 


[References  are  to  Sections.} 


Townsley  v.  Sumrall,  2  Pet.  (U. 

S.)  170,  199,  272,  491,  494,  542 

Traders'  Bank  v.  Alsop,  64  Iowa 

98,  297 

Traders'  Nat.  Bank  v.  Jones,  93 
N.  Y.  Supp.  768,  549 

V.  Rogers,  167  Mass.  316,  45 

N.  E.  923,  655 

Tradesman's      Nat.      Bank      v. 

Looney,  99  Tenn.  278,  474 

Trafford  v.  Hall,  7  R.  I.  104, 

359,  431,  637 

Trammell    v.     Swift    Fertilizer 

Works,  121  Ga.  778,  680 

Trapp  V.  Spearman,  3  Esp.  57,      164 
Trask  v.  Wingate,  63  N.  H.  474, 

116,  238,  386 

Travelers'  Ins.  Co.  v.  Denver,  11 
Colo.  434,  183 

Treacy   &   Wilson  v.    Chinn,   79 
Mo.  App.  648,  288 

Treadway  v.  Antisdel,  86  Mich. 
82,  504,  529 

Treadwell    v.    Himmelmann,    50 
Cal.  9,  693 

Trease  v.  Haggin,  107  Iowa  458,    515 

Tredwell  v.  Blount,  86  N.  C.  33,    627 
V.  Lincoln,   52   Hun    (N.  Y.) 

614,  242,  333 

Trego  V.  Lowrey,  8  Neb.  238,  199 

Tremont  Bank  v.  Paine,  2  Wil- 
liams 24,  679 

Trentman  v.  Fletcher,  100   Ind. 
105,  339 

Trieber  v.  Commercial  Bank  of 
St.  Louis,  31  Ark.  128,  29 

Trigg  V.  Taylor,  27  Mo.  245, 

135,  136 

Triplett  v.  Holly.  4  Litt.  130,  447 

Trow  V.  Baaley,  56  Vt.  560,  606 

Troxell   v.   Malin,    9   Pa.    Super. 

Ct.  383,  292,  473 

Troy  &  Cohoes  Shirt  Co.,  In  re, 

136  Fed.  420,  474,  483 

Troy    Fertilizer    Co.   v.    Zachry, 

114  Ala.  177,  55 

True  V.  Thomas,  16  Me.  36,  523 

V.  Triplett,  4  Mete.  57,  303 

Trueman  v.   Hurst,   1   Term  R. 

40,  648 

Truesdale  v.  Watts,   12  Pa.  St. 

73,  208 

Trust  Co.  V.  Bendow,  135  N.  C. 
303,  194 

V.  Gray,  12   App.   D.  C.   276, 

287,  380 

V.  Nat.  Bank,  101  U.  S.  68, 

456,  460 

Joyce  Defenses — ix 


Trustees   v.   Hill,   12    Iowa   462, 

252,  352 
Trustees  of  Internal  Imp.  Fund 

V.  Lewis,  34  Fla.  424,  699 

Trustees  of  the  Town  of  Ewing 

V.  Clarkesville,  61  Ind.  129,       231 
Tryon  v.  Oxley,  3  G.  Greene,  289,  498 
Tuck  V.  National  Bank  of  Ath- 
ens, 108  Ga.  446,  684 
V.  Tuck,  5  Mees.  &  W.  109,        596 
Tucker    v.     Horner,     3     Coldw. 
(Tenn.)   157,  293 
v.  Ronk,  43  Iowa  80,  196 
V.  Smith,  4  Me.  415,                   419 
V.  Wilamouicz,  8  Ark.  157,        303 
Tuckes  V.  West,  29  Ark.  386,  29 
Tufts  V.  Kidder,  8  Pick  (Mass.) 
53,                                             311,  339 
V.  Shepherd,  49  Me.  312,   304,  421 
Tuggle     V.     Adams,     3     A.     K. 
Marsh.  (Ky.)   429,       238,  243,  269, 

405 
Tullett   V.   Armstrong,   4    Beav. 

319,  323,  32 

Tumelty  v.  Bank  of  Missouri,  13 

Mo.  276,  22 

Tunno  v.  Lague,  1  Johns.  Cas. 

1,  521 

Turcas  v.  Rogers,  3  Mart.  N.  S. 

(La.  L.)   699,  419 

Turley    v.    Bartlett,    10    Heisk. 

(Tenn.)  221,  202,  295 

Turnbull   v.    Bowyer,    40   N.    Y. 
456,  645 

v.  Bouyer,    2    Rob.    (N.    Y.) 

406,  645 

V.  Maddox,  68  Md.  579,  525 

Turner  v.  Beggarly,  11  Ired.  (N. 

C.)   331  419 

V.  Hoy'le,  95  Mo.  345,  436 

v.  Iron    Chief    Min.    Co.,    74 

Wis.  355,  506,  564,  570 

V.  Merchants'  Bank,  126  Ala. 

397,  302 

V.  Mitchell,    22   Ky.   L.  Rep. 

1784,  240 

Tuscaloosa  Ice  Mfg.  Co.  v.  Wil- 
liams, 28  So.  669,  288 
Tuscaloosa   Cotton    Seed   Co.   v. 

Perry,  85  Ala.  158,  333,  341 

Tuttle  V.  Bartholomew,  12  Mete. 
454,  460 

V.  Cooper,    5    Pick.    (Mass.) 

414,  657 

V.  George  A  Tuttle  Co.   (Me. 
1906),  64  Atl.  496, 

80,  208,  226 

V.  Wilson,  33  Minn.  422,  635 

Tuxbury  v.  Abbott,  59  Me.  466,       302 


cxxx 


TABLE    OF    CASES. 


[References  are  to  Sections.l 


Twelfth  Ward  Bank  v.  Brooks, 

71  N.  Y.  Supp.  388,  701 

Twentieth  Century  Co.  v.  Quill- 
ing (Wis.  1907),  110  N.  W.  174, 

190,  192 
Twenty-Sixth     Ward     Bank    v. 

Stearns,  148  N.  Y.  515,  315 

Tye  V.   Chickasha  Town   Co.,  2 

Ind.  Ty.  113,  194 

Tyler  v.  Jaeger,  93  N.  Y.  Supp. 

558,  234 

V.  Still,  106  N.  W.  114,  214 

V.  Todd,  36  Conn.  218,  96 

V.  Waddington,  58  Conn.  375,  504 

Tyrell    v.    Railroad    Co.,    7    Mo. 

App.   294,  660 

Tyson  v.  Bray,  117  Ga.  639,  412 

V.  Jackson   Bros.    (Tex.   Civ. 

App.  1905),  90S.  W.  930,     599 

U 

Uchtmann   v.    Tonyes,    64    Hun 

(N.  Y.)   634,  286 

Ueland    v.    Hibbard,    65    N.    Y. 

Supp.  790,  505 

Ullen    V.    Brohm    (Colo.    App.), 

79  Pac.  180,  402 

Unangst  v.  Fetler,  84  Pa.  135,  62 

Unapa     Nat.     Bank     v.     Butler, 

(Tenn.),  83  S.  W.  655,         465,  475 
Underbill    v.    Phillips,    10    Hun 

(N.  Y.)  591,  183,  186 

Underwood   v.   Patrick,  94   Fed. 
468,  660 

V.  Simonds,  12  Mete.  (Mass.) 

275,  312 

Unger  v.  Ross,  12  Pa.  St.  601,        297 

Union   Bank  v.  Beirne,   1   Grat. 

(Va.)   226,  73 

V.  Cook,  2  Cranch  C.  C.  218,     152 

V.  Crine,  23  Fed.  809,        238,  342 

V.  Fonteneau,  12  Rob.  120,       553 

V.  Fowlkes,  2  Sneed  555,  511 

V.  Gregory,  46  Barb.  98,  542 

V.  Hyde,  6  Wheat.  572,      528,  543 

V.  Middlebrook,  33  Conn.  95,    150 

V.  Morgan,  2  La.  Ann.  418,       280 

Union    Banking   Co.    v.    Martin, 

113  Mich.  521,  174,  194 

Union    Bank    of    Rochester    v. 

Gilbert,  83  Hun  417,  303 

Union  Central  Insurance  Co.  v. 

Huyck,  5  Ind.  App.  474,      116,  127 
Union    Cent.    Life    Ins.    Co.    v. 
Ehrman,    2    Wkly.    Law    Bui. 
(Ohio)    3,  95 

Union    Collection    Co.    v.    Buck- 
wan   (Cal.  1907),  88  Pac.  708, 

196,  198 


Union  Credit,  etc.,  Co.  v.  Union 
Stockyard,  etc.,  Co.,  92  N.  Y. 
Supp.  269,  302 

Union  Gold  Min.  Co.  v.  Rocky 
Mountain  Nat.  Bank,  2  Colo. 
248,  671 

Union  Loan  &  Trust  Co.  v.  So. 
California  Motor  Road  Co.,  51 
Fed.  840,  662 

Union  National  Bank  v.  Can- 
nonburgh  Iron  Co.  (Pa. 
Sup.),  6  Atl.  577,  591 

V.  Cross,  100  Wis.  174,  339 

V.  Fraser,  63  Miss.  231, 

303,  305,  465,  614 
V.  Neil,  149  Fed.  711,  89 

V.  Roberts,  45  Wis.  373, 

142,  161,  369,  376 
V.  Wheeler,  60  N.  Y.  612,  302,  306 
V.  Williams  Milling  Co.,  117 

Mich.  535,  532 

Union   Sav.  Assn.  v.   Diebold,  1 

Mo.  App.  323,  102 

Union    Stock   Yards   Nat.    Bank 
V.  Coffman,  104  Iowa  594,       46,  55 
V.  Haskell    (Neb.),  90  N.  W. 

233,  698 

Union    Trust   Co.   v.    McClellan, 

40  W.  Va.  405,  247,  381,  390 

United  States  v.  Bank  of  United 
States,  5  How.  382,  527,  528 

V.  Barker,  12  Wheat.  559,         511 
V.  Bank    of    the    Metropolis, 
15  Pet.   (U.  S.)   377, 

199,  270,  377 
V.  National  Exchange  Bank, 

45  Fed.  163,  100,  675 

V.  National  Exch.  Bank,  141 

Fed.  209,  100 

V.  Read,  Fed.  Cas.  No.  16125,   398 
V.  Spalding,  2  Mason  (C.  C.) 

478,  142 

United  States  Bank  v.  Dunn,  6 
Pet.  51,  581 

V.  Carneal,  2  Pet.  543,  517 

V.  Goddard,  5  Mason  366,         568 
V.  Geer,  53  Neb.  67,  348 

V.  McNair,  116  N.  C.  550,         627 
V.  National    Park    Bank,    59 

Hun   (N.  Y.)   495,  173 

V.  Russell,    3    Yeates     (Pa.) 

391,  136 

V.  Southard,  17  N.  J.  L.  473, 

523,  525 

United  States  Bank  of  New 
York  V.  McNair,  116  N.  C.  550,   241 

United  States  Nat.  Bank  v.  Bur- 
ton, 58  Vt.  426,  560 
V.  Ewing,  131  N.  Y.  506,          390 


TABLE    OF    CASES. 


CXXXl 


United  States  Nat.  Bank  v.  First 

Nat.  Bank,  79  Fed.  296,  49  U. 

S.  App.  67,  471 

V.  McNair,  116  N.  C.  550,  240 

United  States  Trust  Co.  v.  Har- 
ris, 2  Bosw.  (N.  Y.)  75,  607 
United  States  Wind  Engine,  etc., 

Co.  V.  Simonton,  84  Wis.  545,  348 
University  Bank  v.  Tuck,  96  Ga. 

456,  246 

University   Press,    John   Wilson 

&  Sons  V.  Williams,  59  N.  Y. 

Supp.   817,  564,  569 

Unseld    v.    Stephenson,    33    Mo. 

161,  431 

Upham  V.  Smith,  7  Mass.  265,  342 
Upson   V.    Mt.   Morris   Bank,   92 

N.  Y.  Supp.  1101,  688 

Urquhart    v.    Thomas,    24    La. 

Ann.  95,  523 


Vacitt  V.  James,  39  Tex.  189,  24 

Valette  v.  Mason,  1  Ind.  288,    359,  376 
V.  Mason,  1  Smith  89,  377 

Vallett  V.  Parker,  6  Wend.  615, 

79,  238,  291,  317 
Valley  Nat.  Bank  v.  Urich,  191 

Pa.  556.  541 

Valley    Sav.    Bank    of    Middle- 
town   V.    Mercer,   97   Md.    458, 

465,  476 
Van  Aiken  v.  Dunn,  117  Mich. 

421,  232 

Vananken  v.  Hornbeck,  14  N.  J. 

L.   178,  135 

Vanatta  v.  Bank,  9  Ohio  St.  27,    671 
V.  Lindley,   98   111.  App.  327, 

aff'd  198  111.  40,  13 

Van  Brunt  v.  Eoff,  35  Barb.  (N. 
Y.)    501,  141,  143 

V.  Vaughn,  47  Iowa  145,  555 

Van   Buren   County   Sav.    Bank 

V.  Mills,  99  Mo.  App.  65,  702 

Vanburnt  v.  Singley,  85  111.  281,     27 
Van  Buskirk  v.  Day,  32  111.  260,    449 
Vance     v.     Lowther,     L.     R.     1 
Exch.    Div.    176,  136,  152 

V.  Wells  &  Co.,   6  Ala.  737,       31 
Vandemal  v.  Dougherty,  17  Mo. 

277,  321,  343 

Vanderpool    v.    Brake,    28    Ind. 

130,  653 

Van   Duzer  v.   Howe,   21   N.  Y. 

531,  22,  23,  144,  627 

Van    Eps    v.    Dullaye,    6    Barb. 

(N.  Y.)    244,  94 

Van  Etten  v.  Hemann,  35  Mich. 
513,  270 


[References  are  to  Sections.l 

Van  Etten   v.   Howell,   40   Neb 


850,  320,  339 

Vankirk   v.   Skillman,   34   N.   J. 

L.   109,  45,  46 

Van  Metre  v.  Wolf,  27  Iowa  341,      62 
Vann  v.  Edwards,  128  N.  C.  425,     52 
V.  Marbury,   100  Ala.  438, 

246,  616 

Van   Patton   v.   Beals,   46    Iowa 

62,  71 

Van  Pelt  v.  Eagle   Ins.  Co.,  18 

La.  64,  439 

Vansteeburgh     v.     Hoffman,    15 

Barb.   (N.  Y.)   28,  30 

Van     Stophorst     v.     Pearce,     4 

Mass.  258,  297 

Vanstrum     v.      Liljengren,      37 

Minn.   191,  199,  272,  324 

Van    Valkenburgh    v.     Stupple- 

beem,   49    Barb.   99,  465 

Van  Wagoner,  23  N.  J.  L.  283,  604 
Van    Winkle    Gin    &    Mach.    Co. 

v.   Citizens'   Bank   of  Buffalo, 

89  Tex.  147,  274 

Variscope   Co.   v.   Brady,    77   N. 

Y.  Supp.  159,  280 

Varner  v.  Lamar,  9  Ga.  589,  416 

Varnum    v.    Mauro,     2    Cranch 

425,  208,  286,  354 

Vary  v.  Norton,  6  Fed.  808,  305,  340 
Vass  V.  Riddick,  89  N.  C.  6,  133 

Vatterlieve  v.  Howell,  37  Tenn. 

441,  242,  246,  447 

Vaughan  v.  Fowler,  14  S.  C.  355,  176 
Vauliew  v.  Mason,  1  Cart.  288,  376 
Veach    v.    Thompson,    15    Iowa 

380,  105 

Veazie  v.  Willis,  6  Gray  (Mass.) 

90,  .  645 

Velie  v.  Titus,  60  Hun    (N.  Y.) 

405,  194 

Veuable  v.  Lippold,  102  Ga.  208,     41 
V.  Stewart,  102  Ga.  208,  48 

Vere  v.  Lewis,  3  Term  R.  182,  199 
Verder  v.  Verder,  21  Atl.  611,  507 
Vermont  Loan  Co.  v.  Hoffman, 

5  Idaho  376,  291 

Vette  V.  Geist,  155  Mo.  27,  302 

V.  Sacher,  114  Mo.  App.  363, 

89  S.  W.  360,  473 

Vickery  v.  Assoc,  21  Fed.  773,  622 
Vickroy  v.  Pratt,  7  Kan.  238,  263 
Victor  v.  Bauer,  11  N.  Y.  St.  R. 

531,  380 

Viets  V.  Union  Nat.  Bank,   101 

N.  Y.  658,  549 

Villa  Rica   Lumber  Co.  v.   Par- 
tain,  92  Ga.  370,  47 


CXXXll 


TABLE    OF    CASES. 


[References  are  to  Sections.} 


Vining  v.  Bricker,  14   Ohio   St. 

331,  288 

Vinson  v.   Palmer,   45   Fla.   630, 

34  So.  276,  407 

Vinton  v.   Crowe,   4   Cal.   309, 

419,  436 
V.  Peck,  14  Mich.  287,         29,  240 
Viser  v.  Bertrand,  14  Ark.  267,     288 
Vliet  V.   Eastburn,   63   N.   J.   L. 

450,  45 

Voe   V.    Smith,   1    Smith    (Ind.) 

88,  329 

Vogle  V.  Ripper,  34  111.  100,  137 

Voiers  v.   Stout,  4   Bush    (Ky.) 

572,  113 

Voltz  V.  Bank,  158  111.  532,  88 

Von  Windlich  v.  Klaus,  46  Conn. 

433,  126 

Voorhees  v.  Fisher,  9  Utah  303,     402 
Voreis    v.    Nussbaum,    131    Ind. 

267,  45,  213 

Voris    V.    Harshbarger,    11    Ind. 

App.  555,  238 

Vosburg   v;    Diefendorf,    119    N. 

Y.   357,  193,  292,  488 


W 


Wachovia  Nat.  Bank  v.  Ireland, 

122  N.  C.  571,  306 

Wachusett    Nat.    Bank   v.    Fair- 
brother,   148  Mass.   181,  569 
Waddell's   Succession,  In  re,  44 

La.  Ann.  361,  529 

Waddill  V.  Hanover  Nat.  Bank, 
67  N.  Y.  Supp.  305,  48  Misc. 
Rep.  578,  119 

Wade    V.    Foster,    24    Ky.    Law- 
Rep.   1292,  237,  439 
V."  Wade,  36  Tex.  529,  255 
V.  Wickersham,  27  Neb.  457,    288 
V.  Withington,    83    Mass.    (1 

Allen)    561,  136,  165 

Wadley,  Town  of,  v.  Lancaster, 

124  Ga.  354,  293 

Wadsworth  v.  Dunham,  117  Ala. 
661,  288 

V.  Smith,     10     Shep.     (Me.) 

500,  208 

Wager  v.  Brooks,  37  Minn.  392,    322 
Waggoner   v.   Colvin,    11   Wend. 
27,  406 

V.  German-American  Co.,  56 
S.  W.  961,  22  Ky.  L. 
R.   215,  644 

Wagner  v.  Crook,  167  Pa.  259,  583 
V.  Dietrich,  50  Mo.  484,  270,  472 
V.  Freshl,  56  N.  H.  495,  94 

Wagnor  v.  Pease,  104  Ga.  417,      302 


Wahling     v.      Standard     Pump 

Mfg.  Co.,  9  N.  Y.  Supp.  739,  80 

Wait   V.   Chandler,    63    Me.    257, 
43,  119,  307,  314 

V.  Pomeroy,  20   Mich.  425, 

136,  171 

Waite    V.    City    of    Santa   Cruz, 

46  L.  Ed.  552,  488 
V.  Kalurisky,     22     111.     App. 

382,                                  270,  271 
Wakeman  v.  Sherman,  9  N.  Y. 

85,  651 
Walbridge    v.     Kibbee,     20    Vt. 

543,  635 

V.  Senold,  21  Conn.  424,  108 
Waldner  v.  Bowden  State  Bank 

(N.  D.),  102  N.  W.  169,  302 
Waldo  Bank  v.  Lumbert,  16  Me. 

416,  89,  90 

Waldorf    v.    Simpson,    15    App. 

Div.   (N.  Y.)   297,  180 
Waldron    v.    Young,    9     Heisk. 

(Tenn.)   777,  23 

Waldrop  v.  Black,  74  Cal.  409,  186 

Walker  v.  Bank  of  State  of  New 

York,  9  N.  Y.  582,  497 

V.  Crawford,  56  111.  444,     320,  361 

V.  Ebert,  29  Wis.  194,  25,  27 

V.  Eyth,  25  Pa.  St.  216,  632 

V.  Fearhake         (Tex.        Civ. 

App.),  52  S.  W.  629,  616 

V.  Gregory,  36  Ala.  180,  300 

V.  Hall,  66  Miss.  390,         591,  629 

V.  Jeffries,  45  Miss.  160,  293 
V.  McConnico,   18   Tenn.    (10 

Yerg.)   228,  125 

V.  McKay,  2  Mete.  294,     449,  472 

V.  Millard,  29  N.  Y.  375,  208 

V.  Perkins,  3  Burr.  1568,  300 

V.  Rogers,  40  111.  278,        523,  525 
V.  Russell,  17  Pick.    (Mass.) 

280,  338 

V.  Smith,  2  Vt.  339,  208 
V.  Squires,   Hill   &  Den.    (N. 

Y.)   23,  203 

V.  Stetson,  14  Ohio  St.  89,  555 

V.  Thompson,  108  Mich.  686,  365 
V.  Wilson,   79   Tex.   188, 

419,  439,  467 

V.  Wilson,  70  Tex.  188,  420 

Wall  V.  Bry,  1  -La.  Ann.  312,  538 
V.  Monroe  County,  103  U.  S. 

74,  232 

Wallace  v.  Agry,  4  Mason  336,  496 

V.  Finnegan,  14  Mich.  170,  613. 

V.  Goodlet,  104  Tenn.  670,  302 

V.  Goodlet,  93  Tenn.  598,  59 
V.  Jewell,   26   Ohio   St.    163, 

174,  175 


TABLE   OF    CASES. 


CXXXlll 


[References  are  to  Sections.l 


I 


Wallace  v.  Lark,  12  S.  C.  576,  293 
V.  McConnell,    13    Pet.    136, 

502,  514 

V.  Randol  (Cal.),  54  Pac.  842,  694 

V.  Richards,  16  Utah  52,  504 

V.  Romley,  91  Ind.  586,  55 

V.  Tice,  32  Oreg.  283,  137 
V.  Wallace,  8  111.  App.  69, 

147,  148 

Wallach  v.   Bader,  7   N.  Y.   St. 

Rep.  375,  353 

Walmseley  v.   Cooper,  11  Adol. 

&  E.  216,  337 

Walsh  V.  Blatchley,  6  Wis.  422,  501 
V.  Dart,  23  Wis.  334,  496,  501 
V.  Hunt,  120  Cal.  46,  52  Pas. 

115,  661 

V.  Peterson,  59  Neb.  645,  698 

Walston   V.    Davis    (Ala.    1906), 

40  So.  1017,  400 

Walter   v.    Cubley,   2    Cromp.   & 
M.   151,  137,  149,  162 

V.  Logan     (Kan.),     65     Pac. 

225,  447 

Walter  A.  Wood  Mowing  Mach. 

Co.  V.  Laud,  98  Ky.  516,  461 

Walters  v.  Armstrong,  5   Minn. 

448,  332 

V.  Munroe,  17  Md.  154,       74,  525 

V.  Palmer,  110  Ga.  776,  119 

Walton  V.  Black,  5  Houst.  149,      258 

V.  Bristal,  125  N.  C.  419,  52 

V.  Hastings,   4    Camp.   233, 

135,  152,  154 
V.  Young,  26  La.  Ann.  164,       419 
Walton  Guano  Co.  v.  Copeland, 

112  Ga.  319,  28,  303 

Walton    Plow   Co.   v.   Campbell, 

35  Neb.  174,  147,  161 

Walwyn  v.   St.  Quentin,  2  Bsp. 

515,  523 

Wanzer  v.  Tupper,  8  How.  234,      528 
Waples-Painter   Co.   v.   Bank   of 
Commerce    (Ind.   Ter.),  97   S. 
W.   1025,  528,  545 

Ward    V.    Allen,    43    Mass.     (2 
Mete.)    53,  136,  154 

V.    City    Trust    Co.,    102    N. 
Y.  Supp.  50,  241 

V.  Doane,  77  Mich.  328,  296 

V.  Hackett,  30   Minn.  150, 

182,  316 

V.  Howard,  88  N.  Y.  74,  284 

V.  Ins.    Co..    108    Ind.    301,  9 

N.  E.   361,  645 

V.  Johnson,  51  Minn.  480,  28 

V.  .lohnson,  13  Mass.  148,  679 

V.  Martin,  3  Mo.  19,  618 


Ward  V.  Northern  Bank  of  Ken- 
tucky, 14  B.  Mon.    (Ky.)    351, 

.387,  389 
V.  Sugg,  113  N.  C.  489, 

291,  292,  302 
V.  Wick,  17  Ohio  St.  159,  341 

V.  Williams,  45  Tex.  617,  263 

V.  Whitney,  32  Vt.  89,  302 

V.  Winship,  12  Mass.  480,  687 

Warden  v.  Howell,  9  Wend.  (N. 
Y.)    170,  396 

V.  Hughes,  3  Wend.   (N.  Y.) 

418,  330,  387 

Warder  Bushnell  &  Co.  v.  John- 
son, 114  Mo.  App.  571, 

328,  681,  734 
Warder,    Bushnell     &    Glessner 
Co.  V.  Gibbs,  92  Mich.  29,  282 

V.  Myers,  96  N.  W.  992,  265 

Ware  v.  Allen,  128  U.  S.  590, 

312,  313 
V.  Russell,  57  Ala.  43,  374 

V.  Smith,  62  Iowa  159,  312 

Waring  v.  Betts,  90  Va.  46, 

513,  514,  518,  577 

Wareham    Bank    v.    Lincoln,    3 

Allen  (Mass.)  192,  383 

Warner    v.    Schultz,    74    Minn. 

252,  202 

Warnock    v.    Itawis,    38    Wash. 

144,  27,  288 

Warpole    v.    Ellison,    4    Houst. 

(Del.)    322,  170 

Warren   v.    Branch,   15   W.   Va. 

21,  128 

V.  Fant,  79  Ky.  1,  179 

V.  Haight,  65  N.  Y.  171,  133 

V.  Layton,     3     Harr.     (Del.) 

404,  148,  152 

V.  Lynch,   5    Johns.    (N.   Y.) 

239,  125 

Warrenburg      v.       Co-Operative 

Bldg.  Assn.  V.  Zoll,  83  Mo.  94,    341 
Warrington    v.    Early,    2    El.    & 
Bl.  763,  170 

V.  Early,  23  Law  J.  Q.  B.  47,    179 
Washburn  v.  Picot,  14  N.  C.  390, 

108,  201,  202 
Washington   v.    Triplett,    1   Pet. 

25,  509 

Washington  College  v.  Duke,  14 

Iowa  14,  679 

Washington     Savings    Bank    v. 

Ecky,  51  Mo.  272,  136 

Waterbury  v.  Andrews,  67  Mich. 

281,  30,  44,  48 

Waterman    v.    Barrett,    4    Harr. 
(Del.)    311,  108,  238 

v.  Clark,  76  111.  428,  640 


CXXXIV 


TABLE  OF  CASES. 


348 

232 
654 


Waterman  v.  Vose,  43  Me.  504, 

135,  168,  170 
V.  Waterman,  42  Misc.  195,     271 
Waters  v.  White,  75  Conn.  98,      241 
Watford  v.  Windham,   64   S.  C. 

509,  240 

Wathen  v.  Chamberlain,  8  Dana 

(Ky.)  164,  594 

Watkins   v.   Bowers,   119   Mass. 
383  ^^2 

V.  'Maule,  2  Jac.  &  W.  237,      282 
Watson   V.   Boston   Woven   Cor- 
dage Co.,  75  Hun  (N.  Y.)  115,      18 
V.  Cabot  Bank,  5  Sandf.  423,    359 
V.  Cheshire,  18  Iowa  202, 
V.  City   of   Huron,    38   C.   C. 

A.  664, 
V.  Hoag,  40  Iowa  142, 
V.  Russell,    3    Best  &    S.    34, 

20,  376 
V.  Terpley,  18  How.  517,         564 
Watt  V.  Gans,  114  Ala.  264,  583 

V.  Rice,  1  La.  Ann.  280,  237 

Watts  V.  Burnett,  56  Ala.  340,        359 
V.  Fletcher,  107  Ind.  391,         422 
Watzlavick   v.    D.   &   A.    Oppen- 
heimer    (Tex.   Civ.   App.),    85 
S.  W.  855,  119,  359 

Way  V.  Lamb,  15  Iowa  79,  635 

V.  Peck,  47  Conn.  23,  41 

V.  Sperry,    6    Cush.    (Mass.) 

238,  651 

Wayne  Agricultural  Co.  v.  Card- 
well,   73    Ind.    555,        104,  129,  673 
Wavnesville  Nat.  Bank  v.  Irons, 

8>ed.  1,  443,  662 

Weader  v.  Bank,  126  Ind.  Ill,  593 
Weakly  v.  Hall,  13  Ohio  174,  594 
Wearse  v.  Pierce,  41  Mass.   (24 

Pick.)   141,  125 

Weathered  v.  Smith,  9  Tex.  622,    447 

Weaver    v.    Bromley,    65    Mich. 

212,  161 

V.  Farrington,  7  Misc.  405,      354 

V.  Fries,  85  111.  356,  342 

V.  Lynch,  25  Pa.  St.  449,  447 

V.  Shropshire,  42  Ala.  230,        601 

Webb  V.  Corbin,  78  Ind.  403,     25,  27 

V.  Galveston        (Tex.        Civ. 

App.),  75  S.  W.  355,  302 

V.  Mosely,  30  Tex.  Civ.  App. 

311,  117,  230 

V.  Odell,  49  N.  Y.  583,  116 

V.  Salmon,  19  L.  J.  Q.  B.  N. 

S.  34,  310,  339 

Webber  v.  Alderman,  102  Mich. 
638,  342 

V.  Gotthold,   28   N.   Y.   Supp. 

763,  555 


[References  are  to  Sections.^ 

Webber  v.   Maddocks,   3   Camp. 

1,  137 

Weber  v.  Orton,  91  Mo.  677,  328,  456 
V.  Spokane  Nat.  Bank,  12  C. 

C.A.  93,  64  Fed.  208,      88,  662 
Webster   v.    Whitworth    (Tenn. 

Ch.  App.  1901),  63  S.  W.  290,       80 
Webster  &   Co.   v.   Howe   Mach. 
Co.,  54  Conn.  394,        242,  276,  277, 

287 
Wechler  v.  First  Nat.  Bank,  42 

Md.  581,  581 

Weed  V.  Bond,  21  Ga.  195, 

192,  291,  292 
V.  Carpenter,   10   Wend.    (N. 

Y.)    403,  150,  659 

V.  Richardson,  19  N.  C.  535,      91 
V.  Snow,  3  McLean  265,  292 

V.  Van  Houten,  4  Halst.   (N. 

J.)    489,  516 

Weeks  v.  Medler,  20  Kan.  57,       322 
Weems  v.  Shaughnessy,  70  Hun 

(N.  Y.)    175,  433 

Weidman   v.    Symes,   120   Mich. 

657,  144 

Weil   V.   Carswell,   119    Ga.   873, 

47  S.  E.  217,  489 

Weil,  Succession  of,  24  La.  Ann. 

139,  288 

Weiler  v.  Henarie,  15  Oreg.  28,     681 
Weill  V.  Trosclari,  42  La.  Ann. 

171,  270 

Weimer  v.  Shelton,  7  Mo.  237,  6,      363 
Weirick    v.    Bank,    16    Ohio    St. 

297,  645 

Weisser  v.  Denison,  10  N.  Y.  68,       73 

Welch  V.  Kinney,  46  Oreg.  406,      691 

V.  Mayer,  4  Colo.  App.  440,      199 

V.  Taylor,  82  111.  574,  523 

Welles'  Appeal,  103  Pa.  St.  594,     27 


Wellington  v.  Jackson,  121  Mass. 

157,  74 

Wellman   v.    Dismukes,   42   Mo. 
101,  263 

V.  Highland,     87     111.     App. 

405,  402 

Wells  V.  Evans,   20   Wend.    (N. 
Y.)  251,  89 

V.  Gress,  118  Ga.  566, 

262,  265,  277 

V.  Masterman,  2  Esp.  731,         131 

V.  Potter,  120  Ga.  889,  196 

V.  Sutton,  85  Ind.  70,  670 

Wells  &  Fargo  Co.  v.  Simpson, 

19  Tex.  Civ.  App.  636,  536 

Welstead  v.  Levy,  1  Moody  &  R. 

138.  658 

Welter  v.  Kiley,  95  Pa.  St.  461.     446 
Wendlebone  v.   Parks,  13   Iowa 
546,  359,  365 


TABLE    OF    CASES. 


CXXXV 


[References  are  to  Sections.^ 


Wentworth   v.   Blaisdell,    17   N. 

H.  275,  295 

V.  Dows,  117  Mass.  14,  601 

V.  Goodwin,  21  Me.  150,  208 

Wenzel  v.  Shulz,  78  Cal.  221,   25,  116 

Werr  v.  Kohler,  71  N.  Y.  Supp. 

713,  540 

Wessell    V.    Glenn,    108    Pa.    St. 

105,  144 

Wessellman  v.  Stuart,  30  Misc. 

808,  195 

West  V.  Bannigan,  51  N.  Y.  App. 

Div.  328,  221,  222 

V.  Gavins,  74  Ind.  265,  214 

V.  Hayes,  104  Ind.  251,  600 

V.  Kelly's  Exrs.,  19  Ala.  353, 

309,  320 
V.  Laraway,  28  Mich.  464,  34 

V.  Miller,  125  Ind.  70,  61 

West  Bank  v.  Shawnee  Bank,  95 

U.  S.  557,  370 

Westbay  v.  Stone,  112  Mo.  App. 

411,  502,  544,  680 

Westbrook  v.  Belden  Nat.  Bank, 
97  Tex.  246,  680 

V.  Robinson,  5  Blackf.  105,       472 
Wesson   v.    Saline   Co.,    73    Fed. 

917,  919,  20  C.  C.  A.  227,  229,  488 
Wester  v.  Bailey,  118  N.  C.  183,  183 
Western  Bank  v.  Mills,  7  Gush. 

(Mass.)   539,  671 

Western  Carolina  Bank  v. 
Moore  (N.  G.  1905),  51  S.  E. 
79,  342 

Western    Cottage    Organ    Co.    v. 

Boyle,  10  Neb.  406,  260 

Western  Mfg.  Co.  v.  Rogers,  54 

Neb.  456,  320 

Western  T.  &  Coal  Co.  v.  Kilder- 

house,  87  N.  Y.  430,  442 

Western    Wheeled    Scraper    Co. 

V.  Sadilek,  50  Neb.  105,    574,  583 
Westheimer  v.  Phillips,  11  Neb. 

54,  30,  350 
Westinghouse  Go.  v.  Gainor,  130 

Mich.  393,  327,  328 

Westloh  V.  Brown,  43  Up.  Can. 

Q.  B.  402,  154 

Westminster  Bank  v.  Wheaton, 

4  R.  I.  30,  256 

Weston  V.  Hight,  17  Me.  287,        214 
West  St.   Louis   Bank  v.    Shaw- 
nee Bank,  95  U.  S.  557,  483 
Wethey  v.  Andrews,  3  Hill  582,    507 
Wetmore    v.    Blush,    Brayt.    Vt. 

55,  447,  679 
Wetter  v.  Kiley,  95  Pa.  St.  461,  271 
Weverhauser  v.  Dun,  100  N.  Y. 

150,  135,  170 


Weyman  v.  Perry,  42  S.  C.  415,  379 
Whaley    v.    American    Freehold 

Land  Mort.  Co.,  74  Fed.  73,  302 
Wharton    v.    Hopkins,    11    Ired. 

(N.  C.)   505,  635 

Wheaton  v.  Wheeler,   27   Minn. 

464,  688 

Whedbee  v.   Reddick,   79   N.   G. 

521,  620 

Wheeler  v.  Allen,  59  How.  Pr. 
(N.  Y.)   118,  386,  391 

V.  Asher,  2  Mo.  App.  1286, 

524,  539 
V.  Bancroft,  18  N.  H.  537,  325 
V.  Barret,  20  Mo.  573,  436 

V.  Guild,    20    Pick.     (Mass.) 

545,  551,  394,  621 

V.  Seamans,     123     Wis.    573, 

102  N.  W.  28,  17 

V.  Traders'  Deposit  Bank, 
(Ky.  1900),  55  S.  W. 
552,  673 

V.  Traders'  Deposit  Bank,  21 

Ky.  Law  R.  1416,  28 

Wheeling  Ice  &  Storage  Go.  v. 
Connor  (W.  Va.  1906),  55  S. 
E.  982,  80 

Wheelock  v.  Barney,  27  Ind.  462,  193 
V.  Berkely,  138  111.  153,  222,  601 
V.  Freeman,     30     Mass.     (13 

Pick.)   165,  147,  171 

Wheelwright  v.  Wheelwright,  2 

Mass.  347,  317 

Whelan  v.  Swain,  132  Cal.  389,  194 
Wheller  v.  Barret,  20  Mo.  573,  419 
Whelpley     v.      Stoughton,      112 

Mich.  593,  57 

Whett  V.  Blount,   53  S.  E.   205, 

192,  198,  202 
Whitaker    v.    Brown,    8    Wend. 
(N.  Y.)   490,  657 

V.  Crutcher,    5    Bush     (Ky.) 

621.  387 

Whitcomb  v.  Miller,  90  Ind.  384, 

316    318 
White  V.  Bank,  64  N.  Y.  316,     '  642 
V.  Camp,  1  Fla.  109,  238 

V.  Dougherty,  Mart.  &  Y.  308,  682 
V.  Duggan,  140  Mass.  18,  380 
V.  Francis,  5  Ohio  Dec.  328,  241 
V.  Goldsberg,    49    S.    C.    530, 

27  S.  E.  517,  646 

V.  Harris,  69  S.  C.  65,  142,  171 
V.  Hass,  32  Ala.  430.  147 

V.  Heylman,  34  Pa.  St.  142,  446 
V.  Howe,  3   McLean    (U.   S.) 

291,  119,  120 

V.  Keith,  97  Ala.  668,        538,  573 


CXXXVl 


TABLE    OF    CASES. 


\_References  are  to  Sections.'] 


"White  V.  Rasines,  21  N.  Y.  Supp. 
243,  106 

V.  Savage      (Or.     1906),     87 

Pac.  1040,  270 

V.  Springfield  Bank,  5  N.  Y. 

Super.   Ct.   222,  241,  242 

V.  Stoddard,  11  Gray  258,  511 

V.  Sutlierland,  64  111.  181,         365 
Whiteford    v.    Munroe,    17    Md. 

135,  73,  673 

Whitehead  v.  Emmerick   (Colo. 
1906),  87  Pac.  790,  125,  149 

V.  Heidenheimer,      57      App. 

Div.  590,  .  442 

V.  Walk-er,  10  M.  &  W.  698,       637 
Whitehouse   v.    "Whitehouse,    90 

Me.  468,  214 

Whitely  v.  Allen,  56  Iowa  224,      515 
Whiteside     v.     First     National 
Bank    (Tenn.  Ch.  App.  1898), 
47  S.  W.  1108,  394 

Whitesides   v.    Cannon,   23    Mo. 
457,  33 

V.  Northern  Bank,  10  Bush. 

(Ky.)   501,  164 

Whitlock  V.  Manciet,  10  Ore.  166, 

142 
Whitman   v.   Farmers'   Bank   of 

Chattahoochie,   8   Port.  258,       566 
Whitmer  v.  Frye,  10  Mo.  348, 

147,  169 
Whitmore     v.     Nickerson,     125 

Mass.  496,  137,  175 

Whitney  v.  Cook,  53  Miss.  551,     691 
V.  Snyden,    2   Laws    (N.   Y.) 

447,  25,  26 

Whitney  Nat.  Bk  v.  Cannon,  52 

La.  Ann.  1484.  27  So.  948,  467 

Whitt  V.  Blount,  124  Ga.  671,  53 

S.  E.  205,  '  105,   198,  202 

Whittaker  v.  Edmunds,  1  Mood. 

6  R.  366,  193 
V.  Kuhn,  52  Iowa  315,  260 
V.  Ordway,  69  N.  H.  182,          693 

Whittemore    v.    Obear,    58    Mo. 

280,  271,  350 

Whitten  v.  Hayden,  7  Allen  407, 

303,  304 
Whittenhall  v.  Korber,  12  Kan. 

618,  3 

Whittier  v.  Collins,  15  R.  I.  44, 

525,   573 
Whittington  v.  Farmers'  Bank, 

5  Har.  &  J.   (Md.)   489,  596 

Whittle  V.  Hide  &  Leather  Bank, 

7  Tex.  Civ.  App.  616,  380 
Whit  well  V.  Crehore,  8  La.    (0. 

S.)   540,  282 

Whitworth  v.  Carter,  43  Miss.  61,  61 


Wickersham  v.  Beers,  20  111.  App. 

243,  183 

Wickham  v.  Grant,  28  Kan.  517, 

119,  122 
Widoe  V.  Webb,  20  Ohio  St.  431,  288 
Wiffen  V.  Roberts,  1  Esp.  261, 

369,  376 
Wiggin  V.  Bush,  12  Johns.  306,     472 
V.  Damrell,  4  N.  H.  69,      617,  653 
Wiggins  V.  McGimpsey,  21  Miss. 

532,  260 

Wilbur  V.  Jeep,  37  Neb.  604,         635 
V.  Prior,  67  Vt.  508,         116,  117 
Wilcox  V.  Arnold,  116  N.  C.  708, 

30,  36 
V.  Aultman,  64  Ga.  544,  699 

V.  Howland,  23  Pick.  (Mass.) 

167,  110 

V.  Tennent,  13  Tex.  Civ.  App. 

220,  126 

Wilcoxon   V.   Logan,   91   N.   C. 

449  291 

Wild 'v.  Howe,  74  Mo.  551,  305 

V.  Van    Valkenburgh,    7    Cal. 

166,  514 

Wilderman  v.  Donelly,  86  Minn. 

184,  198,  238 

Wile  &  Brickner  Co.  v.  Roches- 
ter &   F.  F.   L.   Co.,  4  Misc. 
(N.  Y.)    570,  85 

Wilensky  v.  Morrison,  50  S.  E. 

472,  202,  328 

Wiley  V.  First  Nat.  Bank,  47  N. 

Y.  546,  581 

Wilkie  V.  Chandon,  1  Wash.  355, 

288,  524,  539 
Wilkins  v.   Gillis,   20   La.   Ann. 
538,  539 

V.  McGuire,  2  App.  D.  C.  448, 

514,  515 
Wilkinson  v.  Jeffers,  30  Ga.  155, 

635 
V.  Nicklin,     Fed.     Cas.     No. 

17,673,  23 

V.  Sargent,  9  Iowa  521,  699 

V.  Seary,  74  Ala.  243,  653 

V.  Wooten,  59  Ga.  584,  614 

Willard  v.  Crook,  21  App.  D. 
C.  237,  270,   279 

V.  Dow,  54  Vt.  182,  195,  196 

V.  Nelson,  35  Neb.  651,  27 

V.  Pinard,  65  Vt.  160,  183 

Willard  Mfg.  Co.  v.  G.  H.  Tier- 
ney  &  Co.,  133  N.  C.  630,  45 
S.  E.  1026,  414 

Willets  V.  Bank,  2  Duer.  (N.  Y.) 

121,  24 

WillettsR.  laine,  43  111.  432,         523 


TABLE   OF    CASES. 


CXXXVll 


[References  are  to  Sections.'] 


Willetts    V.     Phoenix     Bank,     2 

Duer  121,  443 

Williams  v.  Alexander,  79  N.  C. 
411,  293 

V.  Baker    (Mo.   App.),   73    S. 

W.  339,  260,  264,  265,  467 
V.  Baker,  100  Mo.  App.  284,  419 
V.  Baltimore    Nat.    Bank,    70 

Md.  343,  503,  570 

V.  Bank  of  United  States,  2 

Pet.   96,  553 

V.  Barrett,  52  Iowa  637,  135 

V.  Benton,  10  La.  Ann.  158, 

343,  419 
V.  Bosson,  11  Ohio  52,  389 

V.  Bristoe,    1    A.    K.    Marsh. 

(Ky.)    176,  208 

V.  Brown,    65    N.    Y.    Supp. 

1049,  583 

V.  Cheney,    3    Gray    (Mass.) 

215,  215,  288,  376 

V.  Donaldson,       8       Clarke 

(Iowa)  109,  312 

V.  Farmers'    &    D.    Bank,    20 

Ky.   Law   Rep.    1273,   49 

S.    W.    183,  47 

V.  Haines,  27  Iowa  251,  217,  254 
V.  Harrison,  3   Salk.  197,  67 

V.  Holt,    170    Mass.    351,    49 

N.  E.  654,  402 

V.  Huntington,  68  Md.  590, 

119,  474,  476 
V.  Island    City    M.    Co.,    25 

Oreg.  573,  181 

V.  Jenson,  75  Mo.  681,  684,  175 
V.  Jones,  77  Ala.  294,  679 

V.  Judy,  8  111.  282,  297 

V.  Keokuk,   44   Iowa   88,  87 

V.  Keyes,  90  Mich.  290,  699 

V.  King,  43  Conn.  569,  34,  57 
V.  Little,  11  N.  H.  79,  241,  359 
V.  Nat.  Bank  of  Baltimore,  72 

Md.   441,  375 

V.  Planters'  &  M.   Nat.  Bank, 

91  Tex.  651,  527,  533 

V.  Rabk,   1    Ind.   230,  224 

V.  Reid,    18    Wash    L.    Rep. 

(D.  C.)    607,  56 

V.  Scott,  83  Ind.  405,  338,  340 
V.  Smith,    2    Hill     (N.    Y.) 

201,  270,  359,  376,  377 

V.  Stoll,  79  Ind.  80,  27,  28 

V.  Urmiston,  35  Ohio  St.  296,  33 
V.  Wall,  60  Mo.  318,  297 

V.  Wilmington,  93  N.  C.  42,     414 
Williamson  v.  Cline,  40  W.  Va. 
194,  34,   47 

V.  Doby,  36  Ark.  689,  421 

V.  Fox,  30  N.  J.  Eq.  488,  629 


Williamson   v.   Watts,   1   Camp. 

552,  67 

Willis   V.   Barrow    (Mo.),   45   S. 

W.    289,  634 

V.  Finley,  173  Pa.  28,  574 

V.  Green,  5  Hill  232,         520,  561 

V,  Twambly,  13  Mass.  204, 

63,    446 

Willmarth  v.  Crawford,  10  Wend. 

(N.  Y.)    241,  85 

Wills  V.  Wilson,  3  Oreg.  308,         167 
Wilmington  v.  Kitchin,  91  N.  C. 

39,  150 

Wilson  V.  Denton,  82  Tex.' 531,     237 
V.  Ellsworth,  25  Neb.  246, 

184,   201 

V.  Forder,    20    Ohio    St.    89, 

5  Am.  Rep.  627,  17,   610 

V.  Henderson,    9    Sm.    &    M. 

(Miss.)    375,  145 

V.  Holmes,  5  Mass.  543,  348 

V.  labeil,   45  Ala.   142,  273 

V.  Jamieson,  7  Pa.  St.  126,  149 
V.  Jordan,  3  Stew.  &  P.  (Ala.) 

92,  208 

V.  Kinsey,  49  Ind.  35,  22 

V.  Knight,  59  Ala.  172,  303 

V.  Lewiston    Mills    Co.,    150 

N.  Y.  314,  277 

V.  Metropolitan    R.    R.    Co., 

120  U.  S.  145,  370,  483 

V.  Powers,  131  Mass.  539,  541, 

312 
V.  Richards,  28  Minn.  337,  555 
V.  Riddler,  92  Mo.  App.  335, 

119,  475 
V.  Roche,  58  N.  Y.  642,  380 

V.  Senier,  14  Wis.  380,  505,  521 
V.  Skaggs,  10  Tex.  298,  .  73 
V.  Van  Winkle,  2   Gil.    (111.) 

684,  236 

V.  Wright,   116   Mich.   476,        684 
Wilson's   Admrs.   v.    Green,    25 

Vt.  450,  128 

Wilson,  Ex  parte.  11  Ves.  411,        523 
Wiltbank  v.  Tobler,  181  Pa.  St. 

103,  45 

Wilthaus  V.  Ludecus,  5  Pick.  L. 

(S.  C.)    326,  5B 

Wiltsie  V.  Northam,  5  Bosw.  (N. 
Y.)  421,  635 

V.  Northam,  3  Bosw.  (N,  Y.) 

162,  239 

Wimbish  v.  Wade,  21  La.  Ann. 

180,  350 

Win  V.  Thomas,  55  N.  H.  294,       288 
Winans  v.  Gibbs  &  Starrett  Mfg. 
Co.,  48  Kan.  777,  212,  259 


CXXXVlll 


TABLE   OF    CASES. 


^References  are  to  Sections.'i 


Windham  County  Bank  v.  Ken- 
dall, 7  R.  I.  77,  89,  131 

Windle  v.  Canaday,  21  Ind.  248,    655 

Winebrinner  v.   Weigsger,   3  T. 
B.  Mon.  33,  300 

Wineman  v.  Oberne,  40  III.  App. 
269,  202,  272 

Wing  V.  Dunn,  24  Me.  128,  302 

V.  Ford,  89  Me.  140,  35  Atl. 

1023,  475 

Wingo    V.    McDowell,    8    Rich. 
(S.  C.)   446,  183 

Winkle  v.  Citizens'  Bank  (Tex.), 
33  S.  W.  862,  439 

Winklemam  v.  Choteau,  78  111. 
107,  202 

Winkles  v.  Guenther,  98  Ga.  472, 

135 

Winn  V.  Wilkins,  35  Miss.  186, 

134,  273 

Winona  Bank  v.  Wofford,  71  Miss. 

711,  463,  465 

Winship  v.  Bank,  42  Ark.  24, 

352,  476,  670 
V.  Bank,  5  Pet.   (U.  S.)   529, 

93,  131 

Winslow  V.  Bailey,  4  Shep.  (Me.) 

319,  211 

Winstead  v.  Davis,  40  Misc.  785, 

463,  264,  465 
Winston  v.  Richardson,  27  Ark. 

34,  502 

Winter  v.  Loeb,  100  Ala.  503,       160 

V.  Pool,  100  Ala.  503,  164 

V.  Pool,  104  Ala.  580,         23,  145 

Winters    v.    Home    Ins.    Co.,    30 

Iowa  172,  270,  383 

Winthrop  Sav.  Bank  v.  Jackson, 

67  Me.  570,  597,  598 

Wintle  V.  Crowther,  1  Cromp.  & 

J.  316,  90,  91 

Winton  v.  Freeman,  102  Pa.  St. 

366,  125 

Wirebach  v.  Easton  Bank,  97  Pa. 

St.  543,  72 

Wirt  V.  Stubblefield,  17  App.  D. 

C.  283,  306,  464 

Wisconsin   Yearly   Meeting   of 

Freewill    Baptists    v.    Babler, 

115  Wis.  289,  473 

Wisdom    V.    Shanklin,    74    Mo. 

App.  428,  61 

Wise  V.   Kelly,  2  A.  K.   Marsh. 

(Ky.)   545,  208 

Wiseman  v.  Chiappella,  23  How. 

368,  511,   513,    517,    532 

Wistrand  v.  Parker,  7  Kan.  App. 

562,  366 


Witherow   v.    Slayback,    158   N. 

Y.  647,  570 

Witkowski  v.  Maxwell,  69  Miss. 

56,  530,  532,  542,  552 

Witmer  Bros.  v.  Weid,  108  Cal. 

569,  350 

Witte  V.  Williams,  8  S.  C.  290,  383 
Wittkowski  v.   Smith,   84  N.  C. 

671,  514 

Wittman    v.    Pickens,    33    Colo. 

484,  695 

Wolcott   V:   Boston   Faucet  Co., 

9  Gray  376,  405 
V.  Van  Santvoord,  17  Johns. 

248,  502 

Wold  V.  "Marsh,  54  Cal.  228,  321 

Wolf  V.  Duvall  (Ark.),  13  S.  W. 
728,  57 

V.  Hostetter   (Pa.),  Lane.  L. 

Rev.  201,  567 

V.  Michael,   21   Misc.   R.    (N. 

Y.)    86,  639 

V.  Shelton,   159   Ind.   531,  42 

V.  Zimmerman,  127  Ind.  486,     45 

Wolfe  V.  Jewett,  10  La.  283,  230 

Wolford  V.   Andrews,   29   Minn. 

350,  524,  539 

Wolka  V.   Kuhne,   109   Ind.  313, 

10  N.  E.  116,  95,  670 
Wolverton  v.  George  H.  Taylor 

&  Co.,  157  111.  485,  271 

Wood  V.  Bank,  129  Mass.  358,       622 
V.    Boylston    National    Bank, 

129   Mass.   358,  392 

V.  Bush,  72  Cal.  22,  592,  594 

V.  Callaghan,  61  Mich.  402, 

544,    556 
V.  Kendall,   7   J.   J.   Marsh. 

(Ky)    212,  329 

V.  Ridgeville  College,  114  Ind. 

320,  210,  367 

V.  Rosendale,  18  Ohio  Cir.  Ct. 

R.    247,      509,    515,    566,    569 
V.  Steele,  65  Ala.  436, 

125,  133,   595 
V.  Steele,  6  Wall.  (U.  S.)  80, 

139 
V.  Viosca,  26  La.  Ann.  716,  636 
V.  Warren,  19  Me.    (1  App.) 

23,  635 

V.  Wellington,  30  N.  Y.  218,     418 

Wooden  v.  Wampler,  69  Ind.  88,    34 

Woodford  v.  Dorwin,  3  Vt.  82.       94 

Woodham  v.  Allen,  130  Cal.  194, 

113,  295 

Woodhull  V.  Holmes,  10  Johns. 

(N.  Y.)   231,  317,  380 

Woodin  v.  Foster,  16  Barb.   (N. 

Y.)   146,  333 


I 


TABLE  OF   CASES. 


CXXXl.: 


^References  are  to  Sections.'] 


Woodman  v.  Eastman,  10  N.  H. 

359,  525 

Wood  Mowing  &  Reaping  Mach. 

V.  Land.  98  Ky.  516,  212 

Wood   River   Bank   v.   Omaha 

First  Nat.  Bank,  36  Neb.  708,  587 
Woodruff  V.  Hill,  116  Mass.  310, 

341,  383 
V.  Munroe,  33  Md.  146,  102 

V.  Webb,  32  Ark.  612,  237,  465 
Woods  V.  Colony  Bank,  114  Ga. 

683,  701 

Woodson  V.  Barret,  2  Hen.  &  M. 
80,  291 

V.  Owens,  12  So.  207,  242,  247 

Wood  Sons  Co.  v.  Schaefer,  173 

Mass.  443,  369 

Woodsum  V.  Cole,  69  Cal.  142,      417 
Woodward  v.  Lowry,  74  Ga.  148, 

524,   538,   573 
V.  Mathews,  15  Ind.  339,  455 

V.  Rogers,   31   Iowa  342,  119 

Woodworth  v.  Anderson,  63  Iowa 

503,  147 
V.  Bank,    19    Johns.    (N.    Y. 

391,  135,  164,  179 

V.  Huntoon,  40  111.  131,  434 

V.  Veitch,  29  Ind.  App.  529,  183 
Woolfolk  V.  Bank,  10  Bush  (Ky.) 

504,  '  166,  661 
V.  Plant,  46   Ga.  422,  302 

Woollen    V.    Whitacre,    73    Ind. 

198,  26,  123 

Woolridge  v.  Gates,  2  J.  J.  Marsh. 

(Ky.)    222,  288 

Wooten  V.  Inman,  33  Ga.  41,       307 
Worcester  National  Bank  v.  Che- 
ney, 87  111.  602,  241 
Work  V.  Brayton,  5  Ind.  396,       368 
V.  Case,  34  Pa.  St.  138,  359 
V.  Prall,    26    Pa.    Super.    Ct. 

104,  679 

Workingmen's    Banking    Co.    v. 

Blell,   57   Mo.   App.   410,  525 

Workman    v.    Wright,    33    Ohio 

St.  405,  31  Am.  Rep.  546,  74,  674 
Worley  v.  Moore,  97  Ind.  15,  210 
Wormer  v.  Agricultural  Works, 

50  Iowa  262,  121 

Wormley  v.  Lowry,  1  Humphr. 

468,  447 

Worrall   v.    Green,    39   Pa.    St. 

388,  165 

Wortendyke  v.  Meehan,  9  Neb. 

221,  303 

Worthington   v.    Curd,    22    Ark. 

277,  465 

Wray  v.  Furniss,   27  Ala.   471, 

594,    600 


Wray  v.  Warner  (Iowa),  82  N. 

W.  455,  473 

Wright  V.  Andrews,  70  Mo.  86, 

570 
V.  Austin,  56  Barb.   (N.  Y.) 

13,  639 

V.  Benjamin,  5  La.  Ann.  179,  227 
V.  Brosseau,  73  111.  381,  28 

V.  Flinn,   33   Iowa  259,  28 

V.  Hardie,  88  Tex.  653,  246,  376 
V.  Hughes,  13  Ind.  109,  288 

V.  Irwin,  33  Mich.  32,  123,  328 
V.  Leonard,  11  C.  B.  N.  S.  258,  30 
V.  Lessenfield,  93  Cal.  90,  573 
V.  Levy,  12  Cal.  257,      . 

437,  447,  448 
V.  Maccarty,  92  111.  App.  120,  581 
V.  Parvis,  1  Marv.  (Del.)  325,  45 
V.  Pipe  Line  Co.,  101  Pa.  St. 

204,  85,  86,  251 

V.  Remington,    41    N.    J.    L. 

48,  60,  107,  342 

V.  Riley,  Peake  173,  178 

V.  Steel,  2  N.  H.  54,  64 

V.  Vetter,  54  Mo.  App.  384,     322 

Wrightman  v.  Hart,  37  111.  123,    183 

Wrixon  v.  Macoboy,  6  Vict.  Law 

R.  350,  282 

Wulschner  v.  Sells,  87  Ind.  71, 

57,  629 

Wyatt  V.  Ayers,  2   Port    (Ala.) 

157,  116 

V.  Duferne,  106  111.  App.  214,   680 

V.  Evins,    52   Ala.    285,  195 

V.  Wallace,  67  Ark.  575,    291,  292 

Wyckokk  v.  Runyon,  33  N.  J.  L. 

107,  208 

Wylie  V.  Cotter,  170  Mass.  356,      507 

V.  Railway  Co.,  41  Fed.  623,    151 

Wyman  v.  Bank,  29  Fed.  734,        670 

V.  Bank,  5   Colo.  30,         121,  203 

V.  Ft.  Dearborn  Nat.  Bank, 

181  111.  279,  581 

V.  Gray.  7  Har.  &  J.  (Md.) 

409,  193,  198,  234,  239 

V.  Robbins,  51  Ohio  St.  98, 

635,  639 
V.  Whitehouse,  80  Me.  257,  30 
V.  Yeomans,  84  111.  403,  152 


Yager  v.  Kentucky  Title  Co.,  23 
Ky.  L.  Rep.  2240,  681 

Yakima  Nat.  Bank  v.  Knipe,  6 
Wash.  348,  402 

Yale  V.  Dederer,  18  N.  Y.  265,       33 
V.  Dederer,  22  N.  Y.  450,  59 


cxl 


TABLE   OF    CASES. 


IReferences  are  to  Sections.'\ 


Yance  v.  English,  78   Ind.   80,     679 
Yardley  National  Bank  v.  Van- 

sant,  214  Pa.  250,  442 

Yarwood  v.  Trusts  &  Guarantee 

Co.,  Ltd.,  87  N.  Y.  Supp.  947,  192 
Yates  V.  Donaldson,  5  Md.  389,  270 
Yates  V.  Goodwin,  96  Me.  90, 

507,   511 
Yates,  Ex  parte,  2  De  Gex,  &  J. 

191,  175 

Yeager  v.  Farwell,  13  Wall.  6,     573 
Yeagley  v.  Webb,  86  Ind.  424, 

25,  27 
Yeamans  v.  Chatterton,  9  Johns. 

(N.  Y.)  295,  288 

Yeates  v.  Williams,  5  Ark.  684,     288 
Yeatman  v.  Mattison,  59  Ala.  382, 

233 

Yeatman  Shields  &  Co.  v.  Bell- 
main,  1  Tenn.  Ch.  589,  30 
Yeaton  v.  Burney,  62  111.  61,         502 
Yellow   Medicine   County   Bank 
V.     Tagley,  57  Minn.  391, 

25,   28,   315 
V.  Wiger,  59  Minn.  384,  61  N. 

W.   452,  659 

Yellowstone    National    Bank    v. 
Gagnon,  19  Mont.  402, 

241,  376,  377 
Yenney  v.  Central  City  Bank,  44 

Neb.  402,  699 

Yocum  V.  Smith,  63  111.  321,         145 
Yoho  V.  McGovern,  42  Ohio  St. 

11,  3,    216 

York  V.  Jones,  43  N.  L.  J.  332,     158 
York  Bank  v.  Asbury,  Fed.  Cas. 

No.  18142,   1   Biss  C.  C.   233,     112 
Young  V.  American  Bank,  89  N. 
Y.    Supp.    915,  512 

V.  Baker,  29  Ind.  App.  130, 

185,  136 


Young  V.  Bell,  Fed.  Cas.  No. 
18152,  1  Cranch  C.  C.  342,  63 

V.  Berkeley,  2  N.  H.  410,  303 
V.  Brewster,    62    Mo.    App. 

628,  397 

V.  Bryan,  6  Wheat.  146,  528,  543 
V.  Chew,  9  Mo.  App.  387,  92,  421 
V.  Clarendon,  132  U.  S.  340,  87 
V.  Currier,  63  N.  H.  419, 

172,  679 
V.  Grundy,  7  Cranch    (U.  S.) 

548,  324,  650 

V.  Grote,  4  Bing.  253,  146 

V.  Rodes,  5  T.  B.  Mon.   (Ky.) 

498,  623 

V.  Shriner,  80  Pa.  St.  463, 

627,  634,  635 
V.  Sims,  41  111.  App.  28,  112 

V.  Smith,  14  Wash.  565,  316 

V.  Wright,  1  Camp.  139,  303 

Young  Men's  Christian  Associa- 
tion Gymnasium  Co.  v.  Rock- 
ford  Nat.  Bank,  179  111.  599, 

372,  467 

Youngs  V.  Lee,  18  Barb.  187,         241 

V.  Little,  15  N.  J.  L.  1,     419,  465 

Younker  v.  Martin,  18  Iowa  143,      465 


Zabriskie  v.  Spielman,  46  N.  J. 

L.  35,  472 

Zane  v.  Xane,  Munf.  (Va.)  406,  195 

Zeigler  v.  Maner,  53  S.  C.  115,  302 

Zeis  V.  Potter,  14  C.  C.  A.  665,  237 

V.  Potter,  105  Fed.  671,  420,  436 
Zimmerman  v.  Rote,  75  Pa.  St. 

188,  171,  661 

Zinsser  v.  Columbia  Cab.  Co.,  66 

App.  Div.  (N.  Y.)  514,  334 

Zobel  V.  Bauersachs,  55  Neb.  20.  341 


DEFENSES  TO  COMMERCIAL  PAPER 


CHAPTER  I. 

AVAILABILITY,   GENERALLY   AS   TO   PARTIES. 

Sec.  Sec. 

1.  Rule  as  to  makers.  7.  In  action  on  corporation  note  or 

2.  Same    Subject  —  That    transfer  indorsement. 

from  payee  was  procured  by  8.  Clearing-house      rules  —  When 
undue  influence.  available. 

3.  Joint  and  several  makers.  9.  Guarantor — Rule  as  to. 

4.  Defense  of  maker  not  available  10.  Note  indorsed  in  blank. 

to  indorser.  11.  On  note  purchased  from  bank. 

5.  Where  maker  concluded  by  acts     12.  Obligors    on    bond — Rule    as    to 

of  agent.  where  given  in  consideration 

6.  Accommodation     indorser — Rule  of  extension  of  time. 

as  to. 

§  1.  Rule  as  to  makers. — In  an  action  upon  commercial  paper  it 
is  a  general  rule  that  a  defendant  cannot  avail  himself  of  a  defense 
that  is  peculiar  to  his  co-defendant  and  goes  only  to  the  personal  dis- 
charge of  the  latter/  as  where  the  defense  of  coverture  and  surety- 
ship is  pleaded  by  one  joint  maker  in  which  case,  though  such  defense 
is  established  by  liim,  it  is  held  not  to  release  his  co-maker.-  And 
though  the  indorser  may,  in  an  action  against  him  and  the  maker, 
successfully  defend  the  suit  upon  the  ground  of  want  of  proof  of  due 
demand  and  notice  the  right  of  the  holder  to  recover  against  the 
maker  will  not  be  affected  thereby  as  the  plea  goes  to  the  personal 
discharge  of  the  party  interposing  it.^  And  a  maker  cannot  demur 
to  a  petition  in  an  action  on  a  note  on  the  ground  that  it  does  not 

'Slevin  v.  Reynolds,  1  Handy  =  Brant  v.  Barnett,  10  Ind.  App. 
(Ohio)  37.  653,  38  N.  E.  421.    See  §  62.  herein. 

3  Nevill  v.  Hancock,  15  Ark.  511. 

1 


§2]  AVAILABILITY,   GENERALLY   AS   TO    PARTIES.  2 

state  a  cause  of  action  against  an  indorser.*   Xor  is  it  any  defense  to 
an  action  against  the  maker  by  the  indorsee  that,  in  consequence  of  the 
insolvency  of  the  maker,  the  plaintifE  obtained  the  note  from  the 
payee  for  an  amount  much  less  than  the  amount  due  thereon,  the 
plaintiff  verbally  agreeing  with  the  indorser  to  exact  from  the  maker 
about  the  same  amount  as  he  paid  therefor,  as  such  representation  and 
promise  were  made  to  the  indorser,  were  without  any  consideration 
moving  from  the  defendant,  and  are  to  be  regarded  as  of  too  loose 
and  indefinite  a  character  to  discharge  the  defendant  from  his  legal 
liability  or  to  impair  the  legal  obligation  of  his  contract.   A  promisor 
may  also  withdraw  a  promised  favor  or  gratuity  and  it  cannot  be  de- 
manded as  a  legal  right  since  only  such  rights  and  liabilities  are 
looked  to  by  courts  of  law.=    And  in  such  an  action  it  is  no  defense 
that  the  note  was  obtained  by  the  payee  under  an  agreement  with  his 
creditors,  to  which  the  maker  was  not  a  privy,  that  it  should  be  in- 
dorsed to  them  and  that  in  violation  of  such  agreement  it  was  trans- 
ferred to  the  indorser.*'   So  the  drawer  of  a  check  is  as  between  him- 
self, the  payee,  and  holder,  the  principal  and  it  is  immaterial  that 
the  check  was  for  the  accommodation  of  the  payee  and  that  the  in- 
dorsee had  knowledge  that  it  was  an  accommodation  check.^     But 
where  a  maker  has  a  good  defense  to  a  note  as  between  him  and  the 
payee,  but  is  prevented  from  making  it,  in  consequence  of  the  note 
having  passed  into  the  hands  of  an  indorsee,  it  may  be  proper  to  show 
the  circumstances  under  which  the  indorsement  was  made,  as  that  it 
w-as  indorsed  to  him  past  due,  or  that  he  is  not  for  other  reasons,  a 
hona  fide  holder  of  the  note.     This  defense  is  proper  in  many  in- 
stances for  the  purpose  of  subjecting  the  note  in  the  hands  of  the  in- 
dorsee to  a  defense  existing  between  the  original  parties.^ 

§  2.  Same  subject — That  transfer  from  payee  was  procured  by  un- 
due influence. — The  maker  cannot  avail  himself  of  the  defense  that  the 
indorsement  of  a  promissory  note  from  the  payee  was  procured  by 
undue  influence,  where  the  act  was  disaffirmed  neither  by  the  payee 
nor  his  legal  representatives.  The  indorsement  in  such  case  is  a  con- 
tract which  is  voidable  and  not  void,  and  the  right  to  avoid  it  is  a 

*Sleviii    V.  Reynolds,     1     Handy         « Tarbell  v.  Sturtevant,  26  Vt.  512. 

(Ohio)    37.  Defenses  available  against  a  holder 

■^Babson  v.  Webber,  26  Mass.  (9  of  a  note  may  be  set  up  against  a  re- 
Pick.)    163.  ceiver      appointed      to      collect      it. 

"Mack    V.  Clark,     42     Mass.     (1     Hutchins  v.   Langley,    27   App.    (D. 

Mete.)  423.  C.)   234. 

"Murray  v.  Judah,  6  Cow.  (N.  Y.) 
484. 


I 


3  JOINT    AND   SEVERAL   MAKERS.  [§    3 

personal  right  which  can  only  be  exercised  by  the  one  upon  whom  the 
undue  influence  was  exerted  or  by  his  guardian  or  representatives.^ 

§  3.  Joint  and  several  makers. — If  one  of  several  joint  makers  of 
a  note  establishes  a  defense  in  an  action  against  them  all,  which  goes 
to  the  merits  of  the  case  and  will  defeat  the  rights  of  the  plaintiff  to 
recover,  such  defense  will  inure  to  the  benefit  of  the  other  defend- 
ants," whether  they  individually  made  such  defense  or  not.^^  So  a 
defense  by  one  of  several  makers  sued  jointlj^,  which  goes  to  the  in- 
validit}'  of  the  note  as  that  the  consideration  therefor  was  illegal,  is 
held  to  inure  to  the  benefit  of  the  others.^-  But  the  makers  of  a  joint 
and  several  note,  whatever  may  be  their  true  relation  as  between 
themselves,  stand  as  to  the  payee  as  principals  and  it  cannot  be  shown 
by  either  of  them  that,  as  bet«-een  him  and  the  other  joint  makers, 
he  was  a  surety,  where  the  payee  had  no  knowledge  of  such  relation.^^ 
The  principle  underlying  this  rule  is,  that  a  person  executing  a  note 
as  maker  with  another  enters  into  an  unconditional  obligation  to  pay, 
and  the  contract  so  made  must  stand  or  fall  by  the  legal  rules  which 
are  controlling  in  such  contracts.  The  language  importing  such  an 
unconditional  promise,  the  meaning  thereof  cannot  be  varied  by  parol, 
and  the  law  afl&xes  to  the  language  used  its  obvious  signification.^* 

"Carrier  v.  Sears,  86  Mass.  (4  Al-  Cal.  278;  Shriver  v.  Lovejoy,  32  Cal. 

len)    336,  81  Am.   Dec.   707;    distin-  574;  Auld  v.  Magruder,  10  Cal.  282. 

guishing    Peasley    v.    Robbins,    44  Connecticut. — Bull    v.     Allen,    19 

Mass.    (3  Mete.)    164,  which  appar-  Conn.  101. 

ently  holds  to  the  contrary,  on  the  loica. — Small    v.    Older,    57    Iowa 

ground  that  the  defendant  in  such  326,  10  N,  W.  734;   Murray  v.  Gra- 

case  had  been  notified  by  the  guar-  ham,  29  Iowa  520. 

dian  of  the  insane  payee,  not  to  pay  Kansas. — Whittenhall    v.    Korber, 

the  note  to  the  plaintiff,  and  the  de-  12  Kan.  618. 

fense  being  conducted  by  the  guar-  New  Hampshire.— Heath  v.  Derry 

dian  for  the  bene^c  of  the  ward.  Bank,  44  N.  H.  174. 

'■^Moyer   v.    Brand,    102    Ind.    301,  Ohio. — Cone  v.  Rees,  11  Ohio  Cr. 

26  N.  E.  125;    Brant  v.  Barnett,  10  Ct.  632,  1  Ohio  Cr.  Dec.  192. 

Ind.  App.  653,  38  N.  E.  421;   Miller  Vermont.— Benedict  v.  Cox.  52  Vt. 

V.  Longacre,  26  Ohio  St.  291.  247;    People's  Bank  v.  Pearsons,  30 

"Brant  v.   Barnett,  10   Ind.  App.  Vt.  711;    Claremont  Bank  v.  Wood, 

653,  38  N.  E.  421.  10  Vt.  582. 

"Miller  v.  Longacre,  26  Ohio  St.  But   examine    Texas.— Pridgen   v. 

291.  Buchannon,  27  Tex.  589. 

" Alabama.— Rice    v.    Brantley,    5  "Auld  v.   Magruder,   10  Cal.   282, 

Ala.  184.  290. 

California. — Damon  v.  Pardow,  34 


3] 


AVAILABILITY,   GENERALLY   AS   TO    PARTIES. 


The  note  being  a  joint  obligation  the  same  construction  must  be  put 
upon  it  as  to  all  the  defendants.  The  plaintiff's  legal  right  in  regard 
to  one  of  the  defendants  cannot  be  looked  upon  in  a  different  light 
from  what  they  are  in  regard  to  the  others  without  at  once  destroying 
their  joint  liability  and  changing  a  principal  debtor  into  a  mere 
surety.^^  Makers  in  such  a  case  cannot  be  permitted  to  require  that 
tlie  holder  of  the  instrument  should  respect  rights  arising  out  of  a 
relation  of  the  parties  to  each  other  of  which  he  is  ignorant,  and  to 
impose  such  an  obligation  the  character  in  which  they  occupy  should 
appear  on  the  face  of  the  instrument,  or  he  must  be  notified  of  it  in 
some  other  way.^^  It  has,  however,  been  decided  that  where  a  note 
does  not  hose  verba  describe  the  parties  either  as  principals  or  sure- 
ties, but  merely  as  joint  promisors,  the  general  rule  that,  where  a  party 
has  stated  the  character  in  which  he  contracts,  he  shall  not  be  allowed 
to  prove  the  reverse  by  extrinsic  evidence  does  not  apply.^^  And  it 
has  been  determined  that  a  person  who  signs  a  note  jointly  with  an- 
other, may  show  that  he  in  fact  signed  as  surety  with  the  knowledge 
of  the  payee  or  holder.^^  So  it  has  been  decided  that  if  one  person 
buys  property  and  makes  a  gift  of  a  portion  of  it  to  another  and  both 


«  Bull  V.  Allen,  19  Conn.  101. 

"Noel  V.  Harding,  2  Mete.  (Ky.) 
247.  In  this  case  it  was  said:  "It 
is  a  just  and  reasonable  doctrine 
that  where  the  parties  make  an  in- 
strument which  is  assignable,  and 
upon  the  contract  itself  hold  them- 
selves out  as  principals,  they  are  to 
be  regarded  and  treated  both  by  the 
assignor  and  assignee  as  occupying 
the  attitude  in  which  they  have  rep- 
resented themselves  to  stand,  unless 
the  holder  has  knowledge  that 
some  of  them  are  the  sureties  of  the 
others.  Good  faith  requires  that 
the  holder  of  the  paper  should  have 
a  right  to  so  regard  and  treat  them. 
It  would  be  manifestly  unjust  to 
subject  them  to  the  legal  conse- 
quence of  discharging  the  sureties 
to  the  note  by  an  agreement  with 
the  principal,  when  he  was  igno- 
rant of  the  relation  in  which  the 
parties  stood  to  each  other  and  had 
a  right  to  consider  them  all  as  prin- 


cipals." Per  Simpson,  C.  J.  In 
Shriver  v.  Lovejoy,  32  Cal.  574,  it  is 
said  that:  "Whatever  may  be  their 
true  relation  between  themselves  as 
to  the  payee  they  stood  as  principals. 
The  promise  of  each  is  an  absolute 
and  primary  promise,  not  a  condi- 
tional or  secondary  one.  The  cred- 
itor is  not  interested  in  knowing 
the  relation  of  the  makers  with 
each  other.  In  a  suit  on  the  note 
he  ought  not  to  be  delayed  by  an 
investigation  into  matters  which  do 
not  concern  him."    Per  Rhodes,  J. 

"  Branch  Bank  v.  James,  9  Ala. 
949,  953.  See,  also,  Davis  v.  Bar- 
rington,  30  N.  H.  517;  Smith  v. 
Bing,  3  Ohio  85. 

i^Neel  V.  Harding,  2  Mete.  (Ky.) 
247;  Cummings  v.  Little,  45  Me. 
183;  Grafton  Bank  v.  Kent,  4  N.  H. 
221;  Harmon  v.  Hale,  1  Wash.  T. 
422,  34  Am.  Rep.  816.  See  Kennedy 
V.  Gibbes,  2  Desauss.  (S.  C.)  380. 


I 


5  MAKER   CONCLUDED   BY    ACTS    OF   AGENT.  [§§    4-6 

unite  in  giving  a  note  therefor  with  the  understanding  that  the  Litter 
signs  as  security,  the  gift  to  him  does  not  constitute  him  a  principal 
in  the  contract.^''  And  where  a  statute  provides  that  "when  judgment 
is  rendered  *  *  *  on  a  joint  contract  or  instrument,  parties  to 
the  action  who  were  not  summoned  *  *  *  may  be  made  parties 
thereto  by  action  in  the  same  court,"  the  fact  that  at  the  commence- 
ment of  the  original  action  the  days  of  grace  allowed  the  maker  had 
not  expired,  is  no  defense  to  an  action  to  charge  a  joint  maker.^o 

§4.  Defense  of  maker  not  available  to  indorser. — Wliere  the 
makers  and  indorsers  are  sued  upon  a  note,  it  has  been  decided  that  an 
answer  by  one  of  the  makers  will  not  inure  as  an  answer  of  the  in- 
dorsers.^^ 

« 

§  5.  Where  maker  concluded  by  acts  of  agent. — Where  the  obligee 
of  a  bond  delivered  the  same  to  his  creditor  with  authority  to  receive 
payment,  and  the  latter  accepted  the  note  of  the  obligor  with  a  surety 
and  surrendered  the  bond,  agreeing  that  the  note  should  be  delivered 
up  to  the  maker  in  case  the  obligee  should  refuse  to  consider  the  note 
as  payment,  it  was  decided  that  he  could  not  set  up  in  defense  to  the 
•note  the  agreement  and  the  subsequent  refusal  of  the  obligee  to  con- 
sider the  note  as  payment,  as  the  giving  of  the  note,  and  the  taking  pos- 
session of  the  bond  under  the  authority  given  amounted  in  law  to  a 
payment  and  any  subsequent  dissent  by  the  obligee  was  unavailing, 
he  being  concluded  by  the  acts  of  his  agent.-^ 

§  6.  Accommodation  indorser — Rule  as  to. — Where  a  note  is  in- 
dorsed by  one,  merely  for  the  accommodation  of  another,  the  former 
is  to  be  regarded  as  surety  and  may  avail  himself  of  any  defense, 
which  the  maker  could  make  against  a  subsequent  holder.^^     In  an 

"Fraser  V.  McConnell,  23  Ga.  368.  contract     between     him     and     the 

'°Yohe  V.  McGovern,  42  Ohio  St.  maker.     Weimer  v.   Shelton,   7  Mo. 

11,  decided  under  R.  S.  §  5366.  237:    "An  indorsee  for  accommoda- 

21  Alfred  v.  Watkins,  Code  R.  N.  tion  is  to  be  regarded  in  the  light 

S.  (N.  Y.)  343,  1  Edm.  Sel.  Cas.  (N.  of  a  surety  and  as  such  is  entitled 

Y.)  369.  '  to    avail    himself    of    any    defense 

=^  Parsons    v.    Gaylord,    3    Johns,  which     would     have     availed     the 

(N.  Y.)  463.  maker."    Per  Napton,  J.    Sawyer  v. 

=^Dunscomb  v.   Bunker,   43   Mass.  Chambers,    44    Barb.     (N.    Y.)     52: 

(2  Mete.)   8,  may  show  that  the  in-  "Has    a    right    to   any    defense   the 

dorsee  received  the  note  as  security  maker  could  avail  himself  of."    Per 

for  the  performance  of  a  usurious  Ingraham,  J.    Sawyer  v.  Chambers, 


§    G]  AVAILABILITY,   GENERALLY   AS    TO    PARTIES.  6 

early  case  it  was  said :  "As  the  act  regulating  interest  stood  at  the  in- 
stitution of  this  suit,  the  excess  of  the  usurious  interest  over  the  real 
sum  of  money  advanced  was  adjudged  against  the  lender,  and  it  be- 
came a  debt  of  record,  upon  which  the  party  setting  up  usury,  could 
on  motion  have  judgment.  This  provision  presents  a  serious  difficulty 
in  allowing  the  defense  to  be  set  up  by  a  surety,  as  it  would  seem  to 
be  the  intention  of  the  legislature  that  the  party  whose  necessities  had 
been  taken  advantage  of  should  alone  be  entitled  to"  the  benefit  of  this 
provision.  But,  however  this  may  be,  and  whatever  would  be  the 
proper  course  when  a  case  of  this  kind  arises,  it  is  clear  that  to  con- 
strue the  act  so  as  to  preclude  securities  from  setting  up  its  provisions 
as  a  defense,  would  enable  usurers,  by  a  very  simple  and  easy  device, 
to  evade  the  law  conpletely."-*  So  evidence  has  been  held  admissible 
in  an  action  against  an  accommodation  indorser  "by  the  indorsees  to 
show  that  the  whole  consideration  of  the  note,  or  the  greater  part  of  it, 
had  failed;  that  the  note  was  given  on  account  of  goods  which  the 
plaintiffs  had  agreed  to  sell  to  the  maker;  that  only  a  small  portion 
of  such  goods  had  been  delivered  and  that  the  amounts  so  delivered 
had  been  actually  paid  for.-^  And  a  discharge  in  bankruptcy  may  be 
set  up  or  waived  by  the  bankrupt  at  his  pleasure,  and  it  is  no  defense 
to  an  action  by  the  second  indorser  against  the  first  that  the  former 
negligently  omitted,  in  an  action  against  him  on  the  note,  to  avail 
himself  of  this  defense  in  consequence  of  wliich  he  was  obliged  to  pay 
a  judgment  recovered  thereon.-''  In  Louisiana  this  general  rule  is 
also  affirmed,  an  exception,  however,  being  apparently  made  in  the 
case  of  pleas  or  defenses  personal  to  the  maker. ^^ 

43   Barb.    (N.   Y.)    622;    Gunnis  v.  sued  upon  the  note,  they  could  have 

Weigley,  114  Pa.  St.  191,  6  Atl.  465;  shown  that  the  note  was  given  on 

"As  a  general  rule  a  surety  is  al-  account   of   goods   to    be   delivered, 

lowed  to  stand  upon  the  rights  of  his  and  that  such  goods  had  never  been 

principal."     Per  Mr.  Justice  Clark.  received.        The     plaintiffs,      under 

-*  Weimer  v.   Shelton,   7   Mo.    238,  such    proof,    would    have    no    proof 

240.     Per  Napton,  J.  against     defendants,     as     the    note 

-^  Sawyer   v.    Chambers,    44    Barb,  would    be    with    consideration.      So 

(N.  Y.)  42,  the  court  said.    "I  am  at  long  as  the  court  permits  the  con- 

a  loss  to  see  any  ground  on  which  sideration  of  a  note  to  be  inquired 

this    evidence    could    be    excluded,  into,  under  any  circumstances,  the 

Surely  an  accommodation   indorser  facts   presented    in   the   defendants' 

is  in  no  wors«  condition  than  the  offer   come   within   the    rule."      Per 

maker.     He  has  a  right  to  any  de-  Ingraham,  P.  J. 

fense  which  the  maker  could  avail  -"  Bowman  v.  Pope,  33  Miss.  94. 

himself  of.    If  the  makers  had  been  -'  Johnson    v.     Marshall,    4    Rob. 


7     ACTION    ON    CORPORATION    NOTE — BLANK    INDORSEMENT.      [§§    7-11 

§  7.  In  action  on  corporation  note  or  indorsement. — Where  a 
corporation  authorized  by  resolution  the  raising  of  money  on  its  as-' 
sets  to  pay  its  debts  and  subsequently  a  party  whose  note  it  held  gave 
two  notes  in  place  of  the  old  one,  one  of  which  was  then  indorsed  by 
the  corporation  to  secure  the  loan,  it  was  decided  that  it  was  no  de- 
fense against  the  indorser  that  the  transfer  was  unauthorized  because 
the  notes  were  not  in  existence  at  the  time  of  the  resolution,  it  being 
declared  that  the  substituted  notes  would  seem  to  be  as  much  within 
the  resolution  as  the  original  note,  in  whose  place  they  were  put.-^ 

§  8.  Clearing-house  rules — When  available. — Clearing-house  rules 
are  solely  for  the  purpose  of  facilitating  exchange  between  banks,  and 
in  an  action  against  the  indorser  of  a  note  he  cannot  avail  himself, 
as  a  defense,  of  such  rules  to  which  he  is  not  a  party.  WTiatever  effect 
is  to  be  given  such  regulations  as  between  the  banks,  a  defendant  in 
such  a  case  is  not  in  a  situation  to  claim  the  benefit  of  them.^® 

§  9.  Guarantor — Rule  as  to. — One  who  is  a  guarantor  by  virtue  of 
his  indorsement,  may  set  up  a  defense  of  usury  in  the  inception  of  the 
note  in  the  same  manner  as  if  he  had  indorsed  it  in  blank,  he  being 
regarded  as  a  surety  and  entitled  to  avail  himself  of  this  defense  to 
the  same  extent  as  the  principal  can.^'' 

§  10.  Note  indorsed  in  blank. — Where  one  indorses  a  negotiable, 
promissory  note  in  blank  and  delivers  it  to  another  for  his  accommo- 
dation, by  whom  it  is  delivered  without  indorsement  to  a  third  party 
in  settlement  of  an  indebtedness,  the  latter  agreeing  to  pay  the  differ- 
ence in  cash,  which  he  fails  to  do,  but  indorses  the  note  and  delivers 
it  to  a  fourth  party,  who  brings  an  action  against  the  accommodation 
indorser  for  the  amount  of  the  note,  it  has  been  decided  that  an 
affidavit  of  defense,  which  sets  forth  the  above  facts  and  alleges  that 
plaintiff  is  not  a  bona  fide  holder,  is  sufficient.^^ 

§  11.  On  note  purchased  from  bank. — Where  a  note  is  purchased 
by  a  national  bank  at  a  discount,  though  the  discount  may  be  such 

(La.)    157:    Satterfield  v.   Compton,  Rep.  376.    Examine  Overman  v.  Ho- 

6  Rob.   (La.)   120,  may  show  usury,  boken  City  Banlt,  30  N.  J.  L.  61. 

Sustains  general  rule.  ="  Conger   v.   Babbet,   67   Iowa  13, 

"Crooke    v.    Mali,    11    Barb.     (N.  24  N.  W.  569. 

Y.)  205.  2'  Gunnis,  Barrett  &  Co.  v.  Weig- 

^  Manufacturers'     Nat.     Bank     v.  ley,  114  Pa.  St.  191,  6  Atl.  465. 
Thompson,    129    Mass.    438,    37    Am. 


§    12]  AVAILABILITY,   GENERALLY   AS   TO    PARTIES.  8 

that  it  amounts  to  usury  and  the  bank  forfeits  the  entire  interest,  yet 
the  purchase,  so  far  as  the  title  of  the  note  and  its  negotiability  is 
concerned,  is  not  affected  by  the  usurious  discount.  The  discount 
may,  however,  be  so  great  as  to  be  strong  evidence,  in  connection  with 
other  circumstances  tending  to  prove  notice  of  the  infirmity  of  the 
paper,  and  that  the  bank  had  notice  at  the  time  it  bought  the  paper 
of  its  infirmity  as  to  let  in  antecedent  equities  between  the  makers 
and  payee  as  against  the  note  in  the  hands  of  the  bank.^^  So  where 
a  person  made  and  indorsed  a  note  which  the  plaintiff  purchased  from 
the  bank,  it  is  no  defense  to  an  action  by  the  latter  to  recover  thereon, 
that  the  bank  from  which  he  purchased  is  by  statute  prohibited  from 
discounting  paper  which  has  not  at  least  two  names  thereon,  such 
restriction  being  designed  for  the  protection  of  the  stock  and  bill 
holders  and  the  depositors  of  the  bank.^^ 

§  12.  Obligors  on  bond — Rule  as  to  where  note  is  given  in  con- 
sideration of  extension  of  time. — Wliere,  in  consideration  of  an  ex- 
tension of  the  time  for  payment,  the  obligors  upon  a  bond  given  to 
secure  the  debts  of  third  parties,  execute  a  note  for  the  amount  due 
thereon,  it  has  been  determined  that  they  may  avail  themselves  of  any 
defense  which  would  defeat  a  recovery  upon  the  bond.  Thus  it  was 
so  held,  where  one  who  had  the  exclusive  right  to  sell  sewing  machines 
manufactured  by  the  plaintiff,  and  who  was  required  to  execute  a 
bond  with  good  and  sufficient  sureties  for  the  payment  of  notes  given 
in  purchase  of  such  machines,  and  who,  being  indebted  to  the  plaintiff 
on  notes  so  given  and  which  had  matured,  made  an  arrangement  with 
him,  in  consideration  of  the  extension  of  the  time  of  payment,  to  give 
a  new  note  executed  by  himself  and  the  sureties  upon  his  bond,  which 
note  was  given.^* 

==  Nicholson  v.  National  Bank,  92  Am.    Rep.    242,    construing    R.    S., 

Ky.  251,  17  S.  W.  627,  16  L.  R.  A.  Chap.  47,  §  14. 

223.  ^*  American  Button-Hole  &c.  Mach. 

^Roberts  v.  Lane,  64  Me.  108,  18  Co.  v.  Murray,  Fed.  Cas.  No.  292. 


CHAPTER  11. 


EXECUTION    OR   DELIVERY. 

Sec.  Sec. 

13.  Execution  or  delivery  procured     22.  Execution     or     indorsement    in 

by  force  or  fraud.  blank. 

14.  2Jon    est    factum — Where    name     23.  Same    subject  —  Application    of 

signed  by  another.  rule. 

15.  Where  payee  signs  note  at  foot     24.  Instruments  payable  to  fictitious 

with  maker's  name.  person. 

16.  Signing  after  delivery.  25.  Misrepresentations  as  to  nature 

17.  Mistake.  of  instrument. 

18.  Reliance  on  recitals  in  note.  26.  Same  subject — Bona  fide  holder. 

19.  As  to  revenue  stamp.  27.  Same  subject — Maker  unable  to 

20.  Want  of  delivery.  read  English. 

21.  Delivery  by  agent  in  violation  of     28.  Effect  of  negligence. 

instructions.  29.  Instruments    executed,    accepted 

or  delivered  on  Sunday. 

§  13.  Execution  or  delivery  procured  by  force  or  fraud. — Where 
the  execution  or  delivery  of  a  note  is  procured  by  force  or  fraud 
without  the  maker's  fault  there  can  be  no  recovery  thereon  even  by 
a  lona  fide  holder.^  So  where  the  maker  of  a  note,  who  was  old,  in- 
firm and  ignorant,  was  told  by  the  payees  that  unless  he  signed  the 
note  they  would  do  him  violence,  and  one  of  them  pretended  to  draw 
a  weapon  from  his  pocket,  while  the  man  with  him  stood  guard  at 
the  door  of  the  maker's  house  and  demanded  that  he  sign  the  note, 
and  there  was  no  one  on  the  farm  at  the  time  except  defendant's  wife, 
who  was  also  aged  and  infirm,  and  he  signed  the  note  through  fear 
of  violence,  whereupon  one  of  the  payees  snatched  it  up,  and,  against 

*Vanatta  v.  Lindley,  98  111.  App.  Mich.  415,  4  Am.  Rep.  497;  Denheim 

327,  aff'd,  198  111.  40,  64  N.  E.  735;  v.  Wilmarding,  55  Pa.  St.  73.    Com- 

Cline  V.  Guthrie,  42  Ind.  227,  13  Am.  pare  Dodd  v.  Dunne,  71  Wis.  582,  37 

Rep.  357;  Burson  v.  Huntington,  21  N.  W.  430. 

9 


§§  IJr,  15]  TLXT.CTmoy  or  deliteet.  10 

the  will  of  the  defendant,  carried  it  awav,  it  was  decided  that  the 
defendant  \ras  not  liable  thereon.-  And  where  a  note  was  torn  by  the 
payee  from  the  maker's  book  and  from  an  attached  stub  containing 
an  express  condition,  written  contemporaneous  with  the  note  and 
which,  by  agreement  of  the  partieSj  was  a  snbstantiTe  part  thereof 
and  restricted  its  negotiation,  it  was  decided  that  the  maker  was  not 
liable  thereon,  the  severance  in  such  a  case  of  the  condition  being 
held  to  amount  to  a  material  alteration  which  would  defeat  lecoveTy 
even  by  a  bona  fide  purchaser  for  Talne  and  without  notice.*  And 
there  can  be  no  recoreiy  on  municipal  bonds  fraudulently  re-issued 
after  redemption  and  cancellation  as  they  hare  by  such  acts  become 
estingnished.*  Where,  however,  a  note  was  drawn  as  a  matter  of 
amusement,  there  being  no  intention  to  delivrar  it  as  a  note,  and  it 
was  taken  by  the  payee  by  stealth  and  carried  off  without  the  knowl- 
edge of  the  maker  and  against  his  will,  there  was  hdd  to  be  no  de- 
livery, but  in  an  action  by  a  bona  fide  holder  want  of  deUvery  was 
declared  to  be  no  defense.* 

§  14-  Non  est  factam — ^Where  name  signed  by  another. — Where 
a  person's  name  is  signed  to  a  note  by  another,  the  defense  of  non  est 
factum  is  not  made  out  where  it  appears  that  the  execution  of  the  note 
in  the  former's  name  by  the  latter  was  authorized,  that  its  execution 
was  subsequently  ratified  and  that  an  extension  and  renewal  of  the 
note  was  agreed  to  by  him.*  Where  a  defendant  has  controverted  the 
^ecution  of  a  note  sued  upon  by  a  varied  plea  of  non  est  factum  the 
burden  of  proving  its  execution  is  then  held  to  rest  on  the  plaintiff." 

§  15.  Where  payee  sisr.j  r.::e  :-'.  :o::  •-:-'•.  --.ker'?  nsire, — "^^-re 
a  person  who  was  :„.  r— ;--  -  -  ^  — :  ^— -  --  -i--  i-.:;;  u^:i-  ::i  i-^^e 
also  signed  his  name  at  its  foot  along  with  the  other  makers,  whatever 
may  be  the  rights,  as  against  him,  of  a  third  party,  if  the  note  has 
come  to  such  a  one,  bona  fide  and  for  value,  in  the  due  course  of  trade, 
his  promise  to  pay  himself  is  held  to  be  a  mere  nugatory  act  which 
.  does  not  affect  his  right  to  recover  against  the  makei^  thou^  there 

-  Palmer  v.  Poor,  la  Ind.  135,  22  130  U.  S.  655,  9  Sup.  CL  694. 

N.  E.  &S4,  6  L.  R.  A-  469.    See  Cbap.  V.  *  Shipley  v.  Carroll.  45  HL  285. 

*  Stephen  v.  Davis.  85  Tenn.  271,  'Bowman  v.  Rector,  (Tenn.  Ch. 
2  S.  W.  3S2-   See  chapter  VII.  post^  App.)  59  S.  W.  389. 

as  to  alteration  of  paper.  ^Home  Nat.  Bank  t.  HiU.  (Ind.) 

*  District  of  Colombia  v.  Cornell.    74  N.  E.  1086. 


11  SIGNING   AFTER   DELIVERY — MISTAKE.  [§§    16,    17 

is  said  to  be  authority  for  the  proposition  that  if  the  note  had  simply 
been  a  joint  one  he  could  not  sue  upon  it.* 

§  16.  Signing  after  delivery. — Where  a  note  joint  and  several  in 
form,  is  signed  by  one  person  only,  and  delivered  by  him  to  the 
obligee,  he  cannot  avoid  liability  thereon  by  the  fact  that  another  name 
is  subsequently  signed  thereto,  on  the  ground  that  it  was  unauthorized 
by  him,  unless  he  shows  an  actual  dissent  or  circumstances  equivalent 
thereto.®  And  if  a  person  signs  a  note  after  delivery  for  the  purpose 
of  enabling  the  payee  to  negotiate  it,  he  will  be  concluded  from  the 
defense  that  there  was  no  consideration  for  his  signature  in  an  action 
thereon  by  a  lona  fide  purchaser.^**  But  it  has  been  decided  that,  if 
the  name  of  a  person  is  signed  as  maker  after  a  note  is  executed  and 
delivered,  the  other  makers  may  set  this  up  in  defense  to  an  action 
thereon,  but  the  one  so  signing  will  not  be  discharged  from  liability." 

§  17.  Mistake. — A  bona  fide  holder  of  a  note  is  entitled  to  regard 
it  as  correctly  written,  and  it  is  no  defense  to  an  action  thereon  by 
such  a  holder  that  by  reason  of  a  mistake  the  agreement  of  the  parties 
is  not  correctly  expressed  therein."*  It  has,  however,  been  determined 
that  in  an  action  by  the  payee  of  a  note  against  the  maker  it  may  be 
shown  by  the  latter  that  by  mistake  the  amount  expressed  therein  is 
too  large.^^     So  where  a  note  is  given  on  a  settlement  of  accounts  it 

•^  Fisher  v.  Diehl,  94   Md.   112,   50  C.  470.     The  date  of  a  note  cannot 

Atl.  432.  be  shown  in   such  an  action  to  be 

'Lilley  v.  Evans,  3  B.  Mon.  (Ky.)  other  than  as  expressed  in  the  in- 

417.  strument.     Huston  v.  Young,  33  Me. 

•"Rudolph  V.  Brewer,  96  Ala.  189,  85. 

11  So.  314.  ^  Claxon    v.    Demaree,    14    Bush 

"Browning   v.    Gosnell,    91    Iowa  (Ky.)  172;  Kennedy  v.  Goodman,  14 

448,    59    N.    W.    340;     Hamilton    v.  Neb.    585,    16    N.   W.    834.     But   see 

Hooper,   46   Iowa   515,   26  Am.  Rep.  Cooch    v.    Money,    5    Houst.    (Del.) 

161;    Dickerman  v.   Miner,  43   Iowa  177 ;  Mix  v.  White,  52  Vt.  284.   Where 

508.    One  who  signs  a  note  after  ex-  in    an    action    on    a    due    bill    it    is 

ecution  makes  himself  absolutely  li-  claimed  by  the  defendant  that  there 

able  for  the  amount  to  an  innocent  was  a  mutual  mistake  as  to  amount 

holder.    Ewing  v.  Clark,  8  Mo.  App.  and  the  evidence  is  conflicting  the 

570.  question  should  be  submitted  to  the 

"•*  Steadwell  v.  Morris,  61  Ga.  67;  jury.    Wheeler  v.  Seamens,  123  Wis. 

Chase  National  Bank  v.  Faurot,  149  573,    102    N.    W.    28.     Equity    will 

N.  Y.  532,  44  N.  E.   164;    Miller  v.  cancel  a  note  executed  by  mistake 

Butler,  Fed.  Cas.  No.  9565.  1  Cranch  for  an  amount  not  due.   Fitzmaurice 


§§    18,    19]  EXECUTION    OR   DELIVERY.  12 

may  be  shown  that  the  balance  was  produced  by  mistake  when  in  fact 
nothing  was  due.^-*  Again  it  has  been  decided  that  in  such  an  action 
a  maker  may  show  that  by  mistake  there  was  an  omission  of  certain 
provisions,  either  from  the  note  itself  or  the  contract  in  connection 
with  which  it  was  executed.^-**  The  fact,  however,  that  a  note  was 
executed  under  a  mistake  of  law  will  not  operate  to  defeat  recovery 
in  an  action  thereon. ^^  And  it  has  also  been  decided  that  it  cannot  be 
shown  in  defense  that  a  note  was  given  under  a  mutual  mistake  and 
error  of  the  parties,  not  in  reference  to  any  material  fact  but  to  some 
future,  imaginary  or  speculative  event,  provided  there  was  no  fraud  or 
misrepresentation.^^* 

§  18.  Reliance  on  recitals  in  note. — A  recital  in  a  note  as  to  the 
place  of  execution  is  a  representation,  upon  which  an  innocent  holder 
has  a  right  to  rely,  that  the  note  was  executed  at  the  place  designated, 
and  his  right  to  recover  cannot  be  defeated  by  showing  that  it  was 
not  so  executed.^'* 

§  19.  As  to  revenue  stamp. — Where  a  revenue  stamp  is  required 
upon  a  note  it  is  no  defense  to  an  action  by  a  bona  fide  holder  that 

V.  Hosier,  116  Ind.  363,  16  N.  E.  175,  signed  it  in  the  belief  that  it  was 

19  N.  E.  180,  9  Am.  St.  R.  854.   Com-  necessary  to  make  it  binding  on  the 

pare  Capehart  v.  Moon,  5  Jones  Eq.  corporation  and  without  any  inten- 

(N.  C.)  178.    To  the  extent  of  what  tion   to   bind   himself.     Maledon   v. 

is  actually  due  a  note  given  for  an  Leflor,  62  Ark.  387,  35  S.  W.  1102. 

indebtedness  will  be  sustained.   Wil-  Equity  will  grant  relief  in  the  case 

son  V.  Forder,  20  Ohio  St.  89,  5  Am.  of  an  honest  mistake  of  law  as  to 

Rep.  627.    In  the  case  of  negligence  the  effect  of  an  instrument  on  the 

on  the  part  of  the  maker  in  omit-  part    of    both    contracting    parties 

ting  to  use   the   means   within   his  when   such   mistake   operates   as   a 

power  of  obtaining  correct  informa-  gross  injustice  to  one  and  gives  an 

tion  a  mistake  has  been  held  to  be  unconscionable     advantage    to    the 

no  defense.     Capehart  v.   Moore,   5  other.   Thus  it  was  so  held  where  a 

Jones  Eq.  (N.  C.)  178.  note  was  given  as  a  donation  and 

.'-*  Mercer  v.  Clark,  3  Bibb   (Ky.)  there    was    no    intention     that    it 

224  should   bear   interest  and   to  effect 

i:**  Byi-fi    V.     Campbell     Printing-  this  purpose  the  interest  clause  was 

Press  &  Mfg.  Co.,  94  Ga.  41,  20  S.  E.  left    out.      Loudermilk    v.    Louder- 

253;    Glisson  v.  Craig,  1   Tex.  App.  milk,  98  Ga.  780,  25  S.  E.  927. 

Civ.   Cas.   42.     But   see  Bradley   v.  "*  Cartwright  v.  Gardner,  5  Cush. 

Anderson,  5  Vt.  152.  (Mass.)  273. 

"Pool  V.  Alexander,  26  La.  Ann.  "Watson  v.  Boston  Woven  Cord- 

669.      A    director   of   a    corporation  age  Co.,  75  Hun   (N.  Y.)   115,  58  N. 

signing  a  note  cannot  set  up  that  he  Y.  St.  194,  26  N.  Y.  Supp.  1101. 


13  WANT    OF   DELIVERY.  [§    20 

such  stamp  was  not  placed  thereon  at  the  time  of  execution,  if  it  was 
properly  stamped  when  negotiated,  he  having  received  it  in  ignorance 
of  such  facts."* 

§  20.  Want  of  delivery. — The  fact  that  a  note  was  never  delivered 
may  be  a  good  defense  to  an  action  thereon. ^'^  So  where  a  bill  was 
indorsed  without  delivery  and  issued  in  fraud  of  the  indorser,  it  was 
held  that  he  might  show  in  defense  to  an  action  on  the  instrument 
that  the  plaintiff  was  not  a.  horui  fide  holder. ^^  And  where  a  note 
left  by  the  maker  on  the  table,  was  carried  off  without  his  authority 
by  the  payee  without  any  negligence  on  the  part  of  the  former  it  was 
decided  that  even  as  against  a  bona  fide  purchaser  for  value  the  want 
of  delivery  of  the  instrument  was  a  good  defense.^'  And  where  a  note 
was  executed  with  the  understanding  that  it  should  take  effect  upon 
the  consummation  of  a  certain  contract  for  the  sale  of  land,  and  the 
payee  wrongfully .  and  fraudulently  took  the  note  from  a  desk  on 
which  it  was  placed  and  left  with  the  note  in  his  possessioii,  it  was  de- 
cided that,  though  the  makers  did  not  attempt  to  prevent  his  taking 
the  note,  they  were  not  guilty  of  negligence  thereby  and  were  not 
liable  to  a  lona  fide  holder.^^  Again,  where  a  note  signed  by  certain 
persons  was  left  with  the  agent  of  the  payee  for  the  purpose  of  pro- 
curing other  signatures  upon  the  performance  of  certain  conditions, 
and  was  not  to  be  delivered  until  those  conditions  were  performed 
and  the  signatures  obtained,  it  was  decided  that  it  might  be  shown 
against  the  payee,  though  not  against  a  hona  fide  holder,  that  the  note 
was  delivered  before  the  condition  was  performed  or  the  signatures 
obtained.^''  As  was  said  by  the  court :  "Such  an  unauthorized  delivery 
to  the  payee  and  its  subsequent  transfer  to  the  plaintiffs,  the  present 
holders,  does  not  make  the  note  subject  to  defenses  by  the  .makers, 
providing  the  plaintiffs  are  holders  of  the  note  in  due  course,  without 
notice,  and  for  value.  It  simply  compels  the  plaintiffs  to  show  that 
they  are  such  holders.     The  possession  of  the  note  alone  duly  in- 

"♦IRobinson  v.   Lair,  31  Iowa  9;  Wis.    52;    Thomas    v.    Watkins,    16 

Anderson  v.  Starkweather,  28  Iowa  Wis.  549. 

409;    Gage  v.    Sharp,   24   Iowa  415;  '^  Marston  v.  Allen,  8  Mees.  &  W. 

Blackwell    v.    Denie,    23    Iowa    63.  494. 

Compare  Green  v.  Davies,  4  B.  &  C.  "  Benson  v.  Huntington,  21  Mich. 

233;    Ebert  v.   Gitt,   95   Md.  186,   52  415. 

Atl.  900.  "  Dodd  v.  Dunn,  71  Wis.  578,  37 

«Gasquet  v.  Pechin,  143  Cal.  515,  N.  W.  430. 

77  Pac.  481;  Roberts  v.  McGrath,  38  "Porter  v.  Andrus,  10  N.  D.  558, 

88  N.  W.  567. 


§    20]  EXECUTION    OR   DELIVERY.  14 

dorsed  to  them,  is  not  sufficient  to  protect  them  as  against  the  show- 
ing of  an  unauthorized  and  fraudulent  deliverj-  and  putting  into 
circulation.  Such  a  showing  shifts  the  burden  upon  them  to  show 
that  they  are  bona  fide  holders.  If  they  succeed  in  showing  that  they 
are  such  bona  fide  holders,  they  are  protected  as  against  any  defenses 
in  favor  of  the  makers.  The  makers  having  permitted  the  note  regu- 
larly signed  by  them  to  remain  in  the  agents'  hands,  and  trusted  him 
with  its  possession  for  the  purpose  of  procuring  the  other  signatures, 
cannot  complain  of  his  breach  of  trust,  and  they  should  be  the  suffer- 
ers, rather  than  those  who  innocently  purchased  the  note  without  any 
notice  of  the  manner  in  which  it  was  put  into  circulation.""*  But  in 
another  case  it  has  been  decided,  that  as  against  a  payee  want  of  de- 
livery of  a  note  complete  and  perfect  upon  its  face  is  no  defense  where 
the  payee  was  ignorant  of  the  fraud  perpetrated  by  the  maker's  agent 
who  obtained  and  delivered  the  instrument  to  him,  it  being  declared 
to  be  necessary  to  show  knowledge  of  such  fact  in  the  payee  to  render 
it  a  defense.-"  And  where  a  note  had  been  fully  executed  by  the 
maker,  though,  as  between  the  parties,  it  may  be  shown  in  defense  that 
there  was  never  a  valid  and  legal  execution  of  the  same  because  not 
delivered,  or  fraudulently  obtained  possession  of,  yet,  as  between  the 
maker  and  an  innocent  holder  for  value,  such  fact  will  be  no  defense.-^ 
If,  however,  in  an  action  upon  a  note  proof  is  given  showing  a  fraudu- 
lent and  unauthorized  delivery,  it  is  decided  that  the  burden  of  proof 
rests  upon  the  plaintiff  to  show  that  he  is  a  holder  of  the  note  in  due 
course,  without  notice  and  for  value."  Again,  where  one  accepted  a 
bill  and  gave  it  to  another  who  put  his  name  thereto  as  drawer  for  the 
purpose  of  procuring  it  to  be  discounted  and  handing  over  the  pro- 
ceeds to  the  former,  and,  having  failed  to  discount  it,  he  returned  it 
to  the  acceptor,  who  tore  the  bill  in  half  and  threw  it  aside  and  it  was 
picked  up  by  the  one  to  whom  it  had  been  given,  for  the  purpose  of 
discount,  in  the  presence  of  the  acceptor,  and  was  pasted  together 
by  him  and  put  into  circulation  and  transferred  to  a  bona  fide  holder, 
the  want  of  proper  delivery  was  held  to  be  no  defense."  And,  where 
a  payee  writes  his  name  on  the  back  of  a  note,  his  liability  as  an  in- 

"*  Porter  v.  Andrus,  10  N.  D.  558,  yon  v.  Wohlford,   17  Minn.   239,  10 

88  N.  W.  567.    Per  Morgan,  J.  Am.  Rep.  165. 

^Jordan  v.  Jordan,  78  Tenn.    (10  -Porter  v.  Andrus,  10  N.  D.  558, 

Lea)    124,    43    Am.    Rep.    294.      See  88  N.  W.  567. 

Watson  v.  Russell,  3  Best  &  S.  34.  ==  Ingham  v.  Primrose,  7  C.  B.  N. 

=1  Clarke  v.   Johnson,   54   111.   296;  S.  82. 
Shipley  v.  CarroU,  45  111.  285;   Kin- 


15   DELIVERY   BY   AGENT   IN    VIOLATION    OF   INSTRUCTIONS.    [§§    21,    23 

dorser  cannot  be  defeated  as  to  an  innocent  holder  by  the  claim  that 
it  had  not  been  delivered  by  him.^'* 

§  21.  Delivery  by  agent  in  violation  of  instmctions. — It  is  no  de- 
fense to  an  action  by  a  bona  fide  holder  of  a  note  that  it  was  delivered 
by  the  agent  of  the  maker  in  violation  of  his  instructions,  the  posses- 
sion by  the  agent  being  evidence  of  ownership.-^  So  where  a  note  was 
indorsed  by  the  payee  thereof  and  given  to  his  agent  with  instructions 
to  deliver  it  to  a  certain  person  upon  the  performance  of  certain  con- 
ditions and  was  delivered  to  the  latter  before  tlie  conditions  were 
performed,  upon  his  promise  that  they  would  be  performed  on  the 
same  day,  and  he  failed  to  perform  them  and  delivered  the  note  to  a 
broker  for  sale  and  it  was  in  fact  sold,  the  indorser  could  not  defend 
on  the  ground  that  his  agent  had  violated  his  instructions.^^  And 
where  the  maker  and  payee  of  a  note  went  to  a  hotel  to  leave  it  en- 
closed in  an  envelope  with  the  landlord  to  hold,  and  he  being  out,  the 
payee,  with  the  knowledge  of  the  maker,  placed  the  envelope  contain- 
ing the  note  in  the  drawer  of  a  table  in  the  office  of  the  hotel,  the 
landlord's  wife  promising  to  give  it  to  him  upon  his  return,  and  this 
was  the  last  the  maker  saw  of  the  note,  it  was  decided  that  he  could 
not  interpose  the  defense  of  want  of  delivery  against  a  purchaser  of 
the  note  in  good  faith  before  maturity.^'^  This  rule  has  likewise 
been  applied  in  the  case  of  a  bill  of  exchange  accepted  by  the  prin- 
cipal where  drawn  by  his  agent,  to  whose  order  it  was  made  payable, 
and  who  agreed  to  get  it  discounted  for  the  principal's  benefit,  but 
pledged  it  to  a  hojin  fide  holder  for  his  own  use;-'^  and  also  in  the 
case  of  school  district  bonds,  which  had  been  intrusted  to  a  banker  to 
sell  for  the  benefit  and  account  of  the  school  district,  where  they  are 
sold  or  pledged  by  the  banker  on  his  ovm  account.^'' 

§  22.     Execution  or  indorsement  in  blank. — Where  a  bill  or  note 
as  signed  is  incomplete  by  reason  of  unfilled  blanks,  the  fact  that  it  is 

=*  Gould  V.  Segree,  5  Duer  (N.  Y.)  &  P.  539;   Ramsbotham  v.  Cator,  1 

260.  Starkie  238. 

^Giavanovich    v.    Blank,    26    La.  =*  Chase  Nat.  Bank  v.  Faurot,  149 

Ann.    15;     Putnam    v.    Sullivan,    4  N.  Y.  532,  44  N.  E.  164. 

Mass.  45,  3  Am.  Dec.   206;    Murrell  =' McCormick  v.   Holmes,  41  Kan. 

V.  Jones,  40  Miss.  565;  Bridenbecker  265,  21  Pac.  108. 

V.  Lowell,  32  Barb.   (N.  Y.)    9;    St.  ** Clement  v.   Leverett,   12   N.    H. 

Clairsville  Bank  v.   Smith,   5   Ham.  317. 

(Ohio)   222.     See  Collins  v.  Martin,  =»  School  District  Na   1&  v.   State 

1  B.  &  P.  648;  Bolton  v.  Puller,  1  B.  Bank,  8  Neb.  168. 


§  32] 


EXECUTION    OR   DELIVERY. 


16 


subsequently  filled  fraudulently  or  in  a  manner  not  contemplated  will 
be  no  defense  to  an  action  by  a  bona  fide  holder  against  the  drawer, 
maker  or  indorser,  for  one  who  signs  or  indorses  such  an  instrument 
furnishes  the  means  of  fraud  and  is  estopped  to  deny  his  liability.^" 
The  proper  rule  in  this  class  of  cases  has  been  declared  by  the  United 
States  Supreme  Court  in  the  following  words :  "Where  a  party  to  a 
negotiable  instrument  intrusts  it  to  the  custody  of  another  with 
blanks  not  filled  up,  whether  it  be  for  the  purpose  to  accommodate  the 
person  to  whom  it  was  intrusted,  or  to  be  used  for  his  own  benefit,  such 
negotiable  instrument  carries  on  its  face  implied  authority  to  fill  up 
the  blanks  and  perfect  the  instrument;  and  as  between  such  party 
and  innocent  third  parties,  the  person  to  whom  it  was  so  intrusted 
must  be  deemed  the  agent  of  the  party  who  committed  such  instru- 


^^  Alabama. — Prim  v.  Hammel,  134 
Ala.  652,  32  So.  1006;  Robertson  v. 
Smith,  18  Ala.  220;  Decatur  Bank  v. 
Spence,  9  Ala.  800;  Roberts  v.  Ad- 
ams, 8  Port.  (Ala.)  297,  33  Am.  Dec. 
291;  Herbert  v.  Hule,  1  Ala.  18,  34 
Am.  Dec.  755. 

Georgia. — Moody  v.  Threlkeld,  13 
Ga.  55. 

Illinois. — Hudson  v.  Hanson,  75 
111.  198. 

Indiana. — Gothrupt  v.  Williamson, 
61  Ind.  599;  Wilson  v.  Kinsey,  49 
Ind.  35;  Bowen  v.  Laird  (Ind.  App. 
1906),  77  N.  E.  295. 

Iowa. — McDonald  v.  Muscatine 
Nat.  Bank,  27  Lowa  319;  Iowa  Col- 
lege Trustees  v.  Hill,  12  Iowa  462. 

Kansas. — Lowden  v.  National 
Bank,  38  Kan.  533,  16  Pac.  748. 

Kentucky. — Bank  of  Common- 
wealth V.  Curry,  2  Dana  (Ky.)  142; 
Sowders  v.  Citizens'  Nat.  Bank,  12 
Ky.  L.  Rep.  356. 

Louisiana. — Battalora  v.  Erath,  25 
La.  Ann.  318. 

Maine. — Breckenridge  v.  Lewis, 
84  Me.  349,  24  Atl.  864,  30  Am.  St. 
R.  353;  Roberts  v.  Lane,  64  Me. 
108,  18  Am.  Rep.  242;  Abbott  v. 
Rose,  62  Me.  194,  16  Am.  Rep.  427. 

Massachusetts. — Ives  v.  Farmers' 
Bank,  84  Mass.   (2  Allen)    236;    An- 


droscoggin Bank  v.  Kimball,  64 
Mass.  (10  Cush.)  373;  Putnam  v. 
Sullivan,  4  Mass.  45,  36  Am.  Dec. 
206. 

Mississippi.  —  Goad  v.-  Hart's 
Admr's,  8  Sm.  &  M.  (Miss.)  787. 

Missouri. — Clifford  Banking  Co.  v. 
Donovan  Commissiono  Co.,  195  Mo. 
262,  94  S.  W.  527;  Iron  Mountain 
Bank  v.  Murdock,  62  Mo.  70;  Tu- 
milty  V.  Bank  of  Missouri,  13  Mo. 
276;  Green  v.  Kennedy,  6  Mo.  App. 
577. 

New  York. — Van  Duzer  v.  Howe, 
21  N.  Y.  531;  Griggs  v.  Howe,  31 
Barb.  (N.  Y.)  100. 

North  Carolina. — McArthur  v.  Mc- 
Leod,  51  N.  C.  475. 

Ohio. — Ross  V.  Doland,  29  Ohio  St. 
473;  Fullerton  v.  Sturges,  4  Ohio  St. 
529. 

Pennsylvania. — Simpson  v.  Board, 
74  Pa.  St.  351. 

Tennessee. — Frazier  v.  Gains,  61 
Tenn.   (2  Baxt.)  92. 

Wisconsin.  —  Johnston  Harvester 
Co.  V.  McLean,  57  Wis.  258,  15  N.  W. 
177,  46  Am.  Rep.  39. 

Federal. — National  Exch.  Bank  v. 
White,  30  Fed.  412;  Angle  v.  North- 
western Mut.  &c.  Co.,  92  U.  S.  330, 
23  L.  Ed.  556.  Compare  Riddell  v. 
Stevens,  32  Conn.  378,  87  Am.  Dec. 
181.       See  also.  Chaps.  VII,  VIII. 


17  INDORSEMENT   IN   BLANK APPLICATION   OF    RULE.  [§    23 

ment  to  his  custody,  or,  in  other  words,  it  is  the  act  of  the  principal 
and  he  is  bound  by  it."^^  And  in  a  case  in  New  York  it  is  said :  "It 
is  settled  law  that  when  a  person  signs  a  note  in  blank,  he  impliedly 
confers  upon  the  person  to  whom  it  is  entrusted  authority  to  fill  up 
the  usual  and  ordinary  blanks,  such  as  date,  name  of  payee,  amount 
and  time  of  payment.  *  *  *  The  note  having  found  its  way  into 
the  hands  of  an  innocent  holder,  it  is  immaterial  whether  the  defend- 
ant's express  authority  as  to  the  filling  in  of  the  blanks  was  followed  or 
not,  for  the  defendant,  by  leaving  the  blanks  unfilled,  undertook  to 
be  answerable  for  the  note  when  it  was  filled  up  in  the  shape  of  a 
•binding  obligation.  In  short,  the  sending  into  the  world  of  printed 
notes,  with  the  blanks  unfilled,  seems  to  be  regarded  as  a  letter  of 
credit  for  an  indefinite  sum,  and  it  will  not  do  to  allow  a  person  who 
does  this  to  escape  the  consequence  of  his  act  to  the  prejudice  of  the 
public."^"  .The  fact,  however,  that  a  blank  has  been  filled  in  a  man- 
ner other  than  that  contemplated  is  a  defense  against  the  one  so  fill- 
ing it,^^  or  against  one  taking  the  instrument  with  knowledge  there- 
of.^* And  where  a  note  pajable  to  a  person  named  or  his  order,  is  in- 
dorsed in  blank  it  Jias  been  decided  that  the  holder  may  sue  either  in 
his  own  name  or  in  the  payee's  to  his  use,  but  in  the  latter  case  the 
maker  may  set  up  any  defense  which  he  could  avail  himself  of  if  the 
payee  had  retained  the  Ownersliip  of  the  note.^^ 

§  23.    Same  subject — Application  -of  rule. — This  rule  has  been  ap- 
plied -wliere  l)lanks  have  been  left  for  the  amount,^"  as  in  the  case  of 

^^Bank  of  Pittsburgh  v.  Neal,  22  Tenn.   (1  Head)   331.     "Having  exe- 

How.  (U.  S.)  97^  107.     P?r  Mr.  Jus-  cuted  the  note  in  blank  as  to  the 

tice  Clifford.  amount,  with  the  intention  that  the 

«=  Harris  v.  Berger,   15  -N.  Y.   St.  blank  should  be  filled  before  being 

R.  389,  391.     Per  McAdam,  J.  negotiated  by  the  person  in  whose 

''Luellen  v.  Hare,  32  Ind.  211.  possession  he  placed  it  after  signa- 

'^*  Snyder  v.   Van   Dosen^   46  Wis.  ture,  third  persons  dealing  with  the 

602,  1  N.  W.  285,  32  Am.  Rep.  739.  person  in  possession  have  the  right 

=* Temple  v.  Hays,  Morris   (Iowa)  to  presume  that  the  authority  to  fill 

9.  the  blank  was  a  general  and  not  a 

^^  Kentucky.— Grimth  v.  Collier,  4  special  authority,  and  they  are  not 

Ky.  L.  Bep.  260.  bound   by  any   private   instructions 

New  York. — Van  Duzer  v.  Howe,  as  to  the  amount  which  should  be 

21  N.  -Y.  531.  inserted  in  the  note." 

North     Carolina. — Humphrey     v.         Wisconsin. — Johnston      Harvester 

Finch,  97  N.  C.  303,  1  S.  "E.  870,  2  Co.  v.  McLean,  57  Wis.  258,  264,  46 

Am.  St.  R.  293.  Am.  Rep.  39,  15  N.  W.  177,  per  Tay- 

Tennessee. — Grissom    v.    Pite,    38  lor,  J. 
Joyce  Defensps — 2. 


§    23]  EXECUTIOX    OR   DELIVERY.  18 

one  who  gives  blank  notes  to  another  to  secure  the  latter  on  his  in- 
dorsement of  notes  executed  by  the  former  with  the  understanding 
that  if  the  latter  notes  are  paid  the  blank  notes  are  to  be  returned, 
but  if  not  paid  they  are  to  be  filled  out  for  the  amount  the  indorser  be- 
comes liable  for  and  are  to  be  valid  obligations  for  such  amount,  and 
the  blank  notes  are  filled  up  and  negotiated  in  violation  of  the  agree- 
ment and  come  into  the  hands  of  an  innocent  holder.^^  So  where 
a  bill  of  exchange  is  left  blank  as  to  the  amount,  and  the  person  for 
whose  benefit  it  is  made  fills  it  up  for  a  larger  amount  than  was  agreed 
upon,  an  innocent  holder  who  has  discounted  the  bill  for  the  amount 
called  for  upon  its  face  may  collect  such  amount.^^  And  where  a  per- 
son, as  accommodation  maker  with  another,  signed  a  note  with  the 
understanding  that  the  space  for  the  amount,  which  was  left  blank, 
should  be  filled  so  as  to  make  a  note  for  forty-five  dollars,  and  the 
figures  forty-five  preceded  by  the  dollar  sign  were  put  in  the  corner 
of  the  note,  but  the  person  intrusted  with  the  note  placed  a  cipher 
after  such  figures  and  filled  the  blank  with  the  words  "four  hundred 
and  fifty  dollars,"  without  the  knowledge  of  the  payee  and  before  de- 
livery to  him,  it  was  held  that  the  maker  was  liable.^^  Again  where 
a  person  signed  three  accommodation  notes  and  delivered  them  to 
another  to  be  filled  out  with  an  amount  to  be  ascertained  and  which 
was  due  on  a  prior  accommodation  note  given  between  the  same  parties 
and  instead  of  making  the  notes  for  one-third  each  of  the  total  amount 
due,  the  person  to  whom  it  had  been  intrusted  filled  one  of  them  out 
for  a  considerably  larger  amount  and  indorsed  it  to  the  plaintiff'  bank 
Ijefore  maturity  in  the  usual  course  of  business,  the  bank  was  allowed 
to  recover  thereon  against  the  maker.**'  But  where  the  note  is  com- 
plete in  itself  in  every  way,  the  amount  being  stated  therein  in  the 
proper  places,  the  fact  that  there  is  space  left  before  the  amount 
sufficient  to  enable  the  one  to  whom  it  is  given  to  enlarge  it  by  in- 
serting words  and  figures  before  the  proper  amount,  is  held  not  to  be 
such  negligence  as  will  enable  a  bona  fide  holder  of  a  note  which  has 
been  so  changed  to  recover  the  enlarged  amount.*^     The  general  rule 

^'  Harris  v.  Berger,   15   N.   Y.    St.         ^''  Market  &  Fulton  National  Bank 

R.  389.  V.  Sargent,  85  Me.  349,  27  Atl.  192, 

='  Smith     V.  Lockridge,     8     Bush     35  Am.  St.  R.  376. 

(Ky.)  423.  "Burrows  v.   Klank,  70   Md.   451, 

=»  Johnston  Harvester   Co.   v.   Mc-     17  Atl.  378,  14  Am.  St.  R.  371,  3  L. 
Lean,  57  Wis.  258,  15  N.  W.  177,  46     R.  A.  576. 
Am.  Rep.  39. 


I 


19  INDORSEMENT   IN   BLANK — APPLICATION    OF   RULE.  [§    23 

has  also  been  applied  in  the  case  of  blanks  as  to  the  rate  of  interests- 
date/^  name  of  payee/*  term/''"'  and  the  place  at  which  the  instrument 
is  payable.*^  Again  where  there  is  a  blank  after  the  words  "payable 
at"  in  a  note,  the  payee  is  declared  to  have  implied  authority  to  fill 
such  blank,  and  it  is  no  defense  to  an  action  by  a  bona  fide  holder  on 
such  a  note,  which  the  payee  subsequently  filled  by  inserting  a  place 
of  payment,  that  he  had  no  authority  to  fill  the  blank.*^  And  in  the 
application  of  the  general  rule  it  has  been  decided  that  the  owner 
of  paper,  who  delivers  it  indorsed  in  blank  to  an  agent  for  collection, 
cannot  recover  the  proceeds  from  one  purchasing  it  from  such  agent 
for  value,  without  notice,'*^  nor  where  it  is  delivered  to  an  agent  for 
safe  keeping.*^  The  blank  indorsement  of  a  bill  or  note  to  an  agent 
is  a  power  to  transfer,  and  a  bona  fide  purchaser  from  such  agent 
will  not  be  affected  by  any  violation  of  duty  or  excess  of  authority  on 
the  part  of  such  agent  of  which  he  has  no  knowledge,*^*  and  may  hold 
the  instrument  against  him,  whether  he  purchased  it  before  or  after 
its  maturity.^''  In  the  case,  however,  of  a  non-negotiable  demand,  in- 
dorsed in  blank  by  the  owner,  the  purchaser  from  any  other  party  than 
the  original  owner  is  held  to  take  only  such  rights  as  the  latter  has 
parted  with,  except  where  such  owner  is  by  his  acts  estopped  from  as- 
serting his  original  claim  thereto.^^  Again,  the  fact  that  a  note  was 
fraudulently  written  over  a  signature  placed  on  a  blank  piece  of 

« Fisher  v.  Dennis,  6  Cal.  577,  65  In  Bradford  v.  Williams,  91  N.  C. 

Am.  Dec.  534;   Rainbolt  v.  Eddy,  34  7,  it  is  said:    "The  rule  seems  to  be 

Iowa   440,    11    Am.    Dec.    152;    Iron  that  the  owner  thus  puts  the  note 

Mountain  v.  Murdock,  62  Mo.  70.  in  the  power  of  his  indorsee  to  use 

*^  Averton    v.    Matthews,    35    Ark.  and  dispose,  as  his  property,  and  is 

146,  37  Am.  Rep.  9.  bound  by  his  agents'  acts  and  trans- 

•"  Jones    V.    Primm,    6    Tex.    170;  actions  within  the  scope  of  his  ap- 

Close  V.  Fields,  2  Tex.  232.  parent    authority,     in     his     dealing 

^■'Waldron  v.  Young,  56  Tenn.    (9  with  a  bo/m  fide  assignee  who  pays 

Heisk.)  777.  full  value  therefor."  Per  Smith,  C.  J. 

"Winter  v.  Pool,  104  Ala.  580,  16  *»  Ringling  v.  Kohn,  4  Mo.  App.  59. 
So.  543;  Canon  v.  Grigsby,  116  111.  ^'*  Palmer  v.  Marshall,  60  111.  289; 
ISl,  5  N.  E.  362,  56  Am.  Rep.  769.  Murrell  v.  Jones,  40  Miss.  565.  Corn- 
Compare  Cronkhite  v.  Nebeker,  81  pare  People  v.  Bank  of  North  Amer- 
ind. 319,  42  Am.  Rep.  127;  McCoy  v.  ica.  75  N.  Y.  547. 
Lockwood,  71  Ind.  319.  =^»  Cornell  v.  Bliss,  52  Me.  476. 

"Cason  v.  Grant  County  Deposit  "  Cowdry  v.  Vandenburgh,  101  U. 

Bank,  97  Ky.  487,  31  S.  W.   40,   53  S.    572,    25    L.    Ed.    923.      Compare 

Am.  St.  R.  418;  Newell  v.  First  Nat.  Caulkins  v.  Whistler,  29  Iowa  495, 

Bank,  13  Ky.  L.  Rep.  775.  4  Am.  Rep.  236. 

^Stutzman  v.  Payne,  23  Iowa  17. 


§    24]  EXECUTION    OR   DELIVERY.  20 

paper  has  been  held  a  good  defense  against  all  persons."  But  in  a 
case  in  Maine  it  has  been  decided  that,  where  names  are  signed  on  a 
blank  piece  of  paper  for  commercial  use,  such  as  to  write  an  order  over 
the  signature,  and  a  promissory  note  is  subsequently  written  over, 
such  signatures  the  persons  whose  names  are  so  signed  are  liable  to  a 
bona  fide  holder.^^  Again  the  blank  indorsement  of  a  bill  of  ex- 
change is  held  to  pass  all  the  interest  in  the  bill  to  every  indorsee  in 
succession,  discharged  from  any  obligation  which  might  subsist  be- 
tween the  original  parties,  but  which  does  not  appear  upon  the  face 
of  the  instrument  itself.^* 

§  24.  Instruments  payable  to  fictitious  person. — That  a  bill  or  note 
is  made  payable  to  a  fictitious  person  is  no  defense  to  an  action  by 
aboim  fide  holder,  where  such  a  designation  is  not  forbidden  by  stat- 
ute, as  the  maker  by  making  the  instrument  payable  to  such  a  person 
is  estopped  to  deny  that  the  payee  named  exists  and  it  may  be  re- 
garded as  one  payable  to  bearer.^^  So  the  acceptor  of  a  bill  of  ex- 
change cannot  set  up  that  the  payee  named  is  a  fictitious  person,  as 
by  accepting  the  bill  he  is  estopped  to  assert  such  fact.^^  And  this 
rule  has  been  applied  in  the  case  of  a  note  made  payable  to  a  fictitious 
firm  and  indorsed  by  the  holder  in  the  name  of  the  payee  to  a  bona  fide 
purchaser,  though  the  maker  had  no  knowledge  at  the  time  he  exe- 
cuted the  note  that  the  name  of  the  payee  was  fictitious."  And 
where  a  bank  check  is  payable  to  '"bill  payable"  it  is  held  to  stand 
upon  the  same  ground  as  one  payable  to  a  fictitious  person  and  not 
to  he  subject  in  the  hands  of  an  assignee  to  every  defense  to  which 
it  was  liable  when  transferred.^^  And  a  similar  rule  has  been  held  to 
prevail  in  the  case  of  a  note  payable  "to  order."^^  Again,  where  the 
holder  treats  as  fictitious  the  name  of  the  payee  to  whom  the  instru- 
ment was  drawn  by  the  maker  and  whose  indorsement  was  forged  by 

»- First   Nat.    Bank   v.    Zeims,    93  Blodgett,  2  Yeates  (Pa.)  480;  Vacitt 

Iowa  140,  61  N.  W.  483.  v.  James,  39  Tex.  189.    See  Foster  v. 

■^^  Breckenridge   v.    Lewis,    84   Me.  Shattuck,  2  N.  H.  446. 

349,  24  Atl.  864,  30  Am.  St.  R.  353.  ''  Phillips  v.   Im  Thurn,  18  C.  B. 

"Wilkinson  v.  Micklin,  Fed.  Cas.  N.  S.  694. 

No.  17673.  "  Ort  v.    Fowler,    31   Kan.   478,    2 

=»  Farnsworth    v.    Drake,    11    Ind.  Pac.  580,  47  Am.  Rep.  501. 

101;    Lane  v.  Krekle,  22  Iowa  399;  =^^Willets  v.  Bank,  2  Duer  (N.  Y.) 

Ort  V.  Fowler,  31  Kan.  478,  2  Pac.  121. 

580,    47    Am.    Rep.    501;    Nevada   v.  ^"Davega  v.  Moore,  3  McCord   (S. 

Cleveland,    6    Nev.    181;    Hunter   v.  C.)  482. 


31  MISREPRESENTATIONS   AS   TO    NATURE   OF   INSTRUMENT.       [§    25 


him,  the  latter  is  held  to  be  estopped  from  any  contest  on  the  ground 
of  the  genuineness  of  the  signature.®" 

§  25.  Misrepresentations  as  to  nature  of  instrument. — It  is  a  good 
defense  to  an  action  upon  a  note  against  the  maker  tliat  he  was  in- 
duced to  sign  the  same  by  reason  of  fraud,  artifice  or  deception  prac- 
ticed upon  him  by  another  as  to  the  nature  of  the  instrument,  and  that 
he  signed  the  same  innocently  and  under  the  belief  that  it  was  a  con- 
tract of  a  different  character,  unless  it  appear  that  he  was  guilty  of 
laches  or  carelessness  in  affixing  his  signature  thereto.*'^  So  it  is  said 
in  a  recent  case :  "While  the  legal  presumption  obtains  that  the  party 
attaching  his  signature  to  the  written  embodiment  of  the  contract  ha? 
read  it,  as  he  is  obligated  to  do,  and  is  acquainted  with  its  contents, 
yet,  between  the  original  parties  to  the  instrument,  defendant  may 
plead  and  establish  by  proper  proof  that  through  his  illiteracy,  by 
the  misreading  of  the  paper  to  him  or  other  fraudulent  device,  an  in- 
strument other  than  the  one  understood  and  intended  by  him  to  be 
executed  was  fraudulently  substituted,  and  his  signature  thereto 
wrongfully  obtained.*'-  Such  evidence  is  not  addressed  in  variation 
of  a  written  instrument,  but  assails  its  actual  execution,  and  is  ad- 


»»Meacher  v.  Fort,  3  Hill  (S.  C.) 
227,  30  Am.  Dec.  364. 

"^  Alabama. — Burroughs  v.  Pacific 
Guano  Co.,  81  Ala.  255,  1  So.  212. 

California. — Wenzel  v.  Shulz,  78 
Cal.  221,  20  Pac.  404. 

Georgia. — Brooks  v.  Matthews,  78 
Ga.  739,  3  S.  E.  627. 

Illinois. — Auten  v.  Gauner,  90  111. 
300;  Hewitt  v.  Johnson,  72  111.  513; 
Hewitt  V.  Jones,  72  111.  218;  Hub- 
bard V.  Rankin,  71  111.  129;  Rich- 
ardson V.  Schirtz,  59  111.  313;  Puffer 
V.  Smith,  57  111.  527. 

Indiana. — Yeagley  v.  Webb.  86  Ind. 
424;  Baldwin  v.  Bricker,  86  Ind. 
221;  Webb  v.  Corbin,  78  Ind.  403; 
Detwiler  v.  Bish,  44  Ind.  70;  Ryers 
V.  Dougherty,  40  Ind.  198. 

Maryland. — Kagel  v.  Totten,  59 
Md.  447. 

Michigan. — Soper  v.  Peck,  51  Mich. 
563,  17  n;  W.  57;  Gibbs  v.  Linabury, 
22  Mich.  478,  7  Am.  Rep.  675. 

Minnesota. — Yellow  Medicine  Co. 
V.  Tagley,  57   Minn.   391,  59  N.   W. 


486;  Aultman  v.  Olson,  34  Minn. 
450,  26  N.  W.  451. 

Missouri. — Martin  v.  Smylee,  55 
Mo.  577;  Briggs  v.  Ewart,  51  Mo. 
245,  11  Am.  Rep.  445;  Kalamazoo 
Nat.  Bank  v.  Clark,  52  Mo.  App.  593. 

New  York. — Chapman  v.  Rose,  44 
How.  Pr.  (N.  Y.)  364;  Whitney  v. 
Snyder,  2  Lans.  (N.  Y.)  477. 

Ohio. — De  Camp  v.  Hanna,  29  Ohio 
St.  467. 

Wisconsin. — Griffiths  v.  Kellogg, 
39  Wis.  290,  20  Am.  Rep.  48;  Butler 
V.  Cairns,  37  Wis.  61;  Kellogg  v. 
Steiner,  29  Wis.  626;  Walker  v. 
Ebert,  29  Wis.  194,  9  Am.  Rep.  548. 
But  see  Rowland  v.  Fowler,  47  Conn. 
347. 

That  printed  matter  was  obscured 
is  no  defense.  Palo  Alto  Stock  Farm 
V.  Brooker  (Iowa  1906),  108  N.  W. 
307. 

«=  Citing  Corby  v.  White,  57  Mo. 
452;  Law  v.  Crawford,  67  Mo.  App. 
150;  Kingman  v.  Shawley,  61  Mo. 
App.  54. 


§■26] 


EXECUTION    OR   DELIVERY. 


22 


missible  under  a  plea  of  non  est  factum."^^  So  in  an  action  by  an  in- 
surance company  on  a  note  given  to  them,  it  is  a  good  defense  thereto 
that  the  maker  signed  the  same  under  the  belief  that  he  was  signing 
an  application  for  insurance  instead  of  a  note.®*  And  where  one  was 
induced  to  sign  a  promissory  note  by  a  fraudulent  representation  that 
he  was  witnessing  a  deed  and  he  so  believed  at  the  time,  and  had  no 
knowledge  of  the  existence  of  the  promissory  note,  and  the  jury  nega- 
tived negligence  on  his  part  in  so  signing  a  document,  such  facts  afford 
a  defense  to  the  action.*'^  So  where  a  note  is  obtained  through  the 
usual  device  of  men  who  go  about  the  country  as  dealers  in  patent 
rights  or  new  inventions,  with  papers  so  prepared  as  to  obtain  the 
signatures  of  their  victims  to  promissor}'  notes,  when  the  latter  have 
no  expectation  or  intention  of  executing  a  promissory  note,  the  fraud 
and  circumvention  of  such  parties  is  a  defense  thereto.^®  Again, 
where  one  paper  is  read  to  the  maker  and  another  is  fraudulently 
substituted  for  his  signature,  in  the  absence  of  negligence  on  his  part, 
this  will  be  a  good  defense.®^  And  where  a  maker  objects  to  a  clause 
which  the  other  party  agrees  to  strike  out,  but  instead  of  striking  out 
the  clause  objected  to,  erases  another,  thereby  defrauding  plaintiff, 
a  plea  setting  up  such  facts  has  been  held  good.***  A  misrepresenta- 
tion, however,  as  to  the  legal  effect  of  an  instrument- has  been  held 
not  to  be  such  a  fraud  as  will  constitute  a  defense  against  a  bona  fide 
holder."^ 

§  26.  Same  subject — Bona  fide  holder. — This  defense  of  fraud, 
artifice,  or  deception  has  also  been  held  available  even  against  a  pur- 
chaser before  maturity,  for  value  and  without  notice.'^"     So  where  a 


«Broyles  v.  Absher,  107  Mo.  App. 
168,  80  S.  W.  703,  705.  Per  Rey- 
bum,  J. 

**  Dwelling  House  Ins.  Co.  v. 
Downey,  39  111.  App.  524. 

8^  Lewis  V.  Clay,  67  L.  J.  Q.  B. 
224,  77  Law  T.  653. 

«« Champion  v.  Ulmer,  70  111.  322. 

«'  Butler  V.  Carus,  37  Wis.  61. 

"^Angier  v.  Brewster,  69  Ga.  362. 

«« Latham  v.  Smith,  45  111.  25. 

'"  jninOTS.— Sims  v.  Rice,  67  111.  88. 

Indiana. — Home  National  Bank  v. 
Hill,  165  Ind.  226,  74  N.  E.  1086; 
Lindley  v.  Hofman,  22  Ind.  App.  237, 
53  N.  E.  471. 


Iowa. — First  Nat.  Bank  v.  Zeims, 
93  Iowa  140,  61  N.  W.  483. 

Missouri. — Martin  v.  Smylee,  55 
Mo.  577. 

Isleiv  York. — National  Exch.  Bank 
V.  Venemans,  4  N.  Y.  St.  R.  363; 
Whitney  v.  Snyder,  2  Lans.  (N.  Y.) 
477. 

Ohio. — De  Camp  v.  Hanna,  29  Ohio 
St.  467. 

Wisconsin. — Butler  v.  Cams,  37 
Wis.  61;  Kellogg  v.  Steiner,  29  Wis. 
626.  But  see  Woolen  v.  Whitacre, 
73  Ind.  198;  First  Nat.  Bank  v. 
Johns,  22  W.  Va.  520,  46  Am.  Rep. 
506. 


23  MISREPRESENTATIONS   AS    TO    NATURE    OP   INSTRUMENT.       [§    27 

person  was  induced  by  another  to  sign  a  paper  believing  it  to  be 
merely  to  furnish  means  of  identification  and  not  intending  it  to  be 
a  note  or  contract  in  any  form,  and  the  latter  then  filled  in  certain 
blanks  in  the  paper  so  as  to  make  it  a  note,  it  was  held  that  plaintiff, 
though  an  innocent  holder  for  value,  could  not  recoverJ^  And  where 
a  person  signs  a  note  under  the  belief  induced  by  representations  of 
another,  that  he  is  signing  an  agreement  appointing  him  agent  for  the 
sale  of  a  certain  article  and  a  statement  of  his  ownership  of  property, 
and  it  appeared  from  the  evidence  that  he  could  read  printed  matter 
and  writing  with  difficulty,  the  fraud  and  circumvention  in  obtaining 
his  signature  will  be  a  good  defense  even  as  against  a  bona  fide 
holder.''^  In  an  action,  however,  against  the  maker  of  a  note  by.  a 
bona  fide  holder  the  fact  that  the  maker  was  induced  by  fraud  to  exe- 
cute the  note  in  the  belief  that  he  was  signing  a  paper  of  an  entirely 
different  character  is  not  of  itself  a  good  defense,  as  it  is  essential 
to  the  perfection  of  such  a  defense  that  it  should  appear  that  there 
was  no  negligence  on  the  part  of  the  maker  J^ 

§  27.  Same  subject — Maker  unable  to  read  English. — That  the 
maker  of  a  note  was  unable  to  read  English  and  that  his  signature 
was  obtained  by  false  representations  as  to  the  character  of  the  in- 
strument, without  any  negligence  on  his  part,  will  be  a  good  defense 
even  as  against  a  bona  fide  holder.'^^  In  such  a  case  the  note  has 
never  existed  in  the  sense  of  the  minds  of  the  parties  meeting  to  give 
it  validity.''^  So  where  a  person  unable  tq  read  and  write  executes 
a  note,  after  it  has  been  misread  to  him,  and  under  the  belief  that  the 
time  of  payment  is  different  from  that  actually  stated  in  the  note, 
evidence  of  such  fraud  is  admissible  to  defeat  an  action  on  tJie  instru- 
ment.''®   And  where  such  a  person  signs  a  note  for  a  larger  sum  than 

"  First   Nat.    Bank   v.    Zeims,    93  Minnesota. — Cummings  v.  Thomp- 

lowa  140,  61  N.  W.  483.  son,  18  Minn.  246. 

"  Sims  v.  Rice,  67  111.  88.  iV^e&msfca.— First    Nat.     Bank    v. 

"Brown   v.    Feldwert,    (Ore.)    80  Lierman,  5  Neb.  247. 

Pac.  414.  Texas. — Stacy  v.  Ross,  23  Tex.  3. 

'*  Illinois. — Davis     v.     Snider,     70  Wisconsin. — Walker   v.    Ebert,    29 

Ala.  315;  Taylor  v.  Atchison,  54  111.  Wis.  194,  9  Am.  Rep.  548. 

196,  5   Am.   Rep.   118;    Vanbrunt  v.  '^  Green  v.  Wilkie,  98  Iowa  74,  66 

Singley,  85  111,  281;  Puffer  v.  Smith,  N.  W.  1046. 

57  111.  527.                   •  ■"'  Nielson  v.   Schuckman,  53  Wis. 

/ndiana.— Webb  v.  Corbin,  78  Ind.  638,  11  N.  W.  44. 
403;    Lindley    v.    Hofman,    22    Ind. 
App.  237,  53  N.  E.  471. 


§    27]  EXECUTION   OR   DELIVERY,  24 

he  intends,  being  ignorant  of  the  fact  that  it  is  drawn  for  the  larger 
amount  and  is  guilty  of  no  negligence  in  not  knowing  the  exact 
amount  of  the  note  in  question,  he  is  not  bound  thereby."  And 
where  an  action  was  brought  on  a  note  signed  by  defendant,  and  it 
appeared  that  the  defendant  was  an  illiterate  person  and  had  signed 
the  note  in  question,  not  knowing  it  to  be  such,  but  under  the  belief 
that  he  was  signing  duplicate  contracts  by  which  he  was  to  be  ap- 
pointed agent  for  a  certain  company  and  no  other  parties  were  pres- 
ent and  he  was  compelled  to  trust  to  the  reading  of  the  paper  by  the 
one  to  whom  it  was  given,  it  was  decided  that  there  could  be  no  re- 
covery.'^*  But  if  the  maker  was  guilty  of  negligence  in  signing  the 
instrument  without  having  the  same  read  to  him  or  taking  steps  to 
learn  its  contents,  or  exercising  the  ordinary  care  which  a  prudent 
business  man  would  exercise,  tlie  fact  that  he  was  fraudulently  in- 
duced to  sign  it,  will  be  no  defense  to  an  action  by  a  bona  fide  holder, 
as  in  such  case  the  rule  of  law  applies,  that  where  one  of  two  persons 
must  suffer  loss,  he  who  by  his  negligent  conduct  has  made  it  possible 
must  bear  the  same."^  So  where  an  answer  alleged  the  inability  of 
the  maker  to  read,  and  the  misreading  of  the  note  by  the  payee,  on 
which  the  maker  had  relied  in  affixing  his  signature,  it  was  decided 
that  the  facts  pleaded  were  not  sufficient  to  constitute  a  good  answer 
there  being  no  averment  that  he  was  alone  or  had  no  other  means  of 
having  the  paper  read  to  him  except  by  the  payee.*"  It  has  also  been 
said :  "Where  a  party,  through  neglect  of  precautions  within  his 
power,  affixes  his  name  to  that  kind  of  paper  without  knowing  its 
character,  the  consequent  loss  ought  not  to  be  shifted  from  him  to  a 
bona  fide  purchaser  of  the  paper.  Tested  by  this  rule,  the  facts  which 
defendant  offered  to  prove  would  have  been  no  defense.  He  signed 
the  paper  voluntarily.  He  was  under  no  controlling  necessity  to  sign 
witliout  taking  such  time  as  might  be  needed  to  inform  himself  of  its 
character.  If  he  could  not  read  it  himself,  there  was  no  reason,  ex- 
cept, perhaps,  his  own  convenience  or  haste,  why  he  should  not  post- 
pone signing  until  he  could  have  it  read  by  some  person  upon  whom 

''  Bowers  v.  Thomas,  62  "Wis.  480,  Muhlke   v.   Hegerness,   56   111.   App. 

22  N.  W.  710.  822;   Yeagley  v.  Webb,  86  Ind.  424; 

"  Willard  v.  Nelson,  35  Neb.  651,  Williams  v.  Stoll,  79  Ind.  80,  41  Am. 

53  N.  W.  572,  37  Am.  St.  R.  455.  Rep.  604;  Ruddell  v.  Dillman,  73  Ind. 

"Bedell  v.  Hering.  77  Cal.  572,  20  518,  37  Am.  Rep.  152;  Fisher  v.  Von 

Pac.  129,  11  Am.  St.  R.  307;   Swan-  Behren,  70  Ind.  19,  36  Am.  Rep.  162. 

nell  V.  Watson,  71  111.  456;  Anderson  ^"Lindley  v.  Hofman,  22  Ind.  App. 

V.  Warne,  71  111.  20,  22  Am.  Rep.  83;  237,  53  N.  E.  471. 


I 


25 


EFFECT    OF    NEGLIGEXCE. 


[§   28 


he  had  a  right  to  rely.  Instead  of  doing  this  he  chose  to  rely  upon  an 
entire  stranger,  that  stranger  the  party  opposed  to  him  in  interest, 
and  the  only  person  under  any  temptation  to  deceive  him  as  to  the 
character  of  the  paper  he  was  asked  to  sign.  One  who,  without  any 
necessity,  so  misplaces  his  confidence  ought  not  to  be  heard  to  claim 
that  the  paper  he  is  in  consequence  misled  to  sign  should  be  taken 
out  of  the  rule  protecting  commercial  paper."®^  In  the  absence  of 
fraud,  illiteracy  has  been  held  no  defense.^^  In  this  connection  it  is 
decided  in  a  recent  case  that  the  mere  fact  that  the  maker  of  a  note 
is  an  Indian  and  that  he  could  not,  at  the  time  he  made  the  note,  read 
or  write  the  English  language  and  understood  the  language  imper- 
fectly, is  not  of  itself  sufficient  to  overcome  the  presumption  that  he 
understood  the  plain  terms  of  the  note  when  he  signed  it.*^ 

§  28.  Effect  of  negligence. — The  fact  that  fraud  was  practiced 
upon  the  maker  of  a  note  Avill  be  of  no  avail  as  a  defense  if  it  appears 
that  he  was  guilty  of  negligence,  as  in  such  a  case  where  one  of  two 
innocent  parties  must  suffer,  the  one  whose  negligence  contributed 
to  the  loss  must  bear  it.^*    It  is  incumbent  upon  a  party  executing  an 


'^Mackey  v.  Peterson,  29  Minn. 
298,  13  N.  W.  132,  43  Am.  Rep.  211. 
Per.  Gilfillan,  C.  J. 

*2  Waller's  Appeal,  103  Pa.  St.  594. 

*'  Warnock  v.  Itawis,  38  Wash.  144, 
80  Pac.  297. 

^Alabama. — Orr  v.  Sparkman,  120 
Ala.  9,  23  So.  829 ;  Goetter  v.  Pickett, 
61  Ala.  387. 

Illinois. — Homes  v.  Hale,  71  111. 
552;  Fulford  v.  Block,  8  111.  App. 
284. 

Indiana. — Home  National  Bank  v. 
Hill,  165  Ind.  226,  74  N.  E.  1086; 
Baldwin  v.  Barrows,  86  Ind.  351; 
Baldwin  v.  Bricker,  86  Ind.  221; 
Williams  v.  Stoll,  79  Ind.  80,  41  Am. 
Rep.  604;  Ruddell  v.  Phalor,  72  Ind. 
533,  37  Am.  Rep.  177;  Fisher  v.  Von 
Behren,  70  Ind.  19,  36  Am.  Rep.  162; 
Button  v.  Claffer,  53  Ind.  276. 

Iowa. — Hopkins  v.  Hawkeye  Ins. 
Co.,  57  Iowa  203,  42  Am.  Rep.  41; 
Wright  V.  Flinn,  33  Iowa  259;  Mc- 
Donald v.  Bank,  27  Iowa  319. 

Kentucky. — Wheeler    v.    Traders' 


Bank,  21  Ky.  L.  Rep.  1416,  55  S.  W. 
552. 

Maine. — Kellogg  v.  Curtis,  65  Me. 
59. 

Minnesota. — ^Ward  v.  Johnson,  51 
Minn.  480,  53  N.  W.  766. 

Missouri. — Frederick  v,  Clemens, 
60  Mo.  313;  Shirts  v.  Overjohn,  60 
Mo.  305. 

Nel>7'aska. — Cole  v.  Williams,  12 
Neb.  440,  11  N.  W.  875. 

New  Hampshire. — Citizens'  Nat. 
Bank  v.  Smith,  55  N.  H.  593. 

New  York. — Chapman  v.  Rose,  56 
N.  Y.  137;  15  Am.  Rep.  401;  Carey  v. 
Miller,  25  Hun.  (N.  Y.)  28;  Mosher 
v.  Carpenter,  13  Hun  (N.  Y.)   602. 

Ohio. — Ross  V.  Doland,  29  Ohio 
St.  473. 

West  Virginia.  —  Parkersburg 
First  Nat.  Bank  v.  Johns,  22  W.  Va. 
520,  46  Am.  Rep.  506. 

See  Roe  v.  Jerome,  18  Conn.  138; 
Carpenter  v.  Bank,  119  111.  352,  10 
N.  E.  18. 


§    28]  EXECUTIOX    OR   DELIVERY.  26 

instrument  to  exercise  reasonable  care  and  diligence  to  ascertain  its 
contents.*^  He  is  not  required,  however,  to  exercise  every  possible 
precaution,  but  only  that  caution  which  would  be  expected  from  a  man 
of  ordinary  prudence.^"  But  though  a  maker  may  be  estopped  by  his 
carelessness  from  setting  up  the  defense  of  fraud  as  against  a  bona 
fide  holder  yet  it  may  be  available  against  the  payee. ^^  So  the  gen- 
eral rule  has  been  applied  in  the  case  of  one  who  intends  to  bind  him- 
self by  some  obligation  in  writing  and  signs  the  instrument  voluntar- 
ily with  full  means  of  ascertaining  its  true  character,  but  negligently 
signs  and  delivers  a  note  in  lieu  of  the  instrument  he  intended  to  sign, 
that  he  will  be  estopped  to  impeach  its  validity  in  the  hands  of  a 
bona  fide  holder.^*  So  one  who  has  signed  a  note  as  surety  cannot, 
in  an  action  by  the  payee,  who  is  an  innocent  holder,  defeat  recovery 
on  the  note  by  setting  up  that  one  of  the  signatures  which  was  upon 
the  note  when  he  signed  it  was  a  forgery,  he  having  trusted  and  relied 
upon  the  one  who  procured  him  to  sign  it,  the  fraud  being  practiced 
upon  him  by  such  person  and  not  by  the  payee.*^  And  where  one 
signed  a  note  under  the  belief  that  it  was  a  receipt  for  a  plow,  the  one 
presenting  the  instrument  to  him  for  his  signature  having  so  repre- 
sented it,  both  by  his  statements  and  in  his  reading  of  it,  and  there 
was  no  one  within  half  a  mile  who  could  read  English,  the  person  so 

«5  Hopkins  v.    Hawkeye   Ins.    Co.,  Mo.   App.   264;   First  Nat.   Bank  v. 

57  iQwa  203,  10  N.  W.  605,  42  Am.  Stanley,  46  Mo.  App.  440. 

Rep.  41.  Nebraska. — Dinsmore  v.  Stimbert, 

«« Sims  V.  Rice,  67  111.  88.  12  Neb.  433.  11  N.  W.  872. 

"Dwelling     House     Ins.     Co.     v.  Neic    Hampshire. — Citizens'    Nat. 

Bailey,  39  111.  App.  488.  Bank  v.  Smith,  55  N.  H.  593. 

**  7«inois.— Hubbard  v.  Rankin,  71  ^^ew  Yorfe.— Chapman  v.  Rose,  56 

111.   129;    Sims  v.  Rice,    67    111.   88;  N.  Y.  137;  Hutkoff  v.  Moje,  20  Misc. 

Smith  V.  Culton,  5  111.  App.  422.  (N.   Y.)    632,   46   N.   Y.    Supp.    905; 

Indiana.— Ind.  Nat.  Bank  v.  Wech-  Auburn   Nat.   Exch.    Bank  v.   Bene- 

erly,  67  Ind.  345;  Kimble  v.  Christie,  man,  43  Hun    (N.  Y.)    241;    Fenton 

55  Ind.  140;  Glenn  v.  Porter,  49  Ind.  v.  Robinson,  4  Hun    (N.  Y.)   252,  6 

500.  Thomp.  &  C.  427. 

Zotca.— Douglass    v.    Matting,    29  English.— Broadhelt  v.  Huddleson, 

Iowa  498.  2   Wkly.  Notes  Cas.  293;   Foster  v. 

Michigan.— Anderson    v.    Walter,  Mackinnon,  L.  R.  4  C.  P.  704. 

34  Mich.  113.  See  De  Camp  v.  Hanna,  29  Ohio 

Minnesota.  —  Yellow       Medicine  St.  467.     But  see  Corby  v.  Weddle, 

County    Bank   v.    Tagley,    57    Minn.  57  Mo.  452. 

391,  59  N.  W.  486.  ^"  Wheeler     v..    Traders'     Dsijubit 

Misscmri.— Cogwill  v.   Petifish,  51  Bank,  21  Ky.  L.  Rep.  1416,  55  S.  W. 

552. 


37  EFFECT    OF    NEGLIGENCE.  [§'   28 

affixing  his  signature  in  reliance  merely  upon  the  statement  of  such 
party,  was  held  guilty  of  such  negligence  as  to  estop  him  from  defeat- 
ing recovery  by  a  bona  fide  holder.""  In  another  case,  however,  where 
it  appeared  that  one  had  signed  a  note,  relying  upon  the  representa- 
tion of  a  stranger,  who  had  come  to  his  farm,  that  the  instrument  was 
an  application  for  insurance  and  it  was  read  to  him  as  such  by  the 
stranger,  he  being  unable  to  read,  it  was  decided  that  a  purchaser  of 
such  note  could  not  recover  thereon  against  the  maker.**^  Again, 
failure  to  read  the  instrument  has  been  held  to  be  such  negligence  as 
will  estop  a  maker  from  setting  up  fraudulent  representations,®^  the 
note  not  having  been  signed  under  any  emergency  and  there  being 
nothing  to  prevent  him  from  doing  so  and  no  allegation  of  any  suffi- 
cient excuse."^  And  such  failure  will  not  be  excused  by  the  fact  that 
the  maker  was  unable  to  read  without  glasses  where  they  could  easily 
have  been  obtained.^*  In  this  case  it  appeared  that  the  defendant,  who 
was  president  of  the  school  board,  had  been  given  several  papers  to 
sign  in  reference  to  school  matters,  among  which  papers  the  note  in 
question  had  been  surreptitiously  placed  in  such  a  manner  that  the 
defendant  could  not  distinguish  it  from  the  other  papers,  that  he  had 
affixed  his  signature  thereto,  in  the  belief  that  it  was  an  order  in  regard 
to  school  matters,  and  that  at  the  time  he  was  unable  to  read  or  dis- 
tinguish papers  without  his  glasses,  but  neglected  to  use  them,  and  he 
was  held  estopped,  in  an  action  by  an  innocent  holder,  to  deny  he 
executed  the  paper.   Nor  is  it  any  excuse  that  the  maker  was  not  ac- 

"Mackey  v.   Perterson,   29   Minn.  lotoa. — Sheneberger  v.  Union  Ins. 

298,  13  N.  W.  132,  43  Am.  Rep.  211.  Co.  114  Iowa  678,  87  N.  W.  493. 

"First    Nat.    Bank    v.    Deal,    55  Kansas. — Ort  v.   Fowler,   31   Kan. 

Mich.  592,  22  N.  W.  53.  478,  2  Pac.  580,  47  Am.  Rep.  501. 

^- Alabama.— Martin  v.  Smith,  116  Minnesota.— WarA  v.  Johnson,  51 

Ala.  639,  22  So.  917;  Cannon  v.  Lind-  Minn.  480,  53  N.  W.  766,  38  Am.  St. 

sey,  85  Ala.  198,  3  So.  676,  7  Am.  St.  R.  515. 

R.  38.  New  York. — Chapman  v..  Rose,  56 

Georgia.— Walton    Guano    Co.    v.  N.  Y.  137. 

Copelan,  112  Ga.  319,  37  S.  E.  411.  Compare  Radcliffe  v.  Biles,  94  Ga. 

/JImois.— Carpenter  v.   First  Nat.  480,  20  S.  E.  359;  Downey  v.  Beach, 

Bank,  119  111.  352,  10  N.  E.  18;  Mead  78  111.  53;  Hopkins  v.  Hawksye  Ins. 

V.  Munson,  60  111.  49.  Co.,  57  Iowa  203,  10  N.  W.  S05,  42 

Indiana. — Baldwin  v.  Barrows,  86  Am.  Rep.  41. 

Ind.  351;   American  Ins.  Co.  v.  Mc-  "' Boynton  v.  McDaniel,  97  Ga.  400, 

Whorter.    78    Ind.    136;    Nebeker   v.  23  S.  E.  824. 

Cutsinger,  48  Ind.  436.  »*  McCoy    v.    Gouvion,    19    Ky.    L. 

Rep.  1441,  43  S.  W.  699. 


§    28]  EXECUTION    OR   DELIVERY.  28 

quainted  with  the  language,^^  where  the  instrument  could  have  been 
read  to  him  by  others  who  were  present  when  he  signed  it/*'  or  where 
no  effort  was  made  by  him  to  ascertain  the  contents.^''  So  it  has  been 
determined  that  as  a  matter  of  law  one  who,  possessed  of  all  his  facul- 
ties, and  able  to  read,  signs  a  bill  or  note  relying  upon  the  assurance 
or  the  reading  of  a  stranger  that  it  is  a  different  instrument,  is  guilty 
of  such  negligence  as  will  render  him  liable  thereon.^^  The  rule 
is  said  to  be  founded  upon  the  principle,  that  a  party  who  is  in  pos- 
session of  his  faculties  and  able  to  read  can  know  the  character  of  the 
instrument  which  he  is  signing,  and  owes  the  duty  to  know  this  to 
every  party  who  may  be  subsequently  affected  by  his  act.  By  affix- 
ing his  signature  to  the  instrument,  the  credence  of  the  world  to 
every  statement  and  promise  therein  is  invited  and  an  omission  on  his 
part  to  ascertain  what  the  provisions  and  statements  are,  constitutes 
negligence.''''  Ordinarily,  however,  the  question  of  what  constitutes 
negligence  on  the  part  of  the  maker  is  held  to  be  one  of  fact  for  the 
jury.^**°  And  mere  failure  of  an  illiterate  person  to  procure  some  one 
to  read  a  note  for  him  before  signing  it  cannot  be  held,  as  a  matter  of 
law,  to  constitute  such  negligent  signing  thereof  as  would  prevent  him 
from  controverting  its  execution  even  against  a  hona  fide  holder.^*'^ 
So  where  two  persons  called  on  the  person  whose  name  was  signed  to 
a  note,  several  days  before  it  was  executed,  and  as  a  result  of  their 
negotiations  with  him  he  was  appointed  agent  for  a  certain  territor}' 
for  the  sale  of  cornshellers,  which  were  to  be  forwarded  to  him,  but 
before  they  were  received  another  party  called  and  procured  his  signa- 
ture to  what  was  represented  to  be  a  paper  in  the  nature  of  a  receipt 

''Fisher  v.  Van  Behren,  70   Ind.  his  reading  as  his  own  knowledge, 

19,    36    Am.    Rep.    162;     Boagin    v.  what   his    agent    knows    he   knows, 

Fouchy,  26  La.  Ann.  594.  and  he  cannot  disaffirm  the  acts  of 

^'  Baldwin  v.  Barrows,  86  Ind.  351.  that  agent  done  within  the  scope  of 

®'Ruddell  V.  Dillman,  73  Ind.  518,  the   authority   he   has    intrusted   to 

38  Am.  Rep.  152.  him."    Per  Brewer,  J. 

"**  Ort  v.  Fowler,  31  Kan.  478,  2  Pac.  ^^  Ort   v.   Fowler,    31   Kan.   478,    2 

580,  wherein  it  is  said:    "If  he  has  Pac.  580. 

eyes  and  can  see  he  ought  to  exam-  ^'^Ray  v.  Baker,    (Ind.)    74  N.  E. 

ine;  if  he  can  read  he  ought  to  read;  619;    Hopkins  v.  Hawkeye  Ins.  Co., 

and    he   has  no    right   to   send    his  57  Iowa  203,  10  N.  W.  605;  National 

signature  out  into  the  world  affixed  Exch.   Bank  v.   Venemans,   4   N.   Y. 

to  an  instrument  of  whose  contents  St.  R.   363;    Bowers  v.   Thomas,  62 

he   is  ignorant.     If   he  relies  upon  Wis.  480,  22  N.  W.  710. 

the   word   of   a   stranger   he  makes  ^"^  Ray  v.   Baker,    (Ind.)    74  N.  E. 

that  stranger  his  agent.     He  adopts  619. 


29  INSTRUMENT  EXECUTED,  ACCEPTED  OR  DELIVERED  ON  SUNDAY.  [§    29 

of  a  certain  number  of  cornshellers,  claimed  to  be  at  a  certain  depot 
consigned  to  him,  and  in  response  to  the  signer's  statement  that  he 
feared  the  paper  might  be  a  note,  he  was  assured  that  it  was  not,  and 
he  was  unable  to  read  English,  and  had  no  neighbor  within  a  mile, 
it  was  held  in  an  action  by  a  bo7m  fide  holder  of  the  instrument,  which 
was  in  fact  a  note,  that  the  question  whether  he  was  negligent  in 
signing  the  same  was  for  the  jury  and  in  this  case  it  was  held  there 
could  be  no  recovery.^"-  In  determining  the  question  of  negligence 
the  age,  mental  power,  and  physical  infirmities  of  the  one  signing  the 
note  are  among  the  elements  to  be  considered. ^^^ 

§29.     Instruments   executed,   accepted   or   delivered   on   Sunday. 

Though  it  may  be  shown  as  a  defense  to  an  action  between  the  parties, 
that  a  note  or  bill  of  exchange  was  executed  or  accepted  and  delivered 
on  Sunday,  yet  if  such  an  instrument  bears  the  date  of  a  secular  day, 
the  maker  or  acceptor  will  be  estopped  to  set  up  such  defense  as  against 
a  bona  fide  holder  taking  the  same  before  it  became  due  for  a  valuable 
consideration  and  without  notice."*  So  this  rule  has  been  applied 
in  a  case  of  drafts  delivered  and  accepted  on  Sunday,  but  falsely 
dated  as  of  another  date.  And  in  reference  to  this  the  court  said: 
"The  drafts  were  negotiable  paper  and  bore  date  upon  a  day  of  the 
month  corresponding  to  Saturday.  If  they  were  in  fact  executed  on 
Sunday,  they  were  void  as  between  the  original  parties ;  and  that  they 
were  thus  void  might  be  shown  also  against  any  holder  affected  with 
notice.  But  if  Ball  purchased  them  before  maturity,  and  took  them 
for  a  valuable  consideration,  in  the  due  course  of  trade,  and  without 
notice  of  their  immoral  taint,  the  acceptor,  having  accepted  upon 
Sunday,  with  no  correction  of  the  false  date,  and  no  indication  of  the 
true  time  of  the  acceptance,  is  estopped  from  urging  in  defense  of  a 
suit  against  him  by  Ball  that  the  drafts  M^ere  drawn  and  accepted  on 
Sunday.     *     *     *     This  does  not  trench  upon  the  rule  that  a  Sunday 

"=  National  Exch.   Bank  v.   Vene-  Kentucky. — Hofer   v.   Cowan   C5o., 

mans,  4  N.  Y.  St.  R.  363.  (Ky.)  6S  S.  W.  438. 

""  Kalamazoo  Nat.  Bank  v.  Clark,  J/ai?ie.— Bank  v.  Mayberry,  48  Me. 

52  Mo.  App.  593.  198. 

^"^  Arkansas.— Trieher  v.  Commer-  Massachusetts. — Cranson  v.   Goss, 

cial  Bank  of  St.  Louis,  31  Ark.  128.  107  Mass.  439,  9  Am.  Rep.  45. 

Georgia.— Harrison  v.  Powers,  76  Michigan.— Bernan  v.  Wessels,'  53 

Ga.  218.  Mich.  549,  19  N.  W.  179;   Vinton  v. 

/owa.— Clinton      Nat.      Bank     v.  Peck,  14  Mich.  287. 

Graves,  48  Iowa  228.  New     Hampshire. — State     Capital 

Bank  v.  Thompson,  42  N.  H.  369. 


g    29]  EXECUTION    OR   DELIVERY.  30 

contract  is  void;  it  only  excludes  the  acceptor  from  treating  those 
drafts  as  Sunday  contracts,  after  he  has  given  currency  to  them  as 
Saturday  contracts  and  with  no  timely  disclosure  that  they  were  other 
than  what  they  purported  to  be.  It  makes  their  date  conclusive  that 
they  were  Saturday  contracts,  and  not  Sunday  contracts.  The  de- 
fense that  a  party's  own  act  is  void  may  be  outlawed  by  the  doctrine  of 
estoppel,  to  protect  innocent  purchasers  and  prevent  fraud."^°^  And 
where  a  note  is  delivered  on  a  secular  day,  it  is  held  that  it  is  no  de- 
fense to  an  action  thereon,  that  it  was  signed  on  a  Sunday,  it  being 
declared  that  a  note  becomes  a  contract  at  the  time  of  delivery.^"® 
And  it  has  been  decided  that  in  an  action  by  a  transferee  after  ma- 
turity, the  fact  that  the  note,  though  purporting  to  have  been  exe- 
cuted on  a  week  day,  was  executed  on  a  Sunday,  cannot  be  set  up  in 
defense  thereto  by  the  surety  where  it  is  not  shown  that  such  de- 
fense could  have  been  set  up  by  him  against  the  payee."^  But  where 
the  contract,  which  was  the  consideration  of  the  note,  was  made  on 
Sunday,  and  the  note  was  made  and  delivered  on  that  day  to  the 
original  payee,  such  facts  were  declared  to  be  a  good  defense  to  an 
action  by  him  on  the  note.^"®  And  where  a  note  is  given  on  Sunday 
the  fact  that  the  consideration  was  goods  purchased  on  a  week  day  is 
held  not  to  alter  the  rule,  in  an  action  by  the  payee.^"^  And  it  has 
also  been  decided  that  there  can  be  no  recovery  on  a  note  given  on  a 
week  day  for  a  contract  completed  on  a  Sunday,""  or  on  a  note  exe- 
cuted on  such  a  day  where  the  consideration  was  a  tort  growing  out 
of  an  unlawful  Sunday  contract,  as  where  the  consideration  for  a  note 
was  an  injury  done  to  a  horse  and  wagon  by  careless  or  negligent 
driving  on  a  Sunday."^  Again,  where  a  note  executed  on  Sunday 
is  void  as  in  violation  of  a  penal  statute,  there  can  be  no  recovery  on  a 
renewal  note  made  on  Sunday  and  delivered  by  the  maker  to  another 
to  be  delivered  to  the  payee  on  the  following  day."-     And  under 

"^Ball  V.  Powers,  62  Ga.  757.   Per  9  Am.  Rep.  45;  Allen  v.  Deming,  14 

Bleckley,  J.  N.  H.  133,  40  Am.  Dec.  179. 

'°«Bell  V.  Mahin,  69  Iowa  408,  29  ""Morgan  v.   Bailey,  59  Ga.   683; 

N.  W.  331;   Bank  of  Cumberland  v.  McAuley  v.   Reynolds,   64   Me.   136; 

Mayberry,  48  Me.  198.     See  Hall  v.  Miller  v.  Lynch,  38  Miss.  344.     See 

Parker,  37  Mich.  590,  27  Am.  Rep.  Foreman  v.  Ahl,  55  Pa.  St.  325. 

540.  ""Kountz  v.  Price,  40  Miss.  341. 

"^Leightman     v.     Kadetska,      58  "^  Tillock  v.  Webb,  56  Me.  100. 

Iowa  676,  12  N.  W.  736,  43  Am.  Rep.  "=  Davis    v.    Benger,    57    Ind.    54. 

129.  See  Stevens  v.  Wood,  127  Mass.  123. 

'<«Cranson  v.  Goff,  107  Mass.  439, 


I 


31  INSTRUMENT  EXECUTED,  ACCEPTED  OR  DELIVERED  ON  SUNDAY.   [§    29 

such  a  statute  there  can  be  no  recovery  against  a  surety  on  a  note  so 
executed  by  him,  in  an  action  by  the  payee  to  whom  it  was  delivered 
by  the  principal,  the  payee  taking  the  same  in  good  faith  and  with  no 
knowledge  as  to  the  date  of  the  execution.^^^  So  a  Sunday  note,  void 
under  the  laws  of  a  state,  cannot,  as  between  the  parties,  be  ratified 
by  a  subsequent  promise  to  pay  the  same  made  on  a  week  day,  as  the 
transaction,  being  illegal  in  its  inception,  will  not  be  purged  of  its 
illegality  by  a  subsequent  promise,  it  not  being  in  the  power  of  par 
ties  to  render  a  contract  legal  which  the  law  declares  to  be  illegal 


114 


"3  Parker  v.  Pitts,  73  Ind.  597,  38     amine  Tucker  v.  West,  29  Ark.  386; 
Am.  Rep.  155.  Reeves  v.  Butcher,  31  N.  J.  L.  224. 

"*Pope  V.  Linn,  50  Me.  83.     Ex- 


CHAPTEE  III. 

INCAPACITY   AND   WANT    OF   AUTHORITY. 

Subdivision  I.  Coverture §§  30-62 

Subdivision  II.  Infancy   63-68 

Subdivision  III.  Intoxication    69-79 

Subdivision  IV.  Mental  incapacity  and  insanity 71-72 

Subdivision  V.  Want  of  authority 73-94 

Subdivision  VI.  To  whom  defense  is  available 95 

Suh division  I. 

COVERTURE. 
Sec.  Sec. 

30.  Coverture — Rule  at  common  law.     45.  Same  subject — ^Where  statute  ex- 

31.  Effect  of  new  promise  after  bus-  pressly  prohibits. 

band's  death.  46.  Same  subject — Under  particular 

32.  Rule    in    equity — English    deci-  statutes. 

sions.  47.  Same  subject — When  no  defense. 

33.  Same  subject — United  States  de-     48.  Same  subject — Bona  fide  holders. 

cisions.  49.  Rule  as  to  determining  whether 

34.  Defense  of  coverture  as  affected  principal  or  surety. 

by  statute.  50.  Liability  as  acceptor. 

35.  Statute   does  not   have   retroac-     51.  Indorsement  by  married  woman 

live  effect.  — Common-law  rule. 

36.  Coverture  a  defense  when  trans-     52.  Same    subject — Assent    of    hus- 

action    not    within     statutory  band. 

exceptions.  53.  Same  subject — Under  particular 

37.  Same  subject — Burden  of  proof  statutes. 

Pleading.  54.  Same  subject — General  rule. 

38.  Assent  of  husband.  55.  Woman  in  business — Sole  trader, 

39.  Note  given  for  insurance  premi-  etc. 

ums.  56.  Separate  estate,  benefit,  etc. 

40.  Where  note  made  by  wife  to  hus-     57.  Same  subject  continued. 

band.  58.  Same   subject  continued  —  Note 

41.  Where  wife  a  joint  maker.  for  borrowed  money. 

42.  Where   husband    and    wife    live     59.  Same   subject  continued — Inten- 

apart — English  decisions.  tion  as  affecting. 

43.  Same  subject — United  States  de-     60.  What  law  governs. 

cisions — Conclusion.  61.  Who  may  urge. 

44.  Where   wife    signs    as   surety —     62.  Where  there  is  a  failure  to  plead 

Generally.  coverture  and  judgment  is  ren- 

dered. 

§  30.  Coverture — Rule  at  common  law. — At  common  law  a  mar- 
ried woman  had  no  separate  legal  existence.^  She  could  not  make  a 
binding  contract,  and  a  promissory  note  made  by  her  was  regarded  as 

^Dollner,  Potter  &  Co.  v.  Snow,  16  Fla.  86;  Scudder  v.  Gori,  3  Rob.  (N. 
y.)  661.  32 


I 


33 


COVERTURE RULE   AT    COMMON    LAW. 


[§  30 


void.^  Coverture,  therefore,  was  and  is  a  good  defense  to  an  action  on  a 
note  or  bill  made  or  indorsed  by  her,  in  the  absence  of  some  enabling 
statute,*  even  as  against  a  hona  fide  holder.^  So  where  money  was  loaned 

Illinois. — Taylor  v.  Boardman,  92 


^Florida. — First  Nat.  Bank  v. 
Hirschkowitz  (Fla.  1903),  35  So.  22, 
24;  Dollner,  Potter  &  Co.  v.  Snow, 
16  Fla.  86. 

Iowa. — Jones  v.  Crosthwalte,  17 
Iowa  393. 

Maine. — Bryant  v.  Merrill,  55  Me. 
515;  Howe  v.  Wildes,  34  Me.  566. 

Mississippi. — Robertson  v.  Bruner, 
24  Miss.  242. 

Missouri. — Cummings  v.  Leedy, 
114  Mo.  454,  21  S.  W.  804. 

New  York. — Kinne  v.  Kinne,  45 
How.  Pr.  (N.  Y.)  61;  Vansteenburgh 
V.  Hoffman,  15  Barb.  (N.  Y.)  28. 

South  Carolina. — Goodhue  v.  Barn- 
well, Rice's  Eq.  (S.  C.)  198. 

California. — So  it  was  declared  in 
an  early  California  case,  that  a  feme 
covert  has  no  power  to  make  a  con- 
tract, such  as  to  sign  her  name  to  a 
note,  is  a  doctrine  which  this  court 
has  no  power  to  disturb.  Simpson  v. 
Sloan,  5  Cal.  457.  See  Rowe  v. 
Kohle,  4  Cal.  285. 

Indiana. — And  in  an  Indiana  case 
that:  "It  is  the  settled  law  of  this 
state  that  a  married  woman,  during 
her  coverture,  cannot  make  a  prom- 
issory note  which  will  be  valid  and 
binding  on  her."  American  Ins.  Co. 
V.  Avery,  60  Ind.  566. 

^Alabama. — Fry  v.  Hammer,  50 
Ala.  52. 

California. — Simpers  v.  Sloan,  5 
Cal.  457. 

Colorado. — Fernando  v.  Beshoar, 
9  Colo.  291.  12  Pac.  196. 

District  of  Columhia. — Jackson  v. 
Hulse.  6  Mackey  (D.  C.)  548. 

Florida. — First  Nat.  Bank  v. 
Hirschkowitz  (Fla.  1903),  35  So.  22, 
24;  Hodges  v.  Price,  18  Fla.  342; 
Dollner,  Potter  &  Co.  v.  Snow,  16 
Fla.  86. 

Georgia. — Perkins  v.  Rowland,  69 
Ga.  661. 

Joyce  Defexse.s — 3. 


111.  566;  Madge  v.  Bullock,  83  111.  22. 

Indiana. — Lackey  v.  Boruff,  152 
Ind.  371,  53  N.  E.  412;  American  Ins. 
Co.  V.  Avery,  60  Ind.  566;  Brick  v. 
Scott,  47  Ind.  299;  Hodson  v.  Davis, 
43  Ind.  258;  O'Daily  v.  Morris,  31 
Ind.  111. 

Iowa. — Jones  v.  Crosthwalte,  17 
Iowa  393. 

Louisiana. — Conrad  v.  LeBlanc,  29 
La.  Ann.  123. 

Maine. — Wyman  v.  Whitehouse,  80 
Me.  257,  14  Atl.  68;  Bryant  v.  Mer- 
rill, 55  Me.  515;  Howe  v.  Wildes,  34 
Me.  566. 

Maryland. — Griffith  v.  Clarke.  18 
Md.  457. 

Michigan. — Waterbury  v.  An- 
drews, 67  Mich.  281,  34  N.  W.  575; 
Kenton  Ins.  Co.  v.  McClellan,  43 
Mich.  564,  6  N.  W.  88;  Johnson  v. 
Sutherland,  39  Mich.  579. 

Mississippi. — Robertson  v.  Bruner, 
24  Miss.  242;  Davis  v.  Foy,  7  Sm.  & 
M.  (Miss.)  64. 

New  Jersey. — National  Bank  v. 
Brewster,  49  N.  J.  L.  231,  12  Atl.  769. 

New  York. — Linderman  v.  Farqua- 
harson,  101  N.  Y.  434,  5  N.  E.  67; 
Scudder  v.  Gori,  3  Rob.  (N.  Y.)  661; 
Kinne  v.  Kinne,  45  How.  Pr.  (N.  Y.) 
61;  Bogert  v.  Gulick,  65  Barb.  (N. 
Y.)  322;  Vansteenburgh  v.  Hoffman, 
15  Barb.  (N.  Y.)  28;  Lee  Bank  v. 
Satterlee,  24  N.  Y.  Super.  Ct.  1. 

Rhode  Island. — Radican  v.  Radi- 
can,  22  R.  I.  405,  48  Atl.  143. 

South  Carolina. — Goodhue  v.  Barn- 
well, Rice's  Eq.  (S.  C.)  198. 

Tennessee. — Yeatman,  Shields  & 
Co.  V.  Bellman,  1  Tenn.  Ch.  589. 

Texas. — Kavanaugh  v.  Brown,  1 
Tex.  481. 

°  Louisiana. — Conrad  v.  LeBlanc, 
29  La.  Ann.  123. 


§§    31,    32]      INCAPACITY  AND  WANT  OF  AUTHORITY — COVERTURE.      34 

to  a  wife,  and  she  and  her  husband  executed  a  note  therefor,  prior  to 
the  Indiana  Act  of  1881,  conferring  certain  rights  upon  married 
women,  it  was  decided  that  the  note  was  void.®  And  a  married  woman 
is  not  estopped  from  showing  her  coverture  in  defense  to  a  note  by  the 
fact  that  the  word  "widow"  followed  her  signature  thereto.''  And 
where  a  married  woman  cannot  make  a  valid  promissory  note,  cover- 
ture will  be  a  defense  to  an  action  against  her  on  a  mortgage  note 
given  by  her,  though  she  made  a  payment  thereon  subsequent  to  her 
husband's  death,^  or  made  a  promise  after  his  death  to  pay,  the  prom- 
ise being  void  and  not  binding  on  her.''  So  though  a  note  was  given 
by  a  husband  and  wife  for  money  and  supplies  furnished  to  be  used, 
and  which  were  used  for  the  support  of  the  husband  and  his  family, 
such  support  and  maintenance  being  a  legal  charge  against  the  hus- 
band alone,  and  for  which  his  wife  could  not  bind  herself  to  pay  un- 
less she  had  a  separate  estate  and  business,  and  there  was  no  proof  or 
claim  that  she  had  either,  she  was  held  to  be  under  the  common  law 
disability  of  coverture."  And  it  has  been  decided,  that  a  married 
woman  is  not  liable  on  a  note  given  by  her  for  false  representations  in 
the  nature  of  a  warranty  of  her  capacity.^^ 

§  31.  Effect  of  new  promise  after  husband's  death. — Where  a  mar- 
ried woman  pleads  her  coverture  in  bar  to  an  action  on  a  note  it  is  not 
a  good  replication  thereto  that  she  promised  to  pay  the  note  after  her 
husband's  death,  where  there  is  no  moral  obligation  to  pay  shown,  nor 
any  new  consideration  to  support  the  subsequent  promise.^^ 

§  32.     Rule  in  equity — English  decisions. — Although  the  note  of 

Michigan. — Johnson      v.      Suther-  holder."    Johnson  v.  Sutherland,  39 

land,  39  Mich.  579.  Mich.  579,  per  Campbell,  C.  J. 

Missouri. — Comings  v.  Leedy,  114  "Lackey  v.   Boruff,  152   Ind.   371, 

Mo.  454,  21  S.  W.  804.  53  N.  E.  412. 

New    Jersey. — National    Bank    v.  '  Cannam  v.  Farmer,  3  Exch.  698. 

Brewster,  49  N.  J.  L.  231,  12  Atl.  769.  ^Radican  v.  Radican,  22  R.  I.  405, 

Neio  York. — Linderman  v.  Farqua-  48  Atl.  143. 

harson,  101  N.  Y.  434,  5  N.  E.  67;  "Wilcox  v.  Arnold,  116  N.  C.  708, 

Scudder  v.  Gori,  3  Rob.  (N.  Y.)  661;  21  S.  E.  434. 

Lee  Bank  v.  Satterlee,  24  N.  Y.  Su-  '"  O'Malley  v.  Ruddy,  79  Wis.  147, 

per.  Ct.  1.    "Inasmuch  as  a  married  48  N.  W.  116,  24  Am.  St.  Rep.  702. 

woman    cannot    contract    generally,  "  Wright  v.  Leonard,  11  C.  B.  N. 

her  contracts,  whether  negotiable  or  S.  258. 

i.on-negotiable  in  form,  can  never  be  '^  Vance    v.    Wells    &    Co.,    6    Ala. 

any  better  in  the  hands  of  a  bona  737. 
fide  holder  than  in  those  of  the  first 


35  RULE    IN    EQUITY ENGLISH   DECISIONS.  [§32 

a  married  woman  was  void  at  common  law,  and  her  coverture  was  a 
defense  to  an  action  thereon,  yet  a  different  doctrine  prevailed  in 
courts  of  equity.  So  in  an  early  English  ease,  where  by  deed  a  fatlier 
directed  rents  and  profits  of  a  real  estate  to  be  paid  to  his  daughters, 
whether  sole  or  covert,  for  their  separate  use,  and  they  joined  in  bonds 
for  money  lent  to  their  husbands,  the  trustee  was  ordered  by  the  court 
to  pay  the  rents  and  profits  accordingly.^^  And  in  a  case,  where 
it  appeared  that  a  married  woman  had  borrowed  money,  which 
she  had  promised  should  be  repaid  with  interest  out  of  her  separate 
property,  and  had  given  her  promissory  note  therefor,  it  was  decreed 
that  the  debt  should  be  paid  out  of  the  rents  and  profits  of  estates, 
settled  to  her  separate  use  for  life.^*  In  a  later  case  the  court  said :  "At 
law  there  can  be  no  separate  enjoyment  of  property  by  a  feme  covert; 
in  equity  there  may;  and  as  incident  to  the  power  of  enjoyment,  she 
has  a  power  of  charging  her  separate  property.  Where  a  wife  joins 
vnih  her  husband  in  a  security,  it  is  implied  to  be  an  execution  of  her 
power  to  charge  her  separate  property ."^^  And  in  the  same  year  it 
was  again  said  by  the  court:  "I  am  of  opinion  that  a  feme  covert 
being  incapable  of  contract  this  court  cannot  subject  her  separate  prop- 
erty to  general  demands,  but  that,  as  incident  to  the  power  of  enjoy- 
ment of  separate  property,  she  has  a  power  to  appoint  it,  and  that  this 
court  will  consider  a  security  executed  by  her,  as  an  appointment  pro 
tanto  of  her  separate  estate."^*'  It  was  subsequently  decided  that 
where  a  feme  covert,  having  a  separate  property,  joined  her  husband 
in  a  promissory  note  for  money  advanced  to  the  husband,  her  signa- 
ture was  prima  fade  evidence  to  charge  her  and  that  the  court  acted 
upon  the  security  of  the  wife,  not  as  an  agreement  to  charge  her  sepa- 
rate estate,  but  as  an  equitable  appointment  under  the  settlement. 
Without  the  consent  of  the  defendant,  the  court  said,  it  could  not 
order  the  property  to  be  either  sold  or  mortgaged,  and  the  decree  must 
be  for  satisfaction  out  of  the  rents  and  profits.^^  Again,  in  another 
case,  it  was  declared  that  when  a  woman  has  property  settled  to  her 
separate  use,  she  may  bind  that  property,  without  definitely  stating 
that  she  intends  to  do  so,  and  that  she  may  enter  into  a  bond,  bill, 
promissory  note,  or  other  obligation  which,  considering  her  state  as  a 

"  Standford  v.  Marshall,  2  Atk.  69.  '      "  Stuart  v.  Kirkwall,  3  Madd.  387, 

"Bullpin  v.  Clarke,  17  Ves.  Jr.  365.  388,  per  vice-chancellor. 
«  Greatly  v.  Noble,  3  Madd.  79,  94,        "  Field  v.  Sowle,  4  Russ.  112. 
per  the  vice-chancellor. 


§    33]       INCAPACITY   AXD   WANT    OF   AUTHORITY — COVERTURE.  36 

married  woman,  could  only  be  satisfied  by  means  of  her  separate 
estate.^* 

§  33.  Same  subject — United  States  decisions. — In  the  United  States 
it  has  been  determined,  that  the  power  of  a  married  woman  to  bind 
her  separate  estate  in  equity,  for  the  payment  of  a  promissory  note  is 
recognized,^^  and  the  power  is  declared  to  be  sustained  by  a  great 
weight  of  authority.^**  And  in  a  New  York  case  it  is  said,  that  the 
rule  may  be  regarded  as  settled,  that  in  equity,  the  written  engage- 
ments of  a  married  woman,  entered  into  on  her  own  account,  to  pay 
money,  with  the  intention  to  charge  her  separate  estate,  are  to  be 
satisfied  out  of  her  separate  estate  and  her  coverture  therefore  is  no 
defense.^^  The  following  extract  from  a  decision  in  ISTew  Jersey  is  of 
value  in  this  connection  as  showing  the  origin  and  growth  of  this  doc- 
trine :  "My  examination  has  satisfied  me  that  this  entire  subject,  with 
respect  to  the  power  of  the  feme  covert  over  her  separate  estate,  has 
been  the  creation  of  the  court  of  equity,  and  that  the  system  had  been 
from  time  to  time,  circumscribed  or  extended,  not  under  the  co- 
ercion of  any  inflexible  rules  or  established  principle,  but  in  accord- 
ance with  judicial  opinion  founded  on  very  general  considerations  as 
to  the  propriety  or  policy  of  the  particular  circumscription  or  expan- 
sion. No  one  who  has  the  least  acquaintance  with  the  topic,  can  doubt 
that  the  rule,  that  a  feme  can  bind  her  separate  estate  by  a  contract 
of  suretyship  and  this,  too,  in  the  absence  of  any  expressed  intent  so 
to  do,  is,  and  has  been  for  a  long  time  past,  entirely  settled  in  the  Eng- 
lish courts.  But  still  the  doctrine  in  its  established  form,  is  not  suffi- 
ciently ancient  to  have  in  this  court  an  imperative  force  and  the  con- 
sequence is,  as  I  have  already  remarked,  the  way  is  open  for  us  to 
adopt  a  rule  which  will  embrace,  or  one  which  will  exclude,  the  power 
which  has  been  exercised  in  the  present  instance.  *  *  *  Looking 
back  to  the  beginning  of  this  system,  we  find  that  the  separate  estate 
itself  of  the  feme  covert  is  a  pure  creature  of  equity.     It  bears  no 

"Tullett   v.    Armstrong,    4    Beav.  "  Yale  v.  Dederer,  18  N.  Y.  265,  72 

319,  323.  Am.  Dec.  503n,  citing  North  Amer- 

'"  Maclay  v.  Love,  25  Cal.  367,  379,  lean    Coal    Co.    v.    Dyett,    7    Paige 

85   Am.   Dec.   133;    Davis  v.    Smith,  (N.  Y.)  9;  Bullpin  v.  Clarke,  17  Ves. 

75  Mo.   219;   Whltesides  v.   Cannon,  Jr.  365;  Heatley  v.  Thomas,  15  Ves. 

23  Mo.  457;  Harvey  v.  Johnson,  133  596;    Stuart   v.    Kirkwall,    3    Madd. 

N.  C.  352,  357.  387;  2  Story's  Eq.,  §  1400. 

*"  Williams   v.   Urmiston,   35   Ohio 
St.  296,  35  Am.  Rep.  611. 


37  RULE    IN    EQUITY — UNITED    STATES   DECISIONS.  [§    33 

analogy  to  anything  existing  at  the  common  law.  According  to  the 
general  legal  doctrine,  the  effect  of  marriage  was  to  merge  the  exist- 
ence of  the  wife  into  the  legal  life  of  the  husband,  so  that  with  re- 
spect to  property  and  civil  rights  she,  as  a  separate  person,  had  no 
recognition.  In  open  derogation  of  this  cardinal  principle,  equity 
chose  to  clothe  her  with  a  capacity  to  hold  property  in  her  individual 
right.  It  is  certainly  not  to  be  wondered  at  that  an  estate  thus  origi- 
nating in  this  clear  violation  of  the  laws  of  property  as  between  hus- 
band and  wife,  should  have  been  afterward  modified  to  suit  the  sup- 
posed convenience  or  exigency  of  the  case.  Nor  did  equity  scruple  to 
introduce  another  anomaly  when  the  occasion  seemed  to  require  it.  It 
having  been  settled  that  the  wife  might  enjoy  a  separate  estate,  the 
result  was,  as  the  laws  of  property  attached  to  it,  that  she  .x)uld  alien- 
ate it,  and  this  power  in  its  application  to  settlements,  proving  dis- 
advantageous, the  defect  was  cured  by  another  violation  of  legal  rules, 
and  a  restraint  against  alienation  inconsistent  with  the  nature  of  the 
estate  granted  was  supported.  The  structure  raised  on  a  foundation 
thus  arbitrarily  laid,  could  of  necessity  have  no  other  form  than  that 
which  would  proceed  from  the  will  of  the  builders.  And  such  in  truth 
was  the  result.  The  married  woman  being  thus  recognized  as  the 
owner  of  the  estate,  the  question  arose  as  to  the  nature  and  extent  of 
her  authority  over  it.  It  became  obvious  at  once,  that  in  order  to  en- 
joy the  privileges  thus  granted,  she  must  be  allowed  to  make  contracts 
with  respect  to  her  separate  interests  and  it  was  accordingly  soon 
intimated,^^  that  to  this  extent  she  would  be  regarded  in  equity  as  a 
feme  sole.  The  result  was  that  those  contracts  which  a  woman  under 
coverture  made  touching  her  separate  property,  although  void  at  law, 
were  universally  enforced  in  equity,  the  principle  at  fi-rst  being,  that 
such  contracts,  operating  on  the  property,  were  in  the  nature  of  an 
execution  of  a  power  of  appointment.  But  it  was  soon  supposed  that 
this  principle  was  not  broad  enough  to  satisfy  the  purposes  to  be  sub- 
served and  accordingly  in  the  great  case  of  Hulme  v.  Tenant,^*  Lord' 
Thurlow  decided  that  a  bond  of  a  feme  covert,  jointly  with  her  hus- 
band, would  bind  her  separate  property.  His  language  is:  'I  have 
no  doubt  about  this  principle,  that  if  a  court  of  equity  says  a  feme 
covert  may  have  a  separate  estate,  the  court  will  bind  her  to  the  whole 
extent,  as  to  making  that  estate  liable  to  her  own  engagements,  as,  for 

"  In  Grigby  v.  Cox,  1  Ves.  Sr.  517,         "  Hulme  v.  Tenant,   1  Bro.  C.  C. 
and  in  Peacock  v.  Monk,  2  Ves.  Sr.     16. 
190. 


§   34]       INCAPACITY  AND  WANT  OF  AUTHORITY — COVERTURE.  38 

instance,  for  the  payments  of  debts/  etc.  This  case  does  not  appear 
to  have  been  entirely  satisfactory  to  Lord  Eldon,  but  he  never  judi- 
cially departed  from  it,  and  it  has  been  followed  in  many  subsequent 
cases,  and  according  to  Lord  Coltenham,  it  contains  the  correct  view 
of  the  principle  upon  which  equity  acts  in  giving  effect  to  the  agree- 
ments of  married  women.^®  This  principle,  that  the  general  engage- 
ments of  a  feme  covert  will  be  effectuated  by  the  method  of  the  court 
acting  on  her  separate  property,  has,  in  a  long  series  of  cases,  been 
applied  and  put  in  force.  Thus  it  has  been  held,  that  she  can  render 
her  estate  liable  in  the  form  of  the  acceptance  of  a  promissory  note, 
or  her  own  note,  or  on  an  engagement  to  pay  the  costs  and  proceed- 
ings of  a  suit  in  chancery.  *  *  *  Although  the  theory  of  the 
English  courts  on  this  subject  has,  after  an  agitation  of  a  century,  set- 
tled into  form  and  coherence,  the  process  by  which  this  result  has  been 
produced  has  not  escaped  the  criticism  of  some  of  the  most  distin- 
guished of  American  lawyers."^®  In  the  application  of  this  doctrine 
it  has  been  decided  that  a  wife  only  charges  so  much  of  her  property 
as  she  had  at  the  time  of  signing  the  note  and  not  after-acquired 
property.^^ 

§  34.  Defense  of  coverture  as  affected  by  statute. — The  strict  doc- 
trine of  common  law  in  regard  to  married  women,  has  been  greatly 
modified  by  legislation.  Coverture  is  not  at  the  present  date  a  defense 
to  such  an  extent  as  it  formerly  was,  as  in  most  of  the  states  laws 
have  been  passed  removing  most  of  their  disabilities  and  enlarging 
their  j)Ower  to  contract.-^    So  it  was  determined  in  Indiana  that,  prior 

^^  Owens  V.  Dickenson,  1  Cr.  &  Ph,  which  she  may  make,  though  it  can 

54.                       .  be    enforced    only    as    against    her 

^Perkins  v.  Elliot,  23   N.  J.  Eq.  separate  property.     See  also,  Alex- 

526,  per  Beasley,  C.  J.  ander  r.  Bouton,  55  Cal.  14;  Marlow 

-'Manahan  v.  Hart,  24  Ohio  Cir.  v.   Barlew,   53   Cal.   456;    Belloc  v. 

Ct.  526.  Davis,   38   Cal.   242,   holding  that  a 

^  The    following    citations    show  married    woman    was   incapable    of 

how  various  statutes  have  been  con-  binding  her  estate  except  by  an  in- 

strued  in  different  states:  strument   in   writing  acknowledged 

California. — Goad  v.  Moulton,  67  and  certified  as  required  by  statute. 
Cal.  536,  8  Pac.  63,  holding  that  un-  See  Smith  v.  Greer,  31  Cal.  476; 
der  Cal.  Civ.  Code,  §  158,  providing  Maclay  v.  Love,  25  Cal.  367. 
that  a  married  woman  may  enter  Connecticut. — Williams  v.  King,  43 
into  any  engagement  or  transaction  Conn.  569,  holding  that  the  Con- 
respecting  property  which  she  might  necticut  act  of  1872,  providing  that 
if  unmarried;  a  promissory  note  is  an  action  at  law  might  be  sustained 
an  engagement  respecting  property,  against  any   married   woman   upon 


39 


DEFENSE  OF  COVERTURE  AS  AFFECTED  BY  STATUTE. 


[§ 


to  the  passage  of  the  Act  of  March  25,  1879,  it  was  the  settled  law  of 
that  state  that  the  contract  of  a  married  woman  was  void  and  could 


any  contract  made  by  her,  upon  her 
personal  credit,  for  the  benefit  of 
herself,  her  family,  or  her  estate  in 
the  same  manner  as  if  she  were 
sole,  single,  and  unmarried,  simply 
changed  the  form  of  the  remedy  for 
liabilities  which  had  been  or  should 
be  incurred  by  married  women,  and 
did  not  create  any  new  liability.  It 
authorized  an  action  at  law  against 
a  married  woman  for  the  same 
cause  of  action  upon  which  she 
would  have  previously  been  liable 
in  equity. 

Iowa. — Rodenmeyer  v.  Rodman,  5 
Iowa  426,  holding  that  if  a  married 
woman  by  her  contract,  as  upon  a 
promissory  note,  becomes  liable,  she 
may  be  sued  at  law  in  the  same 
manner  as  any  other  person,  but  her 
liability  is  not  a  personal  one  and 
only  extends  to  and  can  affect  her 
separate  property  or  estate  under 
code. 

Louisiana. — Barrow  v.  Mitten- 
berger,  21  La.  Ann.  396,  construing 
Louisiana  Act  of  1855,  which  de- 
clared in  its  title  that  it  was  "an  act 
to  enable  married  women  to  con- 
tract debts  and  bind  their  parapher- 
nal or  dotal  property." 

Maine. — Howes  v.  Bennett  (Me. 
1886),  3  Atl.  661,  holding  that  under 
the  laws  of  Maine  a  married  woman 
might  bind  herself  by  note  as  if  sole. 

Massachusetts. — Major  v.  Holmes, 
124  Mass.  108,  holding  that  the  Mas- 
sachusetts statute  of  1874,  c.  184, 
authorizing  her  to  contract,  except 
with  her  husband,  was  in  this  latter 
respect  not  intended  to  impose  any 
new  restriction  on  her  capacity,  but 
merely  to  affirm  the  rule  of  common 
law,   so  far  as  her  husband  is  the 


other  party  to  her  grant  or  contract, 
and  did  not  prevent  her  executing  a 
note  jointly  with  her  husband  to  a 
third  party,  though  the  considera- 
tion is  no  other  than  a  debt  of  his 
to  the  payee. 

Michigan. — Kenton  Ins.  Co.  v.  Mc- 
Clellan,  63  Mich.  564,  6  N.  W.  88; 
Russel  V.  People's  Sav.  Bank,  39 
Mich.  671,  33  Am.  Rep.  671;  Johnson 
V.  Sutherland,  39  Mich.  579;  Ross  v. 
Walker,  31  Mich.  120;  West  v.  Lara- 
way,  28  Mich.  464.  In  these  cases  it 
is  decided  that  under  the  statutes  of 
Michigan  a  married  woman  cannot 
become  personally  liable  on  an  exec- 
utory promise  except  concerning  her 
separate  estate,  and  that  a  nota 
given  for  any  other  consideration  is 
void.   See  Mich.  Comp.  L.,  §  4803. 

New  York. — McVey  v.  Cantrell,  70 
N.  Y.  295,  26  Ana.  Rep.  605,  holding 
that  by  §  3  of  the  Act  of  1860,  ch.  90, 
as  amended  by  the  Act  of  1862,  ch. 
172,  a  married  woman  may  enter 
into  any  contract  having  reference 
to  her  real  estate,  and  by  §  7  of  the 
Act  of  1860  she  may  sue  and  be 
sued  in  all  matters  having  relation 
to  her  separate  property.  The  test 
of  her  liability  is  not  whether  her 
separate  estate  is  actually  benefited 
or  not,  but  whether  the  contract  has 
reference  to  it  or  relation  to -it. 
Barton  v.  Beer,  35  Barb.  (N.  Y.)  78, 
holding  that  the  law  of  1860  in 
New  York,  sess.  laws  157,  §  2,  re- 
lieved a  married  woman  from  her 
disabilities  to  a  certain  extent  and 
enabled  her  to  carry  on  her  trade 
or  business  and  perform  any  labor 
or  services  on  her  sole  and  separate 
account,  and  to  make  all  contracts 
incident  to  such  trade  or  business, 


34]       INCAPACITY   AND   WANT    OF    AUTHORITY — COVERTURE. 


40 


and  to  give  a  note  in  payment  of 
goods  purchased  for  use  in  such 
business. 

Pennsylvania. — Mahon  v.  Gorm- 
ley,  24  Pa.  St.  80,  holding  that 
the  Pa.  Act  of  April  11,  1848,  to  se- 
cure the  rights  of  married  women 
"was  intended  for  their  protection, 
not  for  their  injury,  and  must  re- 
ceive such  a  construction  as  shall 
promote  that  object.  *  *  *  The 
statute  is  in  derogation  of  the  com- 
mon law  and  must  therefore  be 
strictly  confined  to  the  objects  plain- 
ly expressed  or  necessarily  implied. 
*  *  *  Where  the  declaration  is 
on  a  promissory  note,  and  contains 
no  averment  respecting  the  origin 
of  the  debt,  the  plea  of  coverture, 
without  any  such  averment,  is  a 
good  answer  to  it  on  demurrer.  If 
the  plaintiff  wishes  to  avoid  its  ef- 
fect he  must  set  forth  in  a  replica- 
tion the  special  circumstancesi  which 
make  the  defendant  liable,  notwith- 
standing her  coverture,  or  amend 
his  declaration  so  as  to  set  forth 
these  circumstances.  So  if  the 
plaintiff,  in  his  affidavit  of  claim, 
sets  forth  a  promissory  note,  with- 
out stating  any  of  the  special  cir- 
cumstances which  make  a  married 
woman  liable  on  such  a  contract,  an 
affidavit  of  defense,  setting  forth 
the  coverture  of  the  defendant,  with- 
out negativing  these  special  circum- 
stances, is  sufficient." 

South  Carolina. — Singluff  v.  Tin- 
dal,  40  S.  C.  504,  19  S.  E.  137;  Martin 
V.  Suber,  39  S.  C.  525,  18  S.  E.  125, 
holding  that  a  promissory  note  is 
not  a  conveyance,  mortgage,  or  a 
like  formal  instrument  affecting  her 
separate  estate  within  the  meaning 
of  the  S.  C.  Act  of  1887. 

Vermont. — Spencer  v.  Stockwell, 
76  Vt.  176,  56  Atl.  661,  holding  that 
the  doctrine  of  the  common  law  by 


which  all  the  personal  property  of 
the  wife's  became  her  husband's 
upon  marriage  has  been  abrogated 
by  statutes.  Reed  v.  Newcomb,  59 
Vt.  630,  10  Atl.  593,  holding  that  un- 
der Vermont  laws  of  1884,  Act  No. 
140,  a  married  woman  has  power  to 
make  contracts  with  any  person 
other  than  her  husband,  and  to  bind 
herself  and  her  separate  estate  in 
the  same  manner  as  if  she  was  un- 
married, and  she  may  sue  and  be 
sued  as  to  all  such  contracts  made 
by  her  estate,  either  before  or  during 
coverture.  This  law  removes  the  in- 
capacity of  a  married  woman  to  con- 
tract, and  permits  her  to  make  con- 
tracts in  the  same  manner  and  to 
the  same  extent  as  a  feme  sole,  ex- 
cepting with  her  husband,  and  en- 
forces them. 

West  Virginia. — Williamson  v. 
Cline,  40  W.  Va.  194,  197,  20  S.  E. 
917,  declaring,  per  Brannon,  J.,  that 
"What  is  commonly  called  the  'Mar- 
ried Woman's  Act'  has  undergone 
material  legislative  amendment 
since  the  first  enactment  in  chapter 
66  of  the  Code  of  1868.  Up  to  the 
enactment  of  chapter  3,  Acts  1893,  a 
court  of  law  had  no  jurisdiction  to 
render  judgment  upon  the  contract 
of  a  married  woman,  and  the  plea  of 
coverture  filed  in  this  action  would 
have  at  once  ousted  the  law  court  of 
the  case.  Only  a  court  of  equity  had 
jurisdiction  to  enforce  against  her 
separate  estate  such  contracts  as 
bound  it.  *  *  *  So  far  as  con- 
cerns the  jurisdiction  of  courts  of 
law  to  enforce  her  contracts  against 
her  separate  estate,  §  15,  of  chapter 
66,  of  the  Code,  as  found  in  chapter 
3,  Acts.  1893,  makes  a  radical  revo- 
lution. By  it  a  married  woman  may 
sue  and  be  sued  in  any  court  of  law 
or  chancery  in  this  state,  which  may 
have    jurisdiction    of    the    subject- 


I 


41  STATUTE  NOT  RETROACTIVE BURDEN  OF  PROOF.       [§§    35-37 

not  be  enforced  against  her;-^  but  ability  has  since  been  declared  to 
be  the  rule  in  this  state  and  disability  the  exception.^" 

§  35.  Statute  does  not  have  retroactive  effect. — Where  coverture 
is  a  defense  to  a  note  at  the  time  of  its  execution,  the  right  to  inter- 
pose such  a  defense  will  not  be  affected  by  a  statute  subsequently 
passed,  as  a  retroactive  effect  will  not  be  given  to  an  enabling  statute 
so  as  to  render  a  note  executed  by  a  married  woman  valid  unless  it 
clearly  appears  that  such  was  the  intention  of  the  legislature.^^ 

§  36.  Coverture  a  defense  when  transaction  not  within  statutory 
exception. — The  rule  of  the  common  law  that  coverture  is  a  defense, 
is  not  changed  except  in  the  particular  cases  provided  by  statute,^-  for 
where  the  legislation  has  created  some  specific  status  for  a  woman, 
she  cannot  act  otherwise  than  the  law  specifically  directs  and  per- 
mits.^^  So  a  married  woman  cannot  bind  herself  by  a  promissory 
note,  unless  the  transaction  comes  within  the  exceptions  of  the  statute 
which  authorizes  her  to  contract,  and  the  fact  that  the  transaction 
is  not  of  such  a  character  will  defeat  a  recovery  thereon.^* 

§  37.  Same  subject — Burden  of  proof — Pleading. — The  general 
rule  being  that  a  married  woman  cannot  make  a  contract,  or  be  sued, 
the  burden  of  proof  is  on  the  plaintiff  to  show  that  she  is  within  the 

matter,  the  same  in  all  cases  as  if  "Rowe  v.  Kohle,  4  Cal.  285.     See 

she  were  a  feme  sole;  and  any  judg-  Wilcox. v.  Arnold,  116  N.  C.  708,  21 

ment  rendered  against  her   in  any  S.   E.    434,   holding   that  except   in 

such  suit  shall  be  a  lien  against  the  the   cases   mentioned    in   the    Code, 

corpus  of  her  real   estate,   and   an  §§    1828,    1831,    1832,    1836,   a   feme 

execution  may  issue  thereon  and  he  covert  is  at  law  Incapable  of  mak- 

collected   against  the   separate   per-  ing  an  executory  contract  and  that 

sonal  property  of  a  married  woman  no  recovery  could  be  had  on  a  note 

as    though    she    were    a    feme    sole,  which  neither  purported  to  charge 

Under    this   section    her    status    or  her  separate  estate  or  to  be  for  her 

condition  of  coverture  has  no  influ-  benefit. 

ence  upon  jurisdiction.     It  depends  '' Scudder  v.  Gori,  3  Rob.  (N.  Y.) 

on  the  subject-matter."  661;    see   Robertson   v.    Bruner,    24 

"  Wooden  v.  Wampler,  69  Ind.  88,  Miss.  242. 

per  Scott   J  Miss.  242.    As  to  purchasing  a  mar- 

'"  Arnold    v.    Engleman,    103    Ind.  I'ied  woman's  note  see  Haas  v.  Amer- 

512,  3  N.  E   238  ^^^^    ^^^-    Bank    (Tex.    Civ.    App.), 

"  Bryant  v.    Merrill,    55    Me.    515,  94  S.  W.  439. 

so  construing  ch.  52  of  P.  L.  of  1866,  "  ^oel  v.  Clark,  25  Tex.  Civ.  App. 

providing  that  the  "contracts  of  any  136,  60  S.  W.  356.     See  Kavanaugh 

married  woman,  made  for  any  law-  '^-  ^'■°^°'  ^  '^^^^  ^^^'  ^^^-   ^^^^^^  ^^ 

ful  purpose,  shall  be  valid  and  bind-  ^'^''Smal  note  of  a  married  woman  is 

ij^o-"  void.     Gilbert   v.    Brown    (Ky.),    97 

S.  W.  40. 


§§    38,    39]     INCAPACITY   AND   WANT    OF    AUTHORITY — COVERTURE.     42 

exception. ^^  And  where  coverture  is  pleaded  as  a  defense  to  an  action 
on  promissory  notes,  it  is  proper  and  necessary  for  plaintiff  to  supply 
the  facts  which  show  that  the  contract  declared  on  is  one  which  the 
married  woman  had  power  to  execute.^®  So  an  answer  which  suffi- 
ciently avers  coverture,  is  a  sufficient  prima  facie  defense,  and  if  plain- 
tiff would  show  or  rely  upon  her  ability  as  a  feme  covert,  he  should 
confess  the  coverture  and  avoid  its  effects,  by  setting  up  or  showing 
such  a  state  of  case,  as  is  contemplated  by  the  provisions  of  the  code. 
The  rule  is  that  she  is  not  liable  and  if  he  seeks  to  bring  her  within 
some  of  the  exceptions  to  the  rule,  he  should  plead  the  exception.^^ 

§  38.  Assent  of  husband. — In  some  states  the  assent  of  the  hus- 
band is  required  by  law  to  render  a  note  executed  by  her  valid.  So 
under  the  code  of  Alabama,  a  married  woman  might,  with  the  assent 
or  concurrence  of  her  husband  expressed  in  writing,  execute  a  note 
payable  in  bank,  or  a  bill  of  exchange,  as  well  as  any  other  contract 
into  which  she  was  authorized  to  enter  by  the  statute.^'*  And  in  an 
early  case  in  New  York,  it  was  decided  that  a  note  made  by  a  feme 
covert  to  bind  a  submission  by  her  was  void  when  made  without  the 
assent  of  her  husband.^^  Wliere  the  written  assent  of  the  husband  to 
a  contract  of  the  wife  is  required  in  order  to  render  such  a  contract 
enforceable  against  her,  his  assent  need  not  be  signified  by  a  separate 
clause,  but  his  execution  of  a  note  jointly  with  her,  is  a  sufficient  com- 
pliance with  the  law  in  this  respect.'*'^ 

§  39.  Note  given  for  insurance  premiums. — A  wife  is  liable  on  a 
note  executed  by  her  and  her  husband  for  the  purpose  of  securing  the 

"Gregory     v.     Preice,     4      Mete.  Bkg.  Co.  v.  Wright,  53  Neb.  574,  74 

(Mass.)    478;    Robertson  v.  Bruner,  N.  W.  82,  per  Nerval,  J. 

24    Miss.    242.      Where    a    married  ^^  Arnold    v.    Engleman,    103    Ind. 

woman  can  make  no  obligation  ex-  512,  3  N.  E.  238. 

cept  on   account  of  her  own  prop-  "  Rodemeyer  v.   Rodman,  5   Iowa 

erty  any  one  seeking  to  hold  her,  426. 

must  make  out  an  affirmative  case.  ^'  Scott  v.  Taul,  115  Ala.  529,  533, 

Feckheimer  v.  Peirce,  70  Mich.  440,  22    So.    447,    under    Code    of    1886, 

38   N.   W.   325.     "In   a  suit  against  §  2346. 

a  married  woman,  when  her  cover-  ^'Rumsey  v.   Leek,   5   Wend.    (N. 

ture   is  pleaded   and   proven,   it  de-  Y.)   20. 

volves    upon   the    plaintiff   to    show  ^"Freeman,   In   re,  116  N.   C.  199, 

that  the   contract   was   made   with  21   S.  E.  110;    Jones  v.  Craigmiles, 

reference  to  and  upon  the  credit  of  114  N.  C.  613,  19  S.  E.  638. 
her  separate  estate."     Grand  Island 


43  NOTE   MADE   BY    WIFE   TO    HUSBAND.  [§    40 

payment  of  the  dues  and  premiums  of  an  insurance  policy  on  her  hus- 
band's life  in  favor  of  her  and  her  child.^^  So  she  has  been  held  liable 
on  a  note  so  given  for  the  premiums  on  such  a  policy  issued  at  her 
request  and  in  his  absence,  the  note  being  declared  to  be  primary  ob- 
ligation against  her  and  not  to  be  a  guaranty  of  the  husband's  debt.*^ 
But  where  a  married  woman  gives  a  note  for  moneys  lent  to  her  hus- 
band to  pay  an  insurance  premium,  it  has  been  held  that  the  note, 
being  for  a  debt  due  by  her  husband,  and  it  not  appearing  what  in- 
terest she  had,  if  any,  in  the  policy,  or  what  it  was  worth,  or  its  value, 
she  is  not  liable.*^ 

§  40,  Where  note  made  by  wife  to  husband. — Where  a  note  is 
made  by  a  wife  to  her  husband  and  indorsed  by  him,  it  has  been  de- 
cided in  Massachusetts,  that  under  the  rule  of  the  common  law  the 
note  cannot  be  enforced  against  her,  and  that  such  rule  is  in  force  in 
this  state.**  So  it  has  been  decided  that  where  notes  were  made  by  a 
married  woman  payable  to  the  order  of  her  husband  and  indorsed  by 
him,  no  action  could  be  maintained  thereon  against  her  or  her  ad- 
ministrator and  that  plaintiff  could  not  be  relieved  in  equity  against 
the  defense  that  the  notes  were  void  as  a  contract  between  husband 
and  wife,  since  this  would  enable  parties,  with  the  aid  of  a  court  of 
equity,  to  set  aside  at  their  pleasure  this  rule  of  the  common  law 
which  had  been  declared  and  recognized  by  the  legislature  and  the 
court.*'^  In  Xew  Jersey,  it  has  been  determined,  that  a  contract  made 
by  a  note  executed  by  a  wife  to  her  husband  and  indorsed  to  the  plain- 
tiff, who  advanced  money  to  the  wife  on  her  credit  and  for  her  sole 
and  separate  use,  being  one  which  in  its  inception  is  a  contract  made 
between  husband  and  wife,  no  legal  cause  for  action  upon  the  contract 
can  arise  in  favor  of  the  indorsee,  and  the  remedy  against  the  wife 
must  be  in  equity.**^  And  imder  a  statute  which  provides  that  a  mar- 
ried woman  may  be  sued  jointly  with  her  husband  on  any  note  which 

"  Crenshaw  v.  Collier,  70  Ark.  5,  *^  National   Granite  Bank  v.  Tyn- 

65  S.  W.  709.  dale,  176   Mass.  547,  57  N.  E.  1022. 

"Mitchell   v.    Richmond,    164    Pa.  See,    also,    Caldwell    v.    Nash,    190 

St.  566,  30  Atl.  486.  Mass.  507,  77  N.  E.  515. 

"Jones  V.   Bradwell,   84   Ga.   309,  *•  First  National  Bank  v.   Albert- 

10  S.  E.  745.  son    (N.   J.   Ch.   1900),  47   Atl.   818, 

"National    Bank    of    Republic    v.  decided  under  Act  June  13,  1895  (P. 

Delano,  185  Mass.  425,  70  N.  E.  444;  L.  821,   2  Gen.  St.,  p.  2017),  Act  of 

Massachusetts  Nat.  Granite  Bank  v.  1874,    §§    5,    14.      Compare  National 

Whicher,   173   Mass.   517,   53   N.   E.  Bank  v.  Brewster,  49  N.  J.  L.  231, 

1004;  Roby  v.  Phelon,  118  Mass.  541.  12  Atl.  769. 


§41]       INCAPACITY   AND    WANT    OF   AUTHORITY — COVERTURE.  44 

she  hab  executed  jointly  with  him/'^  she  is  not  liahle  on  a  note  executed 
by  her  to  her  husband  and  indorsed  by  him  to  a  third  person  as  her 
common  law  disability  still  extends  to  all  undertakings  other  than 
those  which  she  is  empowered  by  statute  to  enter  intc*^  Under  the 
Xew  York  laws,  however,  authorizing  a  married  woman  to  contract 
but  providing  that  the  act  does  not  apply  to  any  contract  that  shall  be 
made  between  the  husband  and  wife/^  it  has  been  decided  that  it  is 
not  a  contract  between  her  and  her  husband  where  she  executes  a  note 
payable  to  his  order  which  he  indorsed  before  maturity,  where  it  is 
given  as  a  loan  of  her  credit  to  her  husband.  In  such  a  case  the  con- 
tract is  held  not  to  spring  into  existence  until  the  note  has  been  dis- 
counted and  the  proceeds  given  to  the  husband  of  the  defendant  who  is 
liable  thereon.^" 

§  41.  Where  wife  a  joint  maker. — In  an  action  against  a  wife  on  a 
note  on  which  her. name  appears  as  a  joint  maker,  coverture  is  a  good 
defense  thereto  either  at  common  law  or  where  her  contract  is  not  one 
within  the  statutory  exception. ^^  So  where  a  husband  and  wife  give 
a  joint  note  for  the  purchase  price  of  a  horse  purchased  jointly,  she 
was  held  not  liable  on  the  note,  as  its  effect  was  to  make  her  liable  as 
a  surety  for  her  husband,  which  she  cannot  become  in  Michigan,  and 
it  is  also  the  established  doctrine  in  this  state  that  the  wife  is  not 
liable  generally  for  her  engagements,  nor  can  she  make  herself  liable, 
except  by  contract  relating  to  her  separate  estate  or  by  contract  by 
which  she  acquires  separate  property."-  And  coverture  is  a  defense 
to  an  action  against  a  wife  on  a  note  executed  by  her  and  her  husband 
jointly  for  money  and  supplies  furnished  to  be  used  for  support  and 
maintenance  of  the  husband  and  his  family  and  which  was  a  legal 
charge  against  him  alone  where  there  is  no  proof  or  claim  that  she 

"  Md.  Code,  Art.  45,  §  2.  Maryland. — Mitchell  v.  Farrish,  69 

*^  Harvard  Pub.  Co.  v.   Benjamin,  Md.  235,  14  Atl.  712. 

84  Md.  333,  35  Atl.  930.  Michigan.— Caldwell  v.  Jones,  115 

^^-N.  Y.  Laws  1884,  chap.  381,  §  2.  Mich.  129,   73  N.  W.  129,  4  Det.  L. 

=°  Bowery  Nat.  Bank  v.  Snift'en,  54  N.  795. 

Hun  (N.  Y.)  394,  27  N.  Y.  St.  R.  10,  Tennessee.— J  or  dsin  v.   Keeble,   85 

7  N.  Y.  Supp.  520,  2  Bkg.  Law  J.  173.  Tenn.  412,  3  S.  W.  511.     If  within 

"  California. — Brown    v.    Orr,    29  her  power  under  statute  it  is  imma- 

Cal.  120;    Luning  v.  Brady,  10  Cal.  terial  that  the  purpose  was  not  car- 

265.  ried  out.     Italo-French  Produce  Co. 

Indiana. — Thacker  v.  Thacker,  125  v.  Thomas,  31  Pa.  Super.  Ct.  503. 

Ind.  489,  25  N.  E.  595.  =•- Caldwell  v.  Jones,  115  Mich.  129, 

Louisiana. — Sprigg  v.    Boissier,   5  73  N.  W.  129. 
Mart.   (La.  0.  S.)  54. 


45  WIFE   A   JOIXT    MAKER.  [§    41 

had  a  separate  estate  or  business.^^  And  where  the  real  consideration 
of  such  a  "note  was  a  loan  to  the  husband  by  the  payee,  it  was  held  that 
she  was  not  estopped  by  a  recital  in  the  note  that  the  said  sum  was 
procured  for  her  benefit  and  that  for  the  payment  of  this  claim  when 
called  for  she  pledged  her  own  individual  estate.^*  In  some  jurisdic- 
tions, however,  slie  is  liable  where  the  consideration  for  the  note  passed 
to  her,^^  or  is  liable  to  a  bona  fide  purchaser  without  notice  of  her 
suretyship,^'^  or  to  an  indorsee  in  good  faith  before  maturity,  if  it  be 
shown  that  she  executed  the  note  as  principal,  or  that  she  is  estopped 
from  denying  that  she  so  executed  it,^^  or  where  the  note  was  for  the 
benefit  of  her  separate  estate,^**  or  where  its  effect  was  to  extinguish  a 
mortgage  held  by  the  payee  and  which  in  turn  freed  the  wife's  in- 
choate right  of  dower. ^"  And,  though  a  note  may  be  so  given  for  the 
individual  indebtedness  of  the  husband,  she  is  liable  thereon  under  a 
statute  which  provides  that  "either  husband  or  wife  may  enter  into 
any  engagement  or  transaction  with  the  other  or  with  any  other  person 
respecting  property,  which  either  might  if  unmarried.'"'*'  So  in  Eng- 
land, where  a  woman,  married  since  the  passage  of  the  Married  Wom- 
ens'  Property  Act  of  1870,  joined  her  husband  in  signing  a  joint  and 
several  promissory  note  for  money  lent  to  him  and  he  became  bank- 
rupt, it  was  held  that  her  separate  estate  was  liable  for  the  amount 
due  on  the  note.''^  And  in  Canada,  under  the  act  of  1872,^^  giving 
a  married  woman  power  to  contract  under  certain  conditions  and  to 
be  sued  or  proceeded  against  separately  from  her  husband  in  respect 
of  any  of  her  separate  debts,  engagements,  contracts  or  torts  as  if  she 
were  unmarried ;  the  power  to  contract  within  the  conditions  specified 
is  just  as  absolute  as  the  power  of  a  man,  and  she  is  liable  on  a  prom- 
issory note  signed  by  her  and  her  husband,  for  money  due  by  him 
which  was  accepted  on  the  representation,  which  was  true,  that  she 

"O'Malley  v.  Ruddy,  79  Wis.  147,  "Potter    v.    Sheets,    5    Ind.    App. 

149,  48  N.  W.  116,  24  Am.  St.  702.  506,  32  N.  E.  811. 

=*  Kilbourn    v.    Brown,    56    Conn.  ''"  Noel  v.  Kinney,  106  N.  Y.  74,  12 

149,  14  Atl.  784,  decided  under  Conn.  N.  E.  351. 

Gen.  St.  1888,  §  984.  "■'  Beberdick  v.  Crevier,  60  N.  J.  L. 

"Shaw  v.   Fortine,   98  Mich.   254,  389,  37  Atl.  959. 

57  N.  W.  128.     She  is  liable  for  only  ™  Miller  v.  Purchase,  5  S.  D.  232, 

so  much  of  the  consideration  as  she  58   N.   W.   556,   decided   under   Dak. 

receives.     Dobbins  v.  Blanchard,  94  Comp.  Laws,   §   2590.     See  Granger 

Ga.  500,  21  S.  E.  215.  v.  Roll,  6  S.  D.  611,  62  N.  W.  970. 

■■"Venable  v.  Lippold,  102  Ga.  208,  "Davis   v.    Jenkins,    6    L.    R.   Ch. 

29  S.  E.  181.  Div.  728. 

»=35  Vict.  Ch.  160. 


§    42]       INCAPACITY   AND    WANT    OF   AUTIIOrxITY COVEETUEE.  4G 

had  a  separate  estate,  the  only  consideration  being  a  forbearance  of 
the  husband's  debt.*'^  Again,  in  West  A-^irginia,  in  an  action  on  a  note 
given  by  a  husband  and  wife  jointly  and  severally,  in  consideration  of 
a  discharge  of  a  partnership  debt  the  husband  being  a  member  of  a 
partnership,  it  was  decided  that,  "the  separate  estate  of  a  married 
woman  is  liable  for  any  simple  contract  debt,  which  she  would  be 
liable  for  if  she  were  a  feme  sole;  and  the  consideration  for  such  debt 
need  not  inure  to  her  own  benefit,  or  that  of  her  separate  estate; 
but  it  may  inure  to  the  benefit  of  her  husband,  or  any  third  party,  or 
may  be  a  mere  prejudice  to  the  other  contracting  party ."^*  In  an 
action  upon  a  note  executed  by  a  husband  and  wife  jointly  and  sev- 
erally, to  entitle  the  plaintiff  to  recover,  the  facts  appearing  of  record 
must  bring  the  case  within  the  provisions  of  the  statute  which  makes 
a  married  woman  liable  "upon  any  contract  made  by  her  since  her 
marriage,  upon  her  personal  credit,  for  the  benefit  of  herself,  her 
family  or  her  separate  joint  estate."^^  So  no  recovery  can  be  had 
on  a  note  signed  by  husband  and  wife  jointly  against  her  succession 
where  the  authorization  of  the  husband  is  not  shown. ^^  And  a  wife 
is  not  bound  on  a  note  given  by  her  and  her  husband  jointly,  unless  it 
be  shown  that  the  contract  turned  to  her  advantage  and  was  for  some- 
thing which  the  husband  was  not  bound  to  furnish. ^^  And  in  Ohio  it 
has  been  decided  that  a  married  woman  is  not  liable  on  such  a  note 
unless  it  appear  that  she  has  separate  property  to  be  charged  there- 
with.*^^ Again,  a  wife's  name  being  found  on  a  note  conjointly  with 
that  of  her  husband,  does  not  raise  a  legal  presumption  that  slie  is 
either  jointly  or  severally  liable  upon  it.*''* 

§  42.     Where   husband   and   wife  live  apart — English   decisions. 

The  question  has  arisen  in  several  cases,  as  to  whether  coverture  is 

*^Kerr  v.  Stripp,  40  U.  C.  Q.  B.  by  the  wife  herself,  with  the  con- 

125.  sent  of  her  husband,  which  property 

°*  Dages   v.    Lee,    20    W.    Va.    584,  under  the  code  became  community 

586,  per  Snyder,  J.  property.      See   Brandegee   v.   Kerr, 

"Way  V.   Peck,   47   Conn.   23,   de-  7  Mart.  (La.  N.  S.)  64;  Durnford  v. 

cided  under  Gen.  St.,  p.  417,  §  9.  Gross,  7  Mart.  (La.  O.  S.)  466. 

""  Maddox  v.  Maddox's  Exr.,  12  La.  **  Buning  v.  Berteling,  5  Ohio  N. 

13.      See    Lombard    v.    Guillet,    11  P.  167,  7  Ohio  Dec.  129. 

Mart.  O.  S.  581.  '^'Harris  v.    Finberg,   46   Tex.    79. 

«' Davidson  v.  Stuart,  10  La.  146.  See  Ruiz  v.   Campbell,   6   Tex.   Civ. 

In  this  case  the  note  was  given  for  App.  714,  26  S.  W.  295. 
part  of  the  price  of  land  purchased 


47 


HUSBAND   AND   WIFE   LIVING   APAET,    ENGLISH   DECISIONS.       [§43 


available  as  a  defense  to  actions  on  obligations  of  a  married  woman 
where  she  and  her  husband  are  living  apart.     In  this  connection  it 
was  declared  in  an  early  decision  in  the  English  courts  that  a  wife 
of  a  man  who  is  under  an  absolute  disability  of  coming  into  the  coun- 
try, may  be  sued  as  a  feme  sole.'"*    And  in  a  later  case  it  was  deter- 
mined that  in  an  action  against  a  feme  covert,  who  eloped  from  her 
hufeband,  for  work  and  labor  done  and  materials  furnished,  that  she 
was  in  every  view,  unless  adultery  be  proved,  a  feme  covert  and  as 
such  could  neither  sue  nor  be  sued  alone,  this  being  the  general  rule 
subject  to  following  exceptions:    1.    Local  customs,  as  in  the  city  of 
London,  where  a  fe77ie  covert  being  a  sole  trader  may  sue  and  be  sued. 
But  there  the  husband  must  be  joined  at  the  outset  for  conformity. 
2.    The  wife  of  an  exile,  one  abjuring  the  realm,  or  perhaps  one  pro- 
fessed; who  are  looked  upon  as  dead  in  law.    3.    The  same  law  has 
been  extended  to  cases  somewhat  like  the  former,  as  the  Duchess  of 
Mazarine's  Case,  whose  husband  lived  in  France.     All  these  are  by 
the  acts  of  the  husband;  but  no  act  of  the  wife  can  ever  make  her 
liable  to  be  sued  alone."    And  in  a  later  English  case,  which  was  not 
an  action  on  a  note,  it  was  decided  that,  when  a  married  woman  hav- 
ing a  separate  estate,  and  living  apart  from  her  husband,  contracts 
debts,  the  court  will  impute  to  her  the  intention  of  dealing  with  her 
separate  estate.^-    Again  it  was  subsequently  decided  in  England  that, 
where  a  married  woman  who  lived  abroad  in  Paris  alone,  under  cir- 
cumstances which  led  to  the  belief  that  she  was  a  feme  sole,  indorsed 
a  bill  of  exchange,  and  drew  a  check  on  her  London  bankers,  for  the 
purpose  of  enabling  one  who  acted  as  her  agent  to  raise  money  and  the 
■bill  and  check  were  cashed  by  a  banker  at  Paris  but  were  dishonored, 
the  separate  estate  of  the  married  woman  was  liable  to  make  good  the 
amount,  irrespective  of  any  equities  between  her  and  her  agent.     It 
was  said"  by  Lord  Eomilly  in  this  case :    "Here  is  a  lady  not  legally 
separated  from  her  husband,  but  residing  alone  in  Paris  for  above 
three  months  for  the  benefit  of  medical  advice,  having  a  separate 
account  at  her  bankers',  paying  her  bills  and  accounts  and  the  like 
with  her  own  money,  and  acting  like  a  woman  who  had  no  husband, 
everything  about  her  tending  to  confirm  this  impression,  I  think  she 
cannot  afterward  be  heard  to  say  that  she  was  a  feme  covert,  and  that 

'"  Derry  v.  Mazarine,  1  Ld.  Raym.  1079,    in    substance    words    of    De- 

147.     This  was  not  an  action  on  a  Grey,  C.  J. 

note,  but  for  wages  and  money  lent.  "  Johnson  v.  Gallagher,  1  DeG.  F. 

•     '"■  Hatchett  v.  Baddeley,  2  W.  Bl.  &  J.  494. 


§43]       INCAPACITY   AXD   WANT    OF   AUTHOEITY COVERTURE.  48 

she  is  not  liable  to  have  her  separate  property  applied  to  make  good 
the  money  that  was  paid  to  her  or  for  her  benefit."" 

§  43.     Same  subject — United  States  decisions — Conclusion. — In  a 

case  in  Georgia  it  was  determined  that  where  a  husband  deserted  his 
wife,  leaving  her  in  Georgia,  and  he  went  to  another  state,  where  he 
continued  to  reside,  she  was  competent  to  contract  as  a  feme  sole  and 
to  sue  and  be  sued,  and  was  bound  by  a  note  given  by  her  for  a  debt 
due  by  her  husband,  in  consideration  that  the  creditor  would  not 
proceed  to  attach  goods  of  her  husband  in  her  hands.''*  In  an  early 
Massachusetts  case  it  is  said:  "At  common  law,  while  the  marriage 
contract  subsists,  unless  the  husband  is  banished  or  has  abjured  the 
realm,  the  wife  cannot  be  treated  as  a  feme  sole,  saving,  however,  the 
custom  of  London,  according  to  which,  if  a  married  woman  trades  by 
herself  without  the  intermeddling  of  her  husband,  she  may  sue  and 
be  sued  as  a  feme  sole.  Now  without  doubt  the  law  is  the  same  with 
us,  in  relation  to  the  effect  of  a  voluntary  separation  of  husband  and 
wife,  or  the  absence  of  the  husband.  The  wife  is  still  a  feme  covert, 
and  is  to  be  treated  as  such  in  all  judicial  proceedings,  for  it  will  not 
be  allowed  to  parties  by  their  own  act  without,  as  it  may  be,  any 
sufficient  cause,  to  destroy  the  effect  of  that  relation,  which  for  most 
important  reasons  the  laws  of  society  have  chosen  to  establish."''^ 
And  in  another  case  in  this  state  the  rule  is  affirmed  that  the  wife 
may  be  liable  on  a  note  given  by  her,  where  there  has  been  an  abso- 
lute desertion  of  her  by  her  husband ;  that  is,  there  must  be  a  volun- 
tary separation  from  and  abandonment  of  the  wife,  embracing  both 
the  fact  and  intent  of  the  husband  to  renounce  de  facto,  and  as  far  as- 
he  can  do  it,  the  marital  relation  and  leave  his  wife  to  act  as  a  feme 
soleJ^  In  this  case  it  was  said  by  Chief  Justice  Shaw  that:  "The 
principle  is  now  to  be  considered  as  established  in  this  state,  as  a  neces- 
sary exception  to  the  common  law,  placing  a  married  woman  under 
disability  to  contract  or  maintain  a  suit,  that  where  the  husband  was 
never  within  the  commonwealth,  or  has  gone  beyond  its  jurisdiction, 
has  wholly  renounced  his  marital  rights  and  duties,  and  deserted  his 
wife,  she  may  make  and  take  contracts  and  sue  and  be  sued  in  her  own 

"  McHenry  v.  Davis,  10  L.  R.  Eq.         "  Gregory     v.      Pierce,     4     Mete. 
88.  (Mass.)   478,  479.     See  Smith  v.  Si- 

"  Clark  v.  Valentino,  41  Ga.  143.         lence,  4  Iowa  321,  66  Am.  Dec.  137. 

"  Dean     v.     Richmond,     5     Pick. 
(Mass.)  461,  per  Parker,  C.  J. 


49  SAME   SUBJECT — UNITED   STATES    DECISrONS.  [§    'iS 

name  as  a  feme  sole.  It  is  an  application  of  an  old  rule  of  the  com- 
mon law,  which  took  away  the  disability  of  coverture  when  the  hus- 
band was  exiled  or  had  abjured  the  realm."  And  in  a  case  in  Alabama 
it  was  declared  by  the  court  that :  "If  a  husband  permits  his  wife  to 
take  her  children  to  a  foreign  country,  or  to  another  state,  and  there 
-enter  into  business  for  their  support  and  maintenance,  and  by  her 
industry  she  acquires  rights  and  property  to  which  he  never  asserted 
any  title  during  his  life,  nor  ever  came  to  the  country  where  she  had 
located,  it  must  be  presumed  that  he  intended  that  she  should  con- 
tract in  reference  to  property  as  a  feme  sole,  and  as  such  might  receive 
payment  of  debts  contracted  with  and  due  her,  and  indorse  bills  or 
notes  which  she  had  acquired.""  In  South  Carolina  it  has  also  been 
■decided  that  if  a  husband  depart  from  the  state,  for  the  purpose  of  a 
residence  abroad,  without  the  intention  of  returning,  such  absence 
renders  the  wife  competent  to  contract,  and  to  sue  and  be  sued  as  if  she 
were  a  feme  sole,  and,  notwithstanding  her  coverture,  she  will  be  bound 
by  a  note  executed  by  her.^^  And  in  New  York  it  has  been  determined 
that,  where  the  wife,  who  was  a  resident  of  the  United  States,  exe- 
cuted notes  and  in  an  action  thereon  set  up  coverture,  she  was  to  be 
regarded  as  a  feme  sole  and  liable  thereon,  her  husband  residing  in 
Prussia,  which  kingdom  he  could  not  leave  without  a  passport  or 
permit.'^''  But  where  a  husband  and  wife  mutually  agreed  to  a  separa- 
tion, but  nothing  was  proved  showing  that  the  separation  was  designed 
to  be  perpetual,  further  than  its  continuance  after  it  took  place,  and 
no  separate  maintenance  was  provided  by  the  husband,  it  was  de- 
cided that  the  court  was  not  satisfied  that  the  separation  was  so 
complete  that  he  was  to  be  treated  as  having  renounced  his  marital 
rights  and  relations,  so  as  to  enable  her  to  contract  as  a  feme  sole  and 
become  liable  on  a  note  given  by  her.®'^  So  in  Vermont  it  has  been 
likewise  held  that  where  a  wife  who  had  been  deserted  by  her  husband, 
and  while  living  apart  from  him  gave  a  note  for  groceries  and  other 
goods  purchased  by  her  in  her  own  support,  her  coverture  is  a  good 
defense  to  an  action  thereon,  though  she  made  a  promise  after  she 
had  obtained  a  divorce  from  her  husband  to  pay  the  same.'^^  So  proof 
of  coverture  has  been  held  a  defense  in  an  action  by  a  payee  who 

"Roland   v.   Logan,   18   Ala.    307,        '"  McArthur  v.  Bloom,  2  Duer  (N. 
per  Dargan,  C.  J.  Y.)   151. 

^^Bean  v.   Morgan,  4  McCord    (S.         **"  Ayer  v.  Warren,  47  Me.  217. 
C.)   148.  s^Hayward  v.  Barker,  52  Vt.  429, 

36  Am.  Rep.  762. 
Joyce  Defense 


§    44]       INCAPACITY   AND    WANT   OF   AUTHORITY — COVERTURE.  50 

knew  of  the  marriage,  though  the  wife  had  been  living  apart  from  her' 
husband  for  two  j^ears,  but  both  were  witliin  the  state.^^  In  this 
connection  it  may  be  well  to  note  the  following  decisions  as  to  the 
right  of  a  married  woman  to  sue.  Thus  it  has  been  decided  that  by  a 
divorce  a  mensa  et  thoro  the  husband's  power  over  a  note  to  his  wife 
before  the  divorce  is  not  extinguished  and  an  action  upon  such  a  note 
cannot  be  maintained  by  her.**^  And  where  a  wife  was  driven  from 
her  husband  and  her  home  more  than  twenty  years  prior  to  an  action 
of  trover  by  her  for  a  note  made  by  the  defendant  to  her,  and  she  had 
all  that  time  acted  as  a  feme  sole  and  had  been  treated  as  such  by 
those  with  whom  she  had  dealings,  and  her  husband,  so  far  from  sup- 
porting her,  had  considered  the  connection  as  extinct  and  had  mar- 
ried and  lived  with  another  woman,  and  it  was  agreed  that  the  separa- 
tion was  caused  by  the  cruelty  and  ill  usage  of  the  husband  and  he 
had  obliged  her  to  live  apart  from  him  and  to  get  her  own  living  by 
trading,  and  she  had  sustained  herself  as  a  feme  sole  within  the  com- 
monwealth, it  was  decided  that  she  was  entitled  to  maintain  the 
action.^*  From  an  examination  of  these  cases  the  rule  seems  to  be 
that  a  wife  may  contract  as  a  feme  sole  and  that  she  cannot  defeat  a 
recovery  on  her  obligations  by  the  defense  of  coverture  where  there 
has  been  an  absolute  desertion  and  abandonment  of  her  by  the  hus- 
band, who  has  gone  beyond  the  Jurisdiction  of  the  state  or  country,  or 
where  a  wife  has  lived  in  another  state  or  country  under  circum- 
stances which  led  to  the  belief  that  she  was  a  feme  sole. 

§  44.  Where  wife  signs  as  surety — Generally. — Coverture  is 
usually  a  good  defense  to  an  action  against  a  married  woman  on  a  note 
signed  by  her  where  it  appears  that  she  was  a  surety  merely,  either 
for  an  obligation  or  debt  of  her  husband  or  of  another.^^    So  it  is  de- 

«2  Painter  v.  Weatherford,  1  Iowa  Smith  v.  Hardman,  99  Ga.  381,  27  S. 

97.     See  Abbott  v.  Bailey,  23  Mass.  E.  731;  Lester  v.  Stewart,  89  Ga.  181, 

(6  Pick.)  90.  15  S.  E.  42;   Love  v.  Lamar,  78  Ga. 

«=Dean  v.  Richmond,  23  Mass.    (5  323,  3  S.  E.  90;  Howard  v.  Simpkins, 

Pick.)   461.  70  Ga.  322. 

^*  Abbott   v.    Bailey,    23    Mass.    (6  Indiana. — Guy    v.     Liberenz,     160 

Pick.)   89.  Ind.  524,  65  N.  E.  186. 

"^^ Federal. — Marchand    v.    Griffon,  Kentucky. — Magoffin  v.  Boyle  Nat. 

140  U.  S.  516,  35  L.  Ed.  527,  11  Sup.  Bank,  24  Ky.  L.  R.  585,  69  S.  W.  702; 

Ct.  R.  834.  Skinner  v.  Lynn,  21  Ky.  Law.  Rep. 

Georgria.— Munroe  v.  Hass,  105  Ga.  185,  51  S.  W.  167;    Russell  v.  Rice, 

468,    30    S.    E.    654;     Strickland    v.  19  Ky.  Law  Rep.  1613,  44  S.  W.  110. 

Vance,    99    Ga.    531,    27    S.    E.    152;  Michigan. — First     Nat.     Bank     v. 


51  WIFE   SIGNING   AS    SURETY.  [§'   44 

Glared  in  one  state  that  the  signing  of  a  note  by  a  married  woman 
as  a  surety  of  her  husband  is  a  general  personal  engagement  on  her 
part,  without  "reference  to  her  separate  estate,"  and  is  void,^^  and  she 
is  held  not  liable,  though  her  intention  in  such  a  case  to  bind  her 
separate  estate  is  expressly  declared."  And  in  another  Jurisdiction, 
where  a  married  woman  executed  a  note  to  a  mercantile  firm  of  which 
her  husband  was  a  member,  the  contract  was  held  void  and  not  en- 
forceable at  law  by  an  indorsee.^ ^  So  in  Michigan  a  wife  cannot  be- 
come liable  upon  her  promise  to  pay  her  husband's  debt,  and  where 
she  and  her  husband  made  a  note  in  order  to  obtain  money  for  his 
business,  in  which  she  had  no  interest  except  as  a  creditor  of  his,  and 
some  of  her  separate  property  was  used  therein,  it  was  decided  that 
the  note  was  void  as  to  her,  as  she  was  a  mere  surety.^^  So  in  Ken- 
tucky, no  personal  liability  is  imposed  upon  a  married  woman  who 
as  surety  affixes  her  signature  to  the  note  of  her  husband,  given  for 
his  debts,  to  which  she  is  a  stranger  and  in  no  way  personally  liable.^* 
And  in  Indiana,  where  a  note  was  executed  by  a  husband,  wife  and 
another,  against  whom  a  judgment  was  rendered  thereon,  which  was 
paid  by  the  latter,  the  defense  of  coverture  was  held  a  good  defense 
to  an  action  by  him,  after  the  death  of  the  husband  insolvent,  to  re- 
cover as  surety  the  sum  so  paid.^^ 

Hanscom,   104   Mich.   67,   62   N.   W.  As  to  burden  of  proof  see  Sample 

167;     Waterbury    v.     Andrews,     67  v.  Guyer  (Ala.),  42  So.  106. 

Mich.  281,  34  N.  "W.  575.  ^"Booker  v.  Wingo,  29  S.  C.  116, 

New    Hampshire.— Citizens'    Nat  7    S.   E.   49,   decided   under   Act  of 

Bank  v.  Davis,  62  N.  H.  695.  1882,    Gen.    St.,    §    2037,    permitting 

Neio    Jersey. — National    Bank    of  her  to  contract  as  to  her   separate 

Rahway  v.  Brewster,  49  N.  J.  L.  231,  property.     Aultman  &  Taylor  Co.  v. 

12  Atl.  769;  Peake  v.  La  Baw,  21  N.  Rush,  26  S.  C.  517,  2  S.  E.  402;  Habe- 

J.  Eq.  269.  nicht  v.  Rawls,  24  S.  C.  461,  58  Am. 

New    Yorfc.— Scudder   v.    Gori,    3  Rep.  268. 

Rob.  (N.  Y.)  661.  ^'  Habenicht  v.  Rawls,  24  S.  C.  461, 

North  Carolina.— McLeod  v.  Wil-  48  Am.  Rep.  268. 

liams,  122  N.  C.  451,  30  S.  E.  129.  ""  National    Bank    of    Rahway    v. 

Pennsylvania. — Imhoff   v.    Brown,  Brewster,   49   N.  J.  L.   231,  12  Atl. 

3  Phila.  (Pa.)  45.  769. 

South   Carolina. — Booker  v.  Win-  ^9  Li^tiefield  v.  Dingwall,  71  Mich. 

go,  29  S.  C.  116.  7  S.  E.  49;   Habe-  223,  39  N.  W.  38. 

nicht  V.  Rawls,  24  S.  C.  461,  58  Am.  ""  Magoffin  v.  Boyle  Nat.  Bank,  24 

Rep.  268.  Ky.  Law  Rep.  585,  69  S.  W.  702. 

New  Brunswick. — Gaskin  v.  Peck,  "  Daudistel  v.  Beninghof,  71  Ind. 

N.  B.  Eq.  Gas.  40.  389. 


45]       -WIFE   SIGNING   AS   SURETY — WHERE    STATUTE    PROHIBITS.      53 


§  45.  Same  subject — ^Where  statute  expressly  prohibits. — In  many 
states  it  has  been  expressly  provided  by  statute  tliat  a  married  woman 
shall  not  become  liable  as  surety  for  the  debt  of  another.^^  The  object 


^^  Alabama. — Richardson  v.  Ste- 
phens, 114  Ala.  238,  21  So.  949,  con- 
struing Ala.  Code,  §  2349,  and  hold- 
ing that  a  note  which  a  married 
woman  signs  as  surety  for  her  hus- 
band is  void,  and  the  fact  that  the 
money  was  used  to  improve  her 
land  does  not  render  it  valid. 

Delaivare. — Wright  v.  Parvis,  1 
Marv.   (Del.)   325,  40  Atl.  1123. 

Indiana. — Voreis  v.  Nussbaum,  131 
Ind.  267,  31  N.  E.  70,  16  L.  R.  A. 
45,  construing  Ind.  Rev.  St.  1881, 
§  5119,  and  holding  that  in  an  ac- 
tion against  a  married  woman  on  a 
note  signed  by  her  as  surety  for  her 
husband,  while  the  statute  makes 
the  contract  of  suretyship  void  as 
to  her,  she  alone  can  claim  the 
benefit  thereof  and  being  under  the 
statute  bound  by  an  estoppel  in 
pais,  like  any  other  person,  it  fol- 
lowed that  she  may  in  some  cases 
be  estopped  by  her  conduct  or  rep- 
resentations from  claiming  the  ben- 
efit of  the  statute,  it  being  declared 
that  this  is  not  an  affirmance  or 
ratification  of  a  void  contract,  but 
an  estoppel  against  the  exercise  of 
a  personal  right.  Wolf  v.  Zimmer- 
man, 127  Ind.  486,  26  N.  E.  173, 
holding  that  under  the  statute, 
where  a  wife  assigns  a  note  which 
belongs  to  her  to  sureties  of  her 
husband,  as  collateral  security  to 
an  indemnifying  mortgage  to  them, 
she  thereby  becomes  surety  to  her 
husband,  and  the  assigftment  is 
void.  Nixon  v.  Whitely  Co.,  120  Ind, 
360,  22  N.  E.  411. 

New  Hampshire. — Storrs  &  Co.  v. 
Wingate,  67  N.  H.  190,  29  Atl.  413, 
decided  under  N.  H.  Gen.  Laws,  ch. 
183,  §  12. 


New  Jersey. — Vliet  v.  Eastburn,  63 
N.  J.  L.  450,  43  Atl.  741,  constru- 
ing 2  N.  J.  Stat,  p.  2017,  pi.  26,  and 
holding  that  an  accommodation 
note  by  a  married  woman  is  a  con- 
tract of  suretyship  and  void  under 
this  statute  unless  she  obtains  di- 
rectly or  indirectly  any  money, 
property  or  other  thing  of  value 
for  her  own  use  or  for  the  use, 
benefit,  or  advantage  of  her  sepa- 
rate estate.  Vankirk  v.  Skillman, 
34  N.  J.  L.  109,  holding  that  a  mar- 
ried woman  is  not  liable  at  law,  as 
surety,  under  Act  March  24,  1862. 

Pennsylvania. — Wiltbank  v.  Tob- 
ler,  181  Pa.  St.  103,  37  Atl.  188,  con- 
struing Pa.  Act  June  8,  1893,  §  2, 
and  holding  that  a  wife  is  not  liable 
who  signs  as  surety  a  note  of  her 
husband,  though  given  to  secure  a 
loan  for  the  payment  of  taxes^  in- 
terest, and  repairs  on  her  separate 
estate.  Harrisburg  Nat.  Bank  v. 
Bradshaw,  178  Pa.  St.  180,  35  Atl. 
629,  34  L.  R.  A.  597,  39  W.  N.  0. 
138,  holding  that  under  this  act  a 
married  woman  may,  however,  bind 
herself  by  the  renewal  of  an  ac- 
commodation indorsement  which 
she  made  before  marriage.  Patrick 
V.  Smith,  165  Pa.  St.  526,  30  Atl. 
1044,  36  W.  N.  C.  10,  construing  Pa. 
Act  of  June  3,  1887,  and  holding 
that  a  married  woman  was  not  lia- 
ble on  a  note  given  by  her  as  secur- 
ity for  her  husband's  debt.  Ruff- 
ner  v.  Luther,  19  Pa.  Co.  Ct.  349, 
6  Pa.  Dist.  R.  588;  Bank  v.  Short, 
15  Pa.  Co.  Ct.  64,  holding  that  the 
Pa.  Act  of  June  3,  1887,  §  2  (P.  L. 
332)  enabling  a  married  woman  to 
contract  "Provided,  however,  that 
nothing  in  this  or  the  preceding  sec- 


53 


WIFE  SIGNING  AS  SURETY — UNDER  PARTICULAR  STATUTES.         [§    -16 


of  a  statute  declaring  such  paper  void  is  to  shield  and  protect  married 
women  from  contracts  from  which  neither  they  nor  their  estate  could  be 
benefited,  and  therefore  they  alone  are  held  entitled  to  invoke  the  bene- 
fit afforded  by  the  prohibition.^^  ^  defendant,  however,  is  not  entitled 
to  a  general  affirmative  charge  on  her  plea  of  coverture  on  proof  merely 
that  she  was  the  wife  of  the  other  defendant  at  the  time  the  note  sued 
on  was  executed,  there  being  no  proof  that  the  note  was  given  for  the 
debt  of  the  husband.^*  And  the  burden  of  proof  is  on  a  married  woman 
in  an  action  against  her  on  a  note  and  mortgage  executed  by  her  to 
allege  and  show  that  she  executed  such  note  and  mortgage  as  surety, 
and  not  as  principal.^^ 

§  46.  Same  subject — Under  particular  statutes. — In  !N"ebraska  a 
married  woman  has  been  held  not  liable  on  a  promissory  note  wliich 
she  has  signed  as  surety,  unless  it  appears  that  it  was  made  with 
reference  to,  and  upon  the  faith  and  credit  of,  her  separate  estate.^^ 


tion  shall  enable  a  married  woman 
to  become  accommodation  indorser, 
guarantor,  or  surety  for  another" 
unfettered  a  married  woman  to  a 
limited  extent  only,  and  did  not 
clothe  her  with  a  general  power  to 
contract  as  a  feme-sole,  and  under 
this  act  and  Act  of  June  8,  1893, 
§  2  (P.  L.  344),  providing  that  "she 
may  not  become  accommodation  in- 
dorser, maker,  guarantor  or  surety 
for  another,"  a  note  given  by  a  wife 
as  accommodation  surety  for  her 
husband  is  void  for  the  reason  that 
she  had  no  power  to  make  such  an 
accommodation  note,  and  is  subject 
to  the  common-law  defenses  of  a 
married  woman,  and  a  banker 'who 
discounts  the  promissory  note  of  a 
person  known  by  him  to  be  a  mar- 
ried woman  is  chargeable  with 
knowledge  that  there  is  a  statutory 
limitation  on  her  power  to  contract. 

"^Vories  v.  Nussbaum,  131  Ind. 
267,  16  L.  R.  A.  45,  31  N.  E.  70. 
See  also,  Plaut  v.  Storey,  131  Ind. 
46,  30  N.  E.  886. 

"Englehart  v.  Richter,  136  Ala. 
562,  33  So.  939. 


^^Guy  v.  Liberenz,  160  Ind.  524, 
65  N.  E.  186,  188;  Vories  v.  Nuss- 
baum, 131  Ind.  269,  31  N.  E.  70,  16 
L.  R.  A.  45. 

".'State  Sav.  Bank  v.  Scott,  10 
Neb.  83,  4  N.  W.  314;  Barnum  v. 
Young,  10  Neb.  309,  4  N.  W.  1054, 
decided  under  Act  March  1,  1871, 
providing  that  "a  married  woman, 
while  the  marriage  relation  exists, 
may  bargain,  sell  and  convey  her 
real  and  personal  property,  and  en- 
ter into  any  contract  with  reference 
to  the  same,  in  the  same  manner,  to 
the  same  extent,  and  with  like  ef- 
fect, as  a  married  man  may,  in  re- 
lation to  his  real  and  personal  prop- 
erty," and  that  "a  woman  may, 
while  married,  sue  and  be  sued  in 
the  same  manner  as  if  she  were  un- 
married." Davis  v.  First  National 
Bank,  5  Neb.  242,  25  Am.  Rep.  484 
(same  point  decided).  Union  Stock 
Yards  Nat.  Bank  v.  Coffman,  101 
Iowa  294,  70  N.  W.  693  (decided  un- 
der laws  of  Nebraska,  which  con- 
trolled in  this  case). 


§    46]       IXCAI'ACITY    AXD   WANT   OF   AUTHORITY — COVERTURE.  54 

So  under  the  early  Xebraska  statutes  permitting  a  married  woman  to 
contract,^^  and  to  carry  on  any  trade  or  business/^  when  she  sets  up 
coverture  to  avoid  liability  on  a  note  signed  by  her  as  surety  she 
must,  in  her  answer,  negative  all  the  causes  from  which  otherwise 
her  liability  may  be  inferred,  as  that  "the  contract  did  not  concern 
her  separate  property,  trade,  or  business,"  the  reason  being  that  her 
non-liability  can  only  arise  from  her  inability  to  contract,  and  this 
she  must  clearly  allege.^^  And  in  JSTew  Jersey  it  was  decided  that 
the  Act  of  March  24,  18G2,  should  receive  a  somewhat  rigorous  con- 
struction, and  that  it  should  not  be  construed  as  rendering  liable  at 
law  a  married  woman  who  signs  a  note  purely  for  the  accommodation 
of  one  of  the  makers,  since,  if  such  an  obligation  be  valid,  there  is 
"no  imaginable  contract  which  a  man  or  feme  sole  can  make  which  a 
married  woman  cannot  make.  She  can  place  herself  as  surety  on  all 
kinds  of  bonds.  She  can  indorse  the  notes  of  her  mercantile  friends 
or  relatives  without  the  knowledge  of  her  husband,  or  even  against 
his  express  dissent,  to  any  amount ;  and  if  this  suit  is  to  be  sustained, 
such  indorsements  will  form  a  legal  basis  for  actions  at  law  against 
herself  and  her  husband."^*'"  And  in  Wisconsin  it  is  decided  that 
where  a  wife  alleged  in  her  answer  that  she  executed  the  note  as  surety 
for  her  husband,  and  that  the  transaction  did  not  concern  her  sepa- 
rate property  or  earnings,  and  it  appeared  from  the  evidence  that 
she  was  a  married  woman  and  that  the  debt  represented  by  the  note 
was  the  husband's,  there  could  be  no  recovery  against  her  in  an  action 
at  law  unless  it  was  shown  that  the  transaction  was  necessary  and 
convenient  for  the  use  and  enjoyment  of  her  separate  estate,  or  the 
carrying  on  of  her  separate  business,  or  in  relation  to  her  personal 
services.^"^     Again,  under  the  Kentucky  statute,  providing  that  the 

"  Act  March  1,  1871.  from  said  notes  to  her  or  her  sepa- 
ls See  chap.  53,  Comp.  St.  rate  estate;  that  she  neither  con- 
*»  Gillespie  v.  Smith,  20  Neb.  455,  tracted  nor  intended   to  make  said 

30  N.  W.  526,  holding  that  an  an-  notes  a  charge  on  her  separate  es- 

swer  by  a  married  woman  alleging  tate,"  does  not  constitute  a  defense. 

coverture,   and   "that   she   executed  ""Vankirk  v.   Skillman,  34  N.   J, 

said  notes  as  surety,  and  that  she  L.  109,  per  Beasley,  C.  J. 

had  no  interest  in  the  transaction,  "'  Ritter  v.  Brass,  116  Wis.  55,  92 

nor    did    the    consideration    thereof  N.    W.    361,    362.      See    Hollister   v. 

accrue  to  her  separate  estate,  and  Bell,   107  Wis.   198,   83   N.   W.   297; 

neither  were  given  in  relation  there-  Mueller  v.  Wiese,  95  Wis.  381,  70  N. 

to;  that  she  received  no  part  of  the  W.    485,    all    decided    under   R.    S.. 

consideration  for  which  said  notes  §§  2342-2345,  which  in  substance  so 

were  given,  and  no  benefit  accrued  provide. 


35 


WIFE    SIGNING   AS    SURETY — WHEN    NO    DEFENSE.  [§    47 


•wife's  estate  is  not  liable  for  the  debt  of  another  unless  set  apart  for 
that  purpose  by  deed,  mortgage  or  other  conveyance,"-  a  married 
woman  is  not  liable  on  a  note  which  she  signs  jointly  with  her  hus- 
band, but  merely  as  his  surety,  where  the  statute  has  not  been  com- 
plied with,  as  it  was  the  manifest  purpose  of  the  legislature  that  a  wife 
should  not  contract  an  obligation  as  a  surety  for  her  husband,  or  any 
other  person  so  as  to  charge  her  estate,  unless  such  estate  should  be 
expressly  set  apart  for  that  purpose  by  deed  or  other  conveyance."^ 
And  in  Canada  it  has  been  decided  that  a  wife's  personal  property 
will  not  be  charged  by  a  joint  and  several  note  executed  by  her  and 
her  husband  in  payment  of  his  debt,  where  it  is  provided  by  statute 
that  her  property  shall  be  exempt  from  seizure  in  any  way  for  such 
debts  without  "her  consent,"  as  the  execution  of  the  note  is  not  such 
consent  as  is  required  by  law."* 

§  47.  Same  subject — ^When  no  defense. — Under  the  laws  in  force 
in  some  jurisdictions  a  married  woman  cannot  defeat  a  recovery  on 
a  note  on  the  ground  that  she  signed  it  as  surety.  So  under  the 
Oklahoma  statute,"^  which  provides  that  "either  husband  or  wife 
may  enter  into  any  engagement  or  transaction  with  the  other,  or 
with  any  other  person,  respecting  property,  which  either  might,  if 
unmarried,  subject,  in  transactions  between  themselves,  to  the  gen- 
eral rules  which  control  the  actions  of  persons  occupying  confidential 
relations  with  each  other,  as  defined  by  the  title  on  trusts,"  a  wife 
who  joins  with  her  huslxand  in  executing  a  promissory  note  for  the 
latter's  debt  will  be  bound  thereby.""  And  a  similar  rule  has  been 
affirmed  under  like  statutes  in  North  Dakota"'^  and  in  South  Da- 
kota."^ So  in  West  Virginia  it  has  been  decided  that  where  a  married 
woman  executes  a  bond  as  surety  for  her  husband's  debt  it  will  be  bind- 
ing on  her  separate  estate  under  the  law  of  1893,  and  coverture  is  no 
bar  to  an  action  thereon."''   And  under  the  statute  in  Missouri,  per- 

"=Ky.  Stat,  §2127,  Act  March  15,  ^"Colonial   &  U.   S.   Mtg.   Co.   v. 

1894.  Stevens,  3  N.  D.  265,  55  N.  W.  578, 

'"'Skinner  v.   Lynn,   21   Ky.   Law  decided  under  §   2590,  of  Compiled 

Rep.  185,  51  S.  W.  167.     See  Crum-  Laws. 

baugh  v.  Postell,  20  Ky.  Law  Rep.  "^Colonial   &   U.    S.    Mtg.    Co.    v. 

1366,  49  S.  W.  334.  Bradley,  4  S.  D.  158,  55  N.  W.  1108, 

"*Gaskin  v.  Peck,  N.  B.  Eq.  Cas.  decided    under    §     2590,     Compiled 

40,  decided  under  ch.  72,  Consol.  St.  Laws.^ 

^'"§  2968  of  Laws  of  1893.  '™  Williamson  v.  Cline,  40  W.  Va. 

'"*  Cooper  V.  Bank  of  Indian  Ter-  194,  20  S.  E.  917,  decided  under  ch. 

ritory,  4  Okla.  632,  46  Pac.  475.  3  Acts  1893. 


§   47]       INCAPACITY   AND   WANT   OF  AUTHORITY — COVERTURE.  56 

mitting  a  married  woinan  to  contract  as  a  feme-  sole,'^'^^  a  recovery  may 
be  had  against  her  on  a  note  of  her  husband's  which  she  signs  as 
surety.^^^  In  Canada,  under  the  Married  Woman's  Act  of  1872,  a 
married  woman  will  be  liable  on  a  note,  indorsed  by  her  for  the  ac- 
commodation of  her  husband,  she  being  possessed  of  a  separate  estate, 
and  credit  being  extended  to  her  husband  on  the  faith  of  such  sepa- 
rate estate  and  her  indorsemeiit  in  reference  thereto.^  ^-  Again,  where 
by  a  judgment  of  a  court,  pursuant  to  statute,  a  married  woman  is 
empowered  to  "make  contracts  as  a  feme  sole"  the  effect  is  to  remove 
the  disability  of  coverture  and  gives  power  to  make  any  lawful  con- 
tract and  render  her  subject  to  all  the  remedies  to  which  she  would 
have  been  subject  if  unmarried,  and  coverture  is  no  defense  to  her 
contract  binding  herself  as  surety  on  a  note.^^^  In  Nebraska  a  mar- 
ried woman  may  become  surety  for  her  husband  and  the  extension  of 
time  on  his  past  due  indebtedness  is  a  sufficient  consideration.^^*  So 
she  has  been  held  liable  on  such  a  note,  though  she  personally  re- 
ceived no  consideration  therefor,  the  contemporaneous  loaning  of 
money  to  her  husband  being  held  a  sufficient  consideration  for  a  note 
so  executed  by  her  pledging  her  separate  estate.^^^  Again  the  cir- 
cumstances in  connection  with  the  execution  of  the  note  may  be  such 
as  to  show  that  she  was  in  reality  the  principal,  or  that  she  received 
the  consideration  or  that  it  inured  to  the  benefit  of  her  separate 
estate,  in  which  case  she  will  be  liable  in  most  jurisdictions.  So  the 
defense  that  a  note  was  given  to  secure  a  debt  of  the  husband  has  been 
held  not  available,  where  the  latter,  who  was  the  owner  of  the  land, 
was  indebted  to  a  third  person  and  an  arrangement  was  made  whereby 
he  was  to  convey  such  land  to  his  wife,  who  was  to  pay  a  certain  sum 
in  cash  to  him  and  to  give  a  note  to  the  debtor  for  the  balance  of  the 
consideration,  the  amount  of  such  note  being  the  same  as  the  debt.^^® 
And  where  a  note  was  given  to  one  holding  a  mortgage  on  personalty 
bought  by  her  husband  for  the  purpose  of  discharging  the  lien,  she 

""Mo.  Rev.  Stat.  1889,  §  6864.  799,   21  Ky.  Law  Rep.  525;    Sypert 

"'Grady  v.  Campbell,  78  Mo.  App.  v.  Harrison,  10  Ky.  Law  Rep.  1052, 

502,  2  Mo.  A.  Rep.   276.     See  Sater  11  S.  W.  435. 

V.  Hunt,  66  Mo.  App.  527;   Moeckel  "^  Smith  v.  Spalding,  40  Neb.  339, 

V.  Helm,  46  Mo.  App.  340.  58  N.  W.  952. 

"=  Frazee    v.    McFarland,    43    Up.  "=  Briggs    v.    Beatrice   First    Nat. 

Can.    Q.    B.    281,    decided    under   35  Bank,  41  Neb.  17,  59  N.  W.  351. 

Vict.  Ch.  160.  "°  Strickland  v.  Gray,  98  Ga.  667, 

"^Hart  V.  Grigsby,  14  Bush  (Ky.)  27  S.  E.  155. 
542.     See  Skinner  v.  Carr,  51  S.  W. 


57  WIFE   SIGNING   AS    SURETY — BONA   FIDE    HOLDERS.  [§48 

was  held  liable,  it  appearing  that  she  did  not  sign  the  note  as  surety 
for  her  husband  and  that  the  debt  which  she  promised  to  pay  was 
really  contracted  by  her  and  not  by  him.^^'  So  she  may  be  liable 
where  any  part  of  the  consideration  moved  to  her  or  was  for  her  bene- 
fit."^ Thus  a  note  is  not  within  a  statute  forbidding  a  married  woman 
to  enter  into  any  contract  of  suretyship,  where  it  was  given  in  pay- 
ment of  fees  for  preparing  a  transcript  upon  appeal  from  a  judgment 
against  her  husband,  where  it  appears  that  judgments  of  the  wife 
against  her  husband  will  be  given  a  priority  in  case  of  a  reversal.^^^ 
And  she  has  been  held  liable  where  she  joins  with  her  husband  in  a  note 
as  a  partner,^^"  or  where  the  proceeds  were  used  in  the  business  of  a 
corporation  of  which  she  owned  the  stock.^^i  ^^^^  gj-^e  cannot  defeat 
a  recovery  on  a  note  for  money  borrowed  by  her  to  pay  the  indebted- 
ness of  another  unless  the  transaction  was  merely  colorable  and  for 
the  purpose  of  evading  the  statute  forbidding  her  to  become  a 
surety ,^^2  or  where  the  note  was  given  for  the  purpose  of  discharging 
a  debt  upon  property  which  was  in  substance  her  own.^-^ 

§  48.  Same  subject — Bona  fide  holders. — Some  discussion  has 
arisen  as  to  the  liability  of  a  married  woman  to  a  bona  fide  holder  of 
a  note  which  she  claims  to  have  signed  as  surety.  In  most  of  the  states 
statutes  have  been  passed,  as  we  have  already  stated,  which  enlarge 
the  power  of  a  married  woman  to  contract,  and  in  pursuance  of 
which  she  may,  in  many  cases,  execute  a  note  as  principal,  or  even  as 
surety,  and  it  is  in  those  states  in  which  she  is  disqualified  from  acting 
as  surety,  but  in  which  she  may  contract  as  principal  that  the  ques- 
tion has  arisen.  In  such  a  case  it  would  seem  that  if  she  signs  a  note 
apparently  as  a  joint  maker,  and  there  is  nothing  on  the  face  of  the 
paper  indicating  that  she  has  signed  other  than  as  a  principal,  she 
cannot  defeat  recovery  thereon  in  an  action  by  a  bona  fide  holder  for 
value  and  without  notice  of  any  defense  thereto.  So  it  has  been  de- 
clared that,  where  a  wife  signs  a  note  as  co-maker  with  her  husband, 

"^  Jones  V.  Holt,  64  N.  H.  546,  15     Bank,  49  S.  W.  183,  20  Ky.  Law  Rep. 

All.  214.  ■  1273. 

"'  Morningstar     v.     Hardwick,  3         '"  National    Bank    v.    Carlton,    96 

\nd.  App.  431,  29  N.  E.  929.  Ga.  469,  23  S.  E.  388.    See  Villa  Rica 

"•Morningstar     v.     Hardwick.  3     Lumber  Co.  v.  Paratain,  92  Ga.  370, 

Ind.  App.  431,  29  N.  E.  929.  17  S.  E.  340. 

^  Compton  v.  Smith,  120  Ala.  233,         "'  Daniel  v.  Royce,  96  Ga.  566,  23 

25  So.  300.  S.  E.  493. 

"'  Williams    v.     Farmers'     &  D. 


§    49]       IXCAPACITY   AXD   WAXT    OF   AUTHOBITY COVERTURE.  58 

there  being  nothing  on  its  face  to  indicate  that  she  signed  as  surety, 
and  places  it  in  the  hands  of  the  payees,  she  arms  them  with  the  power 
to  negotiate  it  to  an  innocent  purchaser  for  value,  without  notice  of 
any  defense,  so  as  to  cut  off  the  defense  that  she  was  a  mere  surety  on 
the  note,  though  the  code  declares  that  she  cannot  directly  or  indi- 
rectly become  surety  for  her  husband.^^*  And  in  Georgia  it  is  decided 
'that  the  defense  of  non-liability  on  the  ground  that  the  defendant,  a 
married  woman,  signed  as  surety  for  another,  is  not  available  against  an 
indorsee  of  a  note  which  a  married  woman  signed  as  joint  maker  with 
another  to  secure  the  latter's  debt,  where  the  indorsee  took  it  for  value, 
before  due,  in  good  faith  and  without  notice.^^^  In  other  decisions, 
however,  a  contrary  vietv  is  taken.  So  in  Indiana  it  has  been  deter- 
mined that  where  a  statute  declares  a  contract  of  suretyship  void,  a 
married  woman  is  not  estopped  from  showing  that  she  signed  as 
surety  and  that  the  note  is  invalid  as  to  her,  by  the  fact  that  the  note 
signed  by  her  and  her  husband  was  payable  in  bank  and  has  passed 
into  the  hands  of  an  innocent  holder.^^^  And  it  has  been  determined 
in  Michigan  that  it  will  be  a  defense  against  a  Ijona  fide  holder  of  a 
note  given  by  a  married  woman,  that  such  note  was  given  without  any 
consideration  to  her,  but  at  the  request  of  her  husband  and  to  secure 
his  performance  of  a  contract  and  agreement  of  purchase  made  by 
him.^^^  And  in  Canada,  it  is  held  that,  as  a  married  woman  cannot 
by  law  bind  herself  to  pay  the  debt  of  her  husband,  she  may  show  the 
invalidity  of  a  note  executed  by  her  husband  in  her  name  for  a  debt 
of  a  corporation  of  which  he  is  the  owner,  though  he  had  been  author- 
ized by  her  to  sign  said  note  in  her  name.^^^ 

§  49.    Kules    as   to    determining    whether   principal    or    surety. 

Wliether  or  not  a  married  woman  is  surety  on  a  promissory  note  or 
other  obligation  is  to  be  determined  in  Indiana,  not  from  the  form 
of  the  contract,  nor  from  the  basis  upon  which  the  transaction  was 

^  Scott  v.  Taul,  115  Ala.  529,  22  ^  Leschen  v.  Guy,  149  Ind.  17,  48 

So.   447.     See   code   as   to   right  to  N.   E.  344,  decided  under  3  Burns' 

contract.    Code  1886,  §  2349.  R.  S.  (1894),  §  6964. 

'"  Howard    v.    Simpkins,    70    Ga.  ^"  Waterbury  v.  Andrews,  67  Mich. 

322.     See  also,  Venable  v.  Stewart,  281,  34  N.  W.   575.     See  Emery  v. 

102  Ga.  208,  29  S.  E.  181;  Strickland  Lord,    26    Mich.    431;     DeVries    v. 

V.  Vance,  99  Ga.  531,  27  S.  E.  152,  Conklin,  22  Mich.  255. 

59  Am.  St.  R.  241;   Laster  v.  Stew-  i=«  MacLean  v.  O'Brien,  Rap.  Jud. 

art,  89  Ga.  181,  15  S.  E.  42;  Strauss  Que.  12  C.  S.  ilO. 
V.  Friend,  73  Ga.  782. 


59  RULE    AS    TO    WHETHER   PRIXCIPAL    OR    SURETY.  [§^19 

liad,  but  from  the  inquiry  as  to  whether  she  received  in  person  or  in 
benefit  to  her  estate  the  consideration  upon  which  the  contract  de- 
pends.^^^  And  in  Kentucky  it  is  decided  that  although  a  wife's  name 
may  first  appear  on  a  note,  the  court  will  look  to  the  substance,  and  if 
in  fact  the  contract  of  the  wife  is  an  a1  tempted  assumption  by  her  of 
the  debt  of  another,  she  will  not  be  held  liable  unless  she  binds  her- 
self in  the  statutory  form-^^*^  So  where  notes  were  signed  by  a  married 
woman  as  "principal,"  and  by  her  husband  as  "surety,"  these  words 
following  the  names  of  the  respective  payors,  and  the  wife  when  sued 
pleaded  her  coverture  in  bar  of  recovery  on  a  debt  which  she  alleged 
Avas  the  debt  of  her  husljaud  and  a  mere  renewal  of  an  old  note  for 
money  borrowed  by  her  husband  of  the  payee,  it  was  held  that  she  was 
not  bound  thereby,  the  fact  that  she  was  designated  as  "principal" 
being  immaterial.^^^  In  Nebraska,  in  order  to  render  a  married 
woman  liable  on  such  a  note,  it  must  have  been  signed  by  her  with  the 
intention  to  bind  her  individual  property  for  the  payment,  where  it 
does  not  relate  to  her  separate  estate  or  business.^^-  But  where  the 
evidence  showed  that  the  woman  signed  as  surety  a  note  given  for 
professional  services  rendered  to  her;  that  while  her  husband  enjoyed 
a  good  practice,  all  the  property  was  in  her  name;  that  she  had  pre- 
viously signed  notes  as  surety ;  that  she  knew  the  object  of  giving  this 
note,  and  that  it  was  necessary  for  her  husband  to  give  security  for  it ; 
that  her  owning  the  property  was  the  reason  urged  on  the  payee  for 
accepting  her  as  surety,  although  this  conversation  was  not  in  her 
presence,  and  she  testified  that  she  presumed  she  was  asked  to  sign 
the  note  because  she  owned  the  property,  and  that  she  believed  that 
that  was  the  reason  why  her  signature  was  desired,  it  was  decided  that 
this  was  suflBcient  evidence  to  sustain  a  verdict  against  her  and  that  the 

*^Guy  V.  Liberenz,  160   Ind.  524,  statute    in    force    when    the    notes 

€5  N.   E.   186,   188,   per   Monks,   J.;  were    executed    provided    that    the 

Cook  V.  Buhrlage,  159  Ind.  162,  64  wife's    estate    shall    not    be    liable 

N.  E.  603;  Andrysiak  v.  Satkowski,  "upon  a  contract  made  after  mar- 

159  Ind.  428,  63  N.  E.  854;  Field  v.  riage,  to  answer  for  the   debt,   de- 

Noblett,  154  Ind.  357,  360,  56  N.  E.  fault  or   misdoing  of  another,   her 

841;  Leschen  v.  Guy,  149  Ind.  17,  48  husband    included,   unless  such   es- 

N.  E.  344.  tate  shall  have  been  set  apart  for 

""  Crumbaugh   v.   Postell,    20    Ky.  the  purpose  by  deed  of  mortgage  or 

Law  Rep.  1366,  49  S.  W.  334;  quoted  other    conveyance,"    etc.      Ky.    St. 

in   Planters'   Bank   &   Trust  Co.   v.  §  2127. 

Major,  25  Ky.  Law  Rep.  702.  ^^=  Smith  v.  Bond,  56  Neb.  529,  76 

^^"^  Crumbaugh    v.    Postell,    20    Ky.  N.    W.    1062;    Eckman   v.    Scott,    34 

Law  Rep.  1366,  49  S.  W.  334.     The  Neb.  817,  52  N.  W.  822. 


§§    50,    51]      INCAPACITY  AXD  WAXT  OF  AUTHORITY — COVERTURE.      60 

jury  was  not  bound  by  ber  direct  denial  of  tbe  fact  that  she  did  intend 
to  bind  her  separate  property,  and  it  had  a  right  to  believe  from  the 
evidence  that  when  she  signed  the  note,  owning  all  the  property  of  the 
family,  and  knowing  that  her  signature  was  desired  because  of  that 
fact,  her  intention  was  to  charge  that  property.^^^ 

§  50.  Liability  as  acceptor. — At  common  law  a  married  woman 
could  not  become  liable  as  an  acceptor.^^*  And  it  has  been  decided 
that  under  a  statute  in  New  Jersey  she  is  disabled  from  accepting  a 
bill  of  exchange."^  So  under  a  code  in  Georgia,  which  provided  that 
a  married  woman  cannot  bind  her  separate  estate  by  any  contract  of 
suretyship,  nor  by  any  assumption  of  the  debts  of  her  husband,  it  is 
decided  that  she  cannot  become  an  accommodation  acceptor,  though 
she  may  be  a  free  trader.^^® 


§  51.     Indorsement  by  married  woman — Common  law  rule. — At 

common  law  a  married  woman  could  not,  acting  for  herself,  indorse 
a  note  or  bill,  payable  to  her,  and  the  indorsee  in  such  a  case  acquired 
no  title  through  her  indorsement  in  her  own  name.^^^  It  is  a  general 
rule  of  law  that  a  bill  or  note  made  payable  to  a  married  woman, 
whose  husband  is  under  no  civil  incapacity  or  disability,  is  by  opera- 
tion of  law  payable  to  the  husband,  who  may  indorse,  negotiate  or 
sue  upon  it  in  his  own  name ;  for  the  legal  existence  of  the  wife  being 
suspended  during  the  coverture,  or  rather  incorporated  into  that  of  her 
husband,  a  promise  to  her  during  coverture  is  a  promise  directly  to 
the  husband.^^^  A  married  woman  has  in  contemplation  of  law  no 
separate  existence,  her  husband  and  herself  being  in  contemplation  of 
law  one  person.^^^  So  it  has  been  declared  that  "there  is  no  doubt  of 
the  general  rule  that  the  husband  is  entitled  to  all  the  personal  prop- 
erty which  belonged  to  his  wife  at  the  time  of  the  marriage,  or  which 

"2  Spatz  v.  Martin,  46  Neb.  917,  65  ^"  Mudge   v.    Bullock,    83    111.    22; 

N.  W.  1063.  Lee    Bank    v.    Satterlee,    24    N.    Y. 

"'Mudge    v.    Bullock,    83    111.    22;  Super.  Ct.  1. 

Lee  Bank  v.  Satterlee,  24  N.  Y.  Sup.  ^^  Roland  v.  Logan,  18  Ala.  307; 

Ct.  1.  Brewer  v.    Hobbs,    17    Ky.    L.    Rep. 

"^Cooley  V.  Barcroft,  43  N,  J.  L.  134,  30  S.  W.  605;   Hancock  v.  Joy, 

363,  decided  under  N.  J.  Rev.  St.,  p.  41  Me.  568;   Savage  v.  King,  17  Me. 

637,  §  5.  301;    Barlow  v.  Bishop,  1  East  432. 

"8  Madden  v.  Blain,  86  Ga.  780,  13  Compare   Cotes  v.    Davis,   1   Camp. 

S.    E.    128,    decided    under    §§  1760,  485. 

1783,  of  the  Georgia  Code.  "'  Howe  v.  Wildes,  34  Me.  566. 


€1       INDORSEMENT  BY  MARRIED  WOMAN HUSBAND's  ASSENT.        [§    52 

she  may  acquire  during  coverture ;  and  it  necessarily  follows  that  where 
that  property  consists  of  negotiable  paper,  payable  to  her  or  her  order, 
it  is,  in  legal  effect,  payable  to  her  husband,  and  an  effectual  transfer 
by  judgment  can,  as  a  general  rule,  be  made  only  in  his  name.""" 
So  where  a  note  was  given  to  a  wife,  knowing  her  to  be  such,  with  the 
the  intention  that  she  should  indorse  it  to  the  plaintiff  in  payment 
of  a  debt  which  she  owed  him,  in  the  course  of  carrying  on  a  trade  in 
her  own  name  by  the  consent  of  her  husband,  the  property  in  the  note 
was  held  to  vest  in  the  husband  and  an  indorsement  in  her  own  name 
was  held  to  pass  no  interest  to  the  plaintiff."^  And  a  feme  covert 
cannot  indorse  a  bill  of  exchange,  the  right  thereto  being  in  point  of 
law  vested  in  the  husband,  and  the  wife  having  no  power  to  dispose  of 
it.^*^  And  where  a  promissory  note  was  made  and  given  by  a  husband 
to  his  wife  before  their  marriage,  and  subsequently  thereto  was  de- 
livered to  the  maker,  who  kept  it  for  the  benefit  of  his  wife  till  a  few 
weeks  before  his  death,  the  note  became  a  mere  nullity  and  could  not  be 
revived  by  the  death  of  the  husband."^  Again,  where  a  note  was 
payable  to  a  feme  sole,  or  order,  and  she  married,  the  note  became  her 
husband's  property,  and  she  could  not  indorse  it  over  while  she  was 
covert}'^^  * 

§  52.  Same  subject — Assent  of  husband. — Xo  power  exists  in  a 
married  woman  to  assign  a  note  executed  to  her  either  before  or  after 
marriage,  in  the  absence  of  authority  by  or  assent  of  the  husband,  or 
of  a  statute  empowering  her  so  to  act."*  But  if  a  bill  or  note  be  made 
payable  to  a  married  woman,  although  the  title  to  it  vests  in  the  hus- 
band, if  he  sees  fit  to  assert  it,  yet  he  may  allow  her  to  indorse  it  in 
her  own  name,  and  if  he  assents  to  her  indorsement  of  it  (which  may 
be  presumed  from  circumstances  as  well  as  expressly  proved),  her 
indorsee  acquires  a  good  title  not  only  as  against  the  husband,  but  also 
against  the  parties  to  the  bill.^*^    And  a  husband  may  subsequently 

'«> Miller  v.   Delameter,   12  Wend.  Rep.    247;    Theurer   v.    Schmidt,   10 

(N.  Y.)  433,  per  Sutherland,  J.  La.  Ann.  293;    Stevens  v.  Beals,  64 

"1  Barlow  v.  Bishop,  1  East.  432.  Mass.    (10  Cush.)    291,  57  Am.  Dec. 

^^  Connor    v.    Martin,    1    Strange  108;    Vann   v.   Edwards,   128   N.   C. 

516.  425,  39  S.  E.  66. 

»"  Abbott  v.  Winchester,  105  Mass.  "'  Alabama. — Roland  v.  Logan,  18 

115.  Ala.  307. 

"'*  Rawlinson  v.  Stone,  3  Wils.  5,  Massachusetts. — Stevens  v.   Beals, 

citing  1  Strange  516.  64    Mass.    (10    Cush.)    291,    57    Am. 

^«Hall   v.    Campbell,    5    Ky.    Law  Dec.  108. 


§    52]       INCAPACITY   AND    WANT   OF   AUTHORITY — COVERTUEE.  62 

satisfy  an  assignment  of  a  bill  or  note  by  his  wife.^*"  And  it  is  declared 
that:  "It  is  well  settled  that  if  the  husband  give  the  wife  express 
authority  to  indorse  a  note  payable  to  her  or  order,  her  indorsement  is 
good  to  transfer  the  note,  and  may  be  made  in  her  own  name,  though 
she  acts  by  authority  of  the  husband  and  as  his  agent."^*^  So  where 
neither  the  assent  of  the  husband,  nor  circumstances  which  authorized 
the  wife  to  make  the  transfer  of  a  note  payable  to  her  order,  are  alleged 
in  the  petition  by  her  indorsee  in  an  action  against  the  maker,  it  is 
decided  that  a  plea  in  abatement  of  the  coverture  of  the  indorser  is 
good.^*^  In  this  connection  it  has  been  decided  that  if  a  husband 
gives  his  wife  authority  to  sell  her  personal  property  and  take  for  it  a 
promissory  note  payable  to  herself  or  order,  he  gives  her  authority  to 
indorse  the  note  according  to  its  tenor,  and  to  hold  the  proceeds  to  her 
own  use,  and  until  this  authority  is  revoked  her  indorsement  of  the 
note  will  be  good  to  pass  title  in  it,  though  not  to  bind  either  her  or 
her  husband  as  indorser,^*^  And  a  married  woman  may  make  a  valid 
indorsement  of  a  note  by  a  name  different  from  that  of  her  husband, 
and  an  authority  so  to  endorse  may  be  presumed  from  all  the  circum- 
stances of  the  case.^^"  Where,  however,  the  husband  went  to  Califor- 
nia, and  his  wife  continued  to  carry  on  his  business,  and  sold  a  part  of 
the  furniture  and  fixtures,  taking  notes  payable  to  herself,  which  she 
afterwards  transferred,  the  fact  that  the  husband  may  have  consented 
that  she  might  carry  on  the  business  does  not  raise  a  legal  presump- 
tion that  she  was  authorized  to  transfer  the  notes,  but  the  jury  must 
decide  whether  the  evidence  would  fairly  bring  their  minds  to  this 
conclusion. ^°^   If  the  statute  prescribes  a  form  of  assent  by  the  hus- 

Missouri. — Menkins    v.    Heringhi,  88  Am.  Dec.  195,  per  Perley,  C.  J. 

17  Mo.  297.  Citing    Brown    v.    Bunnell,    49    Me. 

New  Hampshire. — Russ  v.  George,  425;    Stevens  v.  Beal,  64  Mass.    (10 

45  N.  H.  467.  Cush.)  291,  57  Am.  Dec.  108;  Leices- 

English. — Prestwick  v.  Marshall,  4  ter  v.   Biggs,   1   Taunt.   367;    Prest- 

C.  &  P.  594.    The  indorsement  by  a  wick  v.  Marshall,  1  Bing.  565,  4  C. 

married  woman,  with  her  husband's  &  P.  594. 

assent,  of  a  bill  of  exchange  drawn  "^  Hemingway  v.  Mathews,  10  Tex. 

by   her   is   binding   upon    him,    and  207. 

will  pass  the  interest  in  the  bill  to  ""  George  v.  Cutting,  46  N,  H.  130, 

the  endorsee  so  as  to  enable  him  to  88  Am.  Dec.  195. 

sue  the  acceptor.    Prestwick  v.  Mar-  "°  Miller  v.   Delameter,   12   Wend, 

shall,  4  C.  &  P.  594.  (N.  Y.)  433. 

"«Hall    v     Campbell,    5    Ky.    Law  ^"  Krebs  v.   O'Grady,  23   Cal.   726, 

Rep.  247.  58  Am.  Dec.  312. 

"^  George  v.  Cutting,  46  N.  H.  130, 


G3    INDORSEMENT  BY  MARRIED  W03IAN — PARTICULAR  STATUTES.     [§    53 

band  there  should  be  a  compliance  therewith.  So  where  a  written  as- 
sent of  the  husband  is  by  law  expressly  required  to  a  conveyance  of  a 
wife's  real  or  personal  estate,  or  to  an  attempt  to  charge  her  separate 
estate,  an  indorsement  of  a  note  belonging  to  her  is  void  for  the  pur- 
pose of  transferring  title  or  to  charge  her  separate  estate  where  made 
without  his  written  assent,  a  verbal  assent  not  being  sufficient.^^-  In 
Alabama  it  is  decided  that  under  the  code  a  transfer  by  a  married 
woman  of  a  check  payable  to  her  is  illegal  and  inoperative  to  pass  her 
title  to  it,  unless  the  transfer  was  made  with  the  consent  of  both  the 
husband  and  wife.^^^ 

§  53.  Same  subject — Under  particular  statutes. — Under  a  statu- 
tory provision  giving  to  married  women  the  right  to  hold  all  personal 
property  acquired  by  them  before  coverture  to  their  sole  and  separate 
use,  a  note  given  to  a  married  Avoman  does  not  become  null  and  void 
by  her  marriage  with  the  maker,  and  she  may  sell  the  note  to  a  third 
party  or  transfer  it  for  collection.^""*  And  under  a  statute  authorizing 
a  married  woman  to  make  contracts  and  to  sue  and  be  sued  in  the 
same  manner  as  if  she  were  sole,  with  the  restriction  only  that  she  can- 
not make  contracts  with  her  husband,  she  will  be  liable  on  her  indorse- 
ment of  a  promissory  note  made  by  a  partnership,  of  which  her  hus- 
band is  a  member,  for  the  accommodation  of  the  lirm.^^^  And  under 
this  same  statute  it  has  been  decided  that  where  a  married  woman,  at 
her  husband's  request,  indorsed  a  blank  promissory  note  and  gave  it 
to  him,  with  the  knowledge  that  he  intended  to  fill  up  the  blanks  and 
use  the  same,"  which  he  did,  and  indorsed  it  by  writing  his  name  above 
hers,  it  was  decided  in  a  petition  in  equit}^  to  vacate  insolvency  pro- 
ceedings brought  against  her,  wherein  she  claimed  that  the  note  was 
not  a  valid  claim  against  her,  that  she  was  in  a  position  of  an  indorser, 
and  that  the  note  having  been  transferred  to  the  holders  with  her  con- 
sent for  value,  she  could  not  deny  its  validity  as  against  them,  and  was 
liable  as  an  indorser.^^"    Under  an  Indiana  statute,  where  a  mar- 

"^  Walton  v.  Bristol,  125  N.  C.  419,  ^^  Middleborough  Nat.  Bank  v. 
34  S.  E.  544,  decided  under  N.  C.  Cole,  191  Mass.  168,  77  N.  E.  781, 
Const.,  Art.  10,  §  6  and  §§  1826,  1835,  decided  under  Mass.  Rev.  Laws, 
of  the  Code.  See  Hurt  v.  Cook,  151  c.  73,  §§  82,  83;  Kenworthy  v.  Saw- 
Mo.  416,  52  S.  W.  396,  decided  under  yer,  125  Mass.  28,  decided  under 
Rev.  St.  1889,  §  6869.  Mass.  St.  1874,  c.  184. 

^"  First  Nat.  Bank  v.  Nelson,  105  '■■»  Binney  v.  Globe  Nat.  Bank,  150 

Ala.    180,    199,    16    So.    707,    decided  Mass.  574,  23  N.  E.   380,  6   L.  R.  A. 

under  Ala.  Code,  §  2348.  379,  decided  under  St.  1874,  c.  184, 

^=*  Spencer    v.     Stockwell,    76    Vt.  compare  Hunt  v.  Cook,  151  Mo.  416, 

176,  56  Atl.  661,  decided  under  Vt.  52  S.  W.  396. 
Laws  1884,  p.  79,  No.  84. 


§§    54,    55]     INCAPACITY   AND    WANT    OF   AUTHORITY — COVERTURE.     64 

ried  woman  indorsed  a  promissory  note,  she  and  her  separate  estate, 
real  and  personal,  would  also  be  liable  on  her  contract. ^^'^  And  also, 
under  an  early  statute  in  New  York  state,  a  recovery  could  De  had 
where  a  married  woman  had  indorsed  a  hill  or  note.^^^ 

§  54.  Same  subject — General  rule. — A  roarried  woman  to  whose 
order  a  note  is  made  payable  can  confer  no  right  on  an  indorsee  by 
her  indorsement  unless  done  under  the  forms  provided  by  law,  or 
with  the  implied  or  express  assent  of  the  husband,  or  under  the 
special  circumstances  which  would  authorize  her  to  employ  her  own 
or  the  community  property  for  the  benefit  and  preservation  of  her  sepa- 
rate property,  or  for  the  support  of  herself  and  her  children,  or  under 
circumstances  which  would  authorize  her  separate  action.^^^  So  it  has 
been  decided  that  an  action  is  not  maintainable  against  a  married 
woman  where  it  was  without  benefit  or  consideration  to  her  separate 
estate,  though  the  plaintiff  be  a  bona  fide  holder  for  value.^^" 

§  55.  "Woman  in  business — Sole  trader,  etc. — In  most  of  the 
states  the  right  of  a  married  woman  to  engage  in  business  in  her  own 
name  and  to  execute  a  note  or  other  obligation  in  connection  there- 
with has  been  recognized.  So  in  Illinois  it  is  decided  that  where  a 
married  woman  executes  notes  for  goods  purchased  by  her  as  her  own 
property,  for  her  use  in  a  business  carried  on  in  her  own  name,  with- 
out the  interference  of  her  husband  and  for  her  exclusive  benefit,  her 
coverture  is  no  defense  to  an  action  thereon.^''^  So  in  Louisiana  it 
has  been  held  that  a  wife,  who  is  a  public  merchant,  separated  in 
property  from  her  husband,  can  not  set  up  the  plea  that  a  draft  ac- 
cepted by  her  did  not  enure  to  her  personal  benefit."^  And  in  Michi- 
gan a  debt  for  property  purchased  has  been  declared  to  be  a  valid 
liability  against  a  married  woman,  and  she  is  liable  on  a  note  given 
therefor.^^^  In  South  Carolina  a  feme  sole  trader  has  been  held  bound 
to  a  third  person  by  her  indorsement  to  him  of  a  note  drawn  by  her 
husband  payable  to  herself.^®*    Under  the  California  act  of  1852, 

"'Mathes  v.   Shank,  94   Ind.   501,        ""  Loweree    v.    Babcock,    8    Abb. 

decided  under  Act  1879,  p.  160.  Prac.  N.  S.  (N.  Y.)  255. 

"'  Lee  Bank  v.  Satterlee,  24  N.  Y.         '"  Nispel  v.  Laparle,  74  111.  306. 
Super.   Ct.   1;    N.   Y.  Laws  1848,  p.         '"Levy  v.  Rose,  17  La.  Ann.  113. 
307,   ch.    200;    N.   Y.   Laws   1849,   p.         "' Gillam  v.' Boynton,  36  Mich.  235. 
528,  ch.  375.  '"Wilthaus  v.  Ludecus,  5  Rich.  L. 

""Hemingway  v.  Mathews,  10  Tex.  (S.  C.)  326. 
207. 


65  WOMAN  IN  BUSTNESS— rC0L3  TRADER,  ETC.  [§    55 

authorizing  a  married  woman  to  transact  bnsiness  in  her  own  name 
as  a  sole  trader,  she  was  liable  on  a  promissory  note  given  by  her  in 
her  own  name  for  a  part  of  the  purchase  money  for  a  tract  of  land 
sold  and  conveyed  to  her.^*'^  Under  a  statute  in  Colorado  it  is  decided 
that  a  married  woman  carrying  on  business  as  a  trader  is  bound  by  a 
note  the  consideration  of  which  went  to  the  benefit  of  her  separate 
estate.^"^  So  coverture  is  no  defense,  under  the  Indiana  act  of  1876, 
to  a  note  given  by  a  married  woman  for  money  borrowed  by  her  for 
the  purpose  of  carrying  on  a  separate  trade  and  business.^''^  In  Missis- 
sippi, under  the  code  of  1871,  a  married  woman  could  not  execute  a 
valid  promissory  note  except  in  the  course  of  her  trade  and  business 
as  engaged  in  by  her.^'^^  In  New  York,  under  the  act  of  March  12, 
1860,  authorizing  a  married  woman  "to  carry  on  any  trade  or  business, 
or  perform  any  labor  or  services,  on  her  sole  and  separate  account," 
she  was  enabled  to  embark  in  any  trade  or  business  and  to  give  her 
checks  and  other  commercial  paper,  and  if  she  accepted  the  benefits 
of  this  act  she  also  accepted  its  disadvantages,  and  in  a  mercantile 
business  assumed  the  ordinary  hazards  incident  to  it,  and  to  which 
merchants,  in  the  course  of  whose  business  commercial  paper  is 
ordinarily  issued,  are  exposed  by  their  notes  or  checks,  by  accident  or 
wrongful  design,  getting  into  the  hands  of  bona  fde  holders,  and  for 
value,  before  maturity.^®^  Under  this  act  she  was  also  held  liable  in 
another  case  on  her  note  given  for  goods  purchased  by  her  to  be  used 
in  her  business.^^"  But  where  there  was  no  written  obligation  on  the 
part  of  the  wife,  nor  written  assent  of  the  husband,  nor  his  assent  re- 
corded as  required  by  statute  to  enable  the  wife  to  carry  on  business, 
it  has  been  decided  that,  in  an  action  on  a  note  executed  by  the  hus- 
band as  agent,  he  carrying  on  a  mercantile  business  for  her,  she  is 
not  estopped  to  deny  her  husband's  authority  to  execute  a  note  and 
may  plead  coverture.^^^  And  the  fact  that  a  married  woman  is  the 
owner  of  a  farm  does  not  show  that  she  conducted  a  separate  business 
so  as  to  render  her  liable  in  jSTebraska  on  a  note  given  by  her  as  surety 

^"Camden  v.  Mullen,  29  Cal.  564.  "« Nelson  v.  Miller,  52  Miss.  410, 

"'Barnes   v.    De    France,    2    Colo,  decided  under  Code  1871,  §  1780. 

294,  decided  under  Rev.  St.  455,  §  6,  ^^^  Lewis  v.  Woods,  4  Daly  (N.  Y.) 

providing    that    a    married    woman  241. 

could  make  contracts  affecting  her  ^™  Barton   v.   Beer,   35    Barb.    (N. 

business  or  trade  to  same  extent  as  Y.)  78. 

if  she  were  a  feme  sole.  "i  Troy   Fertilizer  Co.   v.   Zachry, 

"'Wallace  v.  Rowley,  91  Ind.  586,  114  Ala.  177,  21  So.  471. 

decided  under  Ind.  Act  1876,  p.  160, 
Joyce  Defenses — 5. 


56]       IXCAPACITY   AXD    "WAXT    OF   AUTHORITY COVERTURE. 


66 


for  her  husband  where  he  had  entire  control  of  the  farm  and  she  re- 
ceived no  part  of  the  rents  or  jsrofits.^'^^ 

§  56.  Separate  estate,  benefit,  etc. — A  married  woman's  capacity  to 
contract  is  only  enlarged  in  the  case  specifically  mentioned  in  the  stat- 
ute, and  in  other  cases  her  coverture  is  a  defense  to  an  action  on  a  note 
executed  by  her.^''^  In  most  of  the  states  this  defense  may  be  set  up 
by  her  in  such  an  action,  where  the  consideration  therefor,  either  in 
whole  or  in  part,  did  not  go  to  her  benefit  or  to  the  benefit  of  her 
separate  estate.^^* 


"=  Union  Stock  Yards  Nat.  Bank 
V.  Coffman,  101  Iowa  594,  70  N.  W. 
693. 

"*Ankeney  v.  Hannon,  147  U.  S. 
118,  37  L.  Ed.  105,  13  Sup.  Ct.  206, 
47  Alb.  L.  J.  150. 

"*  Federal.— Williams  v.  Reid,  18 
Wash.  L.  Rep.  (D.  C.)  607,  holding 
that  a  note  cannot  be  enforced 
against  a  married  woman  in  an  ac- 
tion at  law  where  it  was  given  by 
her  for  furniture  which  she  pur- 
chased and  which  was  used  in  fur- 
nishing a  house  which  did  not  be- 
long to  her  separate  statutory  estate. 

Indiana. — Thomas  v.  Passage,  54 
Ind.  106,  holding  that  a  note  by  a 
married  woman  based  on  a  promise 
to  pay  for  medical  services  rendered 
to  her  is  not  binding  on  her  person- 
ally and  under  statute  she  may  only 
charge  her  separate  estate  by  such 
contracts  as  are  conscionable  and 
for  the  betterment  of  such  estate. 

Mississippi. — Hendrick  v.  Foote, 
57  Miss.  117,  holding  that  where  a 
married  woman  gives  a  note  for  the 
purchase  price  of  land,  the  note  im- 
poses no  personal  obligation  on  her 
and  no  decree  iji  personam  can  be 
obtained  against  her  by  the  vendor 
or  any  subsequent  holder  of  the 
note. 

Missouri. — Hagerman  v.  Sutton, 
91  Mo.  519,  4  S.  E.  73,  holding 
that  where  a  married  woman  exe- 


cutes a  note  and  signs  a  mortgage 
of  land  in  conjunction  with  her  hus- 
band, her  act  in  signing  the  note, 
she  not  being  possessed  of  a  sepa- 
rate estate  in  the  land  granted, 
gives  her  act  no  validity  either  In 
law  or  equity. 

Xebraska. — Barnum  v.  Young,  10 
Neb.  308,  4  N.  W.  1054;  citing  Hale 
V.  Christy,  8  Neb.  264;  Davis  v. 
First  Nat.  Bank,  5  Neb.  242,  and 
holding  that  no  recovery  can  be  had 
against  a  married  woman  on  her 
note  except  it  be  given  with  refer- 
ence to  and  upon  the  faith  and 
credit  of  her  separate  property. 

Neic  Hampshire. — Shannon  v.  Can- 
ney,  44  N.  H.  592,  holding  that  a 
married  woman  is  not  bound  by  a 
promissory  note  given  during  cover- 
ture and  the  fact  that  at  the  time 
of  her  marriage  she  possessed  prop- 
erty by  inheritance  is  of  no  avail 
where  it  neither  appears  that  she 
held  it  to  her  sole  and  separate  use 
or  that  the  promise  was  made  in 
respect  to  such  property.  See  Ames 
V.  Foster,  42  N.  H.  381;  Bailey  v. 
Pearson,  29  N.  H.  77. 

Xeio  York. — Eylers  v.  Coens,  39  N. 
Y.  St.  R.  789,  15  N.  Y.  Supp.  584, 
holding  that  a  note  not  given  for 
the  benefit  of  the  separate  estate  of 
the  wife  was  uncollectible. 

North  Carolina. — Pippen  v.  Wes- 
son,   74    N.    C.    437,    decided    under 


41 


67 


SEPARATE   ESTATE,   BENEFIT,    ETC. 


[§   57 


§  57.  Same  subject  continued. — ^Yhe^e  it  appears  that  the  con- 
sideration for  a  note  was  received  by  her,  or  that  it  was  for  the  use  or 
benefit  of  her  separate  estate,  she  cannot  under  the  laws  in  force  in 
most  jurisdictions,  defeat  a  recovery  thereon. ^■^**  So  her  coverture  has 
been  held  no  defense  to  an  action  on  a  note  executed  by  her  for  prop- 
erty purchased  by  her,^"  as  where  the  note  was  given  for  the  pur- 
chase price  of  land,^^*'  or  for  a  sewing-machine  purchased  for  her  own 
use,^'^'^  or  for  goods  which  her  husband  purchased  as  her  agent  and 


Const,  Art.  X,  §  6;  Acts  of  1871-72, 
ch.  193  (Bat.  Rev.  Ch.  691),  holding 
that  a  married  woman  has  no 
power  to  enter  into  an  executory- 
contract  even  with  the  written  con- 
sent of  her  husband,  unless  her  sep- 
arate estate  is  charged  with  it, 
either  expressly  or  by  necessary  im- 
plication arising  out  of  the  nature  or 
consideration  of  the  contract,  show- 
ing it  was  for  her  benefit. 

Ohio. — Jenz  v.  Gugel,  26  Ohio  St. 
527,  decided  under  71  Ohio  L.  47, 
and  holding  that  a  married  woman 
was  not  liable  on  her  note  whether 
executed  before  or  after  the  date  of 
the  act  March  30,  1874,  unless  it  ap- 
peared that  she  had  separate  prop- 
erty subject  to  be  charged  there- 
with. 

Pennsylvania. — Heugh  v.  Jones, 
32  Pa.  St.  432,  holding  that  where  a 
note  is  given  for  money  borrowed 
by  a  married  woman  for  the  avowed 
purpose  of  improving  her  separate 
estate  she  is  not  liable  under  the  act 
of  1848  unless  It  be  shown  further 
that  the  money  was  applied  to  that 
object.  Sellars  v.  Heinbaugh,  117 
Pa.  St.  218,  11  Atl.  550,  20  W.  N.  C. 
183,  holding  that  under  this  act  she 
is  not  liable  on  a  judgment  note  for 
money  borrowed  to  improve  her  sep- 
arate estate,  even  though  so  applied. 
South  Carolina. — Howard  v.  Kitch- 
ens, 31  S.  C.  490,  10  S.  E.  224  hold- 
ing that,  under  the  provision  of  the 
statute   in   South  Carolina,   permit- 


ting a  married  woman  to  contract 
in  respect  to  her  separate  estate, 
(Gen.  St.,  §  2037)  where  a  part  of 
the  money  was  borrowed  for  her 
own  use,  it  was  such  a  contract  and 
enforceable  against  her  estate,  but 
that  she  was  not  bound  as  to  such 
part  of  the  note  as  was  for  neces- 
sary expenses  for  her  daughter  and 
for  which  her  husband  was  liable. 
It  was  said  In  this  case  that:  "The 
defense  to  this  action  may  seem  un- 
gracious to  use  a  mild  term.  It  ap- 
pears that  the  defendant  herself  re- 
ceived part  of  this  money  at  least, 
and  that  the  remainder  was  ex- 
pended for  the  benefit  of  her  sick 
daughter  and  at  the  request  of  the 
defendant.  Here  are  strong  reasons 
why  the  defense  should  never  have 
been  interposed.  But  these  ungra- 
cious surroundings  can  have  no  in- 
fluence upon  a  court  whose  sole 
province  isi  to  determine  controver- 
sies according  to  law."  Per  Mr. 
Chief  Justice  Simpson. 

^■»*  Scott  V.  Collier  (Ind.  1906),  78 
N.  E.  184,  aff'g  77  N.  E.  666.  See 
also  cases  in  following  notes. 

"°  Lane  v.  Schlemmer,  114  Ind. 
296,  15  N.  E.  454;  Rothschild  v. 
Raab,  93  Ind.  488;  Wulschner  v. 
Sells,  87  Ind.  71,  decided  under  acts 
1879,  p.  160,  §  3. 

1'"  Packer  v.  Taylor,  12  Pa.  Co.  Ct. 
521,  2  Pa.  Dist.  R.  443,  decided  un- 
der Pa.  Act,  June  3,  1887. 

"^  Baker  v.  Singer  Mfg.  Co.,  122 
Pa.  St.  363,  15  Atl.  458,  22  W.  N.  C. 
366,  19  Pitts.  L.  J.  (N.  S.)  347. 


§'   57]       INCAPACITY   AXD   WANT   OF   AUTHORITY — COVERTURE.  68 

which  were  used  for  the  benefit  of  her  separate  estate.^'^  And  a  prom- 
issory note  executed  by  a  married  woman  in  consideration  of  tlie  sale 
to  her  of  stocks,  is  held  to  be  a  debt  contracted  for  the  benefit  of  her 
separate  estate  and  for  which  she  is  liable. ^^®  Nor  can  she  defeat  re- 
covery on  a  note  given  by  her  for  an  article  which  was  purchased  for 
use  in  and  about  her  separate  estate,  although  her  husband  managed 
such  estate.^^*'  So  she  has  been  held  liable  on  a  note  given  by  her  for  a 
horse  purchased  by  her  to  be  used  on  a  farm  which  she  owned,^^^  and 
likewise  on  a  note  given  in  payment  for  a  mule  to  be  so  used,^^^  or 
for  agricultural  implements  to  be  used  on  her  farm,^®^  or  for  mate- 
rials to  be  used  in  the  necessary  repair  of  her  house,^^*  or  for  lumber 
to  be  used  in  the  construction  of  a  building  on  her  separate  estate,^^^ 
or  to  secure  the  payment  of  money  loaned  to  her  to  pay  off  a  mortgage 
on  her  property,^^''  or  to  pay  rent  or  to  release  her  separate  property 
from  the  lien  of  the  levy  thereon  made  by  the  landlord  for  the  pay- 
ment of  rent  which  was  due  on  land  occupied  by  her  husband  and  the 
family.^^^  Under  the  Miss.  Eev.  Code  of  1857  ^^^  it  was  decided  that 
a  married  woman  could  not  defeat  recovery  on  a  note,  on  the  ground 
of  coverture,  given  for  the  money  and  supplies  furnished  "for  the  use 
and  benefit  of  herself  and  family."^'*^  And  where  a  married  woman 
executes  a  note  to  a  certain  creditor  of  her  husband  for  the  amount 
of  a  note  due  from  the  latter  to  the  former  and  surrendered,  and  to 
relieve  herself  from  an  attack  upon  property  conveyed  by  her  hus- 
band to  her  on  the  ground  that  such  conveyance  was  voluntary  and 
in  fraud  of  creditors,  there  is  sufficient  consideration  to  render  it  a 

I'^Wolf  V.  Duvall  (Ark.),  13  S.  W.  ^^  Ferguson  v.  Harris,  39  S.  C.  323, 

728,     decided     under     Mans.     Dig.,  17  S.  E.  782. 

§§4625,4626,4630.  ^'^  Taylor    v.    American    Freehold 

"» Williams  v.  King,  43  Conn.  569.  Land  Mtg.  Co.,  106  Ga.  238,  32  S.  E. 

""  Dennis  v.   Grove,   4   Pa.    Super.  153. 

Ct.  480,  decided  under  act  June  3,  "^  Kams  v.   Moore,   5   Pa.   Super. 

1887.  Ct.  381. 

"'Mitchell  V.  Smith,  32  Iowa  484,  ""Art.  25,  p.  336,  providing  in  part 

decided  under  Code,  §  2506.  that  "all  contracts  made  by  the  wife 

'*- Allen  V.  Long,  19  Ky.  Law  Rep.  or  by  the  husband  with  her  consent 

488,  41  S.  W.  17,  decided  under  Ky.  for    family    supplies   or    necessaries 

Gen.  St.,  ch.  52,  art.  2,  §  2.  *     *     *     shall    be    binding    on    her 

^'^  Allen  V.  Johnson,  13  Pa.  Co.  Ct.  and  satisfaction  may  be  had  out  of 

218  holding  that  since  act  June  3,  her  separate  property." 

1887,  the  burden  is  on  her  to  show  ^'  Pendleton  v.  Galbreath,  45  Miss, 

her  contract  void.  43. 

i«*  Baird  v.  Pruning,  84  Ky.  645. 


69  SEPARATE   ESTATE — NOTE   FOR   BORROWED   MONEY.       [§§    58,    59 

contract  in  relation  to  her  separate  property. ^''•^  In  Louisiana,  where 
a  note  was  executed  by  a  married  woman  under  the  authorization  of 
the  district  judge  in  accordance  with  the  act  of  1855,  it  may  be  en- 
forced against  her  by  a  transferree  without  showing  that  it  enured 
to  her  advantage  or  benefit,^^^  for  even  as  to  such  a  holder,  where  the 
objection  arises  from  the  incapacity  of  the  party,  no  additional  effect 
to  the  obligation  can  be  given  by  indorsement."^ 

§  58.  Same  subject  continued — Note  for  borrowed  money. — Where 
money  is  borrowed  for  the  benefit  or  use  of  a  married  woman,  or 
for  the  benefit  of  her  separate  estate,  she  is  also  liable  on  a  note 
given  therefor/"^  And  though  the  money  was  not  applied  to  the 
benefit  of  her  separate  estate,  she  cannot  defeat  recovery  thereon.""* 
Thus  it  has  been  so  decided  where  the  money  was  loaned  to  her  on  the 
representation  that  it  was  for  her  sole  and  separate  use,  when  in  fact 
it  was  borrowed  for  the  use  of  her  husband.^^^  So  where  a  married 
woman  was  carrying  on  the  business  of  farming,  through  her  hus- 
band as  her  agent,  and  she  borrowed  money  in  her  own  name  and  re- 
ceived it  herself  and  then  handed  it  over  to  her  husband,  who  was 
carrying  on  the  farm,  it  thus  became  part  of  the  property  employed 
in  her  business,  and  the  fact  that  her  husband  wasted  or  misused  it 
does  not  alter  the  liability  of  the  wife,  who  borrowed  it.  The  money 
borrowed  became  part  of  her  separate  estate  by  the  act  of  borrowing, 
and  her  promise  to  pay  related  to  her  separate  estate,  and  she  was  lia- 
ble on  note  given  therefor.^'' "^ 

§  59.     Same    subject — Intention    as    affecting. — An    intention    to 

charge  the  separate  estate  of  a  married  woman,  as  evidenced  by  the 
mere  execution  of  a  note  is  held  not  sufficient,  where  the  note  does 

I'oWhelpley     v.     Stoughton,     112  Steffen  v.  Smith,  159  Pa.  St.  207,  28 

Mich.  595,  70  N.  W.  1098;  121  Mich.  Atl.   295,   33   W.  N.  C.   520,  decided 

163,  79  N.  W.  1098.  under  Pa.  Act  June  3,  1887. 

1"  Miller  v.   Wisner,   22  La.  Ann.  "'  McVey  v.  Cantrell,  70  N.  Y.  295, 

457.  26  Am.  Rep.  605.     See  Scott  v.  Otis, 

"=  Conrad  v.  Le  Blanc,  29  La.  Ann.  25  Hun   (N.  Y.)   33.    See,  also,  Rood 

123;  Sprigg  v.  Bossier,  5  Mart.    (N.  v.  Wright,  124  Ga.  849,  53  S.  E.  390. 

S.  La.)  54.  »=Till  v.  Collier,  27  Ind.  App.  333, 

''^^Sidway  v.  Nichol.  62  Ark.  146,  61  N.  E.  203;   Bratton  v.  Lowry,  39 

34  S.  W.   529,  decided  under  Sand.  S.  C.  383,  17  S.  E.  832. 

&  H.  (Ark.)  Dig.,  §§4945-4951;  Todd  ""Smith  v.  Kennedy,  13  Hun  (N. 

V.  Bailey,  58  N.  J.  L.  10,  32  Atl.  696;  Y.)  9. 


§    59]       INCAPACITY   AND   WANT    OF   AUTHORITY — COVERTURE.  70 

not,  upon  its  face,  show  any  such  purpose,  there  being  no  independent 
agreement  to  that  effect,  and  the  complaint  showing  no  contract  to 
charge  her  separate  estate.^^^  So  it  has  been  declared  that  "a  promis- 
sory note  in  the  ordinary  form,  signed  by  a  married  woman,  payable 
to  the  order  of  her  husband  and  indorsed  and  presented  for  discount 
by  him,  is  not  a  representation  upon  its  face  that  the  note  is  made 
to  raise  money  for  her.  'Ho  implication,  presumption  or  impression 
that  she  was  to  be  benefited  by  it  in  her  business  or  estate  could  be 
drawn  from  its  form  and  from  the  fact  that  she  had  given  it  to  her 
husband  for  the  purpose  of  having  it  discounted.  To  give  such  a 
note  vitality  and  effect  it  must  be  made  to  appear,  by  evidence  aliunde 
the  instrument,  that  it  was  made  in  her  separate  business,  or  for  the 
benefit  of  her  separate  estate.  The  fact  that  she  owns  a  separate  estate 
is  not  alone  sufficient."^^^  And  in  another  case  it  is  said:  "It  is 
claimed  that,  when  a  feme  covert  executes  a  note,  the  presumption 
arises  that  she  intended  thereby  to  charge  her  separate  estate  or  prop- 
erty. To  this  doctrine  we  cannot  assent.  A  married  woman  cannot 
contract  generally,  and  the  burden  is  cast  upon  the  one  seeking  to 
enforce  a  contract  against  her  to  show  that  it  is  an  obligation  she  was 
authorized  to  make  under  the  statute."^"^  So  where  a  note  was  signed 
by  a  married  woman  as  surety  for  her  husband,  but  there  was  no  in- 
tention expressed  in  the  instrument  to  create  a  charge  upon  her 
separate  estate,  it  was  decided  that  the  mere  existence  of  such  an  in- 
tention on  her  part  did  not  operate  to  render  the  note  binding  on  her, 
and  she  might  avail  herself  of  the  defense  of  coverture.^""  And  it  has 
been  held  that  where  a  note  is  executed  jointly  by  a  husband  and  wife, 
but  is  silent  as  to  the  separate  estate  of  the  wife,  parol  evidence  is  not 
admissible  to  show  that  it  was  intended  to  be  such  a  charge  and 
coverture  is  a  good  defense.^"^  In  other  decisions,  however,  this  doc- 
trine is  not  accepted,  it  being  declared  that  when  a  married  woman 
gives  her  promissory  note  the  presumption  of  law  arises  that  she 

"'  Hodson  v.    Davis,   43    Ind    258.  90  N.  Y.  250,  256,  per  Tracy  J.     See 

See,   also,  Farmers'   Bank  v.  Boyd,  Second  Nat.  Bank  v.   Miller,  63  N. 

67  Neb.  497,  93  N.  W.  676;    Grand  Y.  639. 

Island  B'k'g  Co.  v.  Wright,  53  Neb.  ^"•' Grand      Island      Bk'g     Co.      v, 

574,  74  N.  W.  82;  Bogert  v.  Gulick,  Wright,  53  Neb.   574,  74  N.   W.   82, 

65   Barb.    (N.  Y.)    322;    Wallace  v.  per  Norval,  J. 

Goodlet,  93  Tenn.  598,  30  S.  W.  27;  ^°»Yale  v.   Dederer,  22  N.  Y.  450, 

Litton     v.     Baldwing,     8     Humph.  78  Am.  Dec.  216. 

(Tenn.)  209.  47  Am.  Dec.  605.  ^^  Jordan  v.  Keeble,  85  Tenn.  412, 

1"^  Saratoga  County  Bank  v.  Pruyn,  3  S.  W.  511. 


71  WHAT   LAW    GOVERXS.  [§    60 

charges  her  separate  property  with  the  pa3'ment  thereof,^"-  which  pre- 
sumption can  not  be  overcome  by  testimony  of  the  wife  that  such  was 
not  her  intention-^^^  *  But  where  a  feme  covert  executes  and  puts  into 
circulation  a  negotiable  note  and  places  upon  its  face  a  statement  that 
it  is  free  from  all  objection  in  respect  to  her  condition  as  a  married 
woman,  she  is  estopped  as  against  an  innocent  indorsee  from  denying 
such  statement,  unless  she  shows  that  by  such  statement  he  was  not 
misled,-"^  And  it  is  decided  that  whether  a  note  of  a  married  woman 
sued  on  was  made  with  reference  to  her  separate  property,  trade  or 
business,  or  upon  the  faith  and  credit  thereof,  and  with  the  intention 
on  her  part  to  thereby  bind  her  separate  property,  is  always  a  question 
of  fact.^"^*  The  intention  to  charge  the  separate  estate  may  also  be  pre- 
sumed from  the  nature  of  the  transaction.^"* 

§  60.  What  law  governs. — The  right  to  defend  an  action  on  a 
note  on  the  ground  of  coverture  is  to  be  determined  by  the  law  in  force 
at  the  time  of  its  execution. ^'^**  And  it  is  a  general  rule  that  a  contract 
for  its  validity,  obligation  and  construction  is  to  be  governed  by  the  law 
of  the  place  where  made.^'^^  So  it  has  been  declared  that  the  law  of  the 
place  of  performance  does  not  in  any  way  affect  the  capacity  of  a  mar- 
ried woman  to  contract  in  a  state  which  authorized  her  to  make  the 
contract,  unless  it  is  apparent  from  the  terms  of  the  contract  that  the 
parties  intended  to  incorporate  the  laws  of  the  state  of  performance 
therein.^"^*  This  rule  is  applied  to  the  case  of  a  note  executed  by  a  mar- 
ried woman  residing  in  Missouri,  payable  to  her  son,  resident  at  the 
time  in  the  state  of  Indiana.  The  latter,  who  was  a  member  of  a  firm 
doing  a  tailoring  business,  made  out  the  note  and  mailed  it  to  his 
mother  in  Missouri,  with  a  request  that  she  sign  it  for  his  accommo- 
dation, at  the  same  time  writing  her  of  the  stringent  needs  of  the  firm 
for  money  and  promising  to  take  up  the  note  at  or  before  maturity ; 

'<«  Perkins  v.  Rowland,  69  Ga.  661.  =»*  Yale  v.  Dederer,  22  N.  Y.  456. 

Burnett  v.  Hawpe's  Ex'r,  25  Gratt.  =«^*  Lackey  v.  Boruff,  152  Ind.  371, 

(Va.)    481;    see  Darnall  v.   Smith's  53  N.  E.  412. 

Adm'r,  26  Gratt.   (Va.)  878.  =»=  Partee  v,  Silliman,  44  Miss.  272. 

^■*  Hershizer  v.  Florence,  39  Ohio  See  Wright  v.  Pennington,  47  N.  J. 

St.  516,  524.  L.  (12  Vroom)  48,  32  Am.  Rep.  180; 

'"'Nott  V.  Thomson,  35  S.  C.  461,  Hanover  Nat.  Bank  v.  Howell,  114 

14  S.  E.  940;    National  Exch.  Bank  N.  C.  271,  23  S.  E.  1005. 

V.    Cumberland     Lumber    Co.,    100  ="'*  Hauck  Clothing  Co.  v.  Sharpe, 

Tenn.  479,  47  S.  W.  85.  83  Mo.  App.  385,  391. 

=»'*  Godfrey  v.   Megahan,   38   Neb. 
748,  57  N.  W.  284. 


§    GO]       IXCAPACITY   AND    WANT    OF   AUTHORITY — COVERTURE.  72" 

she  signed  the  note  in  Missouri  and  mailed  it  to  her  son,  to  be  dis- 
counted in  Indiana,  to  enable  him  to  raise  money  on  it ;  the  latter  was 
unable  to  discount  it  there  and  mailed  it  to  plaintiff,  indorsing  it  by- 
writing  his  name  across  the  back  of  it,  with  a  request  in  writing  to 
the  plaintiff  to  let  him  have  more  goods,  and  the  latter  accepted  the 
note  and  shipped  the  goods.  The  evidence  was  that  the  common  law  of 
coverture  was  in  force  in  Indiana,  and  that  if  the  note  was  an  In- 
diana contract  then  it  was  void  for  want  of  capacity  in  the  maker. 
Under  the  laws  of  Missouri,  however,  the  defendant  had  legal  capac- 
ity to  make  the  note.  The  suit  to  enforce  its  collection  was  brought 
in  Missouri,  and  defendant  pleaded  coverture,  claiming  that  under 
the  laws  of  the  state  of  Indiana  she  had  no  power  to  make  a  personal 
obligation,  and  that  she  had  no  separate  property,  and  that  by  reason 
of  these  facts  said  instrument  of  writing  was  void  and  of  no  effect, 
and  still  remained  so.^°^  In  this  case  the  court  said :  "The  law  of  the 
place  of  performance  does  not  in  any  way  affect  the  capacity  of  a  mar- 
ried woman  to  contract  in  a  state  which  authorized  her  to  make  the 
contract,  unless  made  with  reference  to  real  estate  situated  in  the 
state  of  performance,  or  it  is  apparent  from  the  terms  of  the  contract 
that  the  parties  intended  to  incorporate  the  laws  of  the  state  of  per- 
formance in  the  contract.  *  *  *  It  is  contended  that  the  evidence 
proves  that  the  parties  intended  to  make  the  note  an  Indiana  con- 
tract. What  they  intended  as  to  an  innocent  assignee  of  the  note  can 
only  be  ascertained  from  the  terms  of  the  note  and  the  circumstances 
attending  the  execution.  These  show  no  more  than  that  the  note  was  to 
be  paid  at  a  bank  in  Logansport,  Indiana.  The  law  presumes  that  when 
Mrs.  Sharpe  signed  the  note  for  the  accommodation  of  her  son  that 
she  did  so  in  good  faith,  intending  to  be  bound  by  it.  *  *  *  Courts 
will  always  validate  contracts,  where  it  is  possible  to  do  so  without 
doing  violence  to  the  terms  of  the  contract,  or  some  well  settled  prin- 
ciple of  law.  The  respondent  signed  her  name  to  the  note  in  Missouri, 
delivered  it  in  Missouri,  by  mailing  it  to  her  son ;  she  made  him  the 
payee,  with  legal  authority  written  in  the  body  of  the  note,  without 
restrictions  or  qualifications  to  sell  it  where  and  to  whom  he  would; 
he  exercised  this  delegated  power,  this  agency,  by  indorsing  and  de- 
livering the  note  to  appellant  for  value;  they  took  it  in  good  faith, 
gave  value  for  it  without  notice  of  any  restrictions  on  the  payee  as  to 
his  authority  to  endorse  and  transfer  the  note.  The  respondent  ex- 
pressly and  directly  by  her  voluntary  act  put  it  in  the  power  of  her  son. 

=»«  Hauck  Clothing  Co.  v.   Sharpe.  83  Mo.  App.  385,  391. 


73  WHAT   LAW    GOVEENS.  [§    60 

to  transfer  the  note  to  the  appellant.  If  he  disobeyed  respondent's 
private  instructions,  which  were  never  disclosed  to  plaintiff,  and 
transferred  the  note  to  them,  she,  not  the  innocent  purchaser  of  the 
note,  should  suffer;  and  even  if  the  general  principle  (which  I  do  not 
concede)  of  the  law  of  place  should  pronounce  this  an  Indiana  con- 
tract, the  general  principle  should  yield  to  the  peculiar  facts  and  the 
laws  of  Missouri  should  prevail,  in  order  to  make  valid  a  contract 
which  the  law  presumes  the  respondent  intended  should  be  valid 
when  she  made  it/'^oe*  g^  ^  j^q^q  executed  by  a  married  woman  in  New 
York,  of  which  she  is  presumed  to  have  been  a  resident  at  the  time  of 
making  it,  and  which  note  is  valid  by  the  law  of  that  state,  may  be 
enforced  in  another  state,  though  by  the  law  of  the  latter  state  she  is 
under  a  complete  common  law  disability  to  make  any  contract.^" ^ 
And  where  a  note  executed  by  a  married  woman  at  the  request  of  her 
husband,  and  for  his  accommodation  alone,  is  by  the  express  law  of  the 
state  void,^"'^*  it  was  decided  in  New  Jersey  that  in  an  action  by  an 
indorsee  for  value,  such  fact  may  be  shown  in  defense  thereto,  though 
it  may  appear  that  the  note  was  payable  in  and  has  been  transferred 
to  the  indorsee  in  another  state,  and  that  by  the  laws  of  the  latter  state 
a  married  woman  may  execute  such  a  note;  since  the  prohibition  of 
the  statute  cannot  be  evaded,  or  the  public  policy  declared  by  it 
thwarted  by  the  device  of  providing  that  the  place  of  performance 
shall  be  in  a  foreign  jurisdiction,  where  marriage  does  not  curtail  a 
woman's  contracting  power.-"®  But  it  was  determined  upon  a  review  of 
this  case  that  the  statute  was  not  declaratory  of  public  policy  and  that 
where  a  note  is  signed  in  the  state  of  New  Jersey,  but  is  passed  away 
and  comes  first  into  legal  existence  in  the  state  of  New  York,  it  is  in 
contemplation  of  law  made  in  the  latter  jurisdiction.  So  a  note  signed 
by  a  married  womafi  domiciled  in  New  Jersey,  and  intrusted  by  her  to 
her  husband,  thus  giving  him  power  to  make  for  her  a  contract  of  sure- 
tyship in  New  York,  where  it  came  into  legal  existence,  such  a  contract 
being  valid  in  the  latter  state,  by  his  indorsement  and  transfer  there 
the  wife  was  held  to  be  as  effectually  bound  to  the  payee  as  if  she  had 
executed  the  note  in  New  York,  and  it  was  determined  that  it  could  be 

'""*  Hauck  Clothing  Co.  v.  Sharpe,  becoming     an     accommodation     in- 

83  Mo.  App.  385,  391-393,  P|er  Bland,  dorser,  guarantor  or  surety,  or  from 

P.  J.  becoming  liable  on  any  promise  to 

'"^  Taylor  v.  Sharp,  108  N.  C.  377,  pay  the  debt  or  answer  for  the  de- 

13  S.  E.  138.  fault  or  liability  of  a  third  person. 

="'*  See  N.  J.  Gen.  St.,  p.  2017,  §  26,         ="^  Thompson   v.    Taylor,   65    N.    J. 

prohibiting  a  married  woman  from  L.  107,  47  Atl.  544. 


61]       INCAPACITY   AND   WANT    OF   AUTHORITY — COVERTUEE. 


74 


enforced  against  her,  though  it  would  have  been  void  if  executed  in 
New  Jersey.^"**  And  it  has  been  decided  that  a  note  signed  by  a  mar- 
ried woman  in  Tennessee,  but  delivered  and  consummated  in  Ohio, 
and  payable  in  the  latter  state,  is  an  Ohio  contract,  and  though  it  may 
be  valid  and  enforceable  against  a  married  woman  in  that  state,  yet 
such  a  contract  being  voidable  in  Tennessee  at  the  election  of  a  mar- 
ried woman,  coverture  is  a  good  defense  to  an  action  thereon  in  such 
state.2»9 

§  61.  "Who  may  urge. — The  defense  of  coverture  is  a  personal  one 
and  can  only  be  availed  of  by  a  married  woman  and  her  privies  in 
blood  or  representation.^"®*  So  this  defense  does  not  enure  to  the  bene- 
fit of  the  indorser  as  he,  by  his  indorsement,  has  guaranteed  the  capac- 
ity of  the  maker  to  contract  in  the  manner  which  by  the  terms  of  the 
instrument  she  purported  to  contract.-^"   And  it  has  been  declared  in 


20S*  Thompson  v.  Taylor,  66  N.  J. 
L.  253,  49  Atl.  544. 

^=  First  Nat.  Bank  v.  Shaw,  109 
Tenn.  237,  70  S.  W.  807. 

="»*  Lackey  v.  Boruff,  152  Ind.  371, 
53  N.  E.  412.  See  West  v.  Miller, 
125  Ind.  70,  25  N.  E.  143. 

^^°  Indiana. — Bennett  v.  Mattingly, 
110  Ind.  197,  10  N.  E.  299. 

Massachusetts. — Browning  v.  Car- 
son, 163  Mass.  255,  39  N.  E.  1037; 
Kenworthy  v.  Sawyer,  125  Mass.  28; 
Prescott  Bank  v.  Caverly,  73  Mass. 
(7  Gray)  217,  66  Am.  Dec.  473. 

l<!ew  Jersey. — Edmunds  v.  Rose,  51 
N.  J.  L.  547,  18  Atl.  748,  2  Bkg.  L.  J. 
175. 

New  York. — Erwins  v.  Downs,  15 
N.  Y.  575;  Archer  v.  Shea,  14  Hun 
(N.  Y.)  493. 

English. — Haly  v.  Lane,  2  Atk. 
18L 

See  State  Bank  v.  Fearing,  33 
Mass.  (16  Pick.)  533;  Burrill 
V.  Smith,  24  Mass.  (7  Pick.)  291, 
295.  It  is  a  part  of  the  contract  of 
indorsement  that  the  paper  indorsed 
has  been  made  by  a  person  compe- 
tent to  contract  in  that  form.  Con- 
sequently the  fact  that  the  maker 


was  not  legally  bound  affords  no  de- 
fense to  an  action  brought  upon 
the  paper  against  the  indorser. 
Archer  v.  Shea,  14  Hun  (N.  Y.) 
493.  An  indorsement  is  a  guaranty 
of  the  genuineness  of  the  previous 
signature  and  of  the  capacity  of  the 
parties  to  contract.  Ogden  v.  Bly- 
denburgh,  1  Hilt.  (N.  Y.)  182. 
"If  the  husband  procure  his  wife  to 
draw  a  note,  then  indorses  it  and 
puts  it  into  circulation  it  would  be 
difBcult  to  find  reason  or  authority 
to  discharge  him."  Leitner  v. 
Miller,  49  Ga.  489,  per  Trippe,  J. 
"The  note  was  -void  as  against  the 
makers,  because  they  were  married 
women  and  incapable  of  contract- 
ing obligations  in  that  form.  But 
where  the  defendant  indorsed  the 
note,  he  impliedly  contracted  that 
the  makers  were  competent  to  con- 
tract, and  had  legally  contracted 
the  obligations  of  joint  makers  of 
the  note.  He  also  assumed  the  le- 
gal obligation  in  most  respects  of 
the  drawers  of  a  bill.  The  fact, 
known  to  the  plaintiff  at  the  time 
he  took  the  note,  that  the  makers 
were  married   women,    did   not  de- 


JJ'S  "WHO    MAY    SUE.  [§    Gl 

such  a  case  that,  "while  a  promissory  note  between  a  husband  and  wife 
is  void  between  the  original  parties,  an  indorser  when  sued  upon  a 
contract  between  him  and  his  indorsee  is  not  at  liberty  to  deny  the 
validity  of  the  original  note,  or  the  capacity  of  the  maker,  for  the 
purpose  of  defeating  his  or  her  own  liability.  The  consideration  mov- 
ing from  the  party  who  takes  the  note,  with  the  signature  of  the  maker 
and  of  the  indorser,  is  sufficient  to  support  the  promise  of  the  latter, 
and  the  fact  that  the  indorsement  is  for  the  accommodation  of  the 
maker  affords  no  defense  to  the  indorser."" «*  Nor  can  a  second 
indorser  avail  himself  of  the  defense  that  the  first  indorser  was  a 
married  woman.^^^  And  a  husband  cannot  avail  himself  of  this  de- 
fense in  an  action  against  him  on  notes  executed  by  him  Jointly  with 
his  wife,  as  purchase  money  notes  for  land,"^  or  where  notes  have 
been  signed  by  him  as  surety  for  his  wife."^  A  guarantor  is  likewise 
precluded  from  availing  himself  of  such  a  defense.- ^^  So  it  has  been 
decided  under  a  statute  providing  that  "a  married  woman  shall  not 
enter  into  any  contract  of  suretyship,  whether  as  indorser,  guarantor 
or  in  any  other  manner;  and  such  contract  as  to  her  shall  be  void,"-^^ 
that  one  of  her  creditors  cannot  avoid  such  a  contract.  It  was  said 
in  this  case:  "It  has  been  uniformly  held  by  this  court  since  said 
section  took  effect,  that  contracts  of  suretyship  made  by  married 
women  are  voidable,  not  void;  that  coverture  is  a  personal  defense; 
and  therefore  such  contracts  can  only  be  avoided  by  such  married 
women  and  her  privies  in  blood  or  representation."- ^^^  And  the  maker 
of  a  note,  payable  to  his  wife  or  her  order,  cannot  set  up  the  defense 
in  an  action  by  an  indorsee  that  she  had  no  authority  to  indorse  or 
transfer  the  note  as  his  promise  to  pay  to  the  payee's  order  is  a  direct 
affirmance  that  the  payee  has  the  right  to  make  the  order  and  every 
rule  of  estoppel  applies  to  him.^i"^    g^  the  drawer  of  a  bill  in  favor  of 

prive  him  of  the  character  of  a  bona  61;  Hicks  v.  Randolph,  62  Tenn.  (3 

fide  purchaser."     Erwin   v.   Downs,  Baxt.)  352,  27  Am.  Rep.  760. 

15  N.  Y.  575,  per  Shankland,  J.  "*  Nabb    v.    Koontz,    17    Md.    283, 

=^"*  Binney  v.  Globe  Nat.  Bank,  150  291. 

Mass.  574,  23  N.  E.  380,  6  L.  R.  A.  "^Burns'  Rev.  St.   (1894),  §  6964; 

379,  per  Devens,  J.  Horner's  Rev.  St.   (1897),  §  5119. 

="Prescott   Bank    v.    Caverly,    73  ^^^^  Lackey  v.  Boruff,  152  Ind.  371, 

Mass.  (7  Gray)  217.  53  N.  E.  412,  per  Monks,  C.  J. 

=1=  Morgan   v.   Morgan,   20   Ky.   L.  ""Wisdom    v.    Shanklin,    74    Mo. 

Rep.  1308,  49  S.  W.  184.  App.  428,  1  Mo.  App.  Rep.  238,  per 

"^  McGavack  v.  Whitfield,  45  Miss.  Ellison,  J. 
452;  Whitworth  v.  Carter,  43  Miss. 


§§■   62,    63]        INCAPACITY   AND    WANT   OF   AUTHORITY INFANCY.       76 

a  feme  covert,  lie  having  in  express  terms  authorized  her  to  receive  the 
amount  of  the  bill,  cannot,  in  an  action  by  the  husband  for  non-pay- 
ment, deny  the  wife's  right  to  demand  payment  thereof.^ ^* 

§  62.  Where  there  is  a  failure  to  plead  coverture  and  judgment  is 
rendered. — Though  a  married  woman  fails  to  plead  coverture  as  a  de- 
fense, it  has  been  decided  that  it  is  as  competent  for  her  to  prevent 
the  enforcement  of  the  judgment  as  it  would  have  been  to  set  up  the , 
same  defense  in  the  original  action.^^^  So  it  has  been  held  that  a 
judgment  by  default  against  a  married  woman  on  a  promissory  note  is 
a  nullity  and  can  be  no  more  enforced  against  her  at  law  than  the  note 
sued  on.  The  principle  that  a  party  cannot  impeach  a  judgment  on 
any  ground  which  might  have  been  pleaded  or  relied  on  as  a  defense 
to  the  suit  does  not  apply  to  a  case  like  this,  where  the  defendant  is  a 
feme  covert,  and  does  not  sui  juris.-^^ 


Subdivision  II. 


INFANCY. 

Sec.  Sec. 

63.  Infancy    as    a    defense — Gener-     66.  Note    given    in    satisfaction    of 

ally.  tort. 

64.  Effect  of  ratification.  67.  Where  infant  accepts  bill  of  ex- 

65.  Note  given  for  support  of  bas-  change. 

tard  child.  68.  Who    may   urge   defense   of    in- 

fancy. 

§  63.     Infancy  as  a  defense — Generally. — The  infancy  of  a  maker 
of  a  note  is  a  good  defense  to  an  action  against  him  on  the  note.^-^ 

'^^  Cathell  V.  Goodwin,  1  Har.  &  G.  Iowa. — Guthrie     v.     Howard,     32 

(Md.)    468.  Iowa    341;    Van   Metre  v.   Wolf,    27 

'^^  Kentucky. — Stevens  v.  Deering,  Iowa  341. 

10   Ky.   L.  Rep.   393,   9   S.   W.    292;  Kentucky.— Shanklin  v.  Moody,  23 

Green  v.  Page,  80  Ky.  368.  Ky.  L.  Rep.  2063,  66  S.  W.  502. 

Maryland.— Uoftman  v.  Shupp,  80  ^"Griffith  v.  Clarke,  18  Md.  457. 

Md.  611,  31  Atl.  505.  ==' Buzzell  v.  Bennett,  2  Cal.  101; 

Pennsylvania. — Unangst  v.  Fitler,  Des  Moines  Ins.  Co.  v.  Mclntire,  99 

84  Pa.  135.  Iowa   50,    68    N.   W.    565;    Willis  v. 

Texas.— Smith    v.    Wilson     (Tex.  Twambly,  13   Mass.  204;    Heffington 

Civ.  App.  1895),  32  S.  W.  434.    But  v.    Jackson    (Tex.    Civ.    App.    1906), 

see:  96  S.  W.  108. 


77  INFANCY   AS    A   DEFENSE GENERALLY.  [§    G3 

And  a  bona  fide  holder  is  not  protected  against  this  plea.^--  And  a 
maker  is  not  deprived  of  his  right  to  make  this  defense  by  the  fact 
that  the  contract  was  procured  by  his  fraudulent  representation  that 
he  was  of  full  age.^^^  So  infancy  is  a  good  defense  to  an  action  on  a 
note  given  by  a  female  for  an  account  due  by  her  deceased  husband 
and  her  right  to  avail  herself  of  this  defense  is  not  affected  by  the 
fact  that  she  married  by  the  consent  of  her  parents  or  that  on  becom- 
ing a  widow  she  has  administered  on  her  husband's  estate.^-*  Where, 
however,  an  action  of  debt  was  brought  on  a  promissory  note  and  de- 
fendant pleaded  nil  debet  and  offered  evidence  of  infancy  in  support 
of  the  plea  it  was  decided  that  on  this  plea  to  the  action  evidence  of 
infancy  was  not  admissible, ^-^  The  rule  that  a  maker  may  avail  him- 
self of  the  plea  of  infancy  is  not  founded  on  the  principle  that  the  note 
or  bill  is  absolutely  void  from  its  inception  but  rather  that  it  is  void- 
able at  the  election  of  the  maker.--*'  "It  is  now  well  settled  as  a  part 
of  the  law  merchant  that  an  infant  may  make  or  indorse  a  promissory 
note  or  bill  of  exchange,  and  that,  as  to  him,  the  note  in  the  one  case 
and  the  indorsement  in  the  other  will  not  be  void,  but  voidable  at  his 
election.-"-^^  This  is  also  declared  to  be  the  rule,  though  the  note  was 
given  for  necessaries.^^®  So  it  has  been  decided  that  a  note  given  by 
an  infant  for  necessaries  is  not  binding,  though  he  is  responsible  on  a 
quantum  valebant  for  their  value,  as  the  note  determines  the  amount 
positively  and  it  is  necessary  for  the  infant's  protection  that  this  be 
open  to  inquiry.^-''  And  it  is  said  in  another  case  that :  "Express  con- 
tracts, as  by  bond  or  note  are  not  as  such  binding,  and  cannot  be  en- 
forced without  ratification  even  if  given  for  necessaries.  For  whether 
the  articles  furnished  were,  in  the  particular  case,  necessaries,  is  a 
question  of  law  to  be  determined  by  the  court,  and  if  deemed  neces- 
saries, then  their  quantity,  quality,  and  reasonable  price,  is  for  the 

^^  Howard    v.    Simpkins,    70    Ga.  "'  Hastings  v.  Dollarhide,  24  Cal. 

322;    Montgomery  v.  Buown,  1  Del.  195,     208,     per     Shafter,     J.,    citing 

Co.  Rep.  (Pa.)  307.  Hardy  v.  Waters,  38  Me.  450;  Niglit- 

="-=Fitts  v.  Hall,  9  N.  H.  441,  450.  ingale  v.  Withington,  15  Mass.  272; 

See  Conroe  v.  Birdsall,  1  Johns.  Cas.  Story  on  Promissory  Notes,  §  78. 

(N.  Y.)  127,  1  Am.  Dec.  105.  ==«Ayres  v.  Burnsi,  87  Ind.  245,  44 

="*  Poole  V.  Hines,  52  Ga.  500.  Am.  Rep.  759;  Price  v.  Sanders,  60 

=^  Young  V.  Bell,  1  Cranch  C.  C.  Ind.  310;   Fenton  v.  White,  4  N.  J. 

342,  Fed.  Cas.  No.  18152.  L.  115;  Swasey  v.  Vanderheyden,  10 

"'Young  v.  Bell,  1  Cranch  C.  C.  Johns.  (N.  Y.)  33. 

342,  Fed.  Cas.  No.  18152.  "'  Milton  v.   Steward,  5   HI.  App. 

533. 


§    64]         INCAPACITY    AND    WANT    OF   AUTHORITY — INFANCY.  78 

consideration  of  the  jury.  But  if  on  the  contrary,  the  express  contracts 
of  infants,  even  when  necessaries,  so  called,  were  the  consideration, 
could  be  enforced,  these  important  questions  might  be  improvidently 
settled  by  the  infant  himself,  beyond  the  supervision  of  the  courts."^^* 
So  an  infant  is  held  not  liable  on  his  note  or  other  contract  for  money, 
even  though,  he  spends  the  money  for  necessaries.^ ^^  And  where  a 
non-negotiable  note  payable  to  a  minor,  was  transferred  by  him  to 
another  in  exchange  for  a  watch,  but  on  the  following  day  the  minor 
tendered  back  the  watch  and  demanded  the  note,  it  was  decided  that 
the  note  ceased,  to  be  the  transferee's  from  the  date  of  demand  of  its 
return  and  that  he  could  not  recover  in  an  action  thereon  against  the 
maker. -^-  But  in  a  case  in  South  Carolina,  where  a  defendant  pleaded 
infancy  to  an  action  on  a  note  executed  by  him,  it  was  decided  that  a 
replication  thereto  that  the  note  was  given  for  necessaries  ought  to  be 
Bustained.'^^  And  in  Massachusetts  it  has  been  decided  that  a  note 
given  by  an  infant  is  voidable,  not  void,  and  "in  any  action  thereon  the 
consideration  is  open  to  inquiry,  and,  if  given  for  goods,  it  will  be 
competent  to  inquire,  both  whether  the  goods  were  necessaries,  and 
the  just  value  of  them,  and  judgment  may  be  rendered,  pro  ianto  for 
that  part  of  the  note  only  for  which  a  minor  would  be  legally  liable."^^* 
And  in  Vermont,  where  a  note  was  executed  by  an  infant  in  pay- 
ment of  his  board  at  a  certain  sum  per  week,  which  was  reasonable,  it 
was  held  that  the  consideration  of  the  note  being  open  to  inquiry  there 
might  be  a  recovery  under  the  facts  of  the  case.^^^  Again,  in  New 
Hampshire,  it  has  been  decided  that  if  an  infant  purchases  necessaries 
and  gives  a  promissory  note,  signed  by  himself  and  a  surety,  and  the 
surety  afterward  pays  the  note,  he  may  recover  the  amount  so  paid 
of  the  infant.^^*' 

§  64.  Effect  of  ratification. — Where,  in  an  action  on  a  note  exe- 
cuted by  an  infant,  it  appears  that  the  note  was  ratified  by  him  after 
he  became  of  age,  his  infancy  is  no  defense  to  such  action,  such  a  note 
being  held  voidable  and  not  void.-^^     As  to  what  constitutes  such  a 

="»  Henderson  v.  Fox,  5   Ind.   489,  ="Earle    v.    Reed,    51    Mass.    (10 

per  Stuart,  J.,  quoted    in   Ayres  v.  Mete.)  387,  per  Shaw,  C.  J. 

Burns,  87  Ind.  245,  44  Am.  Rep.  759.  "=  Bradley  v.  Pratt,  23  Vt.  378. 

=31  Price  V.  Sanders,  60  Ind.  310.  "°  Conn  v.  Coburn,  7  N.  H.  368,  26 

=2- Willis    V.    Twambly,    13    Mass.  Am.  Dee.  746. 

204.  ^''Alabama. — Faut  v.    Cathcart,   8 

===  Duboise  v.  Wheddon,  4  McCord  Ala.  725, 
(S.  C.)  221. 


I 


79 


EFFECT   OF   EATIFICATION. 


[§   64 


ratification  as  will  have. this  effect  it  has  been  declared  that:  "If  the 
doctrine  be,  that  the  privilege  extended  to  infants  should  be  a  shield, 
it  would  seem  that  his  acts,  which  amount  to  a  confirmation,  ought  to 
be  of  such  an  unequivocal  nature  as  to  establish  a  clear  intention  to 
confirm  the  contract,  after  coming  of  age,  after  full  knowledge  that 
it  was  voidable."-^^  The  ratification  may  be  a  promise  to  pay  after 
QgQ  230  Qj.  II  yi^r^j  \)Q  inferred  against  him  from  his  positive  acts  in 
favor  of  the  contract,^-*''  or  from  his  tacit  assent,  under  circumstances 
not  to  excuse  his  silence.^"  So  there  has  been  held  to  be  a  ratification 
where  an  infant,  after  he  came  of  age,  agreed  to  deliver  corn  on  ac- 
count of  the  note.'-*^  And  where  an  infant  gave  his  note  for  a  yoke 
of  oxen  which  he  converted  to  his  use  after  he  became  of  age  and  re- 
ceived their  avails  it  was  decided,  in  an  action  against  him  on  the  note 
by  the  indorsee,  that  he  had  ratified  the  promise  and  could  not  avail 
himself  of  the  defense  of  infancy.-*^'  But  in  another  case  where  it 
appeared  that  the  defendant  had,  while  a  minor,  given  his  note  for 
goods  purchased  by  him,  had  sold  most  of  them  in  the  ordinary  course 
of  business,  and  the  residue  had  been  assigned  and  transferred  by 
him  to  secure  the  payment  of  a  debt,  but  were  retained  by  him  for 


California. — Hastings  v.  Dollar- 
hide,  24  Cal.  195,  208. 

Indiana. — LaGrange  Collegiate  In- 
stitute v.  Anderson,  63  Ind.  367,  30 
Am.  Rep.  224. 

Massachusetts. — Reed  v.  Batchel- 
der,  1  Mete.  (Mass.)  559. 

New  Hampshire. — Conn  v.  Co- 
burn,  7  N.  H.  368,  372,  26  Am.  Dec. 
746. 

New  York.—Tatt  v.  Sargeant,  18 
Barb.  (N.  Y.)  320. 

Wisconsin. — Stokes  v.  Brown,  4 
Chand.  (Wis.)  39. 

Federal. — Hyer  v.  Hyatt,  3  Cranch 
C.  C.  276,  Fed.  Cas.  No.  6977. 

Connecticut. — But  see  Alsop  v. 
Todd,  2  Root  (Conn.)  109. 

"^  Thing  V.  Libbey,  16  Me.  55,  57, 
per  Emery,  J.  See  also,  Hodges  v. 
Hunt,  22  Barb.  (N.  Y.)  150,  hold- 
ing that  such  new  promise  or  rati- 
fication must  be  equivalent  to  a 
new  contract.  Everson  v.  Carpen- 
ter, 17  Wend.    (N.  Y.)    419,  holding 


that  the  promise  should  either  be 
absolute,  or,  if  conditional,  the  per- 
formance or  happening  of  the  con- 
dition should  be  proved  affirmative- 
ly by  the  plaintiff.  Goodsell  v. 
Myers,  3  Wend.  (N.  Y.)  479,  481, 
holding  that  it  should  be  a  promise 
to  a  party  in  interest  or  to  his 
agent  or  at  least  an  explicit  admis- 
sion of  an  existing  liability  from 
which  a  promise  may  be  implied. 

=="Aldrich  v.  Grimes,  10  N.  H. 
194;  Bobo  v.  Hansell,  2  Bailey  (S. 
C.)  114.  See  Wright  v.  Steele,  2  N. 
H.  54. 

""  Lawson  v.  Lovejoy,  8  Me.  405, 
23  Am.  Dec.  526;  Aldrich  v.  Grimes, 
10  N.  H.  194. 

="  Lawson  v.  Lovejoy,  8  Me.  405, 
23  Am.  Dec.  526. 

-'■  Stokes  V.  Brown,  4  Chand. 
(Wis.)  39. 

-'^  Lawson  v.  Lovejoy,  8  Me.  405, 
23  Am.  Dec.  526. 


§§    65,    66]       INCAPACITY   AXD    WANT   OF    AUTHORITY— INFANCY.       80 

sale  as  the  servant  of  the  assignee,  until  after  he  became  of  age,  it 
was  decided  that  the  facts  did  not  show  such  a  ratification  of  the  con- 
tract by  him  as  to  deprive  him  of  the  right  to  set  up  infancy  as  a  de- 
fense to  an  action  on  the  note.-**  And  an  affirmance  or  confirmation  at 
any  time,  though  after  the  filing  of  the  plea  of  infancy,  has  been  held 
good.-*^  Again  in  Kentuck}'  it  has  been  decided  that  where  defend- 
ant relies  on  a  plea  of  infancy  in  his  answer,  plaintiff  may  prove  a 
ratification  of  his  contract  without  averring  it  in  his  pleadings.^*^ 

§  65.  Note  given  for  support  of  bastard  child. — A  valid  note  may 
be  given  by  an  infant  father  of  a  bastard  child  in  settlement  with  the  I 

mother  and  the  infancy  of  the  maker  is  no  defense  to  an  action  1 

thereon.  As  the  law  authorizes  the  infant  father  in  such  a  case  to 
settle  with  the  mother  and  secure  to  her  compensation  for  keeping  the 
child,  it  impliedly  gives  him  power  to  execute  the  necessary  instru- 
ments to  effectuate  such  settlement. ^*^ 

§  66.  Note  given  in  satisfaction  of  tort. — The  infancy  of  the  de- 
fendant has  been  declared  to  be  no  defense  to  an  action  upon  a  note 
given  by  him  in  satisfaction  of  a  tort.  Thus  it  was  so  held  where  an 
infant  hired  a  horse  to  drive  to  a  certain  place,  but  drove  beyond  the 
place  agreed  upon  and  as  a  result  of  the  overdriving  the  horse  died. 
A  note  was  given  by  him  in  settlement  of  the  claim  for  the  damage 
sustained  and  in  an  action  on  such  note  he  set  up  the  plea  of  infancy 
which  it  was  held  was  not  available  to  defeat  a  recovery  thereon.^*^ 
In  this  case  it  was  said :  "The  law  makes  him  liable  for  his  torts,  and 
where  he  elects  to  settle  such  liability  by  giving  his  note,  as  long  as  the 
consideration  of  the  note  is  open  to  inquiry,  we  see  no  reason  why  he 
should  not  be  held  liable  in  an  action  upon  the  note,  to  the  same  extent 
that  he  would  be  if  the  action  had  been  brought  upon  the  cause  of 
action  which  formed  the  consideration  for  the  note.  The  note  in  suit 
having  been  given  in  settlement  of  a  claim  for  which  the  defendant 
was  liable,  and  no  fraud  nor  imposition  having  been  practiced  in  ob- 
taining it,  the  plea  of  infancy  is  not  available  to  defeat  it."^*^  *  In  a 
case  in  South  Carolina,  however,  it  is  declared  that  though  an  infant 

^  Thing  V.  Libbey,  16  Me.  55.  ^'  Gavin  v.  Burton,  8  Ind.  69. 

^'^  Best  v.  Givens,  3  B.  Mon.  (Ky.)  ="  Ray  v.  Tubbs,  50  Vt.  688,  28  Am. 

72,  75.  Rep.  519. 

^  Stern  v.  Freeman,  4  Mete.  (Ky.)  "^*  Per  Royce,  J. 
309. 


81  WHERE    INFAXT   ACCEPTS   BILL   OF   EXCHANGE.  [§    67 

is  liable  for  torts  yet  it  does  not  follow  that  contracts  by  him  in  satis- 
faction of  his  torts  are  valid,  and  it  was  here  decided  that  a  note 
given  by  him  in  pursuance  of  an  award  was  void,  though  the  matter 
submitted  was  a  tort  committed  by  the  inf  ant.^^ 

§  67.  Where  infant  accepts  bill  of  exchange. — An  infant  accept- 
ing a  bill  oi  exchange  may  plead  his  infancy  upon  an  action  brought 
against  him.^^"  So  an  infant  cannot  bind  himself  by  the  acceptance 
of  a  bill  of  exchange,  even  though  the  bill  is  given  for  the  price  of 
necessaries  supplied  to  him  during  infancy.  In  one  case  it  was  said : 
"The  principle  long  established  by  English  law  is  this,  that  an  in- 
fant cannot  make  himself  liable  upon  any  contract  whatever,  except 
a  contract  for  the  supply  of  necessaries.  I  will  go  further  and  say 
this,  that  the  principle  of  the  cases  goes  to  this  extent,  that,  if  an  in- 
fant accepted  a  bill  of  exchange  or  gave  a  promissory  note  for  the 
price  of  necessaries  supplied  to  him  and  he  were  sued  upon  the  bill 
or  the  note,  by  the  man  who  had  supplied  the  necessaries  and  the 
plaintiff  relied  only  on  the  bill  or  note  and  gave  no  evidence  of  the 
supply  of  necessaries,  the  infant  would  not  be  liable.  He  is  not  liable 
upon  a  bill  of  exchange  or  promissory  note  under  any  circumstances. 
It  is  not  necessary  for  the  protection  of  persons  dealing  with  an  in- 
fant that  he  should  be  liable  on  such  a  contract.  The  person  who 
hv."?,s  supplied  an  infant  with  necessaries  can  also  sue  on  that  contract 
for  the  price  of  whatever  he  has  supplied."^^'-    A  person,  however,  is 

^^'Hank  v.  Deal,  3  McCord  (S.  C.)  is  an  assumption  not  warranted  by 

257.      The    court    declared    in    this  the   evidence.     It   is  true   that  the 

case:    "The  reason  of  the  rule  which  award  was  on  a  matter  of  that  sort, 

exempts  infants  from  their  liability  but   an   infant   is  not  bound   by   a 

on    contracts   is    founded    on    their  submission   to   an   award;    it  could 

supposed  want  of  capacity  and  dis-  not,    therefore,    constitute    evidence 

cretion,  and  the  law  is  so  careful  of  of  the  fact."     Per  Johnson,  J. 
the  rights  of  infants  that  they  are         ^"Williams   v.    Harrison,    3    Salk. 

protected  from  contracts  to  pay  ex-  197. 

travagant    prices    even    for    neces-        "=^  Soltykoff,  In  re  (1891),  1  Q.  B. 

saries.     And    if   the   agreement   be  413,  per  Lord  Esher,  M.  R.    See  also, 

tested   by   this    reason    it   must   at  1  Camp.  552,  in  which  case  it  was 

once  fall  to  the  ground;   for  surely  said:    "This  action  certainly  cannot 

it  must   require   at   least   as  much  be   maintained.     The    defendant   is 

capacity  and  discretion  to  contract  allowed   to   be   an   infant;    and    did 

about  a  tort  as  about  the  ordinary  any  one  ever  hear  of  an  infant  be- 

concerns  of  life.     The  fact  that  the  ing  liable  as  an  acceptor  of  a  bill 

consideration  of  the  note   in   ques-  of  exchange?"    Per  Sir  James  Mans- 

tion  was  a  compensation  for  a  tort  field,  C.  J. 

Joyce  Defenses — 6. 


§    68]         INCAPACITY   AND    WANT    OF   AUTHORITY — INFANCY.  83 

liable  as  acceptor  of  a  bill  of  exchange,  which  was  drawn  while  he  was 
an  infant  but  was  accepted  by  him  after  he  came  of  age.-^^ 

§  68.  Who  may  urge  defense  of  infancy. — The  defense  of  infancy 
is  a  personal  privilege-^^  and  can  only  be  set  up  by  the  infant  him- 
self,^^*  or  his  heir  or  personal  representatives.^^^  So  in  an  action  on  a 
joint  and  several  note  the  infancy  of  one  of  the  defendants  will  not 
defeat  a  recovery  against  the  others.^^^  *  And  where  a  person  signs  a 
note  with  an  infant,  though  the  latter  is  not  liable,  yet  the  former  may 
be  treated  as  the  sole  maker.-^'^  x\nd  where  an  infant  forms  a  partner- 
ship with  an  adult  he  holds  himself  forth  to  the  world  as  not  being  an 
infant,  and  an  adult  who  combines  with  him  in  practicing  the  fraud 
cannot  avoid  his  own  contract  by  saying  that  his  partner  is  an  infant 
and  incompetent  to  contract.  In  such  a  case  a  contract  of  the  part- 
nership is  valid  as  to  the  adult,  though  void  as  to  the  infant.  So 
where  one  of  the  partners  was  an  infant  it  was  decided  that  the  holder 
of  a  bill  accepted  by  both  partners  might  declare  on  it  as  accepted  by 
the  adult  only  in  the  names  of  both.^^*^  *  So  in  an  action  upon  a  note 
executed  by  a  limited  partnership  the  liability  of  a  special  partner  is 
not  affected  by  the  fact  that  one  of  the  partners  is  an  infant.-^^  And 
the  makers  of  a  note  payable  to  an  infant  cannot  set  up  his  liability 
in  defense  to  an  action  thereon  by  the  indorsee,  as  the  maker  of  the 
note  has  asserted  the  competency  of  the  payee  to  negotiate  and  trans- 
fer the  same  by  the  execution  thereof  and  is  estopped,  to  deny  the 
assertion  so  made."^^  iSTor  in  an  action  by  the  indorsee  of  a  bill  of 
exchange  against  the  drawer  is  the  infancy  of  the  payee  any  defense 
thereto.^^^    And  in  an  action  against  the  acceptor  of  a  bill  of  exchange 

=^=  Stevens    v.    Jackson,    4    Camp.  195;  Frazier  v.  Massey,  14  Ind.  382; 

164.  Hardy  v.  Waters,  38  Me.  450. 

-"Frazier  v.  Massey,  14  Ind.  382;  -"^*  Hartness      v.      Thompson,      5 

Commercial       National      Bank      v.  Johns.  (N.  Y.)  160. 

Strauss,    137    N.    Y.    148,    32    N.    E.  ==^'^  Taylor  v.  Dansby,  42  Mich.  82, 

1066;     Hartness     v.     Thompson,     5  3  N.  W.  267. 

Johns.   R.    (N.   Y.)    160;    Rohrer  v.  -"=*  Burgess    v.    Merrill,    4    Taunt. 

Morningstar,  18   Ohio  579;    Grey  v.  468.     See  Dulty  v.  Brounfield,  1  Pa. 

Cooper,  3  Doug.  54.  St.  497. 

-''*  Nightingale   v.   Withington,    15  ^'  Continental      Nat.       Bank      v. 

Mass.    272,    274,    8    Am.    Dec.    101;  Strauss,  137  N.  Y.  148. 

Hartness  v.  Thompson,  5  Johns.  (N.  ==^  Frazier  v.  Massey,  14  Ind.  382; 

Y.)  160.  Nightingale  v.  Withington,  15  Mass. 

==^  Hastings  v.  Dollarhide,  24  Cal.  271.  8  Am.  Dec.  101. 

^^  Grey  v.  Cooper,  3  Doug.  54. 


83  INTOXICATION   OF   MAKEK    OR   DRAWEE.  [§    G9 

by  the  indorsee,  it  is  no  defense  that  the  drawers  who  had  drawn  the 
bill  payable  to  themselves,  and  of  course  indorsed  it,  were  infants 
when  the  bill  was  drawn.  Lord  Ellenborough  said  in  one  case:  "If 
this  action  were  against  the  drawers  themselves,  that  might  be  a  good 
defense;  as  in  that  case  the  drawers,  who  are  stated  to  be  infants, 
would  be  before  the  court,  and  claiming  the  protection  which  the  law 
affords  them.  But  though  the  plaintiff  derives  title  under  them,  the 
note  is  not  to  be  considered  as  void  in  his  hands.  Infants  may  make 
themselves  liable  by  a  promise  after  full  age  to  pay  a  debt  to  which 
their  infancy  might  be  a  discharge;  they  may  here  have  made  a  new 
promise  in  this  case.  It  would  injure  the  circulation  of  a  bill  very 
materially  if  such  facts  were  to  be  inquired  into.  I  am  of  opinion  the 
amount  of  the  bill  is  recoverable."-^''  And  an  indorsee  may  recover 
against  an  indorser,  though  the  original  drawer  was  an  infant.-''^  So 
an  assignor  of  a  negotiable  note  warrants  the  validity  of  the  note  and 
that  the  maker  is  liable  to  pay  it,  and  where  a  note  so  assigned  is  made 
by  an  infant,  the  assignee  may  proceed  in  the  first  instance  against  the 
assignor.-**^  Where,  however,  an  infant  signs  a  note  and  at  his  ma- 
jority disaffirms  the  contract,  it  has  been  decided  that  the  defense  of 
the  maker  will  avail  sureties  who  were  adults,  as  well  as  the  infant  who 
made  the  contract,^**^  where  the  undertaking  of  the  sureties  goes  to 
the  whole  consideration.^^^ 


Subdivision  III. 

INTOXICATION". 

Sec.  Sec. 

69.  Of  maker  or  drawer.  70.  Of  indorser. 

§  69.  Of  maker  or  drawer. — The  intoxication  of  a  person  at  the 
time  of  the  execution  of  a  note,  which  makes  him  incapable  of  know- 
ing what  he  is  doing  or  of  understanding  the  consequences  of  his  act, 
may  be  a  defense  to  an  action  thereon.^'' ^    And  it  is  essential  to  effect 

="»  Taylor  v.  Croker,  4  Esp.  187.  =«  Burroughs  v.  Richman,  13  N.  J. 
="'Haly  v.  Lane,  2  Atk.  181.  See  L.  233,  238,  23  Am.  Dec.  717;  Berk- 
Baker  V.  Kennett,  54  Mo.  82,  92.  ley  v.  Cannon,  4  Rich.  L.  (S.  C.) 
="=  Henderson  v.  Fox,  5  Ind.  489.  136;  Gore  v.  Gibson,  9  Jur.  14p.  See 
="' Patterson  v.  Cave,  61  Mo.  439.  Stigler  v.  Anderson  (Miss.  1893),  12 
="*  Baker  v.  Kennett,  54  Mo.  82.  So.  831 ;  Gore  v.  Gibson,  13  M.  &  W. 


§    G9]      INCAPACITY   AND   WANT    OF   AUTHORITY — INTOXICATION.         Si 

this  result  that  the  intoxication  should  be  of  such  a  character,  for 
though  a  slight  degree  of  intoxication  may  impair  the  mental  facul- 
ties, contracts  are  not  therefore  necessarily  void.^®^  As  against  a  bona 
fide  holder,  however,  it  has  been  determined  that  intoxication  is  no 
defense.^*''^  The  reasons  underlying  this  rule  are  that,  where  a  man 
has  voluntarily  put  himself  in  such  a  condition  and  a  loss  must  fall 
on  one  of  two  innocent  persons,  it  should  fall  on  him  who  occasioned 
it.  It  is  also  founded  on  principles  of  public  policy  and  the  neces- 
sities of  commerce.  The  circulation  and  currency  of  negotiable  paper 
should  not  be  unnecessarily  impeded,  and  if  the  drunkenness  of  the 
maker  were  a  defense  to  a  note  in  the  hands  of  an  indorsee  it  would 
clog  and  embarrass  the  circulation  of  commercial  paper  and  no  man 
could  safely  take  it  without  ascertaining  the  condition  of  the  maker 
or  drawer  when  it  was  given,  though  there  be  nothing  unusual  or  sus- 
picious about  the  appearance  of  the  note.^^^  A  ease  in  Connecticut, 
however,  would  seem  to  imply  that  complete  intoxication  would  be  a 
good  defense  against  a  bona  fide  holder,  it  being  declared  in  this  case 
that  partial  intoxication  was  no  defense  and  that  to  render  intoxica- 
tion a  defense  to  such  an  action  the  courts  supposed  "it  is  incumbent 
upon  the  party  to  show  what  the  books  term  excessive  or  complete 
drunkenness."^''^  It  appeared  in  this  case  that  the  maker  was  able 
to  sign  the  note  with  his  own  hand  and  that  he  remembered  the  next 
morning  that  he  had  signed  the  note.  The  auditor  found  "that  the 
defendant  signed  the  note  with  his  own  hand,  but  by  reason  of  his  in- 
toxication was  incapable  of  understanding  the  consequences  of  his 

623.     "An  obligation  granted  by  a  total  as  to  be  palpable  evidence  of 

person   while   he   is   in   a   state   of  fraud  in  the  person  entering  into  a 

absolute   and   total    drunkenness   is  contract  with   one   so   intoxicated." 

ineffectual,    because   the   grantor   is  Burroughs  v.  Richman,  13  N.  J.  L. 

incapable    of    consent,    for    the    law  233,    238,     23    Am.     Dec.    717,    per 

has  thought  it  equitable  to  protect  Drake,  J. 

those  who  have  not  the  use  of  their  ^"  Miller  v.  Finley,  26  Mich.  248, 
reason  (even  though  they  should  12  Am.  Rep.  306;  McSpanan  v.  Nee- 
have  lost  it  by  their  own  folly)  ley,  91  Pa.  St.  17;  State  Bank  v. 
from  the  fraud  or  circumvention  of  McCoy,  69  Pa.  St.  204,  8  Am.  Rep. 
others."    Ersk.  Inst.  814,  5.  246;    Smith  v.  Williamson,   8  Utah 

'"^  Taylor  v.  Purcell,  60  Ark.  606,  219,  30  Pac.  753. 

31    S.    W.    567;    Reynolds    v.    Dech-  '"« State  Bank  v.  McCoy,  69  Pa.  St. 

aums,  24  Tex.  174,  76  Am.  Dec.  181.  204,  8  Am.  Rep.  846;   Smith  v.  Wil- 

"Sound     policy     requires     that     it  liamson,    8   Utah    219,    221,    30    Pac. 

should  not,  unless  brought  about  by  758. 

the  other  party,  or  unless  it  was  so  -"^  Caulkins  v.  Fry,  35  Conn.  170. 


I 


85      INTOXICATION   OF    INDORSEE — INSANITY   OF   MAKER.       [§§'   70,    71 

act,  and  was  unfit  for  duty."  And  also  "that  he  had  sufficient  con- 
sciousness to  remember  the  next  morning  that  he  had  signed  the  note, 
and  that  he  thereupon  repudiated  the  contract,  returned  the  property 
for  which  the  note  was  given  and  demanded  of  Jaycox,  the  payee,  the 
surrender  thereof."  The  court  held  that  a  case  of  complete  intoxica- 
tion was  not  shown  and  therefore  it  was  no  defense  against  a  hona  fide 
holder.  And  though  a  person's  intoxication  may  have  been  such,  at 
the  time  of  the  execution  of  a  note,  as  to  defeat  a  recovery  thereon,  yet 
if  he  subsequently  ratifies  the  transaction  when  sober  by  retaining 
the  consideration  it  is  held  no  defense.^^"  To  enable  a  maker  or  repre- 
sentative to  defend  on  such  a  ground  there  must  have  been  a  rescission 
of  the  contract  by  placing  the  parties  in  statu  quo.  So  where  real 
estate  was  the  consideration  for  a  note  and  a  deed  was  given  but  title 
was  never  recognized,  the  intoxication  of  the  maker  was  held  no  de- 
fense.-^^ 

§  70.  Of  indorser. — In  an  action  by  the  indorsee  of  a  bill  of  ex- 
change against  a  prior  indorser  it  is  a  good  plea,  that  the  defendant, 
at  the  time  when  he  indorsed  the  bill,  was  so  intoxicated  and  under 
the  influence  of  liquor,  and  thereby  so  entirely  deprived  of  the  use  of 
his  reason,  as  to  be  unable  to  understand  the  nature  and  effect  of  the 
indorsement,  and  that  the  plaintiff,  at  the  time  of  the  indorsement, 
was  aware  of  his  being  in  that  state.^^^  * 


Subdivision  IV. 

MENTAL  INCAPACITY  AND  INSANITY. 

Sec.  Sec. 

71.  Of  maker.  72.  Of  indorser  or  surety. 

§  71.  Of  maker. — It  is  a  general  rule  that  an  idiot  or  insane  person 
is  not  bound  by  his  contract."-  And  in  an  action  on  a  bill  or  note  the 
defendant  may  show  that  he  was  non  compos  mentis  at  the  time  of  its 
execution.2"    Nor  is  a  hona  -fide  holder  protected  against  this  defense 

"•Smith    v.    Williamson,    8    Utah  =■=  Van  Patton  v.  Beals,  46  Iowa  62. 

219,  30  Pac.  753.  -''Kentucky. — Taylor  v.  Dudley,  5 

"^Joest  v.  Williams,  42  Ind.  565,  Dana  (Ky.)  308. 

15  Am.  Rep.  377.  Massachusetts. — Mitchell  v.  King- 

"'*  Gore  V.  Gibson,  9  Jur.  140.  man,  5  Pick.  (Mass.)  431. 


•1] 


IXCAPACITT   AND   WAXT    OF   AUTHORITY — INSANITY. 


86 


as  one  who  purchases  such  paper  takes  it  charged  "vrith  constructive 
notice  of  the  legal  disability  of  the  maker.^'*  The  rule  of  commercial 
law  which  protects  commercial  paper  in  the  hands  of  a  bona  fide 
holder  who  has  acquired  it  before  its  maturity,  for  value,  does  not 
apply  in  the  case  of  paper  signed  by  persons  nan  compos  mentis.^''^ 
But  it  has  been  decided  in  Michigan  that  one  who  in  good  faith  takes 
a  note  from  a  person  without  notice  of  want  of  capacity  in  a  trans- 
action not  calculated  to  put  him  on  his  guard  may  recover  thereon. ^^^ 
And  in  Pennsylvania  it  has  been  decided  that  an  instrument  in  the 
hands  of  a  bona  fide  holder  for  value  is  not  affected  by  a  subsequent 
inquisition,  finding  the  maker  to  have  been  insane  at  the  time  he  exe- 
cuted it,  the  contract  being  executed  and  without  fraud  and  the  holder 
having  no  notice  of  the  want  of  capacity.^^^  An  exception  to  the  gen- 
eral rule  is  held  to  exist  in  the  case  of  a  note  given  for  necessaries, 
though  in  an  action  on  such  a  note  the  burden  is  declared  to  be  upon 
the  plaintiff  to  prove  that  they  were  furnished  to  the  amount  or  value 
of  the  note.^^^  Where  the  plea  of  non  compos  mentis  is  set  up  it 
should  be  satisfactorily  established  to  entitle  the  defendant  to  the 
benefit  of  the  bar;^"^  and  where  insanity  is  set  up  as  a  defense  to  an 


Mississippi. — Bates  v.  Hyman 
(Miss.  1900),  26  So.  567. 

New  York. — Rice  v.  Peet,  15  Johns. 
(N.  Y.)  503.  "There  must  be  a  limit 
to  the  civil  responsibility  of  persons 
of  unsound  mind,  otherwise  their 
property  would  be  at  the  mercy  of 
unscrupulous  and  designing  men." 

Pennsylvania. — Moore  v.  Hershey, 
90  Pa.  St.  196,  200,  per  Mr.  Justice 
Paxson. 

'^^  Indiana. — McClain  v.  Davis,  77 
Ind.  419. 

Ohio. — Hosier  v.  Beard,  54  Ohio 
St.  398,  43  N.  E.  1040,  56  Am.  St. 
R.  1040,  35  L.  R.  A.  161. 

Pennsylvania. — Moore  v.  Harshey, 
90  Pa.  St.  196. 

English. — Sentance  v.  Poole,  3 
Carr.  &  P.  1. 

Illinois. — See  Jeneson  v.  Jeneson, 
66  111.  259. 

=="  Hosier  v.  Beard,  54  Ohio  St. 
398,  43   N.  E.   1040,  56  Am.   St.  R. 


1040,  35  L.  R.  A.  161.  "If  such  paper 
can  be  protected  in  the  hands  of  a 
holder  who  has  paid  value,  how- 
ever trifling,  this  helpless  class 
would  have  little  protection." 
Moore  v.  Kershey,  90  Pa.  St.  196, 
201,  per  Mr.  Justice  Paxson. 

'■'=  Shoulter  v.  Allen,  51  Mich.  529, 
16  N.  W.  888;  compare  Van  Patton 
V.  Beals,  46  Iowa  62,  holding  that 
one  non  compos  mentis,  is  not  lia- 
ble on  a  note  signed  by  him  as 
surety,  where  given  for  an  anteced- 
ent debt,  though  the  person  taking 
it  had  no  knowledge  thereof. 

-"  Lancaster  Co.  Nat.  Bank  v. 
Moore,  78  Pa.  St.  407,  21  Am.  Rep. 
24. 

='' Hosier  v.  Beard,  54  Ohio  St. 
398,  43  N.  E.  1040,  56  Am.  St.  R. 
1040,  35  L.  R.  A.  161. 

="^  Taylor  v.  Dudley,  5  Dana  (Ky.) 
308,  310. 


87  OF  IXDORSER  OR  SURETY.  [§  73 

action  on  a  note,  evidence  is  admissible  that  after  the  execution  of  the 
note  the  defendant,  while  of  sound  mind,  received  from  the  avails  of 
a  mortgage,  given  by  him  prior  to  the  execution,  while  sane,  and  as 
security  for  certain  responsibilities  which  he  had  assumed  for  the 
mortgagor  out  of  which  the  note  in  suit  originated,  a  sum  more  than 
sufficient  to  indemnify  him  for  the  note,  such  evidence  not  being  for 
the  purpose  of  showing  a  ratification  but  to  show  a  recognition  of  the 
note  and  that  the  defendant  was  of  sound  mind  when  he  made  it.^^" 

§  72.  Of  indorser  or  surety. — An  indorser  of  a  note  may  defeat  re- 
covery thereon,  on  the  ground  of  his  mental  incapacity  at  the  time  of 
the  indorsement.-^^  So  the  indorsement  of  a  certificate  of  deposit  by 
an  insane  person  creates  no  valid  contract  of  indorsement  and  an  inno- 
cent purchaser  is  not  protected  against  the  defense  of  incapacity.'*^ 
But  in  an  action  against  an  accommodation  indorser  of  a  renewal  note 
his  want  of  capacity  is  no  defense,  where  there  have  been  several  re- 
newals upon  which  he  was  accommodation  indorser,  at  the  execution 
of  which,  as  well  as  the  original,  the  defendant  was  unquestionably 
of  sound  mind.2^^  Again  an  indorsement  of  a  promissory  note  by 
the  payee  is  a  contract  which  an  insane  person  cannot  make  because 
he  has  not  the  power  to  give  that  consent  which  the  law  requires,  and 
in  an  action  by  an  indorsee  against  the  maker  the  insanity  of  the  payee 
and  indorser  at  the  time  of  the  indorsement  and  transfer  is  held  to  be 
a  valid  defense.^**   And  where  the  mental  incapacity  of  the  payee  of  a 

='°  Grant    v.    Thompson,    4    Conn,  vantage  of  his  minority,  a  different 

203,  10  Am.  Dec.  119.  rule   should   prevail   in   case   of  an 

^^^Wirebach   v.    Easton    Bank,   97  insane   person.     It  was  said:     "He 

Pa.  St.  543,  39  Am.  Rep.  821.     See  understands  not  the  effect  of  indors- 

Carrier  v.  Sears,  86  Mass.  (4  Allen)  ing  the  note,  nor  whether  he  is  re- 

336,  81  Am.  Dec.  707.  ceiving  a  valuable  consideration  for 

^^-  Anglo-Californian      Bank      v.  the  same  or  not.     He  may  not  even 

Ames,  27  Fed.  727.  know  that  he   is  parting  with   the 

-"  Snyder    v.    Laubach,    7    Wkly.  property,     and     an     indorsee     who 

Notes  Cas.  464,  466;   Memphis  Nat.  should  take  a  note  under  such  cir- 

Bank  v.  Sneed,  97  Tenn.  120,  34  L.  cumstances     would     be     guilty     of 

R.  A.  274,  36  S.  W.  716,  56  Am.  St.  fraud.     If  at  the  time  the  note   is 

R.  788.  given  the  payee  should   be   insane, 

^*  Burke  v.  Allen,  29  N.  H.  106,  61  and  the  maker  should  be  aware  of 
Am.  Dec.  642.  In  this  case  a  dis-  the  fact,  he  would  be  bound  in 
tinction  was  made  between  the  con-  equity  and  good  conscience  not  to 
tracts  of  a  minor  and  of  an  insane  pay  it  to  an  indorsee  till  he  had 
person,  and  it  was  declared  that  ascertained  that  he  was  the  right- 
while  the  minor  alone  can  take  ad-  ful  and  legal  holder.     Or,  if  when 


72] 


INCAPACITY   AND   WANT    OF    AUTHORITY. 


note,  at  the  time  he  indorsed  it,  is  relied  on  as  a  defense  to  an  action  by 
the  indorsee  against  the  maker,  evidence  is  admissible  to  prove  his  inca- 
pacity when  the  note  was  given  to  him.^^^  And  evidence  of  the  in- 
dorser's  incapacity,  before  and  after  the  indorsement,  may  be  properly 
submitted  to  the  jury,  to  enable  them  t6  decide  correctly  on  the  ques- 
tion of  his  incapacity,  at  the  time  of  the  indorsement.^^^  *  Again, 
where  in  an  action  against  a  surety  the  plea  is  set  up  that  the  defend- 
ant was  insane  and  incapable  of  transacting  business  at  the  time  he 
signed  the  note,  such  mental  incapacity  is  held  to  be  sufficiently  es- 
tablished by  a  preponderance  of  the  evidence.^^''  But  in  an  action 
by  the  indorsee  against  the  maker  of  a  promissory  note,  it  has  been 
held  no  defense  to  prove  that  the  plaintiff  procured  the  indorsement 
by  undue  influence  from  the  payee,  when  he  was  of  unsound  mind  and 
incapable  of  making  a  valid  indorsement,  if  the  payee  or  his  legal 
representatives  have  never  disaffirmed  it.^®®* 


Subdivision  V. 


WANT    OF   AUTHORITY. 


Sec. 

73.  Unauthorized    signature    or    in- 

dorsement. 

74.  Where  unauthorized  signature  is 

ratified — Estoppel. 

75.  Violation     of     instructions     by 

agent. 

76.  Unauthorized  collection  of  note 

given  as  collateral. 


Sec. 

77.  Receipt  of  paper  by  public  officer 

only     authorized     to     receive 
cash. 

78.  Paper  given  to  or  transferred  by 

administrator  or  executor. 

79.  Corporate  want  of  authority  as 

affected   by  illegality  or  stat- 
ute. 


it  is  given  he  should  not  be  aware 
of  the  existence  of  the  insanity,  or 
if  after  it  should  be  given  the  payee 
should  become  insane,  the  reason  is 
equally  strong  why  he  should  not 
pay  it  without  due  inquiry,  if  he 
had  notice  of  the  insanity.  And  if, 
under  such  circumstances,  he  ought 
not  to  be  protected  in  paying  the 
note  to  the  indorsee,  then  it  would 
seem  to  follow  as  a  legitimate  con- 
sequence that  he  should  be  per- 
mitted to  show  the  existence  of  in- 


sanity at  the  time  of  the  indorse- 
ment in  defense  of  an  action 
brought  by  the  indorsee,"  per  East- 
man, J.  See  also,  Alcock  v.  Alcock, 
3  Man.  &  G.  268;  Hannahs  v.  Shel- 
don, 20  Mich.  278. 

="  Peaslee  v.  Robbins,  44  Mass.  ( 3 
Mete.)   164. 

2,s5*  Peaslee  v.  Robbins,  44  Mass.  (3 
Mete.)   164. 

"» Gaar  v.  Hulse,  90  111.  App.  548. 

^•'*  Carrier  v.  Sears,  86  Mass.  (4 
Allen)  336,  81  Am.  Dec.  707. 


89 


UNAUTHORIZED    SIGNATURE   OR   INDORSEMENT. 


[§   '3 


Sec. 

80.  Want  of  authority  of  corporate 

officers  or  agents. 

81.  Same     subject — Application     of 

rules — Illustrations. 

82.  Same     subject  —  Bank     officials' 

acts. 

83.  Same  subject — Paper  issued   by- 

public  officers. 

84.  Ultra  vires  instruments. 

85.  Same    subject — Corporation    au- 

thorized to  issue  paper. 

86.  Same    subject — Application    and 

illustration  of  rule. 


Sec. 

87.  Same    subject  —  Municipal    or 

public  corporations. 

88.  Guarantee  of  checks  beyond  de- 

posits. 

89.  Want  of  authority — Partner. 

90.  Same  subject  continued. 

91.  Same     subject  —  Qualifications 

and  limitations  of  rule. 

92.  Note  between  partner  and  firm. 

93.  Paper  given  in  violation  of  ar- 

ticles of  partnership. 

94.  Paper    executed    in    firm    name 

after  dissolution. 


§  73.  Unauthorized  signature  or  indorsement. — It  is  a  general  rule, 
subject  to  certain  exceptions  hereinafter  considered,^^'^  that  a  person 
whose  name  is  signed  to  a  note  either  as  maker  or  indorser  by  another 
without  any  authorization  may  show  such  fact  in  defense  to  an  action 
against  him  on  such  paper.-"*  The  defendant  in  such  a  case  has  a 
perfect  right  to  deny  his  signature.  Every  one  taking  such  paper 
does  at  his  own  risk  and  when  he  comes  to  the  party,  whose  name 
is  signed  thereto  for  payment,  it  is  for  him  to  prove  that  the  signature 
is  genuine.^^^  So  in  order  to  bind  one  of  two  alleged  joint  makers  of 
a  note,  where  the  payee's  indorsement  is  not  genuine,  in  a  suit  by  the 
holder  of  the  note  against  such  maker,  it  is  necessary  to  show  that  the 
defendant's  signature  is  genuine  or  was  authorized  by  him  to  be  signed 
or  sanctioned  by  him  after  it  was  signed.-^^*     And  where  a  partner 


^  See  §  74. 

='^*  California. — Hendrie  v.  Berko- 
witz,  37  Cal.  113,  99  Am.  Dec.  251. 

GeorgrMi.— Stillwell  v.  Woodruff,  76 
Ga.  347. 

Indiana. — Hamilton  Nat.  Bank  v. 
Nye  (Ind.  App.  1906),  77  N.  E.  295. 

Iowa. — Smith  v.  Framel,  68  Iowa 
488,  27  N.  W.  471. 

Kansas. — First  Nat.  Bank  v.  Mar- 
tin, 56  Kan.  247,  42  Pac.  713. 

Kentucky. — Garrott  v.  Ratcliff,  83 
Ky.  384. 

Maryland. — Whiteford  v.  Munroe, 
17  Md.  135. 

Massachusetts. — Hall  v.  Huse,  10 
Mass.  39. 

Nebraska. — Dietz  v.  City  Nat 
Bank,  42  Neb.  584,  60  N.  W.  896. 


New  York. — Craighead  v.  Peter- 
son, 72  N.  Y.  279,  28  Am.  Rep.  150. 

Pennsylvania. — Hunter  v.  Reilly, 
36  Pa.  St.  509. 

Texas. — Wilson  v.  Skaggs,  10  Tex. 
298. 

yirginia. — Union  Bank  v.  Beirne, 
1  Graft.  (Va.)  226. 

Washington. — Seattle  Shoe  Co.  v. 
Packard   (Wash.  1906),  86  Pac.  845. 

See: 

Georgia. — Dobbins  v.  Blanchard, 
94  Ga.  500,  21  S.  E.  215. 

Illinois.  —  Manufacturers'  Nat. 
Bank  v.  Barnes,  65  111.  69,  16  Am. 
Rep.  576. 

--'Crout  V.  DeWolf,  1  R.  I.  393, 
395,  per  Greene,  C.  J. 

2S8*  Whiteford  v.  Munro,  9  B.  Mon. 
(Ky.)  135. 


§    74]  INCAPACITY   AXD   WANT    OF    AUTHORITY.  90 

makes  an  accommodation  indorsement  in  the  firm  name  without  the 
authority  or  consent  of  the  other  partner  want  of  authority  of  the 
former  is  a  defense  to  an  action  thereon  by  any  party  who  takes  the 
security  with  notice  and  the  burden  of  proving  the  authority  or  con- 
sent of  the  other  partner  lies  on  the  creditor  or  holder  of  the  note.-^^ 
A  married  woman  is  also  held  not  estopped  from  showing  want  of 
authority  of  her  husband  to  sign  her  name  as  principal  maker  in  a 
particular  case  by  the  fact  that  she  has  given  him  authority  to  sign 
her  name  to  notes  as  surety  for  his  benefit.^^'^  So  a  husband  to  whom 
written  power  of  attorney  to  execute  notes  for  his  wife  in  a  certain 
capacity  has  been  given  by  her  has  no  power  to  execute  a  note  in  her 
name  for  his  own  debt,  and  a  subsequent  transferee  with  notice  of  the 
want  of  authority  cannot  enforce  it  against  her.^^^  So  it  is  no  defense 
to  an  action  against  a  bank  to  recover  a  balance  claimed  to  be  due  on 
deposits  made  by  the  plaintiffs  with  the  bank,  that  a  clerk  of  the  plain- 
tiff had  been  given  authority  to  draw  checks  on  the  bank,  where  it 
appeared  that  the  authority  was  in  writing  and  limited  to  fifteen  days, 
and  notice  thereof  lodged  with  the  bank,  which  had  continued,  how- 
ever, to  pay  checks  drawn  after  such  period,  which  amount  plaintiff 
sought  to  recover.^^^  But  where  trustees  were  authorized  by  power  of 
attorney  to  indorse  any  bond  or  note  and  to  execute  any  mortgage  on 
the  trust  property  to  pay  off  a  judgment  against  them,  it  has  been  de- 
cided that  evidence  to  show  a  termination  of  such  authority  and  that 
said  Judgment  was  paid  off  before  the  note  was  given,  was  properly 
excluded  as  against  a  purchaser  before  maturity,  for  value  and  with- 
out notice  of  any  defense  to  or  infirmity  in  the  note.^^^ 

§  74.  Where  unauthorized  signature  is  ratified — Estoppel. — A  per- 
son whose  name  is  signed  to  commercial  paper  without  his  author- 
ity may  expressly  ratify  the  execution  of  such  paper  and  acknowledge 
its  binding  validity  upon  him,  or  he  may  by  his  conduct  and  acts  in 
connection  therewith  be  estopped  from  setting  up  the  defense  of  want 
of  authority,  and  in  either  case  his  relation  thereto  will  be  precisely 

=^'Hendrie  v.   Berkowitz,   37    Cal.  =^=  Man.  Nat.   Bank  v.   Barnes,  65 

113,  116,  99  Am.  Dec.  251.    But  see,  111.  69,  16  Am.  Rep.  576,  approving 

Mitchell  V.  Whaley,  29  Ky.  Law  R.  Weisser    v.    Denison,    10    N.    Y.    68. 

125,  92  S.  W.  556.  See    Adler    v.    Broadway    Bank,    30 

^"Farmington  Sav.  Bank  v.  Buz-  Misc.    (N.   Y.)    382,   62   N.   Y.   Supp. 

zell,  61  N.  H.  612.  402. 

=»iMoqun  v.  Bennett,  24  Misc.   (N.  =«^  Toms  v.   Jones,   127   N.  C.   464, 

Y.)  157,  51  N.  Y.  Supp.  18.  37  S.  E.  480. 


I 


91    WHERE  UNAUTHORIZED  SIGNATURE  IS  RATIFIED — ESTOPPEL.     [§    74 

the  same  as  if  he  had  executed  it  personally. ^''^  So  a  person,  by  de- 
livering a  note  with  his  signature,  is  held  to  adopt  such  signature  and 
to  be  bound  thereby  whether  written  by  himself  or  some  one  else.^^^ 
And  -wtere  a  person's  name  has  been  forged  to  a  note  as  a  surety, 
if  he  subsequently  takes  a  deed  of  trust  upon  property  of  the  principal 
for  the  purpose  of  indemnifying  himself,  the  execution  of  the  note  is 
thereby  ratified  and  he  is  liable  as  surety.^^*^  So  the  execution  of  a 
mortgage  in  which  notes  are  substantially  described,  is  a  sufficient 
ratification  and  will  estop  one  from  denying  the  proper  execution  of 
the  notes.^**^  And  a  person  has  been  held  to  be  estopped  to  deny  his 
signature  to  a  note,  as  one  of  the  makers  thereof,  by  his  admissions 
and  declarations  that  the  note  was  "all  right"  and  that  if  plaintiff 
would  "hold  stili"  he  would  pay  him,  and  knowingly  and  designedly 
induced  the  plaintiff  to  omit  taking  any  measures  to  collect  the  same 
of  the  other  maker  while  he  was  solvent,  until  after  he  had  left  the 
country.-^^  But  where  there  is  no  evidence  that  the  indorser  had 
notice  that  his  name  had  been  indorsed  by  the  maker,  upon  the  notes 
■sued  on,  until  after  such  notes  became  due,  he  cannot  be  said  to  have 
ratified  the  indorsements.^''^  And  it  has  been  decided  that  a  mere 
promise  to  pay  a  note  is  not  such  a  raification  as  will  amount  to  an 


=**  California. — Goetz  v,  Goldbaum 
(Cal.  1894),  37  Pac.  646. 

Illinois. — Paul  v.  Berry,  78  111. 
158;  Hefner  v.  Vandolah,  62  111.  483, 
14  Am.  Rep.  106. 

Mattie. — Casco  Bank  v.  Keene,  53 
Me.  103. 

Massachusetts.  —  Wellington  v. 
Jackson,  121  Mass.  157;  Charles 
River  Nat.  Bank  v.  Davis,  100  Mass. 
413;  Greenfield  Bank  v.  Crafts,  86 
Mass.  (4  Allen)  447. 

Missouri. — First  Nat.  Bank  v. 
Badger  Lumber  Co.,  54  Mo.  App.  327. 

New  Hampshire.  —  Hazelton  v. 
Batchelder,  44  N.  H.  40. 

New  York. — First  Nat.  Bank  v. 
Commercial  Travelers'  Home  Assn. 
(N.  Y.),  78  N.  E.  1103. 

07iio.— Hood  V.  Nicholas  (Ohio),  1 
Wkly.  Law  Bui.  227. 

Oklahoma. — Cassidy  v.  Saline 
County  Bank,  14  Okla.  532,  78  Pac. 
324. 

Pennsylvania. — Cohen  v.  Teller,  93 
Pa.  St.  123. 


Rhode  Island. — Crout  v.  DeWolf, 
1  R.  I.  393. 

Vermont. — Bigelow  v.  Denison,  23 
Vt.  564. 

West  Virginia.  —  Devendorf  v. 
West  Virginia  Oil  &  Oil  Land  Co.,  17 
W.  Va.  135. 

Wisconsi7i. — Ballston  Spa  Bank  v. 
Marine  Bank,  16  Wis.  120. 

Tennessee. — See  Jones  v.  Hamlet, 
34  Tenn.   (2  Sneed)   256. 

See  Chap.  XXIX. 

=^Melvin  v.  Hodges,  71  111.  422. 

=""  Fitzpatrick  v.  School  Commis- 
sioners, 26  Tenn.  (7  Humph.)  224, 
46  Am.  Dec.  76. 

=»'Bell  V.  Wandby,  4  Wash.  743, 
747,  31  Pac.  18. 

=»' Hefner  v.  Dawson,  63  111.  403, 
14  Am.  Rep.  123.  See  Crout  v.  De- 
Wolf,  1  R.  I.  393. 

^«  Walters  v.  Munroe,  17  Md.  150, 
77  Am.  Dec.  328. 


75] 


INCAPACITY  AND  WANT  OF  AUTHORITY. 


92 


estoppel,^""  though  it  is  evidence  from  which  a  ratification  may  be 
inferred.^"^  So  it  has  been  determined  that  mere  silence  on  the  part 
of  one  whose  name  has  been  so  signed  will  not  estop  him  from  setting 
up  want  of  authority  in  affixing  his  signature.^*'^ 

§  75.  Violation  of  instructions  by  agent. — Where  an  agent  has 
general  authority  to  act  for  his  principal  in  making  or  indorsing  com- 
mercial paper,  it  is  no  defense  that  he  has  misapplied  the  paper  or 
violated  his  instructions  in  reference  thereto,  where  he  has  acted 
within  the  apparent  scope  of  his  authority  and  where  the  party  with 
whom  he  has  transacted  the  business,  or  the  holder  of  the  paper,  had 
no  notice  of  any  limitation  of  authority  and  would  otherwise  suffer 
loss.^°^  So  where  an  agent  was  authorized  by  his  pjincipal  to  draw 
and  negotiate  paper  for  the  latter's  use,  and  by  a  course  of  dealing  in 
the  recognition  of  such  paper,  drawn  for  legitimate  purposes,  the 
principal  had  accredited  drafts,  having  nothing  on  their  face  to  dis- 
criminate them  from  such  as  the  agent  had  the  right  to  issue,  he  was 
held  responsible  to  a  bona  fide  purchaser,  without  notice,  though  such 
paper  had  been  issued  fraudulently  for  the  accommodation  of  a  third 
jjarty.^"*  And  where  a  bill  of  exchange  drawn  on  a  principal  is  ac- 
cepted by  his  agent,  in  the  former's  name,  to  whom  written  and  ex- 
press authority  to  so  act  has  been  given,  the  principal  cannot  defeat 


^''Gleason  v.  Henry,  71  111.  109, 
holding  that  the  ratification  must 
be  with  a  knowledge  of  the  facts 
affecting  the  rights  of  the  one  al- 
leged to  have  ratified  his  signature. 
Omsley  v.  Phillips,  78  Ky.  517,  39 
Am.  Rep.  258;  Workman  v.  "Wright, 
33  Ohio  St.  405,  31  Am.  Rep.  546, 
holding  mere  promise  to  pay  is  no 
ratification  where  no  new  considera- 
tion or  circumstances  creating  an 
estoppel. 

^°^  Commerce  Bank  v.  Bernero,  17 
Mo.  App.  313. 

^'  California  Bank  v.  Sayre,  85 
Cal.  102,  24  Pac.  713,  holding  that 
mere  failure  to  repudiate  the  signa- 
ture or  to  notify  the  holder  that  he 
will  not  be  bound  thereby  is  not  a 
ratification  without  some  further 
element  of  estoppel.    Corser  v.  Paul, 


41  N.  H.  24,  77  Am.  Dec.  753,  hold- 
ing that  mere  silence  of  a  party 
to  whom  a  note  is  shown,  purport- 
ing to  be  signed  by  him,  is  compe- 
tent evidence  that  his  signature  is 
genuine  or  of  his  assent  thereto, 
but  does  not  operate  as  an  estoppel 
unless  the  holder  has  been  led  to 
change  his  position  or  otherwise  act 
upon  It  to  his  injury. 

^"^  Hanover  Nat.  Bank  v.  American 
D.  &  T.  Co.,  148  N.  Y.  612,  43  N.  E. 
72;  City  Bank  v.  Perkins,  29  N.  Y. 
554;  Crawford  v.  Hildebrant,  6 
Lans.  (N.  Y.)  502;  Edmunds  v. 
Bushell,  L.  R.  1  Q.  B.  97.  Compare 
North  River  Bank  v,  Aymer,  3  Hill 
(N.  Y.)  262;  Bank  of  Morganton  v. 
Hay  (N.  C.  1906),  55  S.  E.  811.  See, 
also,  Brittain  v.  Pioneer  State  Bank 
(Wash.),  87  Pac.  1051. 

=°*  Exchange  Bank  v.  Monteath,  26 
N.  Y.  505. 


I 


93  VIOLATION  OF   INSTRUCTIONS  BY   AGENT,  [§    75 

recovery  thereon  unless  he  can  show  that  his  agent,  to  the  knowledge 
of  the  holder  abused  his  power.^"^  Again,  where  two  persons  were 
joint  agents  of  the  Eoyal  Veteran  Battalion,  but  were  not  otherwise 
connected  in  business,  and  were  in  the  habit  of  accepting  bills  by 
means  of  a  clerk,  in  this  form :  "For  agents  of  the  R.  V.  B. — J.  G." 
it  was  held  to  be  no  answer  to  a  joint  action  against  them  by  the  in- 
dorsee of  such  a  bill  to  show  that  it  was  accepted  for  the  private  ad- 
vantage of  one  without  the  knowledge  of  the  other,  although  it  ap- 
peared that  the  indorsee  might,  if  he  had  inquired  of  the  clerk  who 
accepted  it,  have  ascertained  that  such  was  the  fact.^*'*'  So  where  a 
principal  permits  an  agent  to  do  business  under  the  name  of  a  com- 
pany and  holds  him  out  to  the  world  as  such  company,  he  cannot 
question  the  validity  of  his  acts  as  against  one  who  deals  with  him 
in  good  faith  without  notice  of  the  alleged  relationship,  and  where 
notes  are  given  to  such  agent  in  his  own  name,  or  the  name  of  the  com- 
pany ;  he  and  the  company  being  in  legal  effect  one  and  the  same,  they 
may  be  assigned  by  him,  and  the  defense  of  want  of  authority  cannot 
be  set  up  against  the  transferee  without  notice.^°^  And  where  full 
authority  is  given  to  an  agent  to  sell  notes  indorsed  in  blank,  the 
rights  of  a  purchaser,  who  had  no  notice  of  the  instructions  given  to 
such  agent,  are  held  not  to  be  prejudiced  by  the  fact  that  the  latter 
has  violated  his  instructions  as  to  the  manner  of  making  the  sale  or 
as  to  the  disposition  of  the  proceeds.^"^  But  where  one  was  a  special 
agent  for  another  to  sign  the  latter's  name  to  a  note  for  a  certain 
amount,  and  affixed  his  name  to  one  for  a  larger  amount,  and  it  did  not 
appear  that  the  one  to  whom  the  instrument  was  given  knew  that  the 
signer  was  an  agent  for  any  purpose  and  it  did  not  purport  to  be 
signed  by  him  as  agent,  the  principal  was  held  not  liable  to  a  third- 
person  who  advanced  money  thereon  to  the  agent  and  for  his  benefit.^"® 
And  where  one  who  is  a  special  agent,  with  authority  to  negotiate  his 
principal's  draft  for  cash  at  a  reasonable  discount,  transfers  the  draft 
to  a  third  person,  having  knowledge  of  the  agency,  in  payment  of  his 

'»'  Broadway  Sav.  Bank  v.  Vorster,  ed    with    such,    large    powers,"    per 

29   La.    Ann.    587.     It   was    said    in  Marr,  J. 

this   case:     "Those   who   give   such  ^"o  Saunderson  v.  Brooksbank,  4  C. 

extraordinary  powers  incur  the  risk  &  P.  286. 

of  loss  by  the  imprudence  or  by  the  ^o?  Q^rdner   v.   Wiley  -  (Oreg.),    79 

fraud  of  the  agent,  but  they  must  Pac.  341. 

attribute  this  only  to  their  own  mis-  ^°*  Howry  v.  Eppinger,  34  Mich.  29. 

fortune  or  want  of  proper  caution  ^"^  King  v.  Sparks,  77  Ga.  285,  1  S. 

in  selecting  the  agent  to  be  entrust-  E.  266. 


§§    76-78]  INCAPACITY   AND   WANT   OF   AUTHORITY.  94: 

own  debt,  such  transfer  being  beyond  the  agent's  authority,  it  is  de- 
cided that  the  transferee  thereby  acquires  no  rights  as  against  the  prin- 
cipal.^^** So  mere  authority  to  an  agent  to  collect  cash  confers  no 
authority  upon  him  to  indorse  his  principal's  name  and  collect  the 
cash  upon  commercial  paper  issued  to  the  principal,  and  the  latter  may 
recover  from  the  one  so  paying  the  value  of  such  paper.^^^  Again 
in  an  English  case  it  has  been  decided  that  the  acceptance  or  indorse- 
ment of  a  bill  of  exchange  expressed  to  be  "per  procuration"  is  a  no- 
tice to  the  indorsee  that  the  party  so  accepting  or  indorsing  professes 
to  act  under  an  authority  from  some  principal,  and  imposes  upon  the 
indorsee  the  duty  of  ascertaining  that  the  party  so  accepting  or  in- 
dorsing, is  acting  within  the  terms  of  such  authority.^^^ 

§  76.    Unauthorized  collection  of  note  given  as  collateral. — It  is  no 

defense  to  an  action  on  a  note  that  defendants  delivered  to  a  third 
person,  by  plaintiff's  authority,  a  note  secured  by  chattel  mortgage  as 
collateral  security  for  the  note  in  suit  and  that  such  third  person  col- 
lected the  collateral  note  by  foreclosure  of  the  mortgage  where  he  had' 
no  authority  from  plaintiff  to  collect  it.^^^ 

§  77.  Receipt  of  paper  by  public  officer  only  authorized  to  receive 
cash. — Wliere  the  clerk  of  a  court  has  taken  a  note  in  payment  at  a 
judicial  sale,  an  indorsee  of  such  note  is  not  subject  to  the  defense 
that  the  clerk  was  only  authorized  to  take  cash  and  had  no  power  to 
take  the  note,  it  having  been  transferred  for  its  face  value.  The  court 
said  in  this  case:  "He  was  *  *  *  qj^Ij  authorized  to  receive 
money,  and  the  note  was  his  private  property  until  its  acceptance  was 
ratified  by  the  court,  subject,  of  course,  to  the  trust  in  favor  of  the 
beneficiary  in  case  of  ratification.  But  as  he  would  have  been  clearly 
authorized  to  have  received  the  money  from  Hill  and  delivered  up  the 
note  to  him,  he  might  also,  before  ratification,  sell  the  note  for  the 
money  it  was  intended  to  secure.  For  it  was  the  money  he  was  di- 
rected to  receive  and  account  for."^^* 

§  78.     Paper  given  to  or  transferred  by  administrator  or  executor. 

A  purchaser  of  property  from  an  executor  or  an  administrator  is,  at 

^"'  Dowden  v.  Cryder,  55  N.  J.  L.  766.     See  Atwood  v.  Mumings,  7  B. 

329,  26  Atl.  941.  &  C.  285. 

^^  Goodell   v.    Sinclair  &  Co.,   112  '"  St.  Paul  Grain  Co.  v.  Rudd,  102 

111.  App.  594.    See  Bank  of  Morgan-  Iowa  78,  71  N.  W.  417. 

ton  v.  Hay  (N.  C.  1906),  55  S.  E.  811.  '"  Harrison  v.  Black,  78  Tenn. 

^i'' Alexander  v.  Mackenzie,  6  C.  B.  Lea)   117,  per  Cooper,  J. 


95  PAPER   GIVEN   BY   ADMINISTRATOR   OR   EXECUTOR.  [§    T9 

his  own  peril,  required  to  ascertain  the  grounds  of  authority  of  the 
fiduciary,  not  from  his  declarations  at  the  time  of  the  sale,  but  from 
the  orders  of  the  court  and  the  statutes  of  the  state  in  regard  to  his 
special  duties  in  the  premises.  The  purchaser  has  the  same  means  of 
knowing  and  understanding  the  nature  of  such  orders  and  the  provi- 
sions of  the  laws  as  the  administrator  or  executor  and  any  representa- 
tions or  statements  which  the  latter  may  make  will  not  operate  as  a 
fraud  upon  the  former  and  cannot  be  set  up  by  him  in  defense  to  an 
action  on  a  note  given  for  such  purchase.  Thus  it  was  so  declared 
where  fraud  in  the  administrator  at  the  sale  and  at  the  execution  of 
the  note  was  set  up,  in  that  he  stated  at  the  sale  that  the  bids  would 
be  in  confederate  money  and  the  notes  payable  therewith,  and  that  de- 
fendants relied  on  his  representations  in  making  the  bid  and  in  exe- 
cuting the  note  which  the  administrator  subsequently  refused  to  re- 
ceive or  its  equivalent  in  value  at  its  maturity.^^^  And  where  the 
payee  of  a  note  has  died  and  his  wife  acting  as  sole  executrix  indorses 
the  note  to  a  third  person,  the  latter,  in  order  to  maintain  an  action 
thereon,  should  show  authority  to  make  the  indorsement  either  by 
the  will  or  by  an  authenticated  or  proved  copy.^^^ 

§  79.  Corporate  want  of  authority  as  affected  by  illegality  or  stat- 
ute.— Except  where  it  is  provided  by  statute  that  a  bill  or  note  issued 
by  a  corporation  shall  be  void,  such  an  instrument,  which  does  not 
appear  upon  its  face  to  be  illegal  or  unauthorized,  will  not  in  the 
hands  of  a  bona  fide  holder  without  notice,  who  has  paid  a  valuable 
consideration  therefor,  be  subject  to  the  defense  that  it  is  illegal  or 
issued  without  authority.^^^  And  although  a  state  will  not  enforce 
foreign  laws  in  contravention  of  its  own  policy,  yet  if  a  note  is  made 
to  a  foreign  corporation  the  maker  will  not  be  permitted,  as  against 
a  bona  fide  holder,  to  set  up  in  defense  to  an  action  on  the  note  that 
the  corporation  is  not,  by  reason  of  non-compliance  with  the  state  laws, 
authorized  to  do  business  within  the  state,  where  such  laws  do  not 
declare  that  contracts  made  with  such  corporation  shall  be  void.^^^ 

""Hamilton  v.  Pleasants,  31  Tex.  Y.)   615;   Pickaway  County  Bank  v. 

638,  98  Am.  Dec.  551.  Prather,  12  Ohio  St.  497. 

""Russell  V.  Russell,  1  MacArthur  "''Williams  v.  Cheney,  69  Mass.  (3 

(D.  C.)  263.  Gray)  215;  Hart  v.  Livermore  Foun- 

Where  estate  has  received  benefit  dry  &  M.  Co.,   72   Miss.   809,  17   So. 

of  note  by  executrix  she  will  be  lia-  769;  Chesbrough  v.  Wright,  41  Barb, 

ble  in  her  representative   capacity.  (N.  Y.)   28;  Press  Co.  v.  City  Bank, 

Ellis  v.  Littlefield  (Tex.  Civ.  App.),  58  Fed.  321,  7  C.  C.  A.  248,  17  U.  S. 

93  S.  W.  171.  App.    213.     See    Tallapoosa   Lumber 

'"Vallett  V.  Parker,  6  Wend.   (N.  Co.  v.  Holbert,  5  App.  Div.   (N.  Y.) 

559,   39   N.   Y.   Supp.   432.     But  see 


§    80]  INCAPACITY   AND   WANT   OF   AUTHORITY.  96 

So  althoiigh  a  statute  provides  that  a  note  taken  for  insurance  pre- 
miums shall  express  such  fact  upon  its  face,  and  that  it  shall  not  be 
collectible  unless  the  company  or  its  agents  shall  have  fully  complied 
with  the  laws  of  the  state  in  reference  thereto,  this  will  not  be  a  de- 
fense to  an  action  on  such  note  by  a  purchaser  of  the  same  for  value 
before  maturity,  as  the  object  of  such  a  statute  is  to  prevent  unauthor- 
ized companies  from  doing  business  within  the  state  and  not  to  de- 
prive a  bona  fide  holder  of  commercial  paper  of  his  legal  rights.^^^ 
Nor,  in  an  action  by  a  bona  fide  holder  of  a  note,  can  the  illegality  of 
such  note,  on  the  ground  that  it  was  given  for  an  unauthorized  pur- 
chase of  stock,  be  set  up.^-*'  And  where  a  note  is  given  to  a  corpora- 
tion formed  for  an  illegal  purpose,  for  consideration  of  dealings  grow- 
ing out  of  its  illegal  operations,  a  bank  which  has  discounted  the  same 
before  maturity  and  without  notice  will  not  be  subject  to  a  defense  of 
such  facts,^'^  Again,  in  an  action  by  a  bank  upon  a  note  or  accept- 
ance it  is  decided  that  the  organization  of  the  bank  cannot  be  inquired 
into  for  the  purpose  of  a  defense.^^^  It  has,  however,  been  determined 
that  the  payor  of  a  note  which  has  been  transferred  by  an  officer  of  an 
insurance  company  may,  where  he  is  a  creditor  of  the  company,  con- 
test the  validity  of  such  transfer  so  that  he  may  avail  himself  by  way 
of  set-off  of  existing  equities  between  him  and  the  company.^^^  And 
it  has  been  held  in  the  federal  courts  that  it  may  be  shown  in  de- 
fense to  an  action  on  a  bill  or  note,  even  by  one  who  is  a  bona  fide 
holder,  that  such  paper  was  executed  by  a  corporation  in  violation  of 
an  express  statute.^^*  So  under  a  national  banking  act  conferring  no 
authority  on  national  banks  to  purchase  notes,  it  has  been  decided  that 
no  title  is  acquired  by  them  to  notes  which  they  have  purchased  and 
that  they  cannot  recover  thereon.^ ^^ 

§  80.    Want  of  authority  of  corporate  officers  or  agents. — The  fact 

First     Nat.      Bank     v.      Coughron        ^=«  Litchfield  v.  Dyer,  46  Me.  31. 
(Tenn.  1898),  52  S.  W.  1112.  ==*Root  v.  Godard,  3  McLean    (U. 

^i^Cook  v.  Weirman,  51  Iowa  561,  S.)   102,  Fed.  Gas.  No.  12037;   Hay- 

2  N.  W.  386.  den    v.    Davus,    3    McLean    (U.    S.) 

^'"City   Bank  v.   Barnard,  1   Hall  276,  Fed.  Gas.  No.  6259. 
(N.  Y.)  80.  ^'^^Lazear    v.    Bank,    52    Md.    78; 

^-^  Burton  v.  Stewart,  62  Barb.  (N.  First  Nat.  Bank  v.  Pierson,  24  Minn. 

Y.)  194.  140.     But  see   National   Pemberton 

"^  Southern    Bank   of    Georgia   v.  Bank  v.   Porter,  125   Mass.   333,   28 

Williams,  25  Ga.  534;  Smith  v.  Mis-  Am.  Rep.  235. 
sissippi   &  A.    R.    Go.,   6    Sm.   &   M. 
(Miss.)   179. 


97       WANT  OF  AUTHORITY  OF  CORPORATE  OFFICERS  OR  AGENTS,       [§80 


that  an  officer  or  agent  of  a  corporation  either  abuses  or  disregards  or 
exceeds  his  authority  in  the  issuance  or  transfer  of  a  corporate  bill, 
note,  or  certificate  of  deposit,  is  no  defense  to  an  action  upon  such  in- 
strument by  an  innocent  holder  without  notice  and  for  value  where 
the  transaction  is  properly  one  which  may  pertain  to  the  business  of 
such  corporation,^26  qj.  where  the  corporation  has  received  the  pro- 
ceeds and  may  be  said  to  have  ratified  or  assented  to  the  act  of  such 
officer.^^^  "Proof  of  apparent  authority  of  a  corporate  officer  to  con- 
tract in  its  behalf  prima  facie  establishes  actual  authority  so  to  do, 
and  evidence  of  want  of  such  authority  will  not  relieve  the  corporation 
from  the  burden  of  a  contract  made  with  reasonable  reliance  upon 
such  apparent  authority,  if  such  corporation  is  responsible  for  such 
appearance."^"*  But  if  a  note  is  given  in  a  transaction  which  does  not 
affect  the  business  of  the  corporation  and  it  does  not  appear  that  the 
officer  had  any  authority  by  by-law  or  resolution  to  so  act,  or  there  is 
no  recognized  course  of  business  by  which  he  is  held  out  as  possessing 
such  power,  it  has  been  decided  that  such  facts  will  be  a  good  defense 
even  as  against  a  bona  fide  holder.^^^ 


^^  Alabama. — Allen  v.  West  Point 
Co.,  132  Ala.  292,  31  So.  462. 

California. — Meyer  v.  Brown,  65 
Cal.  583. 

Connecticut. — Standard  Cement 
Co.  V.  Windham,  71  Conn.  668,  42 
Atl.  1006. 

Idaho. — Jones  v.  Stoddart,  8  Idaho 
210,  67  Pac.  650. 

Indiana. — Book  v.  Stinger,  36  Ind. 
346. 

Maryland. — Davis  v.  West  Sara- 
toga Building  Union,  32  Md.  285. 

Massachusetts. — Bird  v.  Daggett, 
97  Mass.  494. 

Missouri. — St.  Louis  Perpetual 
Ins.  Co.  V.  Cohen,  9  Mo,  421. 

New  York. — Grant  v.  Treadwell 
Co.,  82  Hun  (N.  Y.)  591.  31  N.  Y. 
Supp.  702;  National  Park  Bank  v. 
German  American  Mut.  W.  &  S.  Co., 
21  Jones  &  S.  (N.  Y.)  367;  Bank  of 
New  York  v.  Bank  of  Ohio,  29  N. 
Y.  619;  Exchange  Bank  v.  Monteath, 
26  N.  Y.  505;  Merchants'  Bank  v, 
McCall,  6  Bosw.  (N.  Y.)  473. 

OTiio.— Citizens'  Sav.  Bank  v. 
Blakesley,  42  Ohio  St.  645. 

Texas. — Manhattan  Liquor  Co.  v. 
Magnus  &  Co.  (Tex.  Civ.  App),  94 
Joyce  Defenses — 7. 


S.  W.  1117;  Manhattan  Liquor  Co.  v. 
German  Nat.  Bank  (Tex.  Civ.  App.), 
94  S.  W.  1120. 

Federal. — Irwin  v.  Bailey,  8  Biss. 
C.  C.  523,  Fed.  Cas.  No.  7079. 

Yirginia. — Compare  Davis  v.  Rock- 
ingham Inv.  Co.,  89  Va.  290,  15  S.  E. 
547. 

="  Cadillac  State  Bank  v.  Cadillac 
Stave  &  Heading  Co.,  129  Mich.  15, 
88  N.  W.  67,  8  Det.  L.  N.  851;  Grant 
V.  Treadwell  Co.,  82  Hun  (N.  Y.) 
591,  31  N.  Y.  Supp.  702;  Webster  v. 
Whitworth  (Tenn.  Ch.  App.  1901), 
63  S.  W.  290.  See,  also,  First  Nat. 
Bank  v.  Commercial,  &c..  Home 
Ass'n  (N.  Y.),  78  N.  E.  1103. 

32'*  Bullen  V.  Milwaukee  Trading 
Co.,  109  Wis.  41,  85  N.  W.  115,  per 
the  court. 

==«  Wahling  v.  Standard  Pump  Mfg. 
Co.,  9  N.  Y.  Supp.  739;  Dexter  Sav. 
Bank  v.  Friend,  90  Fed.  703.  Com- 
pare Eaton  V.  Berlin,  49  N.  H.  219. 
"The  officers  of  a  corporation  have 
no  power  to  authorize  the  execution 
of  a  note  as  surety  for  another  in 
respect  to  a  matter  having  no  rela- 
tion to  the  corporate  business  and 


§    81]  INCAPACITY   AND   WANT   OF   AUTHORITY.  98 

§  81.  Same  subject — Application  of  rules — Illustrations. — Where 
a  treasurer  of  a  corporation  has  power  to  accept  drafts  the  fact  that 
certain  drafts  were  accepted  by  him  without  authority  and  contrary 
to  the  provisions  of  the  by-laws  of  the  corporation  is  no  defense  to  an 
action  on  such  paper  by  one  who  is  a  hona  fide  holder,^^''  So  where 
the  president  and  treasurer  of  a  corporation  had  authority  to  sign 
and  put  in  circulation  commercial  paper  in  furtherance  of  and  in  the 
regular  course  of  business  of  the  corporation  and  he  abused  his  author- 
ity and  gave  paper  for  the  accommodation  of  a  stranger  and  it  came 
into  the  hands  of  an  innocent  holder  the  corporation  was  held  bound 
thereon.^^"  And  where  the  president  of  a  corporation  was  authorized 
by  resolution  of  the  directors  to  incur  debts,  negotiate  loans  and  con- 
tract for  the  company,  recovery  on  a  note  executed  by  the  president 
alone  could  not  be  defeated  by  the  fact  that  it  was  provided  for  by  a 
by-law  of  the  corporation  that  notes  signed  by  the  president  and  secre- 
tary should  be  binding,  such  provision  not  requiring  that  all  notes 
should  be  signed  by  the  secretary.^^^  So  where  a  corporation  sent  its 
assistant  secretary,  who  had  executed  contracts  in  its  behalf,  to  an- 
other state  to  superintend  its  business  there  and  with  its  knowledge 
and  assent  such  officer  opened  an  account  with  the  bank  in  the  city 
where  he  was  sent,  it  was  decided  that  the  corporation  could  not,  by 
setting  up  the  defense  of  want  of  authorit}^  defeat  recovery  on  notes 
given  by  such  officer  in  the  company's  name,  to  cover  overdrafts  made 
of  the  company's  account,  of  which  it  had  knowledge,  the  amount  of 
such  notes  having  been  placed  to  the  credit  of  the  company  by  the 
bank  in  the  pass  book  of  the  contents  of  which  the  company  was  held 
to  have  notice  and  being  checked  against  and  withdrawn  by  the  officer 
in  charge  of  the  account  apparently  so  far  as  the  bank  could  see  for  the 
company's  business.^^^     And  where  the  secretary  of  a  corporation  is 

in  which  the  corporation  has  no  in-  54  Conn.  357,  8  Atl.  473,  1  Am.  St. 

terest.     Such    a    transaction    is    not  R.  123. 

within    the    scope    of    its    business,  ^="  Dexter  Sav.  Bank  v.  Friend,  90 

and  a  party  receiving  such  a  note  Fed.  703.  Corporation  liable  on  guar- 

with  notice  of  the  circumstances  un-  anty  of  president.    See  Lloyd  &  Co. 

der  which  it  is  given  cannot  recover  v.  Matthews  (111.  1906),  79  N.  B.  172. 

on    it."     Hall    v.    Auburn    Turnpike  =■*'  McCormick  v.  Stockton  &  T.  C. 

Co.,  27  Cal.  256,  257,  87  Am.  Dec.  75,  R.   Co.,   130   Cal.   100,    62   Pac.   267; 

per  the  court.  examine    Third    National    Bank    v. 

Unauthorized    accommodation    pa-  Laboring    Man's    Mercantile    &    M. 

per    issued    by    corporation    officers.  Co.    (W.   Va.,    1904),   49    S.   E.    544, 

Cook  v.  Amer.  Tubing,  &c.,  Co.   (R.  holding  a  president  has  no  inherent 

L),  65  Atl.  641;  Tuttle  v.  Tuttle  Co.  power  to  bind  corporation  by  note. 

(Me.),  64  Atl.  496.  ='-Hennesey  Bros.  &  Co.  v.  Mem- 

^'^^  Credit  Co.  v,  Howe  Mach.  Co.,  phis   National   Bank,   129   Fed.    557, 

64  C.  C.  A.  125.    The  court  said  in 


II 


99 


WANT  OF  AUTHOKITY  OF  CORPORATE  OFFICERS  AXD  AGENTS.      [§    ^1 


merely  authorized  to  accept  drafts  and  has  no  power  to  discount  them 
for  the  accommodation  of  a  third  person,  no  recovery  can  be  had 
against  the  corporation  by  a  bank  which  has  discounted  such  a  draft 
with  the  knowledge  that  the  indorsement  was  merely  for  accommoda- 
tion.^^^  And  though  the  by-laws  of  a  corporation  provide  that  a  note 
executed  in  the  name  of  the  corporation  shall  be  signed  by  its  presi- 
dent and  treasurer,  yet  the  fact  that  it  was  not  signed  by  the  latter 


this  case:  "The  notes  served  every 
purpose  which  would  have  been  sub- 
served if  the  company  had  made 
equivalent  deposits  on  those  dates. 
The  bank  required  the  overdrafts 
to  be  paid,  and,  instead  of  cash,  it 
took  these  notes.  The  authority 
which  the  company  intrusted  to 
Evans,  or  the  exercise  of  which  it 
apparently  sanctioned,  was  suffi- 
ciently extensive  to  cover  his  deal- 
ings with  the  bank,  including  the 
giving  of  the  notes..  We  are  in- 
clined to  think  that  his  general  au- 
thority, coupled  with  that  which 
was  given  him  to  open  an  account 
and  transact  the  business  of  his 
company  with  the  bank,  was  suffi- 
cient to  justify  his  covering  of  the 
overdrafts  which  he  had  made  in 
the  company's  behalf,  and  of  which 
the  company  had  the  benefit.  If  he 
had  made  the  company's  note,  and 
negotiated  it  with  the  bank,  pro- 
fessedly for  the  company's  business, 
and  secured  a  loan  of  money  there- 
on, which  he  used  in  the  company's 
business,  could  it  be  doubted  that 
the  company  would  be  bound  by  his 
act?  "We  think  not.  If  his  use  of 
the  proceeds  was  that  of  paying  an 
overdraft  owing  by  the  company, 
would  not  that  be  devoting  it  to  the 
company's  business?  But  there 
could  be  no  distinction  between 
such  a  transaction  as  that  which 
occurred  and  that  supposed,  except 
in  mere  form,  on  which  the  law 
would  lay  no  stress.  But  it  was  in- 
'  disputably  proved  that  the  company 
knew  that  overdrafts  were  occur- 
ring.   It  took  no  precautions  to  pre- 


vent them  or  to  provide  for  their 
settlement.  It  must  have  been 
known  that  they  had  been  provided 
for  in  some  way  and  must  be  if 
they  occurred  again.  The  only  rea- 
sonable inference  is  that  it  was  in- 
tended by  the  company  to  leave  the 
duty  of  attending  to  such  contin- 
gencies to  their  superintendent  who 
was  in  charge  of  the  account.  There 
is  another  feature  of  this  case,  how- 
ever. The  company  had  a  pass 
book  which  was  periodically  bal- 
anced by  the  bank  and  returned  to 
the  company,  that  is,  it  was  re- 
turned to  its  superintendent.  *  *  * 
The  credits  obtained  by  the  notes 
were  shown  by  the  book.  *  *  *  The 
company  is  affected  by  notice  of  the 
contents  of  the  pass  book  to  the 
same  extent  as  if  the  agent  had  been 
an  honest  one.  *  *  *  The  conten- 
tion of  the  defendant  runs  counter, 
as,  indeed,  does  its  entire  defense, 
to  the  settled  rule  that,  when  one 
of  two  persons  is  to  suffer  by  the 
act  of  an  agent  intrusted  by  his 
principal  with  the  appearance  of 
authority  to  do  the  act,  that  one 
shall  take  the  burden  whose  agent 
committed  the  wrong.  We  think 
this  is  a  plain  case  for  the  applica- 
tion of  that  doctrine."  Per  Sever- 
ens,  C.  J. 

^'  Eureka  Bank  v.  Eureka  Woolen 
Mfg.  Co.,  33  N.  S.  302.  No  presump- 
tion exists  that  secretary  can  bind 
corporation  as  an  accommodation 
indorser  of  his  personal  note. 
Wheeling  Ice  &  Storage  Co.  v.  Con- 
nor  (W.  Va.  1906),  55  S.  E.  982. 


§'  83]  INCAPACITY   AND   WANT   OF   AUTHORITY.  100 

is  no  defense  to  an  action  on  the  note  in  the  hands  of  a  bona  fide 
holder,  the  corporation  having  received  the  benefit  of  the  proceeds.^^* 
So  it  has  been  decided  that  a  warehouse  receipt,  where  issued  within 
the  apparent  scope  of  the  authority  of  the  managing  officer  of  a  cor- 
poration is  not  subject  to  the  defense,  in  the  hands  of  a  bona  fide 
holder,  that  the  officer  issuing  it  acted  in  disregard  or  excess  of  his 
authority.^^^  And  evidence  is  admissible  in  support  of  the  authority 
of  the  president  of  a  corporation  to  draw  a  bill  of  exchange  that  he  had 
on  various  occasions,  both  before  and  after  the  bill  in  question,  exe- 
cuted similar  bills  and  notes  which  had  been  accepted  and  the  sums 
thus  expended  entered  into  the  accounts  of  the  corporation  without 
objection.^^^  But  where  it  was  provided  by  the  articles  of  a  corpora- 
tion that  all  corporate  notes  should  be  executed  by  its  president  or,  in 
case  of  his  absence  or  disability,  the  vice-president,  want  of  authority 
to  execute  notes  signed  by  its  secretary,  who  had  been  appointed  with 
the  vice-president  merely  to  effect  a  settlement  with  certain  creditors, 
was  held  a  good  defense  to  an  action  thereon.^^^ 

§  82.  Same  subject — Bank  officials'  acts. — Where  a  bank  teller  cer- 
tifies a  check  in  such  a  form  as  to  be  apparently  within  his  power,  and 
so  that  by  comparing  the  power  with  the  act  alleged  to  be  done  in  pur- 
suance of  it  the  latter  appears  to  be  authorized  and  the  security  is  ne- 
gotiated to  an  innocent  party  who  parts  with  value  without  notice 
that  there  has  been  any  abuse  of  authority,  it  is  no  defense  to  an  action 
on  the  instrument  that  the  paper  was  certified  in  a  case  or  for  a  pur- 
pose to  which  his  authority  did  not  extend.^^^  And  a  similar  rule 
prevails  in  the  case  of  a  certification  by  a  bank  cashier,^^^  or  of  an 
indorsement  by  him.^^°  And  where  directors  of  an  unincorporated  and 
unregistered  banking  company  issued  notes  as  directors,  for  them- 
selves *^and  the  shareholders  of  the  said  company ,''  promising  jointly 
and  severally  to  pay  the  same,  it  was  decided  that  assuming  the  par- 
ties signing  were  authorized  to  sign  promissory  notes  on  account 
of  the  partnership  this  form  of  note  showed  sufficiently  an  intention 

"*  Grant  v.  Treadwell  Co.,  82  Hun  ^^''  Thompson  v.  Des  Moines  Driv. 

(N.  Y.)  591,  31  N.  Y.  Supp.  702.   See,  Park,  112  Iowa  628,  84  N.  W.  678. 

also,    Houts    V.    Sioux    City    Brass  "^'*  Farmers'  &  Mechanics'  Bank  v. 

Works   (Iowa  1907),  110  N.  W.  166.  Butchers'  &  Drovers'  Bank,  14  N.  Y. 

=>==  Smith   V.    Capital    Elevator    Co.  623. 

(Kan.),  58  Pac.  483.  ™  Cooke   v.    State    Nat.    Bank,    52 

=f  Olcott  v.  Tioga  Railroad  Co.,  27  N.  Y.  96,  11  Am.  Rep.  667. 

N.  Y.  546,  84  Am.  Dec.  298.  ='"  Bank  of  New  York  v.  Bank  of 

Ohio,  29  N.  Y.  619. 


I 


101  ULTRA  VIRES   INSTRUMENTS.  [§§    83,    84 

to  bind  the  partnership  Jointly,  and  though  the  attempt  to  bind  the 
shareholders  severally  was  ultra  vires  and  void  and  a  stockholder 
separately  sued  might  successfully  deny  his  separate  liability,  yet  they 
would  be  liable  in  a  joint  action.^*^ 

§  83.  Same  subject — Paper  issued  by  public  officers. — Where  paper 
is  issued  by  public  officers  without  any  authority  at  law  to  so  act,  the 
want  of  authority  may  be  shown  in  defense  to  an  action  by  a  purchaser 
of  the  same,  as  in  such  a  case  the  latter  is  bound  to  look  to  the  au- 
thority to  issue  the  paper,^*^  Their  powers  and  duties  are  defined 
by  statute,  which  is  notice  to  the  world  of  the  limitations  of  their 
authority  and  no  pretension  of  authority  or  customary  action  can 
amplify  that  authority  beyond  the  statutory  limitation.^*^  So  ne- 
gotiable paper  which  originates  in  fraud  and  is  issued  by  a  person  in- 
capable of  entering  into  such  contract  on  the  part  of  the  estate  which 
such  paper  purports  to  represent  is  void  and  want  of  authority  is  a  de- 
fense to  an  action  thereon,  as  the  powers  and  duties  of  state  officers 
being  defined  by  statute  constitute  notice  to  all  the  world  of  the  limi- 
tation upon  their  authority  to  issue  negotiable  obligations  for  the 
state.3** 

§  84.  Ultra  vires  instruments. — Want  of  corporate  authority  to 
make  or  indorse  a  bill  or  note  may  in  some  cases  be  available  as  a  de- 
fense in  an  action  against  the  corporation  on  such  instrument.^***  So 
paper  issued  by  a  corporation  in  contravention  of  a  statute  forbidding 
it  to  issue  such  paper  has  been  held  subject  to  this  defense.^*^  And 
where  a  statute  provided  that  no  monied  corporation  subject  to  it 
should  "issue  any  bill  or  note  of  the  said  corporation,  unless  the  same 
be  made  payable  on  demand,  and  without  interest"  and  notes  were 
issued  in  contravention  of  this  act  by  a  banking  corporation  the  notes 
were  held  void  in  the  hands  of  a  'bona  fide  holder  without  notice.^*^ 
And  a  draft  or  warrant  drawn  by  the  corporation  of  a  city  upon  the 
treasurer  of  the  city,  not  in  the  course  of  its  proper  legitimate  busi- 

'^i  Maclae   v.    Sutherland,    3   E.   &  '"  Elliott  Nat.  Bank  v.  Western  & 

B.  1,  32.  Atlantic  Railroad,  70  Tenn.  676,  680. 

^*-  School    Directors  v.   Fogelman,  ^"  State  v.  Hart,  46  La.  Ann.  40. 

76    111.    189;    Eastman    y.    Lyon,    40  '"*  Scott  v.  Bankers'  Union   (Kan. 

Iowa    438;     Elliott    Nat.    Bank    v.  1906),  85  Pac.  604. 

Western  &  A.  R.  Co.,  70  Tenn.    (2  '"  Chillicothe    Bank    v.    Dodge,    8 

Lea)    676.      See    Loomis   v.    Brown  ^^arb.  (N.  Y.)  233. 

Co.,  15  S.  D.  606,  91  N.  W.  309.  '"  ^^^o^  v.  Godard,  3  McLean  102, 

Fed.  Cas.  No.  12037. 


85] 


INCAPACITY    AND   WANT    OF    AUTHORITY. 


102 


ness,  as  required  by  the  charter  to  render  it  valid,  is  void  in  the  hands 
of  a  tona  fide  holder,  without  actual  notice  of  its  consideration,  as  the 
charter  being  a  public  act  every  person  is  bound  to  know  the  extent 
of  the  powers  of  the  corporation.^*''  Again  a  corporation  not  estab- 
lished for  trading  purposes  was  held  not  liable  on  its  acceptance  of  a 
bill  of  exchange  where  the  act  of  acceptance  was  clearly  within  the 
prohibition  of  the  several  acts  passed  for  the  protection  of  the  bank 
of  England-^^s 

§  85.     Same  subject — Corporation  authorized  to  issue  paper. — A 

corporation  which  is  authorized  to  issue  commercial  paper  for  any 
purpose  and  which  executes  such  paper  apparently  within  the  scope 
of  its  corporate  powers,  will  be  estopped  to  set  up  in  an  action  upon 
the  instrument  by  a  bona  fide  holder  the  defense  of  ultra  vires.^*^  In 
such  cases  the  presumption  arises  that  the  paper  has  been  lawfully 
issued.^^"    This  rule  applies  in  the  case  of  accommodation  paper.^^^ 


^^Halstead  v.  Mayor,  5  Barb.  (N. 

Y.)  218. 

^*'  Broughton  v.  Manchester  Water 
Works  Co.,  3  Barn.  &  A.  1. 

^^^  Georgia. — Jacobs  v.  Southern 
Banking  Co.,  97  Ga.  573,  25  S.  E. 
171;  Towles  Excelsior  Co.  v.  Inman, 
96  Ga.  506,  23  S.  E.  418. 

Kentucky. — German  Nat.  Bank  v. 
Louisville  Co.,  97  Ky.  34,  29  S.  W. 
882. 

Maine. — Commercial  Bank  v.  St. 
Croix  Mfg.  Co.,  10  Shep.  (Me.)  280. 

Massachusetts. — Monument  Nat. 
Bank  v.  Globe  Works,  101  Mass.  57, 
36  Am.  Rep.  322. 

Michigan. — Gennesee  County  Sav. 
Bank  v.  Michigan  Barge  Co.,  52 
Mich.  438,  17  N.  W.  790. 

Minnesota. — American  Bank  v. 
Gluck,  68  Minn.  129,  70  N.  W.  1085; 
Auerbach  v.  Le  Sueur  Mill  Co.,  28 
Minn.  291,  9  N.  W.  799,  41  Am.  Rep. 
285. 

New  Jersey. — Blake  v.  Manufac- 
turing Co.  (N.  J.  Eq.),  38  Atl.  241; 
National  Bank  of  Republic  v.  Young, 
41  N.  J.  Eq.  531,  7  Atl.  488. 


New  York. — Ellsworth  v.  St.  Louis 
&c.  R.  Co.,  98  N.  Y.  553;  Wile  ft 
Brickner  Co.  v.  Richester  &  K.  F.  L. 
Co.,  4  Misc.  (N.  Y.)  570,  25  N.  Y. 
Supp.  794. 

OTiio.— Pittsburg,  C,  C.  &  St.  L.  R. 
Co.  v.  Lynde,  55  Ohio  St.  23,  44  N.  E. 
593. 

Pennsylvania. — Wright  v.  Pipe 
Line  Co.,  101  Pa.  St.  204,  47  Am. 
Rep.  701. 

Wisconsin. — Lehigh  Val.  Coal  Co. 
v.  West  Depere  Agricultural  Works, 
63  Wis.  45,  22  N.  W.  831. 

Federal. — Maxwell  v.  Akin,  89  Fed. 
178.    See: 

Illinois. — Peoria  R.  Co.  v.  Thomp- 
son, 103  111.  187. 

Wisconsin. — Blunt  v.  Walker,  11 
Wis.  334,  78  Am.  Dec.  709. 

"'°  St.  Joe  &  M.  F.  Consol.  Min.  Co. 
v.  First  Nat.  Bank,  10  Colo.  App. 
339,  50  Pac.  1055. 

^^'^  Alabama. — Florence  R.  R.  & 
Imp.  Co.  v.  Chase  Nat.  Bank,  106 
Ala.  364,  17  So.  720. 

Georgia. — Jacobs  Pharmacy  Co.  v. 


II 


103  ULTRA   VIRES   INSTRUMENTS — APPLICATION    OF    RULE.        [§    86 

And  a  similar  rule  prevails  where  a  note  is  taken  by  a  corporation  and 
is  subsequently  transferred  to  one  taking  the  same  in  good  faith  and 
for  value. ^^2  Nor  is  the  fact  that  a  by-law  as  to  the  manner  of  execu- 
tion was  not  complied  with  available  as  a  defense.^^^ 

§  86.  Same  subject — Application  and  illustration  of  rule. — Where 
a  corporation  having  power  to  make  and  issue  commercial  paper,  en- 
ters into  a  contract  prohibited  by  its  charter  and  executes  a  note  in 
pursuance  thereof,  as  in  the  case  of  a  contract  to  purchase  stock  in 
another  corporation  and  the  contract  is  executed  by  the  delivery  of  the 
stock,  it  cannot  set  up  in  defense  to  an  action  on  the  note  by  a  bona 
fide  purchaser  that  the  note  was  ultra  vires,  there  being  no  evidence 
of  illegality  on  the  face  of  the  instrument.^^*  And  a  negotiable  secur- 
ity of  a  corporation,  which  upon  its  face  appears  to  have  been  duly 
issued  by  such  a  corporation,  and  in  conformity  with  the  provisions 
of  its  charter,  has  been  held  valid  in  the  hands  of  a  bona  fide  holder 
thereof,  without  notice,  although  such  security  was  in  fact  issued  for  a 
purpose  and  at  a  place  not  authorized  by  the  charter  of  the  corpora- 
tion and  in  violation  of  the  laws  of  the  state  where  it  was  actually 
issued.^^^  So  where  a  banking  corporation  enters  into  an  unauthor- 
ized contract  which  is  in  the  form  of  a  negotiable  instrument  it  cannot 
avail  itself  of  the  defense  that  the  instrument  was  ultra  vires  as  against 
one  who,  without  notice,  has  become  the  holder  of  the  paper  for 
value.^^^  And  where  money  was  loaned  in  good  faith  to  a  corpora- 
Southern  Banking  &  T.  Co.,  97  Ga.  '"  Mclntire  v.  Preston,  10  111.  (5 
573,  25  S.  E.  171.  Gilm.)   48,  48  Am.  Dec.  321;   Stude- 

Minnesota. — American  Trust  &  backer  Bros.  Mfg.  Co.  v.  Montgom- 
Sav.  Bank  v.  Gluck,  68  Minn.  129,  70  ery,  74  Mo.  101 ;  First  Nat.  Bank 
N.  W.  1085.  V.  Gillilan,  72  Mo.  77;  Willmarth  v. 

New  Jersey. — National  Bank  of  Crawford,  10  Wend.  (N.  Y.)  241; 
Republic  v.  Young,  41  N.  J.  Eq.  531,  Gorrell  v.  Ins.  Co.,  11  C.  C.  A.  240, 
7  Atl.  488.  63  Fed.  371. 

New  York. — Mechanics*  Banking  '"  National  Spraker  Bank  v. 
Ass'n  V.  New  York  &  S.  White  Lead  Treadwell  Co.,  80  Hun  (N.  Y.)  363, 
Co.,  35  N.  Y.  505.  30  N.  Y.  Supp.  77. 

Texas. — Marshall    Nat.    Bank    v.         '"Wright  v.    Pipe   Line   Co.,    101 
O'Neal,  11  Tex.  Civ.  App.  640,  34  S.     Pa.  St.  204,  47  Am.  Rep.  701. 
W.  344.  3^=  Stoney    v.    American   Life    Ins. 

Federal— Tod  v.  Kentucky  Union     Co.,  11  Paige  (N.  Y.)  635. 
Land  Co.,  57  Fed.  47.  ==="  Farmers'  &  Mechanics'  Bank  v. 

Michigan. — Compare  McLellan  v.  Butchers'  &  Drovers'  Bank,  16  N.  Y. 
File  Works,  56  Mich.  579,  23  N.  W.  125,  69  Am.  Dec.  678.  In  this  case 
321.  it  appeared  that  a  check  had  been 


§•   87]  INCAPACITY   AND   WANT    OF   AUTHOKITT.  104 

tion  on  a  note  properly  executed  by  the  corporation,  which  imported  a 
valid  obligation,  the  corporation  in  an  action  on  the  note  has  been  held 
liable,  though  it  did  not  receive  the  money,  there  being  nothing  to 
show  that  the  lender  suspected  fraud  any  more  than  an  ordinary  person 
in  the  usual  course  of  transactions  of  the  company  who  dealt  in  like 
manner  would  suspect  such  a  thing.^^^  Again  where  a  corporation  has 
power  to  indorse  negotiable  paper  in  the  transaction  of  its  legitimate 
business,  though  it  may  have  no  right  to  lend  its  name  for  the  accom- 
modation of  another,  yet  the  fact  that  it  has  exceeded  the  authority 
conferred  upon  it  by  indorsing  paper  for  accommodation  is  no  de- 
fense to  an  action  thereon  by  one  who  was  an  innocent  holder  before 
maturity  for  value  and  without  notice  of  the  character  of  the  indorse- 
ment.^^® Where  it  is  provided  by  statute  that  it  shall  not  be  lawful 
for  any  corporation  to  divert  its  operations  to  purposes  not  set  forth 
in  its  articles  of  association,  such  a  statute  has  been  held  merely 
declaratory  of  the  common  law  and  to  be  no  defense  to  an  action  by 
a  bona  fide  indorsee  for  value  before  maturity  against  the  corpora- 
tion on  its  acceptance  of  a  bill  of  exchange  for  the  accommodation  of 
the  drawee.^^^  So,  though  a  banking  corporation  has  not  received  its 
certificate  from  the  bank  commissioner  authorizing  it  to  transact  busi- 
ness as  required  by  law,  yet  innocent  purchasers  of  paper  negotiated 
by  the  bank  will  obtain  a  valid  title  thereto,  as  to  otherwise  construe 
such  a  law  would  be  to  aid  in  defrauding  those  who  might  deal  with 
an  unlawfully  conducted  bank.^^" 

§  87.  Same  subject — Municipal  or  public  corporations.— A  munici- 
pal or  other  public  corporation  which  issues  commercial  paper  in  ex- 
cess of  the  authority  conferred  upon  it  by  statute  may  set  up  in  de- 
fense to  an  action  on  such  paper,  even  by  a  bona  fide  holder,  that  the 
act  of  issuing  the  same  was  ultra  vires,  as  one  taking  such  paper  is 
bound  to  a  knowledge  of  the  laws  under  which  it  was  issued.^^^    There 

certified  by  an  authorized  agent  of  '"  Alabama. — See  Cleveland  School 

the  bank  where  the  drawer  had  no  Furn.  Co.  v.  Greenville  (Ala.  1906), 

funds.  41  So.  862. 

"^^  Allen  v.  "West  Point  Min.  &  M.  Arkansas. — Lindsey   v.    Rottaken, 

Co.,  132  Ala.  292,  31  So.  462.  32  Ark.  619;  Hancock  v.  Chicot  Co., 

=="  Marshall   Nat.  Bank  v.   O'Neal,  32  Ark.  575. 

11  Tex.  Civ.  App.  640,  34  S.  W.  344.  Illinois. — School    Directors    v.    Fi- 

'''^  Farmers'    Nat.    Bank  v.   Sutton  gleman,  76  111.  189 ;    Bissell  v.  City 

Mfg.  Co.,  52  Fed.  191,  3  C.  C.  A.  1.  of  Kankakee,  64  III.  249,  21  Am.  Rep. 

=«"  Kellogg  v.  Douglas  Co.  Bank,  58  554. 

Kan.  43,  48  Pac.  587,  62  Am.  St.  R.  Iowa. — Williamson  v.  Keokuk,  44 
596. 


i 


105     ULTRA  VIRES   INSTRUMEINTS MUNICIPAL    CORPORATIONS.      [§    87 

can  be  no  bona  fide  holders  of  auch  paper,  within  the  meaning  of  the 
law  applicable  to  negotiable  paper,  which  has  been  issued  without  au- 
thority. The  conditions  under  which  such  paper  may  be  issued  and 
generally  the  manner  of  issuing  the  same  are  prescribed  by  statute 
and  all  persons  taking  the  same  are  chargeable  with  knowledge  of  these 
express  provisions  of  law  and  it  is  obligatory  upon  them  to  see  whether 
there  has  been  a  compliance  with  the  same  before  they  can  take  this 
kind  of  paper  with  safety.^**^  So  it  has  been  declared  by  the  United 
States  Supreme  Court  that:  "It  is  the  settled  doctrine  of  this  court 
that  municipal  corporations  are  merely  agents  of  the  state  government 
for  local  purposes,  and  possess  only  such  powers  as  are  expressly  given, 
or  implied  because  essential  to  carry  into  effect  such  as  are  expressly 
granted ;  that  the  bonds  of  such  corporations  are  void  unless  there  be 
express  or  implied  authority  to  issue  them ;  that  the  provisions  of  the 
statute  authorizing  them  must  be  strictly  pursued ;  and  that  the  pur- 
chaser or  holder  of  such  bonds  is  chargeable  with  notice  of  the  require- 
ments of  the  law  under  which  they  are  issued."^^^  And  in  a  case  in  Illi- 
nois it  is  said :  "The  authority  of  a  municipal  corporation  to  issue  bonds 


Iowa  88;  McPherson  v.  Foster,  43 
Iowa  48,  22  Am.  Rep.  215;  Clark  v. 
City  of  Des  Moines,  19  Iowa  199,  87 
Am.  Dec.  423. 

Louisiana. — Cecil  v.  Board,  30  La. 
Ann.  34;  Louisiana  State  Bank  v. 
Orleans  Nav.  Co.,  3  La.  Ann.  294. 

Michigan. — Bailey  v.  Tompkins, 
127  Mich.  74,  86  N.  W.  400. 

Mississippi. — Supervisors  of  Jef- 
ferson County  V.  Arrighi,  54  Miss. 
668. 

Missouri. — State  v.  Macon  Co.,  68 
Mo.  29;  Cagwin  v.  Hancock,  84  N.  Y. 
532;  Halstead  v.  New  York,  3  N.  Y. 
430;  Citizens'  Bank  v.  Greenburgh, 
60  App.  Div.  (N.  Y.)  225,  70  N.  Y. 
Supp.  68. 

Tennessee. — Galbraith  v.  City  of 
Knoxville,  105  Tenn.  453,  58  S.  W. 
643. 

West  Virginia. — Slifer  v.  Howell's 
Adm'r,  9  W.  Va.  391. 

Wisconsin. — Fisk  v.  Kenosha,  26 
Wis.  23. 

Federal. — Brenham  v.  German 
American  Bank,  144  U.  S.  173,  12 
Sup.   Ct.   559;    Young  v.   Clarendon, 


132  U.  S.  340,  10  Sup.  Ct.  107;  Mer- 
chants' Exch.  Nat.  Bank  v.  Bergen 
Co.,  115  U.  S.  384,  6  Sup.  Ct.  88;  Hoff 
V.  Jasper  Co.,  110  U.  S.  53,  3  Sup.  Ct. 
476;  Ogden  v.  County  of  Daviess,  102 
U.  S.  634;  South  Ottawa  v.  Perkins, 
94  U.  S.  260,  24  L.  Ed.  154;  Lehman 
V.  City  of  San  Diego,  83  Fed.  669,  27 
C.  C.  A.  668;  County  of  Bates  v. 
Winters,  97  U.  S.  83;  East  Oakland 
v.  Skinner,  94  U.  S.  255;  Chisholm 
V.  City  of  Montgomery,  2  Woods 
C.  C.  584;  Fed.  Cas.  No.  2686.  Com- 
pare Evansville  v.  Dennett,  161  U. 
S.  434,  16  Sup.  Ct.  613;  Block  v. 
Commissioners,  99  U.  S.  686;  Grand 
Chute  V.  Winegar,  15  Wall.  (U.  S.) 

355. 

A  note  by  a  city  for  property  it 
is  not  authorized  to  purchase  is  not 
binding.  Cleveland  School  Furn. 
Co.  V.  Greenville  (Ala.  1906),  41  So. 
862. 

'"-  Cagwin  v.  Town  of  Hancock,  84 
N.  Y.  532,  542. 

"'"  Barnett  v.  Denison,  145  U.  S. 
135,  12  Sup.  Ct.  819,  per  Brown,  J. 


§    87]  INCAPACITY  AND  WANT  OF  AUTHORITY.  106 

is  derived  from  public  laws,  and  the  avenues  to  information  in  regard 
to  the  law  and  ordinances  of  such  corporations  being  open  to  public 
inspection,  the  holder  of  such  securities  will  be  presumed  to  have 
examined  them,  and  to  have  known  whether  the  corporation  had  the 
requisite  power  to  issue  the  bonds.  He  has  no  such  opportunity  in 
regard  to  private  corporations.  Their  by-laws  are  not  open  to  in- 
spection by  those  who  deal  in  securities  issued  by  them,  and  hence  the 
reason  for  the  distinction  that  has  been  taken."^®*  So  a  county  war- 
rant is  held  binding  on  the  county  only  where  issued  by  the  oflBcers 
having  legal  authority  to  issue  it  or  to  contract  the  obligation  in  set- 
tlement of  which  it  was  issued;  and  such  a  warrant  imposes  no  lia- 
bility on  the  county  when  issued  in  violation  of  the  law,  or  in  fulfill- 
ment of  a  contract  that  the  officers  were  prohibited  from  entering 
into.^^^  And  where  bonds  are  void  from  the  beginning  because  of  lack 
of  power  in  a  municipality  to  issue  them,  the  municipality  is  not  es- 
topped from  asserting  their  invalidity  by  reason  of  any  subsequent 
act  of  its  officers  or  agents  or  by  reason  of  any  supposed  ratification 
by  them.^^®  But  where  authority  has  been  conferred  by  statute  in 
general  terms  upon  a  municipality  to  issue  bonds,  the  non-perform- 
ance of  conditions  and  details  provided  by  the  act,  which  are  not  re- 
cited in  the  bond,  cannot  be  set  up  in  defense  to  an  action  thereon  by  a 
bona  fide  holder.^*^^  So  the  fact  that  bonds,  which  a  municipal  cor- 
poration has  been  authorized  to  issue,  do  not  state  upon  their  face  the 
class  of  bond  to  which  they  belong,  is  no  defense  to  an  action  thereon 
where  the  indebtedness  which  they  represent  is  a  valid  one,  as  in  such 
a  case  a  technical  compliance  with  the  law  in  the  form  of  the  instru- 

""Bissell  V.  Kankakee,  64  111.  249,  of  Eldorado,  11  Cal.  171;  Sturte- 
252,  16  Am.  Rep.  554,  per  Scott,  J.  vant  v.  Inhabitants  of  Liberty,  46 
"It  must  be  conceded  that  munici-  Me.  457.  Where  county  warrants 
pal  corporations,  organized  as  they  appear  to  be  genuine  upon  their 
are,  for  restricted  governmental  pur-  face,  having  the  names  and  signa- 
poses,  have  no  power  to  issue  com-  tures  of  proper  persons  and  are 
mercial  paper  unless  such  power  worded  in  accordance  with  the  re- 
has  been  conferred  by  statute,  and  quirements  of  the  statute  relative 
without  such  power  such  paper  is  thereto,  they  are  binding  in  the  ab- 
void,  even  in  the  hands  of  an  inno-  sence  of  proof  showing  the  con- 
cent holder  for  value  before  matur-  trary.  Apache  County  v.  Barth 
ity."  Coquard  v.  Village  of  Oquaw-  (Ariz.  1898),  53  Pac.  187. 
ka,  192  111,  355,  61  N.  E.  660,  661,  =°'  Sage  v.  Fargo,  107  Fed.  383. 
per  Carter,  J.  ^"  Danielly    v.    Cabaniss,    52    Ga. 

^^  Supervisors  v.  Arrighi,  54  Miss.  211.     See  Chilton  v.  Town  of  Grat- 

668.    See  also^  People  v.  Supervisors  ton,  82  Fed.  873. 


I 


107 


WANT   OF   AUTHORITY   OF   PARTNER.  [§§    88,    89 


ment  is  immaterial.^^^  And  where  power  exists  to  execute  bonds  and 
it  is  exercised  in  a  lawful  manner,  it  is  not  competent  to  set  up  against 
a  bona  fide  holder  that  the  proceeds  from  such  bonds  have  been  used 
for  an  unauthorized  purpose.^®* 

§  88.  Guarantee  of  checks  beyond  deposits. — Where  checks  have, 
for  clearing  house  purposes,  been  guaranteed  by  one  bank  to  another 
beyond  the  drawer's  deposits,  the  latter  cannot  set  up  the  ultra  vires 
character  of  the  agreement  against  the  bank  having  paid  the  check  in 
compliance  therewith,  the  power  to  redress  the  wrongful  act  of  the 
bank  in  such  case  being  declared  to  be  in  the  government  only  by  a 
proceeding  to  forfeit  the  bank's  charter."*' 

§  89.  Want  of  authority  of  partner. — The  ostensible  power  of  a 
partner  raises  a  sufficient  implication  to  bind  the  firm,  and  where  a 
firm  note  is  executed  or  transferred  by  one  of  the  partners  it  will  be 
no  defense  to  an  action  thereon  in  the  hands  of  one  who  is  a  bona  fide 
holder  for  value  and  without  notice  that  the  note  was  given  for  a 
purpose  other  than  the  partnership  business,  and  that  the  partner 
therefore  acted  without  authority."^    So  it  has  been  declared  to  be 


•"»  City  of  Gladstone  v.  Throop,  71 
Fed.  341,  349,  18  C.  C.  A.  61. 

'«» Jones  V.  Camden,  44  N.  C.  319, 
23  S.  B.  141;  Clifton  Forge  v.  Brush 
Electric  Co.,  92  Va.  289,  23  S.  B. 
288;  Clifton  Forge  v.  Alleghany 
Bank,  92  Va.  283,  23  S.  B.  284. 

^""Voltz  v.  Bank,  158  111.  532,  42  N. 
E.  69;  citing  National  Bank  t. 
Whitney,  103  U.  S.  99;  National 
Bank  v.  Matthews,  98  U.  S.  621; 
Weber  v.  Spokane  Nat.  Bank,  64 
Fed.  208. 

^^^ Alabama.. — Knapp  v.  McBride,  7 
Ala.  19. 

Illinois. — Wright  v.  Brosseau,  73 
111.  381;  Gregg  v.  Fisher,  3  111.  App. 
261. 

Iowa. — Sherwood  v.  Snow,  46  Iowa 
481,  26  Am.  Rep.  155. 

Kentucky. — Mitchell  v.  Whaley, 
29  Ky.  Law  R.  125,  92  S.  W.  556. 

Maine. — Emerson  v.  Harmon,  14 
Me.  271. 

Maryland. — Porter  v.  White,  39 
Md.  613. 

Massachusetts. — Blodgett  v.  Weed, 


119  Mass.  215;  Boardman  v.  Gore,  15 
Mass.  331. 

Mississippi. — Hibernian  Bank  v. 
Everman,  52  Miss.  500;  Sylverstein 
v.  Atkinson,  45  Miss.  81;  Faler  v. 
Jordan,  44  Miss.  283. 

Missouri. — Bascom  v.  Young,  7 
Mo.  1. 

New  York. — Chittenango  First 
Nat.  Bank  v.  Morgan,  6  Hun  (N.  Y.) 
346;  Smith  v.  Lusher,  5  Cow.  (N. 
Y.)  688,  709;  Wells  v.  Evans,  20 
Wend.  (N.  Y.)  251;  Onondaga  Coun- 
ty Bank  v.  DePuy,  17  Wend.  (N.  Y.) 
47;  Bank  of  Vergennes  v.  Cameron, 
7  Barb.  (N.  Y.)  143;  Bank  of  Roch- 
ester V.  Monteath,  1  Denio  (N.  Y.) 
402,  43  Am.  Dec.  681. 

North  Carolina. — Cotton  v.  Evans, 
21  N.  C.  284. 

Pennsylvania. — Potts  v.  Taylor, 
140  Pa.  St.  601,  21  Atl.  443;  Leather- 
man  V.  Hecksher  (Pa.),  12  Atl.  485; 
Sedgwick  v.  Lewis,  70  Pa.  St.  217; 
Saylor  v.  Merchants'  Exch.  Bank,  1 


90] 


INCAPACITY  AND  WANT  OF  AUTHORITY. 


108 


well  settled  that  a  general  partner  in  a  trading  business  may  borrow 
money  for  the  benefit  of  the  firm  and  execute  notes  or  drafts  there- 
for, unless  restrained  by  the  articles  of  copartnership,  of  which  the 
lender  has  notice,  and  that  where  money  is  borrowed  by  the  partner 
of  a  trading  firm  in  the  name  of  the  firm,  and  a  note  is  executed 
therefor,  such  note  is  prima  facie  the  obligation  of  the  partnership, 
and  if  the  other  partner  seeks  to  avoid  its  payment  the  burden  of 
proof  lies  upon  him  to  show  that  the  note  was  given  in  a  matter  not 
relating  to  the  partnership  business,  and  that  also  with  the  knowledge 
of  the  holder  of  the  note."^  And  this  rule  applies  in  the  case  of  an 
accommodation  note  which  has  been  given  by  one  partner  in  the  firm 
name."^  It  is  a  question  for  the  jury  where  the  evidence  is  conflicting 
whether  the  act  of  a  partner  was  within  the  scope  of  his  authority  or 
whether  there  was  a  subsequent  ratification  of  such  act  by  the  firm.^^* 

§  90.     Same  subject  continued. — If  one  of  several  partners  obtain 


Walk.  (Pa.)  328;  Haldeman  v.  Bank 
of  Middletown,  28  Pa.  St.  440,  70 
Am.  Dec.  142. 

Rhode  Island. — Parker  v.  Burgess, 
5  R.  I.  277. 

Texas. — Moore  v.  Williams,  26 
Tex.  Civ.  App.  142,  62  S.  W.  977. 

Yermimt. — Roth  v.  Colvin,  32  Vt. 
125. 

Wisconsin. — Sullivan  v.  Sullivan 
(Wis.  1904),  99  N.  W.  1022;  Rol. 
lins  V.  Russell,  46  Wis.  594,  1  N. 
W.  277;  Kellogg  v.  Fancier,  23  Wis. 
21. 

Federal. — Michigan  Bank  v.  El- 
dred,  9  Wall.  (U.  S.)  544,  19  L.  Ed. 
763;  Union  Nat.  Bank  v.  Neil,  149 
Fed.  711;  Townsend  v.  Hagar,  72 
Fed.  949,  19  C.  C.  A.  256;  Drexler  v. 
Smith,  30  Fed.  754;  Babcock  v. 
Stone,  Fed.  Cas.  No.  701,  3  McLean 
172. 

English. — Ridley  v.  Taylor,  13 
East  175;  Jacaud  v.  French,  12  East 
322;  Swan  v.  Steele,  7  East  210; 
Baker  v.  Charlton,  Peake  80. 

But  compare  Pennsylvania. — Lerch 
Hardware  Co.  v.  First  Nat.  Bank 
(Pa.),  5  Atl.  778;  Cooper  v,  McClur- 


kan,  22  Pa.  St.  80;  King  v.  Faber,  22 
Pa.  St.  21;  Tanner  V.  Hall,  1  Pa. 
St.  417.  "The  Indorsement  and  ne- 
gotiation of  promissory  notes  and 
bills  is  within  the  scope  of  the  part- 
nership business;  and  as  to  every- 
thing within  the  scope  Of  that  busi- 
ness, every  partner  by  virtue  of  the 
partnership  is  clothed  with  the 
power  to  act  for  the  firm — to  use 
its  name — and  in  that  name  to  do 
every  act  the  firm  collectively 
might  do,  whether  it  be  to  make  or 
indorse  notes  or  bills." 

Rhode  Island. — Windham  County 
Bank  v.  Kendall,  7  R.  I.  77,  84,  per 
Brayton,  J. 

"=Deitz  V.  Regnier,  27  Kan.  94, 
105,  per  Horton,  C.  J. 

"3  Chemung  Bank  T.  Bradner,  44 
N.  Y.  680;  Austin  V.  Vandermark, 
4  Hill  (N.  Y.)  259;  Catskill  Bank 
V.  Stall,  15  Wend.  (N.  Y.)  864.  See 
also,  Leach  v.  Bank,  2  Ind.  488; 
Waldo  Bank  v.  Lumbert,  16  Me. 
416. 

"*  Cassldy  v.  Saline  County  Bank, 
14  Okla.  S32,  78  Pac.  324. 


I 


109  WANT   OF   AUTHORITY   OF    PARTNER.  [§    91 

a  loan  of  money  for  his  individual  use,  by  giving  the  note  or  cheek 
of  the  firm,  but  within  their  authority,  the  other  partners  will  never- 
theless be  bound  thereby  unless  there  be  something  in  the  transaction 
to  induce  the  lender  to  suspect  that  the  money  is  not  borrowed  for 
their  benefit  or  the  circumstances  were  such  as  to  put  him  upon  in- 
quiry.^''^  And  where  a  note  was  made  payable  to  an  individual  part- 
ner for  partnership  property,  it  is  decided  that  the  right  of  a  trans- 
feree, who  is  a  bona  fide  holder,  to  recover  can  not  be  defeated  by  the 
fact  that  such  partner  transferred  the  note  in  satisfaction  of  his 
individual  debt,  and  in  fraud  of  the  other  partner's  rights,  except  there 
be  evidence  of  a  participation  by  the  transferee  in  the  fraud  or  mis- 
conduct of  such  partner.^^*'  So  where  a  partnership  was  formed  for 
the  purpose  of,  and  was  engaged  in,  selling  and  buying,  an  instruc- 
tion in  an  action  upon  a  note  executed  by  one  of  the  partners  in  the 
firm  name  that  if  the  other  partner  did  not  authorize  the  note  to  be  so 
executed  or  did  not  subsequently  ratify  it,  he  was  not  bound,  is  errone- 
ous.^" And  though  the  name  of  a  firm  be  afiixed  by  one  of  the  mera- 
bers  to  negotiable  paper  for  the  accommodation  of  a  third  person,  if 
the  note  is  discounted  by  a  bank  without  knowledge  of  such  fact,  the 
other  members  of  the  firm  are  liable,  though  the  note  is  given  out  of 
the  course  of  the  partnership  business,  and  without  their  knowledge 
or  consent.^^^  Again,  where  a  partnership  firm  is  pledged  by  the 
acceptance  of  a  bill  of  exchange  by  one  partner  in  the  name  of  the 
firm,  the  partnership,  of  whomsoever  it  may  consist,  whether  they  are 
named  or  not,  and  whether  the  partners  are  known  or  secret  partners, 
will  be  bound,  unless  the  title  of  the  person  who  seeks  to  charge 
them  can  be  impeached  or  he  be  shown  to  have  knowledge  of  the  mis- 
application by  such  partner  of  the  bill  or  its  proceeds.^"'' 

§  91.  Same  subject — Qualifications  and  limitations  of  rule. — Wliere 
the  partnership  is  not  in  the  trade  of  merchandise,  want  of  authority 
may  be  shown  in  an  action  on  a  firm  note  given  by  one  of  the  partners 
in  a  transaction  which  has  no  connection  with  the  business  of  the  joint 
concern.^^*^   The  general  rule  as  to  the  authority  of  a  partner  to  bind 

•"Wagner   v.    Freschl,    5&   N.    H.  416;     Catskill    Bank    v.    Stall,     15 

465;    Miller  v.  Manice,   6   Hill    (N.  Wend.   (N.  Y.)  364. 

T.)  114.  "»Wintle  v.  Crowther,  1  Cromp  & 

"'•Nichols  V.  Sober,  38  Mich.  678.  J.  316. 

"'Carter  v.    Steele,   83    Mo.   App.  »8°  Cocke  v.  Branch  Bank,  3   Ala. 

211.  175;  Grey  v.  Ward,  18  111.  32. 

•'"Waldo  Bank  t.  Lumbert,  16  Me. 


91] 


INCAPACITY  AND  WANT  OF  AUTHORITY. 


110 


his  co-partner  by  the  execution  or  indorsement  of  paper  in  the  firm 
name  does  not  control  in  the  case  of  a  partnership  of  the  non-trading 
class,  which  holds  itself  out  as  engaged  in  an  employment  or  occupa- 
tion which  does  not  necessarily  or  fittingly  embrace  buying  and  sell- 
ing, or  a  pledging  of  the  firm's  credit,  unless  it  be  shown  to  be  the 
common  usage,  or  the  business  is  of  a  character  to  make  the  power 
essential  to  a  proper  transaction  thereof,  and  in  such  case  the  burden 
is  held  to  be  on  the  holder  of  such  paper  to  prove  its  validity  against 
the  firm.^®^  And  want  of  authority  may  be  shown  against  the  payee 
taking  a  note  with  full  knowledge  of  the  fact  that  the  note  was  not 
given  in  connection  with  the  partnership  business.^^^  So  this  is  a  good 
defense  against  one  to  whom  a  firm  note  is  given  by  a  partner  for  the 
individual  debt  of  the  latter.^^^  And  where  a  partner  borrowed  money 
without  his  co-partner's  knowledge,  which  money  was  with  the  lender's 
knowledge  borrowed  and  used  by  such  partner  for  the  purpose  of 
speculating  in  "cotton  futures,"  and  the  firm  note  was  given  for  such 
money,  the  other  partner  signing  it  in  the  belief  that  it  was  given  for 
a  lawful  partnership  debt,  it  was  held  that  the  lender  could  not  re- 
cover thereon  as  against  such  partner.^**  And  a  holder  with  notice  of 
the  want  of  authority  is  subject  to  this  defense.^^^  So  where  a  note 
is  executed  to  the  order  of  a  firm  by  one  of  the  partners,  who  indorses 


^1  Marsh  v.  Wheeler,  77  Conn. 
449;  Scheie  v.  Wagner,  163  Ind.  20, 
71  N.  E.  127;  citing  Bowling  v.  Na- 
tional Bank,  145  U.  S.  512,  12  Sup. 
Ct.  928,  36  L.  Ed.  795;  Schellenbeck 
V.  Studebaker,  13  Ind.  App.  438,  41 
N  .E.  845,  55  Am.  St.  R.  240.  Com- 
mercial or  trading  partnerships 
"are  those  whose  conduct  so  in- 
volves buying  and  selling  whether 
incidentally  or  otherwise,  that  it 
naturally  comprehends  the  employ- 
ment of  capital,  credit  and  the 
usual  instrumentalities  of  trade  and 
frequent  contact  with  the  commer- 
cial world  in  dealings  which  in 
their  character  and  incidents  are 
like  those  of  trades  generally." 
Marsh  v.  Wheeler,  77  Conn.  449,  454, 
per  Prentice,  J. 

''"  Benson  v.  Warehouse  Co.,  99 
Ga.  303,  25  S.  E.  645;    Sherwood  v. 


Snow,  46  Iowa  481,  26  Am.  Rep. 
155;  Rice  v.  Doane,  164  Mass.  136, 
41  N.  E.  126;  Roberts  v.  Pepple,  55 
Mich.  367,  21  N.  W.  319. 

^^  Lanier  v.  McCabe,  2  Fla.  32; 
Taylor. V.  Hillyet,  3  Blackf.  (Ind.) 
433,  26  Am.  Dec.  430. 

^^^  Benson  v.  Warehouse  Co.,  99 
Ga.  303,  25  S.  E.  645. 

^^New  Yorfc.^Gansevoort  v.  Wil- 
liams, 14  Wend.  (N.  Y.)  133;  Liv- 
ingston V.  Roosevelt,  4  Johns.  (N. 
Y.)    251. 

North  Carolina. — Weed  v.  Rich- 
ardson, 19  N.  C.  535. 

Pennsylvania. — Brown  v.  Pettit, 
178  Pa.  St.  17,  35  Atl.  865,  56  Am.  St. 
R.  742,  34  L.  R.  A.  723;  Stockdale  t. 
Keyes,  79  Pa.  St.  251. 

English. — Wintle  v.  Crowther,  1 
Cromp.  &  J.  316, 


Ill  NOTE   BETWEEN    PARTNER   AND   FIRM.  [§    9^ 

the  firm  name  theeron  and  delivers  it  to  a  bank  for  discount,  with  a 
direction  that  the  proceeds  be  placed  to  his  personal  credit,  this  is 
declared  to  be  a  sufficient  indication  of  the  nature  of  the  transaction 
to  make  it  the  duty  of  the  bank,  which  discounts  it,  to  inquire  into 
his  authority  to  use  the  firm  name  for  the  occasion  unless  there  are 
circumstances  from  which  the  authority  can  be  implied.^^®  And  it 
has  been  declared  that  "it  is  not  necessary  to  secure  a  person  giving 
credit  to  a  partnership,  that  he  should  know  or  believe  that  each 
individual  of  the  firm  would  approve  the  transaction ;  but  it  is  neces- 
sary that  he  should  not  know  that  the  debt  attempted  to  be  secured 
was  not  the  debt  of  the  partnership,  or  the  property  sold  was  not  to 
inure  to  their  benefit. ^^^  But  where  a  note  is  made  payable  to  one 
member  of  a  partnership,  upon  the  purchase  of  partnership  property, 
and  the  name  of  the  partnership  is  different  from  that  of  the  payee 
of  the  note,  it  is  decided  that  the  legal  title  does  not  pass  by  an  in- 
dorsement by  another  one  of  the  partners  in  the  name  of  the  payee, 
there  being  nothing  whatever  on  the  face  of  the  note  to  indicate  the 
connection  of  any  partnership  with  it.^^^ 

§  92.  Note  between  partner  and  firm. — Though  a  partner  cannot 
sue  the  firm  of  which  he  is  a  member  or  be  sued  by  it,  yet  if  a  note  is 
executed  by  him  to  the  firm  or  by  the  firm  to  him,  a  subsequent  in- 
dorsee, who  is  not  a  member  of  the  firm,  may  recover  in  an  action 
against  it  on  the  note.^*^  The  reason  underlying  this  is  that  though  a 
party  cannot  sue  himself  as  promisor,  yet  "this  is  a  difficulty  at- 
tending the  remedy  only,  not  the  right,  and  when  the  note  is  indorsed 
by  those  having  the  right  to  indorse  it,  to  one  against  whom  there  is 
no  such  exception,  whereby  he  acquires  a  legal  interest  and  right  to  sue 
in  his  own  name,  the  difficulty  vanishes.    It  is  like  a  note  payable  to 


»«« Brown  v.  Pettit,  178  Pa.  St.  17,  Maine.— Hapgood    v.    Watson,    65 

35  Atl.  865,  56  Am.   St.   R.   742,  34  Me.  510. 

L.  R  A.  723;  Tanner  v.  Hall,  1  Pa.  Massachusetts. — Thayer     t.     Buf- 

417.  fum,  52  Mass.   (11  Mete.)  398. 

^  Huntington     v.     ^^yman,     1     D.  Missouri. — Young  v.  Chew,  9  Mo. 

Chip.    (Vt.)    438,   448i   per   Skinner,  App.  387. 

Ch.  J.  Yermont. — Ormsbee  v.  Kidder,  48 

'^  McCauley  v.  Gordon,  64  Ga.  221,  Vt.  361. 

37  Am.  Rep.  68.  Compare  Michigan. — Davis  v.  Mer- 

'"^  Illinois.— KipD  v.  McChesney,  66  rill,  51  Mich.  480,  16  N.  W.  864. 
111.  460. 


§   93]  INCAPACITY   AXD    WANT    OF   AUTHORITY.  113 

one's  own  order,  which,  though  till  indorsement  is  not  a  good  legal  con- 
tract, becomes  such  by  the  indorsement."^^** 

§  93.    Paper  given  in  violation  of  articles  of  partnership. — The 

fact  that  a  note  was  given  in  violation  of  the  articles  of  partnership 
is  no  defense  as  against  a  bona  fide  holder  for  value  and  before  ma- 
turity.^"^  "Whenever  there  are  written  articles  of  agreement  between 
the  partners,  their  power  and  authority,  inter  se,  are  to  be  ascertained 
and  regulated  by  the  terms  and  conditions  of  the  written  stipulations. 
*  *  *  Any  restriction  which,  by  agreement  among  the  partners,  is 
attempted  to  be  enforced  upon  the  authority  which  one  partner  pos- 
sesses, as  a  general  agent  for  the  other,  is  operative  only  between  the 
partners  themselves,  and  does  not  limit  the  authority  as  to  third 
persons,  who  acquire  rights  by  its  exercise,  unless  they  know  that  such 
restrictions  have  been  made."^^^  So  where  a  note  was  given  by  one  of 
the  partners  in  a  firm  name  to  pay  certain  partnership  expenses,  and 
signed  by  him  as  agent,  it  was  decided  in  an  action  thereon  by  a 
bona  fide  holder,  who  had  discounted  the  same,  that  the  partner  had 
the  power  to  make  the  note  in  suit  and  thereby  bind  his  co-partners, 
and  that  the  restriction  on  his  authority  contained  in  an  agreement 
between  the  partners  did  not  affect  the  plaintiff,  as  it  was  not  com- 
municated to  him.^"^  So  the  bona  fide  holder^  for  a  valuable  con- 
sideration, without  notice,  of  a  bill  of  exchange  indorsed  by  one  of 
the  partners  of  a  firm,  may  recover  the  amount  against  all  the  part- 
ners, notwithstanding  the  indorsement  of  the  name  of  the  firm  was 
expressly  prohibited  in  the  articles  of  partnership.^®*  And  though 
partners  may  have  agreed  between  themselves  that  no  member  of  the 
firm  should  indorse  paper  to  make  the  others  liable,  yet  this  will  be 
no  defense  to  an  action  on  such  paper  made  payable  to  the  firm  and 
indorsed  by  one  of  the  partners  in  the  firm  name  to  a  bona  fide  pur- 

^^  Pitcher   v.    Barrows,    17    Pick,  against  third  parties  unless  it  were 

(Mass.)  361,  363,  28  Am.  Dec.  306.  shown    that    such    third    party    had 

^"  Cottana  v.   Smith,   27   La.   Ann.  knowledge  of  that  agreement."   Cot- 

128;    Michigan    Bank    v.    Eldred,    9  tarn  v.  Smith,  27  La.  Ann.  127,  128, 

Wall.  (U.  S.)  544;  Winship  v.  Bank,  per  Taliaferro,  J. 

5  Pet.   (U.  S.)   529;  Hogg  v.  Skeen,  ^"Kimbro  v.  Bullitt,  22  How.   (U. 

34  L.  J.  C.  P.  153.     See  Sandilands  S.)   256,  266,  per  Clifford,  J. 

V.  Marsh,  2  B.  &  A.  678.     "If  by  an  '"  National    Union    Bank   v.   Lan- 

agreement  inter  se,  a  different  rule  don,  66  Barb.  (N.  Y. )  189. 

were     established     by     commercial  ^^  Bank  of  Kentucky  v.  Brooking, 

partners,  it  would  be  without  effect  2  Litt.  (Ky.)  41. 


113       PAPER  EXECUTED   IN   FIRM    NAME   AFTER  DISSOLUTION.        [§'  94 

chaser  for  value. ^^^  In  the  case,  however,  of  an  action  by  an  indorsee 
against  the  members  of  a  firm  on  a  bill  accepted  in  the  name  of  the 
firm,  upon  its  being  proved  that^the  acceptance  was  by  one  of  the 
partners  in  fraud  of  the  partnership  and  contrary  to  the  partnership 
articles,  it  has  been  decided  that  the  burden  rests  on  the  plaintiff  to 
show  that  he  gave  value.^^"  And  the  fact  that  a  note  was  executed  or 
transferred  in  violation  of  the  articles  of  partnership  will  be  a  good 
defense  as  against  a  holder  with  notice.^^^ 

§  94.  Paper  executed  in  firm  name  after  dissolution. — If  after  the 
dissolution  of  a  firm  by  one  or  more  of  the  parties  retiring,  a  bill  or 
note  is  reexecuted  in  the  firm  name  by  the  remaining  partners,  in  the 
usual  course  of  business,  the  retiring  partners  cannot  set  up  in  defense 
to  an  action  thereon  by  a  holder  for  value  and  without  notice  the  fact 
that  the  firm  has  been  dissolved,  as  the  authority  and  obligation  of  the 
partners  continue  until  legal  notice  of  the  dissolution  has  been 
given.398  "Wlien  a  partnership  has  once  existed  the  presumption  is 
that  it  still  exists  until  its  dissolution  is  made  known,  and,  until  this 
is  done,  the  public  have  the  right  to  presume  on  its  continued  ex- 
istence, and  when  a  former  member  contracts  a  debt  in  its  name,  to 
allow  a  retired  member  to  escape  liability  from  its  payment  would  be 
to  allow  the  perpetration  of  a  fraud.  *  *  *  Until  notice  of  the 
dissolution  of  a  firm  is  given,  the  pul)lic,  who  has  no  such  knowledge, 
may  treat  the  firm  as  in  existence,  and  a  note  given  by  one  member 

^  Barrett  v.  Russell,  45  Vt.  43.  Massachusetts.— Goddard  v.  Pratt, 

'""Hogg  V.   Skeen,   34   L.   J.   C.   P.  33  Mass.  (16  Pick.)  412. 

153.      See    Dickson    v.    Primrose,    2  New       Hampshire.— Wagner       v. 

Miles  (Pa.)  366.  Freschl,  56  N.  H.  495. 

="' Monroe  v.  Connor,  15  Me.  179;  New  Yorfc.— Buffalo  City  Bank  v. 

Dickson  v.  Primrose,  2  Miles   (Pa.)  Howard,  35  N.  Y.  500;  Van  Epps  v. 

366;    Gallway    v.    Mathew,    10    East  Dullaye,  6  Barb.   (N.  Y.)  244. 

2^'^-  South      Carolina. — Hammond      v. 

'^^  Connecticut.— Marsh  v.  Wheeler,  Aiken,  3  Rich.  Eq.  (S.  C.)  119. 

77  Conn.  449.  Texas.— Davis  v.   Willis,  47   Tex. 

Georgia.— Ewing  v.  Trippe,  73  Ga.  154. 

'^'^^-  Wisconsin. — Clement   v.    Clement, 

Illinois.— Uoltgr eve    v.    Wuntker,  69  Wis.  599,  35  N.  W.  17,  2  Am.  St. 

85  111.  470.  R.  760. 

Indiana.— Stall  v.  Cassidy,  57  Ind.  New  Yorfc.— Compare  Gale  v.  Mil- 

284.  ler,  54  N.  Y.  536. 

Kentucky.— Merritt  v.    Pollys,   16  Yermon^.— Woodford  v.  Dorwin,  3 

B.  Mon.  (Ky.)  355.  Vt.  82. 

Joyce  Defenses — 8. 


95] 


IXCAPACITY   AND   WAXT   OF   AUTHORITY. 


114 


of  such  firm  is  binding  upon  all  the  other  members,  notwithstanding 
such  dissolution."^^''  So  where,  after  the  dissolution  of  a  partnership, 
a  note  is  given  by  one  of  the  members  in  the  firm  name  in  payment  of 
a  firm  debt  to  one  who  has  had  no  notice  of  the  dissolution,  the  firm 
will  be  held  liable  thereon.*"*'  But  there  can  be  no  recovery  against  a 
firm  on  a  note  given  by  one  of  the  partners  in  the  firm  name  after 
dissolution  where  the  payee  knew  that  it  was  given  for  his  private 
debt,  and  knew  also,  or  what  amounts  to  the  sameothing,  was  charge- 
able with  notice  of  the  dissolution.*"^ 


Subdivision  VI. 

TO  WHOM  DEFENSE  IS   AVAILABLE. 

§  95.  Who  may  set  up  incapacity  or  want  of  authority. — The  mak- 
ers of  a  note  negotiable  imder  the  law  merchant  warrant  the  capacity 
of  the  payee  to  transfer  it  in  the  usual  course  of  business,  and  in  an 
action  by  a  bona  fide  holder  can  not  dispute  the  authority  of  the  payee 
to  accept  and  transfer  the  note  executed  by  them.*°^  The  defendant, 
who  owes  the  debt,  has  no  interest  beyond  the  bona  fides  of  the  holder. 
This  rule  is  declared  to  be  "founded  in  the  most  obvious  dictates 
of  reason  and  sound  policy"  and  one  which  should  be  inflexibly  main- 
tained.*"^ So  the  incapacity  to  contract  of  one  party  to  a  bill  does 
not  determine  the  responsibility  of  the  other  competent  parties  to 
each  other,  or  to  third  parties.*"*  The  rights  of  the  third  parties  do  not 


^^^Ewing-  V.  Trippe,  73  Ga.  776, 
777,  778,  per  Blandford,  J. 

«°  Long  v.  Gamett,  59  Tex.  229. 

^°^  Lansing  v.  Gains,  2  Johns.  (N. 
Y.)  300. 

^""Wolke  v.  Kuhne,  109  Ind.  313, 
10  N.  E.  116  (so  holding  where  a 
note  was  made  payable  to  order  of 
"T.  W.  Wollen,  attorney-general," 
the  words  added  to  the  name  of 
the  payee  being  regarded  as  merely 
descriptive  of  the  person,  and  which 
could  in  no  way  trammel  the  rights 
of  a  bona  fide  holder";  City  Bank 
of  New  Haven  v.  Perkinsi.  29  N.  Y. 


554  (holding  that  defendant  cannot 
question  the  legality  of  the  trans- 
fer of  a  note  to  a  bona  fide  holder, 
nothing  short  of  notice  or  bad  faith 
enabling  a  maker  or  indorser  to  de- 
feat an  action  brought  upon  it  by 
one  who  is  apparently  a  regular  in- 
dorsee or  holder). 

^"^  City  Bank  of  New  Haven  v. 
Perkins,  29  N.  Y.  554.  See  also. 
Gage  V.  Kendall,  15  Wend.  (N.  Y.) 
640. 

'"'Knox  V.  Reside,  1  Miles  (Pa.) 
294.  297.  See  Hennen  v.  Bourgeat, 
12  Rob.  (La.)  522. 


115  TO   WHOM   DEFENSE   IS   AVAILABLE.  [§    95 

depend  in  such  cases  "upon  the  actual  title  or  authority  of  the  party 
with  whom  they  deal  directly,  but  are  derived  from  the  act  of  the  real 
owner,  which  precludes  him  from  disputing,  as  against  them,  the  ex- 
istence of  the  title  or  power,  which,  through  negligence  or  mistaken 
confidence,  he  caused  or  allowed  to  be  vested  in  the  party  making  the 
conveyance.*"^  This  rule  is  based  upon  the  principle  that  when  one 
of  two  innocent  parties  must  suffer  for  the  wrongful  act  of  another 
the  one  who  puts  the  latter  in  a  position  to  do  it  must  be  the  suf- 
ferer.*"® So  this  rule  has  been  applied  in  the  case  of  a  bill  of  ex- 
change, where  it  was  claimed  that  the  paper  was  not  a  bill  of  ex- 
change or  negotiable  because  the  drawee  was  an  officer  of  the  govern- 
ment and  as  such  had  no  authority  to  contract,  and  having  been 
drawn  upon  him  in  his  official  character,  his  acceptance  did  not  affect 
him  personally.*"^  Again,  in  an  action  on  a  note  by  an  assignee 
thereof  for  value  and  without  notice  before  maturity,  the  makers 
cannot  deny  the  existence  of  the  corporation  to  whom  he  has  executed 
such  note  as  payee.*"*  jSTor  can  a  maker  avail  himself  of  the  defense 
that  the  payee  to  whom  he  executed  the  note  is  a  fraudulent  associa- 
tion,*"^ or  that  it  had  no  authority  to  loan  the  money  which  was  the 
consideration  of  the  note.*^"  And  an  indorser  cannot  set  up  against 
the  indorsee  that  the  corporation  made  the  note  in  violation  of  the 
statute,  as  by  the  indorsement  he  has  admitted  the  capacity  of  every 
prior  party  to  the  paper.*"  The  indorser  ordinarily  warrants  by  his 
indorsement  the  existence  of  every  essential  necessary  to  constitute 
the  instrument  a  valid  and  subsisting  obligation.  It  is  a  part  of  his 
contract  that  the  maker  was  competent  to  contract  in  that  form,  and 
he  cannot  escape  liability  on  the  ground  that  the  act  of  the  corpora- 

"^  McNeil  V.  Tenth  Nat.  Bank,  46  tion  is  an  admission  by  the  defend- 
N.  Y.  329,  per  Papallo,  J.;  cited  with  ant  of  the  existence  of  the  corpora- 
approval  in  Lee  v.  Turner,  89  Mo.  tion  and  he  is  not  permitted  to  deny 
489;  International  Bank  v.  German  that  there  is  a  duly  organized  cor- 
Bank,  71  Mo.  195.  poration."     Nashua  Fire  Ins.  Co.  v. 

''*'  Neuhoff  V.  O'Reilly,  93  Mo.  164,  Moore,  55  N.  H.  48,  per  Smith,  J. 

6  S.  W.  78.  ^o"  Reynolds  v.  Roth,  61  Ark.  317, 

^"^Knox  V.  Reside,  1  Miles   (Pa.)  33  S.  W.  105. 

294.  ""  Brown  v.   United   States  Home 

*"' Reynolds  v.  Rath,  61  Ark.  317,  &  D.  Ass'n  (Ky.),  13  S.  W.  1085. 

33    S.    W.    105;     Studebacker    Bros.  "' Glidden     v.     Chamberlain,     167 

Mfg.  Co.  v.  Montgomery,  74  Mo.  101;  Mass.  486,  46  N.  E.  103.     See  Pres- 

First  Nat.  Bank  v.  Gillilan,  72  Mo.  cott  Nat.  Bank  v.  Butler,  157  Mass. 

77;    Camp    v.    Byrne,    41    Mo.    525.  548,  32  N.  E.  909. 
"The  giving  of  a  note  to  a  corpora- 


§    95]  INCAPACITY   AND   WANT   OF   AUTHORITY.  116 

tion  in  issuing  the  paper  was  ultra  vires.*^-  The  maker  of  a  note  is 
only  interested  in  paying  the  same  to  one  who  is  authorized  to  re- 
ceive payment  and  to  discharge  him  from  liability,  and  the  fact  that 
the  transaction  between  corporations,  in  consequence  of  which  a 
note  held  by  one  of  the  corporation  has  been  transferred  to  the  other 
was  unauthorized  by  their  charters,  does  not  constitute  a  defense  by 
the  maker.*^^  Again,  where  a  note  was  payable  to  the  maker's  wife,  or 
bearer,  and  was  indorsed  by  her  in  blank,  it  was  decided  that  the 
maker  could  not  defeat  a  recovery  by  setting  up  in  defense  to  an  ac- 
tion on  the  note  by  a  third  party,  to  whom  it  had  been  transferred, 
that  the  payee  was  his  wife  at  the  time  the  note  was  executed  and 
had  no  separate  estate,  and  that  she  was  incompetent  to  indorse  the 
same.*^*  And  the  acceptor  of  a  bill  of  exchange  payable  to  the  order 
of  the  drawer  cannot  question  the  authority  of  the  drawer  to  draw  or 
indorse  such  bill.*^^  But  where  a  person  has  entered  into  an  unlawful 
contract  for  the  purchase  of  corporate  stock,  and  a  third  party  pur- 
chases such  stock  from  him  and  gives  his  promissory  note,  it  has  been 
decided  that  he  cannot  be  compelled  to  perform  the  contract  and  may 
set  up  in  defense  to  an  action  on  the  note  the  want  of  power  on  the 
part  of  the  directors  to  sell  the  stock.*^^ 

"=  Monarch   v.   Farmers'   &   Drov-  "*Leitner  v.   Miller,    49   Ga.   486. 

ers'  Bank,  105  Ky.  430,  49  S.  W.  317,  See  Ormsbee  v.  Kidder,  48  Vt.  361. 

88  Am.  St.  R.  31.  "^  Halifax  v.  Lyle,  3  Exch.  446. 

"^  Union    Cent.    Life    Ins.    Co.    v.  «» Sturges  v.  Stetson,  1  Bias.  C.  C. 

Ehrman,  2  Wkly.  Law  Bui.   (Ohio)  246,  Fed.  Cas.  No.  13586. 
3.     See  also,  Brown  v.   Donnel,  49 
Me.  421.  77  Am.  Dec.  266. 


CHAPTEE  IV. 


FORGERY. 


Sec. 

96.  General  rule  as  to  forgery. 

97.  Particular  cases  where  forgery- 

no  defense. 

98.  Of  name  of  maker  or  drawer. 

99.  Where     drawee     obligated     to 

know  signature  of  drawer. 


Sec. 

100.  Payment  of  or  by  forged  paper 

— Duty  as  to  notice. 

101.  In  case  of  certified  check. 

102.  Of  name  of  payee. 

103.  By  agent  of  owner. 

104.  To  whom  defense  available. 


§  96.  General  rule  as  to  forgery. — The  fact  that  a  person  is  an  in- 
nocent holder  of  a  forged  bill  Or  note  does  not  render  the  paper  valid, 
nor  does  the  good  faith  of  such  a  holder  confer  upon  him  any  equity 
as  against  the  one  whose  name  is  forged.  And  in  an  action  against 
such  a  person  the  forgery  of  his  name  is  a  good  defense  thereto/ 
unless  he  has  so  acted  in  respect  to  the  instrument  as  to  estop  him 
from  interposing  this  infirmity.^  In  an  action  on  such  an  instrument, 
where  the  defense  of  forgery  is  set  up,  testimony  of  persons  familiar 
with  the  signature  affixed  to  the  instrument  is  admissible  to  show 
that  it  is  not  genuine.*  And  a  disputed  signature  may  be  compared 
with  one  admitted  to  be  genuine  for  the  purpose  of  aiding  in  the  de- 
termination of  the  question  whether  the  signature  in  dispute  is  genu- 
ine or  not.^  So  the  use  of  an  admittedly  genuine  lead-pencil  signa- 
ture as  a  standard  of  comparison,  where  the  genuineness  of  a  signa- 


^Ehrler  v.  Braun,  120  111.  503,  12 
N.  E.  996.  "If  forged  no  amount 
of  good  faith  would  profit  the 
holder,  who  has  no  equity  against 
the  party  whose  name  is  forged," 
per  Campbell,  J.,  in  Camp  v.  Car- 
penter, 52  Mich.  375,  379,  18  N.  W. 
113.  "A  forged  bill  or  note  derives 
no  validity  from  being  passed  to  an 
innocent  holder,"  per  Denio,  C.  J., 
in  Farmers'  &  Mechanics'  Bank  v. 
Butchers'  &  Drovers'  Bank,  14  N.  Y. 
626.     "The  loss  resulting  from  the 


act  of  forgery  must  fall  upon  the 
purchaser  of  forged  paper,"  per 
Young,  J.,  in  Porter  v.  Hardy,  10 
N.  D.  551,  88  N.  W.  461.  See  Ha- 
vorka  v.  Hemmer,  108  111.  App.  443; 
Coflan  V.  Anderson,  4  Blackf.  (Ind.) 
395. 

^Ehrler  v.  Braun,  120  111.  503,  507, 
12  N.  E.  996. 

*  Ellis  V.  Watkins,  73  Vt.  371,  50 
Atl.  1105. 

"  Tyler  v.  Todd,  36  Conn.  218. 


117 


§§■   97,    98]  PORGERY.  118 

ture  is  in  dispute,  is  proper.®  So  it  has  been  held  proper  to  admit  en- 
larged photographs  of  the  signature  in  contest  and  of  admittedly 
genuine  ones,  after  proof  by  the  photographer  of  their  accuracy,  this 
being  declared  to  be  merely  a  more  enduring  form  of  showing  the  sig- 
natures to  the  jury  as  under  a  magnifying  glass.'^  The  question  as  to 
the  genuineness  of  a  signature  which  is  in  dispute  is  one  for  the 
jury.^  Again,  the  fact  that  in  an  affidavit  of  defense  there  is  an 
allegation  of  forgery  does  not  change  the  rule  of  law  that  forgery  is 
a  matter  of  defense,  and  it  is  not  required  in  the  first  instance  to  be 
disproved  by  the  plaintiff.^ 

§  97.  Particular  cases  when  forgery  no  defense. — Where  one  exe- 
cutes a  note  to  a  bank  as  security  with  a  guarantee  indorsed  thereon 
by  another  of  the  payment  of  notes  of  third  persons,  which  are  de- 
posited by  him  in  and  discounted  by  the  bank,  neither  the  maker  of 
the  note  nor  the  guarantor  can  avail  himself,  as  a  defense,  of  the  fact 
that  some  of  the  notes  so  deposited  and  discounted  were  forged. ^°  So 
an  action  on  a  note  by  an  assignee,  who  occupies  the  position  of  a 
hona  fide  holder,  cannot  be  defeated  by  the  fact  that  an  assignment 
of  a  forged  note  by  the  payee  to  the  maker  of  the  note  in  controversy 
was  the  consideration  for  such  note.^^  And  it  is  not  a  defense  to  one 
note  that  the  person  who  presents  it  has  forged  another  note,  or  that 
his  general  character  is  bad.^- 

§  98.  Of  name  of  maker  or  drawer. — In  an  action  against  the 
maker  or  drawer  of  an  instrument  it  is  a  good  defense  thereto  that  the 
signature  which  purports  to  be  that  of  such  maker  or  drawer  is  in  fact 
a  forgery. ^^  This  defense  is  as  available  against  a  suit  by  an  assignee 
before  maturity  as  against  the  payee. ^^  And  where  the  name  of  the 
former  owner  of  land  is  signed  to  notes  which  purport  to  reserve  a 
vendor's  lien  on  the  land,  if  it  is  shown  that  the  notes  are  forged 

« Groff  V.  Groff,  209  Pa.  St.  603,  59  "  McCauley   v.    Murdock,    97    Ind. 

Atl.  65.  229. 

^  First  National  Bank  v.  Wisdom's  "  Dodge   v.    Haskell,    69    Me.    429. 

Exrs.,  23  Ky.  Law  Rep.  530,  536,  63  See  Patton  v.  Lund,  114  Iowa  201, 

S.  W.  461.  86  N.  W.  296. 

« Groff  v.  Groff   (Pa.  S.  C.  1904),  "  Caulkins    v.    Whisler,    29    Iowa 

59  Atl.  65.  495.      See    Mersman    v.    Werges,    3 

•Towles  v.  Tanner,  21  App.  D.  C.  Fed.  378;  Mechanics'  Bank  v.  Wood- 

530,  543.  ward,  74  Conn.  689,  51  Atl.  1084. 

^^  Pennsylvania  Trust  Co.  v.  Mc-  "  Miers  v.  Coates,  57  111.  App.  216. 
Elroy,  112  Fed.  509,  50  C.  C.  A.  371. 


I 


119  DRAWEE   OBLIGATED  TO   KNOW   SIGNATURE   OF  DRAWER.     [§    99 

no  lien  will  be  created.^^  And  as  the  law  prescribes  the  method  in 
which  school  bonds  are  to  be  issued  and  the  powers  of  the  officers  to 
issue  the  same,  a  school  district  will  not  be  liable  on  such  bonds 
where  they  are  fraudulently  issued,  with  forged  signatures  affixed 
thereto,  even  though  they  are  in  the  hands  of  an  innocent  holder. 
It  was  declared  by  the  court  in  one  case:  "It  may  be  said  that  the 
bonds  being  negotiable  and  having  passed  into  the  hands  of  lona 
fide  purchasers  for  value  the  district  is  bound  by  the  recitals  therein. 
It  is  sufficient  answer  to  this  objection  to  say  that  while  lona  -fide 
purchasers  are  protected  against  equities  between  the  parties  they  are 
not  protected  against  a  want  of  power  to  execute."^*^  Again,  where  a 
note  purporting  to  be  that  of  an  incorporated  banking  company  was 
is^Sued  after  the  cashier  had  signed  it,  but  before  the  signature  of  the 
president  was  affixed,  as  required  by  law  to  render  it  binding,  and  the 
signature  of  the  latter  officer  was  forged  thereto,  the  company  was 
held  not  liable  on  the  instrument.^^ 

§  99.    Where  drawee  obligated  to  know  signature  of  drawer. — It  is 

incumbent  upon  a  drawee  to  know  the  signature  of  a  drawer,  and  in 
the  absence  of  any  fraud  a  drawee  cannot  recover  back  money  paid 
by  him  on  his  acceptance  of  an  instrument  to  which  the  drawer's 
name  is  forged.^®  So  it  was  said  by  Lord  Mansfield  in  an  early  case : 
"It  can  never  be  thought  unconscientious  in  the  defendant  to  retain 
this  money  when  he  has  once  received  it  upon  a  bill  of  exchange 
indorsed  to  him  for  a  fair  and  valuable  consideration,  which  he  had 
bona  fide  paid  without  the  least  privity  or  suspicion  of  the  forgery. 
Here  was  no  fraud,  no  wrong.  It  was  incumbent  upon  the  plaintiff 
to  be  satisfied  that  the  bill  drawn  upon  him  was  the  drawer's  hand 
before  he  accepted  or  paid  it,  but  it  was  not  incumbent  on  the  defend- 
ant to  inquire  into  it.""  So  a  bank  is  obligated  to  knov.^  the  signatures 

"Neal  V.  Parker    (Tenn.),   62   S.  court:     "The    rule    is    well    settled 

W.  170.  that  the  drawee  of  a  check  is  bound, 

"  State  V.  School  District,  10  Neb.  at  his  peril,  to  know  the  handwrit- 

544,  7  N.  W.  315,  per  Maxwell,  C.  J.  ing  of  the  drawer;   and  if  he  pays 

"  Salem  Bank  v.  Gloucester  Bank,  a  check  to  which  the  signature  of 

17  Mass.  1.  the    drawer    was   forged,    he    must 

^'  Price  V.  Neal,  3  Burr  1354.     See  suffer  the  loss,  as  between  himself 

also,  McCall  v.  Corning,  3  La.  Ann.  and    the    drawer,    or    an    innocent. 

409,  48  Am.  Dec.  454.  holder,  to  whom  he  has  made  pay- 

"  Price  V.  Neal,  3  Burr  1354.     In  ment.     As  between  himself  and  the 

Redington  v.  Woods,  45  Cal.  406,  13  drawer,  he  undertakes  that  he  will 

Am.  Rep.  19,  it  was  also  said  by  the  pay  no  checks  except  such  as  have 


§    100]  FORGERY.  120 

of  those  whose  money  it  receives  upon  deposit,  and  if  it  pays  a  forged 
check  the  loss  must  fall  upon  the  bank  and  not  upon  the  one  to  whom 
the  money  has  been  paid,  the  latter  having  acted  in  good  faith  and 
without  notice  of  the  forgery.^"  So  where  an  acceptance  was  forged, 
and  the  bankers  of  the  acceptor,  where  the  bill  was  payable,  paid  the 
bill  at  maturity  to  a  holder  for  value,  and  the  forgery  was  discovered 
about  a  month  after,  when  notice  was  given  to  the  defendant,  it  was 
decided  that  the  bankers  were  not  entitled  to  recover  the  money  so 
paid.^^  And  where  a  consignor  drew  a  bill  of  exchange  on  his  con- 
signee with  a  forged  bill  of  lading  attached,  and  had  the  drafts  dis- 
counted by  a  bank,  ignorant  of  the  fraud,  and  the  drafts  were  ac- 
cepted and  paid  by  the  consignee  in  accordance  with  the  ordinary 
custom  between  the  consignor  and  consignee,  it  was  decided  that  the 
latter  had  no  recourse  against  the  bank.-^ 

§  100.     Payment  of  or  by  forged  paper — Duty  as  to  notice. — One 

who  has  made  a  payment  on  a  forged  bill  or  note  may  forfeit  any 
right  which  he  possesses  to  recover  such  payment  by  a  failure  to  give 
a  notice  until  after  an  unreasonable  period  of  time  has  elapsed  after 
his  discovery  of  the  forgery.^^  And  a  bank  which  has  paid  a  check 
on  the  forged  indorsement  of  the  name  of  the  payee  may  be  relieved 
from  liability  to  the  maker  by  a  failure  to  give  notice  within  a 
reasonable  time  after  it  has  learned  that  such  indorsement  was 
forged.  So  where  the  drawer  of  a  check  waited  for  over  a  month 
after  knowledge  of  the  fact  that  it  had  been  paid  on  a  forged  indorse- 

the      genuine     signature      of      the  of  such  payment,  has  parted   with 

drawer,  which  he  assumes  to  know;  his  own  money  or  been  placed  in  a 

and,   as  he  is  presumed   to  be   ac-  worse  position  than  he  would  have 

quainted  with  the  signature,  he  will  been    but   for   such    payment,"    per 

not  be  allowed  to  recover  the  money  Miller,  J.,   in   Commercial   Bank  v. 

back  from  an  innocent  holder,  who  First    National    Bank,    30    Md.    11. 

is  not  presumed  to  have  such  knowl-  See  also,  Bernheimer  v.  Marshall,  2 

edge."  Minn.    78;    Bank    of    St.    Albans   v. 

^°  "A  bank  which  receives  money  Farmers'  &  Merchants'  Bk.,  10  Vt. 

on  deposit  and  hence  derives  profit  141;  Smith  v.  Mercer,  6  Taunt.  76. 

is  justly  held   to  the  obligation  to  ^  Smith  v.  Mercer,  6  Taunt.  76. 

know  the  signature  of  its  depositors  -  Hoffman  v.  Bank  of  Milwaukee, 

to  their  checks,  and   if  it  pays  in  12  Wall.   (U.  S.)  181,  20  L.  Ed.  366. 

mistake  a  forged  check  there  is  no  ^  Redington  v.  Woods,  45  Cal.  406, 

reason     why     the    loss     should     be  13  Am.  Rep.  190;    Continental  Nat. 

shifted    to    another    innocent    party  Bank    v.    Metropolitan    Nat.    Bank, 

upon  whom  the  law  casts  no  such  107    111.   App.   455.      See  Thomas  v. 

obligation,  and  who,  upon  the  faith  Todd,  6  Hill  (N.  Y.)   340.    See  also. 

Ford  &  Co.  V.  People's  Bank,  74  S.  C. 

ISO,  54  S.  E.  204. 


121  CERTIFIED   CHECKS.  [§    101 

ment  before  it  gave  notice  to  the  bank  of  Bueh  fact,  and  that  it  in- 
tended to  hold  the  bank  liable,  it  was  decided  that  this  was  an  unrea- 
sonable time  to  wait  and  that  the  bank  was  released  from  liability, 
as  notice  should  have  been  given  without  unnecessary  delay  so  as  to 
enable  the  bank  to  pursue  any  remedy  it  might  have  against  the 
forger  or  indorsers.^*  This  duty  to  give  notice  in  either  case  does  not 
mean  that  notice  must  be  given  on  the  very  day  of  payment,  but  does 
require  notice  promptly,  according  to  the  circumstances  and  usage 
of  the  business.^^  So  it  has  been  decided  that  where  forged  checks 
are  paid  by  a  bank,  charged  to  the  depositor's  account,  and  returned 
to  him,  he  need  not  examine  the  vouchers  at  once  so  as  to  discover 
fraud.  Only  reasonable  care  is  required,  and  if  this  is  exercised  by 
him  or  his  agent  the  bank  cannot  complain,  though  it  is  too  late  when 
the  forgery  is  discovered  to  enable  it  to  retrieve  its  position  or  make 
reclamation  from  the  forger.^®  So  where  a  bank  without  instructions 
paid  a  forged  acceptance  and  sent  the  same  to  the  firm  whose  name 
was  forged  as  acceptor,  it  was  decided  that  there  was  no  legal  obliga- 
tion on  the  firm  to  examine  such  acceptance  immediately  upon  its 
reception  for  the  purpose  of  ascertaining  if  it  was  genuine,  that  the 
firm  was  not  guilty  of  negligence  in  not  discovering  the  forgery  at 
once,  and  that  notice  of  the  forgery,  when  discovered,  was  sufficient.^^ 
Again,  where  one  pays  out  a  counterfeit  bill  in  good  faith  it  has  been 
decided  that  he  is  not  obligated  to  receive  it  back  unless  it  is  returned 
within  a  reasonable  time  after  it  is  discovered  to  be  spurious.^^  So 
where  a  bank  note  was  delivered  to  a  party  as  payment  and  it  was 
believed  by  both  parties  to  be  genuine,  but  it  was  discovered  to  be  a 
counterfeit  by  the  creditor  at  about  the  same  time  as  he  received  it, 
he  was  held  to  have  lost  his  remedy  by  failing  to  make  an  offer  to 
return  it  for  about  two  months.^^  What  is  reasonable  diligence  in 
giving  notice  of  forgery  after  its  discovery  is  a  question  of  fact  under 
the  circumstances  of  each  particular  case.^" 

§  101.     In  case  of  certified  checks. — ^Mierc  a  bank  certifies  a  check 

=*  United    States    v.    National    Ex-  ='  Simms  v.  Clark,  11  111.  137. 

change  Bank,  45  Fed.  163.  -'Thomas  v.  Todd,  6  Hill   (N.  Y.) 

"=  Iron  City  Nat.  Bank  v.  Fort  Pitt  340. 

Nat.   Bank,   159   Pa.   St.   46,   28   Atl.  ="  Continental    Nat.    Bank    v.    Met- 

195,  23  L.  R.  A.  615.    See  Murphy  v.  ropolitan   Nat.   Bank,    107    111.    App. 

Metropolitan   Nat.   Bank,    191   Mass.  455.     See    Kearny    v.     Metropolitan 

159,  77  N.  E.  693.  Trust   Co.,    110    App.    Div.    (N.    Y.) 

="  Frank  v.  Bank,  84  N.  Y.  209.  236,  97  N.  Y.  Supp.  274. 

"  First  National  Bank  v.  Tappan, 
6  Kan.  456,  7  Am.  Rep.  568. 


g'   103]  fORGERY.  123 

drawn  upon  it  as  good,  and  in  the  ordinary  course  of  business  such 
check  comes  into  the  hands  of  a  third  person,  who  takes  it  in  good 
faith  and  for  value,  it  is  no  defense  to  an  action  against  the  bank 
that  the  check  was  forged,  as  the  bank  is  liable  to  make  good  its  certi- 
fication by  paying  the  check.^^ 

§  102.  Of  name  of  payee. — The  forgery  of  the  name  of  a  payee  of 
a  bill  or  note  is  a  good  defense  to  an  action  against  him  even  by  a 
bona  fide  holder,32  as  no  title  can  be  acquired  by  such  indorsement.^^ 
An  action  can  only  be  maintained  on  notes  or  obligations  by  those 
in  whom  the  legal  title  is  vested,  and  to  divest  a  person,  to  whom  such 
an  instrument  is  made  payable,  of  his  title  a  transfer  from  him  or 
his  indorsement  is  necessary.^*  So  it  is  said  in  a  case  in  Iowa  that: 
"Where  a  person  has  obtained  possession  of  a  promissory  note  belong- 
ing to  another  person,  and  without  authority  undertakes  to  transfer 
it  by  indorsing  it  in  the  name  of  the  owner,  we  think  that  neither  the 
person  whose  name  is  thus  wrongfully  used,  nor  the  wrongdoer, 
would  become  liable  to  the  transferee  upon  the  note.  The  transferee 
would  acquire  no  title  to  it."^^  So  where  one  personated  another 
and  received  a  letter  addressed  to  the  latter,  which  contained  a  check, 
and  forged  the  indorsement  of  the  payee,  it  was  decided  that  the 
forgery  was  a  good  defense  even  as  against  a  bona  fide  holder,  as  no 
title  passed  by  the  forgery,  and  also  because  defendants  remained  re- 
sponsible upon  the  check  to  the  real  payee.^^  Again,  a  check  drawn 
in  favor  of  a  particular  payee  or  order,  is  payable  only  to  the  actual 

^1  Hagen      v.      Bowery      National  883,    overruling,    Duke    v.    Hall,    9 

Bank,  64  Barb.  (N.  Y.)  197,  6  Lans.  Baxt.   (Tenn.)  282. 

490;     citing    Commercial    Bank    v.  ^^  Kohn  v.  Watkins,  26  Kan.  691, 

First    National    Bank,    30    Md.    11;  40  Am.  Rep.  336;  Buckley  v.  Second 

Farmers'     &     Mechanics'     Bank    v.  National  Bank,  35  N.  J.  L.  400,  10 

Butchers'  &  Drovers'  Bank,  26  How.  Am.  Rep.   249;    Gilbert  v.   Sharp,   2 

Pr.  (N.  Y.)  1;  Price  v.  Neal,  3  Burr.  Lans.    (N.  Y.)    412;    Palm  v.  Watt, 

1354.  7  Hun   (N.  Y.)   317;   Terry  v.  Allis, 

==  Citizens'  State  Bank  v.  Adams,  16  Wis.  478. 

91   Ind.   280;    Woodruff  v.   Munroe,  '' Foltier    v.     Schroeder,     19     La. 

33    Md.    146;    Union    Sav.    Ass'n    v.  Ann.  17,  92  Am.  Dec.  521. 

Diebold,  1  Mo.  App.  323;  McCarville  ==  Thorpe  v.  Dickey,  51  Iowa  676, 

v.  Lynch,  14  Misc.    (N.  Y.)    174,  35  2  N.  W.  581,  per  Adams,  J. 

N.  Y.  Supp.  383.     See  also,  Kibby's  '"Palm  v.   Watt,   7   Hun    (N.   Y.) 

Admr.    v.    Kibby,    Wright     (Ohio)  317.       See    Rowe    v.    Putnam,     131 

607;    Roach   v.    Woodall,    91    Tenn.  Mass.  281,  holding  forgery  of  name 

206,   18   S.   W.   407,  30  Am.    St.   R.  of    payee    a    defense   in    an    action 

against  the  maker. 


123  TO   WHOM   DEFENSE   AVAILABLE.  [§§    103,    104 

payee,  or  upon  his  genuine  indorsement;  and  if  the  bank  mistake 
the  identity  of  the  payee,  or  pay  upon  a  forged  indorsement,  it  is  not 
a  payment  in  pursuance  of  authority,  and  it  will  be  responsible.^^ 
But  where  the  maker  of  a  note  payable  to  a  real  person  forges  the  in- 
dorsement of  such  person,  or  procures  it  to  be  done,  and  puts  the 
note  into  circulation,  he  is  estopped  from  denying  that  the  indorse- 
ment is  genuine.^^  And  it  has  been  determined  that  a  maker  or  prior 
indorser  of  a  note  is  not  relieved  from  liability  thereon  by  the  addi- 
tion of  a  forged  name  of  another  as  a  subsequent  indorser.^'' 

§  103.  By  agent  of  owner. — Where  a  note  is  indorsed  by  an  agent 
of  the  payee,  in  the  latter's  name,  without  any  actual  or  apparent 
authority  to  so  act,  the  one  so  taking,  though  for  value  and  without  no- 
tice, acquires  no  valid  legal  title  thereto  and  does  not  become  a  bona 
-fide  holder,  in  the  sense  of  that  term.  Nor  in  such  a  case  does  a  rati- 
fication of  the  indorsement  by  the  payee  after  the  commencement  of 
an  action  by  the  indorsee  relate  back  so  as  to  cut  off  a  defense  on  the 
merits.  Under  such  circumstances  the  note  is  subject  to  defenses  ex- 
isting between  the  original  parties.**^ 

§  104.  To  whom  defense  available. — In  an  action  by  a  payee 
against  one  who  has  signed  a  note  as  surety  it  is  no  defense  thereto 
that  the  name  of  one  or  more  of  the  obligors  on  such  instrument  has 
been  forged,  though  the  surety  signed  the  same  in  the  belief  that  the 
signatures  were  genuine,  where  it  appears  that  the  instrument  was 

^'  Pickle  V.  Muse,  88  Tenn.  381,  12  added,    though    in    form    that   of   a 

S.  W.  919,  17  St.  R.  900,  7  L.  R.  A.  joint  promissor,  is  in  fact  that  of  a 

93.     See  Chism  v.   Bank,  96   Tenn.  surety  or  guarantor  only,  the  orig- 

641,  36  S.  W.  387,  54  Am.  St.  R.  863,  inal   maker   is   as   between   himself 

32    L.    R.    A.    778;    First    National  and  the  surety  exclusively  liable  for 

Bank  v.   Whitmore,   94   U.   S.   343;  the  whole  amount  and  his  ultimate 

Buckley  v.  Bank,  35   N.  J.  L.  400;  liability  to  pay  is  neither  increased 

Talbot  V.  Bank  of  Rochester,  1  Hill  nor    diminished,    and    according    to 

(N.  Y.)   295.  the  general  current  of  American  au- 

^' Meacher  v.  Fort,  3  Hill  L.    (S.  thorities  the  addition  of  the  name 

C.)  227,  30  Am.  Dec.  364.     See  York  of  a  surety,  whether  before  or  after 

Bank     v.     Asbury,     Fed.     Cas.     No.  first  negotiation    of   the   note,   does 

18142,  1  Biss.  C.  C.  233.  not  discharge  the  maker.     Per  Mr. 

'°  Produce  Exch.  Trust  Co.  v.  Bie-  Justice  Gray.     As  to   alteration   by 

berbach,    176    Mass.    577,    58    N.    E.  addition  of  names,  see  §  174,  herein. 

162.     See   Meisman  v.   Werges,   112  ^"Gilbert  v.    Sharp,    2   Lans.    (N. 

U.  S.  139,   28  L.   Ed.   641   declaring  Y.)   412. 
that  where   a   forged   signature   is 


§    104]  FORGERY.  124 

accepted  by  the  payee  without  notice  of  the  forgery.*^  And  it  is  no 
defense  to  an  action  against  an  indorser  of  an  instrument  by  his  in- 
dorsee or  a  bona  fide  holder  that  an  indorsement  previous  to  that  of 
the  defendant  was  a  forgery/^  as  an  indorsee  by  his  indorsement 
warrants  the  genuineness  of  the  prior  indorsements  and  that  the  in- 
strument is  the  valid  one  it  purports  to  be.*^  So  in  a  case  in  Louisi- 
ana, in  which  this  question  was  considered,  the  court  said:  "The  de- 
fense relied  on  is,  that  a  previous  indorsement  on  the  note  was  not 
genuine,  but  a  forgery  committed  by  the  drawer  himself,  and  that  the 
note  was  indorsed  by  the  defendant  through  error,  he  believing  the 
previous  indorsement  to  be  genuine.  *  *  *  We  are  of  opinion 
that  he  is  not  entitled  to  be  relieved  on  the  ground  of  error  or  fraud 
without  showing  that  such  error  was  caused  by  the  plaintiff  or  that  he 
participated  in  the  fraud.  Such  in  substance  -was  the  charge  of  the 
judge  on  the  trial  in  the  first  instance,  and  we  think  it  correct. 
*  *  *  The  plaintiff  took  the  note  on  the  credit  of  the  defendant's 
indorsement  and  no  privity  is  shown  between  the  plaintiff  and  the 
drawer  in  relation  to  the  forgery.  Whether  the  indorsement  was  for 
the  accommodation  of  the  maker,  or  in  the  regular  course  of  business, 
is,  in  our  opinion,  immaterial.  Every  indorsement  is  essentially  an 
original'  contract,  equivalent  to  the  drawing  of  a  new  bill  in  favor  of 
the  holder,  on  the  acceptor  or  obligor.  The  obligation  of  the  indorser 
is,  that  if  the  obligor  or  acceptor  does  not  pay  at  maturity,  he  will 
pay  on  due  notice  of  the  dishonor  of  the  bill.  The  forgery  of  a  pre- 
vious indorsement  does  not  release  him  from  that  obligation  towards 
a  bona  fide  holder,  who  took  the  note  on  the  credit  of  his  indorsement. 
The  doctrine  on  this  subject  appears  well  settled."** 

"Wayne  Agricultural  Co.  v.  Card-  ^^ Olivier    v.    Andry,    7    La.    496; 

well,  73  Ind.  555;   Helms  v.  Wayne  Rambo    v.    Metz,    5    Strob.    (S.    C.) 

Agricultural  Co.,  73  Ind.  325,  38  Am.  108. 

Rep.     147.       See     Second     National  **  Cochran    v.    Atchison,    27    Kan. 

Bank  v.  Hewitt,  59  N.  J.  L.  57,  34  728. 

Atl.  988.  *^  Olivier  v.  Andry,  7  La.  496,  per 

Bullard,  J. 


II 


CHAPTER  V. 


DURESS. 


Sec. 

105.  General  rule  as  to  duress. 

106.  Equity  may  decree  cancellation. 

107.  What   does  not   constitute    du- 

ress. 

108.  Where  procured  from  one  un- 

der    illegal     arrest     or     re- 
straint. 

109.  By  abuse  of  legal  process. 

110.  Effect  of  threat  to  lawfully  in- 

voke legal  process. 


Sec. 

111.  Giving    of    paper    indorsed    by 

fear  of  violence. 

112.  Threatened    criminal    prosecu- 

tion and  imprisonment  as  in-? 
ducing. 

113.  Availability  of  as  between  par- 

ties. 

114.  Same    subject — Against    subse- 

quent parties. 

115.  Same  subject — Parties  with  no- 

tice. 


§  105.  General  rule  as  to  duress. — Consent  is  one  of  the  ordinary 
requisites  to  a  valid  contract  and  it  is«essential  as  between  the  parties 
that  it  should  be  voluntarily  given.  This  principle  applies  in  the  case 
of  bills  and  notes,  and  it  is  therefore  in  many  cases  a  good  defense 
to  an  action  on  such  an  obligation  to  show  that  it  was  executed  under 
duress.^  The  common-law  strictness  as  to  what  duress  would  avoid 
a  contract  has  been  much  relaxed  in  modern  times,  especially  in 
American  courts,  upon  the  principle  that  the  very  essence  of  a  contract 
is  the  agreement  of  the  minds  entering  into  it.  A  mind  constrained 
by  fear  cannot  be  said  to  have  agreed.^  As  showing  that  the  courts 
are  not  holding  to  the  strict  rule  of  the  common  law  as  to  what  is 
necessary  to  constitute  duress  which  will  avoid  a  contract  the  follow- 
ing quotation  from  a  recent  case  in  Nebraska  is  pertinent.  It  is  here 
said :  "This  state  has  already  taken  its  position  in  line  with  the  more 
advanced  position  upon  this  subject.  *  *  *  rpQ  constitute  duress 
sufficient   to   avoid    a    contract   in    this    state,    the   means    adopted 

'  Georgia.— What    v.    Blount,    124     Lin  v,   Marshall,   1   Heisk.    (Tenn.) 

678.      See     French    v.     Talbot,     100 
Mich.  443,  59  N.  W.  166. 

=  Coffelt  v.  Wise,  62  Ind.  451,  per 
Biddle,  J.;  Phelps  v.  Zuschlag,  34 
Tex.  371. 


Ga.  671,  53  S.  E.  205.  Iowa.— Veach 
V.  Thompson,  15  Iowa -380.  Ken- 
tucky.— Hall  V.  Commonwealth  Bank, 
5  Dana  (Ky.)  258,  30  Am.  Dec.  685. 
New  York. — Mills  v.  Young,  23 
Wend.  (N.  Y.)  314.    Tennessee.— Mc- 


125 


§   106]  DURESS.  126 

need  only  be  of  a  character  necessary  to  overcome  the  will  and  desire 
of  the  injured  party,  whether  that  person  be  above  or  below  the  aver- 
age person  in  firmness  and  courage,  and  whether  the  means  employed 
come  clearly  within  the  common-law  definition  of  duress  or  otherwise. 
In  other  words,  the  law  extends  its  protection  to  the  individual  with- 
out reference  to  whether  he  is  strong  or  weak  intellectually,  and  re- 
fuses to  measure  his  rights  by  an  arbitrary  yardstick  avowedly  ap- 
plicable only  to  men  of  ordinary  intellect,  firmness  and  courage. 
Under  this  view  of  the  law  the  jury  is  properly  directed  to  inquire 
into  the  mental  capacity  of  the  defendant,  and  whether  the  threats, 
whatever  they  were,  probably  deprived  him  of  his  free  will,  inducing 
him  to  make  a  contract  that  he  would  not  otherwise  have  made 
rather  than  to  the  particular  threats,  made  to  see  whether  they  meet 
with  an  arbitrary  standard,  which  may  or  may  not  be  applicable  to 
the  person  injured."^  This  defense  is  available  though  there  may  be 
some  consideration  to  support  the  instrument.^*  And  it  is  decided  that 
the  fact  that  the  defendant  did  not  act  as  a  reasonable  man  in  resist- 
ing the  coercion  exercised  upon  him  will  not  prevent  him  from 
setting  up  the  defense  of  duress  in  such  a  case  though  it  might  be  a 
circumstance  from  which  the  jury  might  find  he  did  not  yield  and 
sign  the  note  on  that  account.*  Where  a  person  relies  upon  duress 
as  a  defense  to  an  action  on  such  an  instrument  it  is  held  that  facts 
sufficient  to  show  duress  should  be  pleaded.** 

§  106.  Equity  may  decree  cancellation. — Wliere  it  clearly  appears 
that  a  bill  or  note  has  been  given  by  a  person  while  imder  duress  a 
court  of  equity  may  decree  that  the  obligation  so  given  shall  be  can- 
celled.^ So  where  a  mother  executed  and  gave  a  note  to  the  employer  of 
her  son,  the  latter  having  embezzled  money  from  the  former,  and  it 
appeared,  to  the  satisfaction  of  the  court,  that  the  motive  controlling 
the  mother's  action  was  to  protect  her  son  from  prosecution,  it  was 

^  Nebraska    Mut.    Bond    Ass'n    v.  ^  Overstreet  v.  Dunlap,  56  111.  App. 

Klee  (Neb.  1903),  97  N.  W.  476,  478,  486. 

per  Kirkpatrick,  C,  citing  First  Na-  '*  Bond  v.  Kidd   (Ga.  1905),  50  S. 

tlonal  Bank  v.  Sargent,  65  Neb.  594,  E.  934. 

91  N.  W.  595,  59  L.  R.  A.  296;  Galu-  '  McLln     v.     Marshall,     1     Heisk. 

sha  V.  Sherman,  105  Wis.  263,  81  N.  (Tenn.)  678.    See  White  v.  Rasines, 

W.  495.  501,  47  L.  R.  A.  417.  21  N.  Y.  Supp.  243,  66  Hun   (N.  Y.) 

=*  Magoon  v.  Reber,  76  Wis.  392,  633  mem.,  citing  with  approval  Sis- 

49  N.  W.  112.  tare  v.    Hecksher,   18    N.   Y.    Supp. 

475,  63  Hun  (N.  Y.)  634  mem. 


I 


127  WHAT   DOES    NOT    CONSTITUTE   DURESS.  [§    107 

held  that,  as  the  evidence  showed  that  she  did  not  act  of  her  own  free 
will,  the  note  should  be  cancelled.*^  And  it  was  likewise  so  held  where, 
under  similar  circumstances,  a  note  was  given  by  a  father  to  take  up 
forged  notes  executed  by  his  son.'^ 

§  107.  What  does  not  constitute  duress. — In  an  action  against  a 
wife  on  a  note  signed  by  her  it  is  no  defense  that  she  was  induced  to 
execute  the  same  by  a  threat  of  suicide  made  by  her  husband,  as  this 
does  not  constitute  duress  within  the  meaning  of  that  term,®  Nor 
does  the  fact  that  a  note  was  signed  under  protest  constitute  a  de- 
fense."* Nor  can  recovery  be  defeated  on  the  ground  of  duress  by  the 
fact  that  the  defendant  was  coerced  into  the  performance  of  his 
duty.^"  And  a  threat  by  one  to  remove  property  in  the  assertion  of  a 
claim  that  he  is  the  owner  thereof  has  been  held  no  defense  to  an  ac- 
tion on  a  note  given  to  compromise  such  claim.^^  And  duress  has 
been  held  not  established  by  evidence  that  a  wife  executed  notes 
through  fear  of  her  husband,  it  not  appearing  that  she  was  ever  threat- 
ened by  him  in  regard  to  the  notes,  or  even  requested  by  him  to 
execute  the  same,  and  that  she  subsequenth^  wrote  a  letter,  not 
claimed  to  have  been  dictated  by  fear,  recognizing  her  husband's 
interest  in  the  note  and  expressing  a  desire  not  to  disturb  such 
interest.^-  Nor  does  a  refusal  by  a  party  to  a  contract  to  perform  his 
part  thereof  and  the  exaction  of  a  larger  amount  than  the  contract 
designates  for  the  doing  of  the  acts  specified  therein,  though  he 
thereby  takes  advantage  of  the  necessities  of  the  other  party,  con- 
stitute duress  which  will  defeat  recovery  on  a  note  executed  on  the 
basis  of  the  new  demand.  Thus  it  was  so  held  where  a  party  refused 
to  supply  ice  on  the  basis  of  the  contract  and  demanded  an  increased 
price,  which  the  other  party  to  the  contract  accepted  and  gave  his  note 
therefor.^  ^ 

"Foley  V.  Greene,  14  R.  I.  618,  51  a  duty  which  devolved  upon  the  de- 
Am.  Rep.  419.  fendant. 

'  Coffman  v.  Lookout  Bank,  5  Lea  "  Heysham   v.    Oeltre,    89    Pa.    St. 

(Tenn.)  232,  40  Am.  Rep.  31.  506. 

^Remington   v.   Wright,   43    N.   J.  ^=  Gillespie  v.  Simpson   (Ark.),  18 

L.  451;  Wright  v.  Remington,  41  N.  S.  W.  1050. 

J.  L.  48,  32  Am.  Rep.  180.  i=  Goebel  v.  Linn,  47  Mich.  489,  11 

*  Jacoby  v.  Ross,  12  Mo.  App.  577.  N.  W.   284,  41  Am.  Rep.  723.     The 

*"  Smith  V.  Paris,  70  Mo.  615  so  court  said  in  this  case:  "The  de- 
holding  where  the  effect  of  coercion  fense  is  *  *  *  that  a  note  for  a 
was  to   hasten   the  performance  of  .sum  greater  than  the  contract  price 

has    been    extorted    under    circum- 


§■  108] 


DURBSS. 


138 


§  108.    Where  procured  from  one  under  illegal  arrest  or  restraint. 

One  who  wrongfully  restrains  another  of  his  liberty  cannot  obtain 
the  benefit  of  any  obligation  which  he  may  obtain  from  him  while  so 
restrained  and  which  is  executed  as  a  consequence  of  such  restraint.^* 


stances  amounting  to  duress.  It  is 
to  be  observed  of  these  circum- 
stances that  if  we  confine  our  at- 
tention to  the  very  time  when  an 
arrangement  for  an  increased  price 
was  made  the  defendants  make  out 
a  very  plausible  case.  They  had  a 
very  considerable  stock  of  beer  on 
hand  and  the  case  they  make  is 
one  in  which  they  must  have  ice  at 
any  cost  or  they  must  fail  in  busi- 
ness. If  the  ice  company  had  the 
ability  to  perform  their  contract, 
but  took  advantage  of  the  circum- 
stances to  extort  a  higher  price 
from  the  necessities  of  the  defend- 
ants its  conduct  was  reprehensible, 
and  it  would  perhaps  have  been  in 
the  interest  of  good  morals  if  de- 
fendants had  temporarily  submitted 
to  the  loss  and  brought  suit  against 
the  ice  company  on  their  contract. 
No  one  disputes  that  at  their  option 
they  might  have  taken  that  course, 
and  that  the  ice  company  would 
have  been  responsible  for  all  dam- 
ages legally  attributable  to  the 
breach  of  the  contract.  But  the  de- 
fendants did  not  elect  to  take  that 
course.  They  chose  for  reasons 
which  they  must  have  deemed  suffi- 
cient at  the  time  to  submit  to  the 
company's  demand  and  pay  the  in- 
creased price  rather  than  rely  upon 
their  strict  rights  under  the  exist- 
ing contract.  *  *  *  if  unfair 
advantage  was  taken  of  defendants, 
whereby  they  were  forced  into  a 
contract  against  their  interests,  it 
is  very  remarkable  that  they  sub- 
mitted to  abide  by  it  as  they  did 
for  nearly  eight  months  without  in 
the  meantime  taking  any  steps  for 


their  protection.  Whatever  com- 
pulsion there  was  in  the  case  was 
to  be  found  in  the  danger  to  their 
business  in  consequence  of  the 
threat  made  at  the  beginning  of 
May  to  cut  off  the  supply  of  ice, 
but  the  force  of  the  threat  would 
be  broken  the  moment  they  could 
make  arrangements  for  a  supply 
elsewhere;  and  there  is  no  showing 
that  such  a  supply  was  unattainable. 
The  force  of  the  threat  was  there- 
fore temporary;  and  the  defend- 
ants, as  soon  as  they  were  able  to 
supply  their  needs  elsewhere,  might 
have  been  in  position  to  act  inde- 
pendently, and  to  deal  with  the  ice 
company  as  freely  as  they  might 
with  any  other  party  who  declined 
to  keep  his  engagements).  On  any 
view,  therefore,  which  we  may  take 
of  the  law,  the  defense  must  fail. 
But  if  our  attention  were  to  be  re- 
stricted to  the  very  day  when  notice 
was  given  that  ice  would  no  longer 
be  supplied  at  the  contract  price, 
we  could  not  agree  that  the  case 
was  one  of  duress.  It  is  not  shown 
to  be  a  case  even  of  a  hard  bargain; 
and  the  price  charged  was  probably 
not  too  much  under  the  circum- 
stances," per  Cooley,  J. 

"Bennett  v.  Ford,  47  Ind.  264; 
Osborne  v.  Robbins,  36  N.  Y.  365,  4 
Abb.  Prac.  N.  S.  (N.  Y.)  15;  Strong 
V.  Grannis,  26  Barb.  (N.  Y.)  122; 
Behl  V.  Schuett,  88  Wis.  471,  60  N. 
W.  701.  See  Preston  v.  Bacon,  4 
Conn,  471,  holding  that  a  note  given 
by  a  person  under  arrest  in  civil 
process  to  the  officer  having  him 
in  custody,  for  fees  to  which  he 
was  not  entitled,  was  void   on  the 


i 


129  BY  ABUSE  OF  LEGAL  PROCESS.  [§  109 

So  "when  a  party  is  arrested,  without  just  cause,  and  from  motives 
which  the  law  does  not  sanction,  any  contract  into  whicli  he  may  en- 
ter with  the  authors  of  the  wrong,  to  procure  his  liberation  from  re- 
straint, is  imputed  to  illegal  duress.  It  is  corrupt  in  its  origin,  and 
the  wrongdoer  can  take  no  benefit  from  its  execution."^ ^  The  rule  is 
said,  in  an  early  case  in  New  York,  to  be  "that  where  there  is  an  ar- 
rest for  improper  purposes  without  a  just  cause,  or  where  there  is  an 
arrest  for  a  just  cause  but  without  lawful  authority;  or  where  there 
is  an  arrest  for  a  just  cause  and  under  lawful  authority,  for  unlawful 
purposes,  it  may  be  construed  a  duress."^^  So  the  defense  of  duress 
has  been  held  good  in  an  action  on  a  note  exacted  from  one  under  ar- 
rest on  a  false  charge  of  felony,  and  which  was  given  to  procure  his 
liberation  from  illegal  restraint.  ^^  But  if  a  man  be  lawfully  im- 
prisoned and  to  procure  his  discharge  gives  his  note  it  w^ill  not  be 
subject  to  the  defense  of  duress.^^  It  is  necessary  to  show  either  an 
unlawful  imprisonment  or  an  oppression  under  a  lawful  detention. ^^ 
So  where  a  party  who  was  under  arrest  in  a  criminal  prosecution  for 
an  assault  in  which  he  had  participated  gave  a  note  in  settlement  of 
the  injury  sustained  by  such  an  assault,  it  was  decided  that  the  note 
could  not  be  avoided  on  the  ground  that  its  execution  was  procured 
by  threats  unless  it  appeared  that  they  were  such  as  would  intimidate 
a  person  of  ordinary  firmness.^" 

§  109.  By  abuse  of  legal  process. — A  person  cannot  claim  the  bene- 
fit of  an  instrument  which  another  has  been  induced  by  him  to  sign 
by  an  abuse  of  legal  process,  and  it  is  a  good  defense  as  between  the 
parties  thereto  that  it  has  been  so  obtained.-^   In  the  case  of  an  abuse 

ground  of  extortion,  which  was  de-        "Heaps  v.   Dunham,   95   111.   583; 

fined  to  be  any  oppression  by  color  Soule  v.  Bonney,  37  Me.  128;  Strouf- 

or  pretense  of  right,  and  particular-  fer  v.  Latshaw,  2  Watts   (Pa.)    165, 

ly  the  exaction  by  an  officer  by  color  27  Am.  Dec.  297.     See  also,  Water- 

of  his  office  of  money  not  due.  man  v.  Barratt,  4  Har.  (Del.)  311. 

»' Osborne    v.    Robbins,    36    N.    Y.         ^''Walbridge   v.    Senold,    21   Conn. 

365,  371,  4  Abb.  Pt.  N.  S.    (N.  Y.)  424.      See    Pritchard    v.    Sharp,    51 

15,  per  Porter,  J.  Mich.  432,  16  N.  W.  798. 

'"Strong  V.  Grannis,  26  Barb.  (N.         =' Thurman   v.    Burt,    53    111.    129; 

Y.)  122,  per  Welles,  J.  Shenk    v.    Phelps,    6    111.   App.    612; 

"Osborne    v.    Robbinsi,    36    N.    Y.  Modlin    v.    Northwestern    Turnpike 

365,   4  Abb.   Pr.   N.   S.    (N.  Y.)    15.  Co.,  48  Ind.  492;   Gorham  v.  Keyes, 

See  Meadows  v.  Smith,  7  Ired.  Eq.  137  Mass.  583;  Downing  v.  Ely,  125 

^N.  C.)  7.  Mass.  369;  Osborn  v.  Robbins,  36  N. 

"  Bates  V.  Butler,  46  Me.  387,  cit-  Y.  365,  4  Abb.  Prac.  15. 
Ing  1  Black.  Com.  136. 

Joyce  Defenses — 9. 


§    110]  DURESS.  130 

of  criminal  process  the  rule  is  based  on  the  ground  of  public  policy, 
which  will  not  permit  the  process  of  the  state  to  be  perverted  and  used 
b}'^  a  person  for  the  mere  purpose  of  obtaining  the  execution  of  con- 
tracts,^^ So  where  a  requisition  was  procured  for  the  arrest  and  de- 
livery of  a  person  on  the  ground  that  a  crime  had  been  committed  in 
obtaining  goods  under  false  pretenses,  and  the  process  was  made  use 
of  to  compel  defendant  to  settle  the  claims  of  his  creditors  and  give 
the  note  in  suit,  it  was  decided  that  it  was  a  use  of  process  wholly  un- 
authorized by  the  law  and  the  note  was  void.-^  So  it  has  been  decided 
that  if  one  fraudulently  threaten  to  attach  property  upon  a  ground- 
less suit  for  the  purpose  of  compelling  the  giving  of  notes  by  another, 
and  the  sole  inducement  for  the  giving  of  the  notes  is  to  prevent  such 
attachment,  there  can  be  no  recovery  thereon.^^*  And  it  has  been  de- 
cided that  a  note  given  under  a  threat  to  bring  in  a  United  States 
Marshal  and  to  turn  defendant  and  his  family  out  of  doors,  and  to 
take  the  defendant  out  of  the  state,  is  not  binding  as  between  the  par- 
ties.2^  j^-^^  there  can  be  no  recovery  on  a  note  given  to  secure  the 
possession  of  property  which  has  been  unlawfully  detained,-^  as  in  the 
case  of  an  illegal  levy,-^  But  it  has  been  decided  that  the  fact  that 
a  suit  was  brought  to  recover  possession  of  land,  claim  thereto  being 
made  only  under  a  tax  deed,  which  fact  the  defendant  knew,  and  the 
deed  was  in  fact  void,  does  not  as  a  matter  of  law  constitute  duress  so  as 
to  render  a  note  given  in  settlement  of  such  action  void  even  though 
he  may  have  been  induced  through  fear  of  losing  his  land  to  execute 
the  note  in  question.^^ 

§  110.  Effect  of  threat  to  lawfully  invoke  legal  process. — Courts 
are  constituted  for  the  purpose,  among  others,  of  enabling  persons  to 
obtain  the  proper  remedies  and  process  for  the  enforcement  of  tlieir 
legal  rights.    The  mere  fact,  therefore,  that  one  threatens  to  sue  an- 

==  Shenk  v.  Phelps,  6  111.  App.  612.  -^  Perkins  v.  Trinka,  30  Minn.  241, 

=^  Shaw  V.   Spooner,   9   N.  H.   197,  15  N.  W.  115. 

32  Am.  Dec.  348.  ''  Davis  v.  Rice,  88  Ala.  388,  6  So. 

=*Modlin    V.    Northwestern    Turn-  751;    McClair    v.    Wilson,    18    Colo, 

pike  Co.,  48  Ind.  492.  82,  31  Pac.  502;   Bond  v.  Kidd   (Ga. 

=^Ganz    v.    Weisenberger,    66    Mo.  1905),    50    S.    E.    934;    Perryman    v. 

App.  110,  2  Mo.  App.  1323.  Pope,  94  Ga.  672,  21  S.  E.  715;  Peck- 

="  Crawford   v.   Cato,    22   Ga.    594;  ham  v.  Hendren,  76  Ind.  47;  Snyder 

Oliphant  v.  Markham,  79  Tex.  543,  v.    Braden,    58    Ind.    143;    Jones    v. 

15  S.  W.  569,  23  Am.  St.  R.  363.  Houghton,  61  N.  H.  51. 

"  Bingham  v.   Sessions,   6   Sm.  & 
M.  (Miss.)  13. 


131  PAPER   GIVEN    THROUGH    FEAR   OF   VIOLEXCE.  [§    111 

other  or  to  invoke  some  legal  process  in  respect  to  his  property  or  per- 
son in  order  to  enforce  some  right  which  the  former  may  possess  does 
not  constitute  duress  so  as  to  render  void  a  note  given  as  a  result  of 
such  threat. ^^  So  a  threat  of  a  judgment  creditor  to  levy  execution 
on  the  property  of  the  debtor  will  not  render  a  note  void  as  being 
given  under  duress.^"  Xor  will  a  threat  of  bankruptcy  proceedings 
against  a  third  person  which  would  affect  the  maker  of  the  note.^^ 
And  where  a  person's  son  was  under  arrest  in  a  civil  suit  it  was  decided 
that  a  note  given  in  settlement  of  such  suit,  in  consideration  of  its 
withdrawal  and  of  the  release  of  the  son,  was  not  void  for  duress.^^ 

§  111.  Giving  of  paper  induced  by  fear  of  violence. — That  the  pa- 
per was  executed  under  threats  of  death,  violence,  or  bodily  harm  will 
be  a  good  defense,  as  between  the  parties,  to  an  action  on  the  instru- 
ment where  it  appears  that  the  threat  was  such  as  to  reasonably  ex- 
cite the  fear  of  the  person  to  whom  it  was  made  and  induce  the  belief 
that  the  threat  would  be  presently  carried  into  execution.^^  The 
question  whether  the  threat  was  such  as  to  excite  the  fear  of  a  person 
of  ordinary  courage  is  not  made  the  test  by  the  later  decisions,  but 
rather  the  determination  of  the  question  whether  the  threat  was 
such  as  to  reasonably  excite  the  fear  of  the  person  to  whom  it  was 
made  and  thus  overcome  his  will  without  regard  to  whether  his  courage 
was  that  of  an  ordinary  person  or  not  is  said  to  control,  as  it  would 
seem  it  properly  should.^*  So  where  one  executed  notes  to  his  uncle 
under  threats  by  the  latter  that  he  would  take  his  nephew's  life  if  he 

^"Wilcox    V.    Howland,     23    Pick,  ful  imprisonment  about  to  be  then 

(Mass.)     167;    Brown    v.    Tyler,    16  and    there,   or   at   least   to  be   very 

Vt.  22.  shortly  inflicted.     The  threat  must 

'^Barnes  v.  Stevens,  62  Ind.  226.  be  such  as  would  naturally  excite 

^^  Mascolo  V.  Montesanto,  61  Conn,  such  a  fear  (grounded  upon  the  rea- 

50,  23  Atl.  714,  29  Am.  St.  R.  170.  sonable  belief  that  the  person  who 

^^Bond  V.  Kidd   (Ga.  1905),  50  S.  threatens    has   at   hand    the    means 

E.    934;    Palmer    v.    Poor,    121    Ind.  of  carrying  his  threat  into  present 

135,  22  N.  E.   984,  6  L.  R.  A.  469;  execution)    as   would   overcome   the 

Magoon   v.   Reber,    76   Wis.   392,   45  will   of  a  pers-on  of  ordinary  cour- 

N.  "W.  112.     "Duress  by  threats  ex-  age."     6  Am.  &  Eng.  Ency.  Law  64, 

ists,  not  wherever  a  party  has  en-  cited  in  Barrett  v.  Mahnken,  6  Wyo. 

tered  into  a  contract  under  the  in-  541,  48  Pac.  202. 
fluence  of  a  threat,  but  only  where        ^^  Nebraska    Mut.    Bond    Ass'n    v. 

such  a  threat  excites  a  fear  of  some  Klee  (Neb.  1903),  97  N.  W.  476,  478, 

grievous  wrong, — as  of  death  or  of  See  §  105  herein, 
great  irremediable  injury  or  unlaw- 


8  112]  DURESS.  133 

refused,  it  was  held  that  the  courts  would  not  enforce  the  same.^^ 
And  where  a  person  who  owned  a  fourth  interest  in  a  mine,  which 
had  been  leased  to  another,  was  surrounded  by  employes  of  the  lessee, 
who  threatened  to  shoot  him  unless  he  settled  their  claims,  and  he 
gave  his  notes  therefor,  it  was  decided  that  they  were  void  as  being 
given  under  duress. ^^  And  a  note  given  by  a  father  as  principal,  and 
his  son  as  surety,  under  the  threat  that  the  father  would  be  taken  off 
and  killed,  was  held  void  as  to  both.^''*  Though  no  actual  threats  are 
made  to  a  person,  yet  the  circumstances  may  be  such  as  to  create  such  a 
fear  of  violence  or  bodily  harm  as  to  constitute  duress,  which  will  be  a 
defense  to  an  action  on  paper  given  under  these  circumstances.  Thus 
where  the  plaintiff  had  demanded  entrance  and  had  come  into  de- 
fendant's house  with  an  armed  force,  shortly  after  the  latter  had  been 
injured  by  the  plaintiff,  it  was  held  sufficient  to  awaken  his  appre- 
hensions, and  the  court  declared  that  a  note  given  under  such  circum- 
stances did  not  deserve  the  countenance  of  a  court  or  jury."  Threats 
of  personal  violence,  however,  to  a  third  person,  who  lives  at  a  dis- 
tance, as  where  he  resided  in  another  state,  have  been  held  to  be  no 
defense  to  an  action  on  a  note  induced  by  such  threat.^^ 

§  112.  Threatened  criminal  prosecution  and  imprisonment  as  in- 
ducing.— That  the  execution  of  paper  was  induced  by  a  threat  of  crimi- 
nal prosecution  and  unlawful  imprisonment,  made  in  bad  faith  and  for 
the  purpose  of  procuring  the  execution  of  the  paper  in  controversy,  is 
a  good  defense  to  an  action  thereon.=*»    So  where  a  woman  was  re- 

='5  Mollere   v.    Harp,    36    La.    Ann.  Nebraska. — Hullhorst  v.  Scharner, 

471.  15  Neb.  57,  17  N.  W.  259. 

5»Rossiter  v.  Loeber,  18  Mont.  372,  New  Yorfc.— Haynes  v.  Rudd,   30 

45  Pac.  560.  Hun   (N.  Y.)  237. 

^''*  Owens    V.     Mynatt,     1     Heisk.  Wisconsin. — Schultz     v.     Culbert- 

(Tenn.)    675.  son,  46  Wis.  313,  1  N.  W.  19. 

=^  Evans  v.  Huey,  1   Bay    (S.  C.)  See   Colorado. — Jackson   v.   Allen, 

13.                                '  4  Colo.  263. 

=»  Barrett  v.  Mahnken,  6  Wyo.  541,  Maine. — Thompson    v.    Hinds,    67 

48  Pac.  202.  Me.  177. 

="  California.— Morrill     v.      Night-  Ytrf/inta.— Keckley  v.  Union  Bank, 

Ingale,  93  Cal.  452,  28  Pac.  1068,  27  79  Va.  458. 

Am.  St.  R.  207.  "If   a   person   execute   an   instru- 

Co dorado.— Lighthall   v.    Moore,    2  ment  from  a  well-grounded  fear  of 

Colo.  App.  554,  31  Pac.  511.  illegal  imprisonment  he  may  avoid 

7ot<;a.— Henry      v.      State      Bank  it    on   the   ground    of   duress,"   per 

(Iowa  1906),  107  N.  W.  1034.  Downey,   J.,   in   Bush  v.   Brown,   49 

Massachusetts.— Bryant  v.  Peck  &  Ind.  573,  19  Am.  Rep.  695. 
Whipple  Co.,  154  Mass.  460,  28  N.  E. 
678. 


133  THREATETTED  CEIMINAL  PROSECUTION.  [§   112 

strained  illegally  in  the  office  of  an  attorney,  who  stated  to  her  that 
her  husband  would  be  arrested  on  a  charge  of  felony  unless  she  ex- 
ecuted a  certain  mortgage  and  note,  which  she  did  to  avoid  his  arrest, 
it  was  held  that  the  defense  of  duress  was  good.*"  And  where  a  note 
was  given  by  a  sister  because  of  threats  of  the  plaintiff  to  prosecute 
her  brother  for  an  alleged  felony  it  was  held  that  recovery  could  be 
defeated  on  the  ground  of  duress,  though  the  threats  were  not  made 
directly  to  the  maker  of  the  note,  but  to  her  brother,  with  the  inten- 
tion that  they  should  be  communicated  to  her.*^  And  where  it  ap- 
peared that  notes  were  executed  by  a  wife,  who  also  turned  over  to  the 
payee  certain  of  her  individual  property  in  payment  of  her  husband's 
debts  to  avoid  a  criminal  prosecution  against  her  husband,  it  was  de- 
cided that  such  facts,  which  were  both  alleged  and  admitted,  were 
sufficient  to  sustain  a  finding  of  duress.*^  In  order  to  constitute 
duress  in  case  of  menace  of  imprisonment  it  has  been  decided  that  it 
must  be  unlawful  imprisonment  and  that  the  party  was  put  in  fear 
and  thereby  induced  to  execute  the  note.^^  And  in  a  case  in  Illinois  it 
has  been  decided  that:  "Where  the  party  making  the  threats  is  not, 
and  is  not  represented  to  be,  in  any  position,  and  has  no  means  for  car- 
rying out  his  threat  other  than  one  possessed  by  all  members  of  the 
community,  that  is,  where  the  liberty  of  the  person  against  whom  the 
threat  is  made  is  in  no  wise  restrained  and  the  threatener  has  made  no 
complaint,  has  no  warrant,  and  is  not  represented  to  have,  and 
neither  has  or  appears  to  have,  at  hand  or  within  his  control  any  means 
for  carrying  into  execution  his  announced  purpose,  mere  threats  of 
arrest  do  not  constitute  duress."** 

"A    contract    made    under   threat  in  the  the  case  of  a  threatened  ar- 

of      unlawful      imprisonment,      the  rest   for   assault  and   battery   on   a 

fear     induced     by    the    threat    be-  warrant  already  issued,  that  a  note 

ing   the   moving   cause   for    its   ex-  obtained  from  one  under  the  threat 

ecution,   is  a   contract  made  under  of  lawful  imprisonment  and  in  sat- 

duress  and  its  maker  may  avoid  it,"  isfaction  of  the  injury  sustained,  is 

per  Stayton,  C.   J.,   in  Morrison  v.  not  subject  to  the  defense  of  duress; 

Faulkner,  80  Tex.  128,  15  S.  W.  797.  Thorn  v.   Pinkham,   84   Me.   101,  24 

'"First  National   Bank   v.   Bryan,  Atl.  718,  holding  that  where  money 

62  Iowa  42,  17  N.  W.  165.  was    embezzled    and    a    promissory 

"Schultz  V.   Catlin,   78  Wis.   611,  note  given  in  payment  of  the  same 

47  N.  W.  946.  on  a  threat  of  criminal  prosecution 

"  Delta  County  Bank  v.  McGrana-  it  is  not  void  for  duress.    See,  on 

han  (Wash.  1905),  79  Pac.  796.  same  point  as  last,  Catlin  v.  Hen- 

*' Alexander   v.    Pierce,    10   N.    H.  ton,  9  Wis.  476.    Compare  Henry  v. 

494.     See  Eddy  v.   Herrin,  5    Shep.  State  Bank   (Iowa  1906),  107  N.  W. 

(Me.)  338,  35  Am.  Dec.  261,  holding,  1034. 

"Youngs  V.  Sim,  41  III.  App.  28, 
per  Waterman,  J. 


§§  113,  114]  DUEEsa.  134 

§  113.  Availability  of  as  between  the  parties. — In  an  action  on  a 
bill  or  note  it  is  a  good  defense,  as  between  the  parties,  that  the  in- 
strument was  executed  under  duress.*^  This  rule  has  been  applied 
where  a  note  has  been  procured  by  an  abuse  of  criminal  process,  such 
process  having  been  used  not  for  the  punishment  of  the  offender 
for  an  offense  against  the  public,  but  to  coerce  him  by  threatened  im- 
prisonment into  the  payment  of  a  debt  by  giving  the  note  in  con- 
troversy.*^ It  has  also  been  applied  in  the. case  of  a  note  which  has 
been  obtained  by  the  use  of  military  force.*'^  It  has  been  held,  how- 
ever, that  it  is  no  defense  that  the  note  was  given  for  the  debt  of  the 
maker  in  order  to  procure  his  release  from  prison,*^  or  for  money 
embezzled  for  the  maker,  in  pursuance  of  a  threat  to  criminally  prose- 
cute him,*^  or  in  pursuance  of  a  declaration  that  he  could  not  leave 
the  state  until  he  signed  the  note.^°  And  if  the  maker  has  received 
a  valuable  consideration  for  the  note,  duress  will  be  no  defense  to  an 
action  thereon  where  there  has  been  neither  a  return  of  nor  an  offer 
to  return  such  consideration.^^  A  note  given  under  duress  may  be  vali- 
dated by  subsequent  acts  of  ratification,  and  where  it  appears  that  it 
has  been  so  ratified  the  maker  will  be  precluded  from  setting  up  the 
defense  of  duress.^^ 

§  114.  Same  subject — Against  subsequent  parties. — A  bona  fide 
holder  of  a  bill  or  note,  having  obtained  the  same  before  maturity 
and  without  notice,  is  not  subject  to  the  defense  that  it  was  obtained 
by  duress. ^^  But  upon  proof  that  a  note  was  executed  under  duress 
the  burden  is  then  cast  upon  the  plaintiff  to  show  that  he  is  a  bona 

*' Hatch  V.  Barrett,  34  Kan.   223,  ^^Beath    v.    Chapoton,    115    Mich. 

8    Pac.    129;    Magoon    v.    Reber,    76  506,  73  N.  W.  806. 

"Wis.  392,  45  N.  W.  112.     See  Wood-  '"  Seymour  v.  Prescott,  69  Me.  376. 

ham  V.  Allen,  130  Cal.  194,  62  Pac.  "  City  National  Bank  v.  Kusworm, 

398.  91  Wis.  166,  64  N.  W.  843. 

*"  Shenk  v.  Phelps,  6  111.  App.  612;  "Bartle  v.  Breniger,  37  Iowa  139. 

Phelps   V.    Zuschlag,    34    Tex.    371;  ^' Hogan    v.    Moore,    48    Ga.    156; 

Schultz  V.  Catlin,  78  Wis.  611,  47  N.  Peckham  v.   Hendrew,   76   Ind.   47; 

W.  946.  O'Keefe  v.  Handy,  31  La.  Ann.  832; 

*'Voiers  v.   Stout,  4   Bush    (Ky.)  Farmers'  Bank  of  Grand  Rapids  v. 

572.  Butier.  48   Mich.   192,   1  N.  W.   36; 

***  Bates  V.  Butler,  46  Me.  387;   St.  Mundy  v.   Whitmore,   15   Neb.   647, 

Albans  Bank  v.  Dillon,  30  Vt.  122,  19    N.    W.    694;    Keller   v.    Schmidt, 

73  Am.  Dec.  295.  104  Wis.  596,  80  N.  W.  935;    Mack 

V.  Prang,  104  Wis.  1,  79  N.  W.  770. 


135  AVAILABILITY   AS    BETWEEN"    SUBSEQUENT   PARTIES.        [§    111 

fide  holder.^*  Again,  in  an  action  against  an  indorser  it  lias  been 
decided  that  he  cannot  avail  himself  as  a  defense  of  the  fact  that  the 
maker  executed  the  note  under  duress,  it  being  declared  that  the 
duress  of  a  principal  does  not  affect  the  free  agency  of  the  indorser.^''^ 
In  other  decisions,  however,  the  rule  is  affirmed  that  in  an  action 
against  a  surety  upon  a  bill  or  note  he  may  avail  himself  of  the  fact 
that  the  paper  was  executed  by  his  principal  under  duress.^*'  In  this 
connection  it  has  been  said  by  the  court  in  an  Indiana  case :  "There 
are  reasons,  which,  to  our  minds  are  conclusive,  why  a  surety  should 
not  be  held  bound  upon  a  contract  to  which  his  principal  has  a  valid 
defense,  not  of  a  personal  character,  but  going  to  the  contract  itself 
as  fraud,  duress,  want  or  failure  of  consideration,  etc.  If  the  surety 
is  bound  by  such  a  contract  one  of  two  things  must  follow.  The 
surety,  having  been  compelled  to  pay  the  money  due  by  the  contract, 
must  either  have  his  action  against  his  principal  to  recover  the  amount 
paid,  or  he  must  lose  it.  If  the  first  alternative  is  to  be  adopted,  and 
the  surety  may  maintain  an  action  against  his  principal  to  recover  the 
money  paid,  then  the  principal  will  be  compelled  virtually  to  pay  upon 
a  contract  to  which  he  had  complete  defense.  It  is  but  a  mockery  to 
say  that  a  man  has  a  valid  defense  to  a  claim,  and  yet  say  that  he 
must  pay  the  amount  due  thereon  to  his  surety,  whom  the  law  com- 
pels to  pay  to  the  creditor.  On  the  other  hand,  if  the  surety,  having 
been  compelled  to  pay  the  money  to  the  creditor,  cannot  recover  it 
from  his  principal,  he  must  lose  it,  and  an  equal  injustice  is  done."^^ 
And  in  an  action  by  the  assig-nee  of  a  non-negotiable  note  against  the 
maker  the  defense  of  duress  may  be  set  up."*  And  where  a  note  was 
executed  by  a  married  woman  under  duress  which  purported  to 
charge  her  separate  estate  and  contained  a  statement  that  the  con- 
sideration was  for  the  benefit  of  such  estate,  it  was  decided  that  in 
view  of  the  circumstances  under  whicli  the  note  was  executed  and  the 

=*  Clark  V.   Pease,   41   N.   H.    414.  holding  that  the  defense  of  duress 

See  Duncan  v.  Scott,  1  Camp.  100,  was  available  in  an  action  against 

holding  that  where  the   drawer  of  an  indorser  for  the  maker's  accom- 

a    bill    of    exchange    executed    the  modation    bj^    a    holder    who    was 

same    under    duress,    in    an    action  guilty   of  the   duress   by  means  of 

against  him  by  an  indorsee  the  lat-  which  the  note  was  obtained, 

ter  must  show  that  he  gave  some  =°  Osborn  v.  Robbins,  36  N.  Y.  365. 

consideration  therefor.  "  Per  Biddle,  J.,  in  Coffelt  v.  Wise, 

°=  Bowman    v.    Hiller,    130    Mass.  62  Ind.  451. 

153,    39    Am.    Rep.    442.      Compare  ^■*  Butterfield    v.     Davenport,     84 

Griffith  V.  Sitgreaves,  90  Pa.  St.  161,  Ind.  590. 


115] 


0nREas. 


136 


facts  that  the  note  was  not  given  in  the  course  of  any  separate  business 
carried  on  by  her,  and  that  the  consideration  did  not  go  to  the  benefit 
of  her  separate  estate,  the  instrument  could  not  be  enforced  against 
her  even  by  a  hona  fide  holder. ^^  A  purchaser  after  maturity  is  also 
subject  to  this  defense  to  the  same  extent  as  his  indorsee.^^ 

§  115.  Same  subject — Parties  with  notice. — It  is  a  good  defense  as 
against  a  transferee  with  notice  that  the  note  was  procured  from  the 
maker  by  means  of  duress.*^''  But  a  surety  who  signs  a  note  with  notice 
of  the  duress  of  his  principal  cannot  avail  himself  of  this  fact  as  de- 
fense to  an  action  on  the  instrument.''^ 


^'Loomis  V.  Ruck,  56  N.  Y.  462. 
The  court  said  in  this  case:  "The 
law  merchant  which  gives  to  the 
6ona  fide  transferee  of  negotiable 
paper  greater  rights  than  those  of 
the  transferer  has  no  application  to 
this  class  of  obligations.  They  are 
not  recognized  at  law  and  we  have 
been  referred  to  no  authority  tend- 
ing to  sustain  the  position,  that  the 
transferee  of  an  obligation  of  a 
married  woman  obtained  from  her 
by  fraud  or  duress,  and  against 
which  she  had  a  good  defense,  when 
in  the  hands  of  the  original  holder, 
can  be  enforced  in  eqviity  out  of  her 
separate  estate,  simply  because  it 
has  passed  into  the  hands  of  a  bona 
fide  transferee.  The  rules  applica- 
ble  to  commercial  paper   can  not 


govern  this  case.  It  must  be  gov- 
erned by  the  rule  of  equity,  which, 
in  case  of  equal  equities,  and  in  the 
absence  of  sufficient  grounds  of  es- 
toppel, give  preference  to  the  equity 
which  is  prior  in  point  of  time." 
Per  Rappallo,  J. 

°' Linton  v.  King,  4  Allen  (Mass.) 
562. 

'"Thompson  v.  Niggley,  53  Kan. 
664,  35  Pac.  290,  26  L.  R.  A.  803; 
Osborn  v.  Robbins,  36  N.  Y.  365,  4 
Abb.  Prac.  N.  S.  15.  That  the  note 
was  procured  from  the  maker  by 
threats  of  great  bodily  harm  is  a 
good  defense  against  an  assignee 
with  notice.  McGowen  v.  Bush,  17 
Tex.  195. 

"  Graham  v.  Marks,  98  Ga.  67,  25 
S.  E.  931. 


I 


CHAPTEE  VI. 


FRAUD  AND   FRAUDULENT   REPRESENTATIONS. 


Sec. 

116.  Rule  as  to  fraud  and  fraudu- 

lent   representations — Gener- 
ally. 

117.  "What    constitutes    a    misrepre- 

sentation which  is  a  defense. 

118.  Fraudulent  concealment. 

119.  As  against  bona  fide  holder — 

Generally. 

120.  Same  subject — Rule  illustrated. 

121.  Same  subject — Fraud  of  parti- 

cular persons. 

122.  False  representations  as  to  con- 

sideration. 

123.  Same  subject — Bona  fide  holder. 

124.  Certified  check— Effect  of  fraud 

— Bona  fide  holder. 


Sec. 

125.  Paper  in  fraud  of  creditors. 

126.  Fraudulent  procurement  of  in- 

dorsement. 

127.  Fraud  as  to  amount. 

128.  Fraud  as  to  surety. 

129.  Same  subject — Bona  fide  hold- 

ers. 

130.  Fraudulent  transfer. 

131.  Same  subject — By  partner. 

132.  Same   subject — By   adminis- 

trator. 

133.  Availability     of     defense  — 

Maker. 

134.  Same  subject — Other  parties. 


§  116.  Rules  as  to  fraud  and  fraudulent  representations — Gener- 
ally.— Courts  will  always  carefully  scrutinize  a  contract  and  the  sur- 
rounding circumstances  in  connection  with  its  execution  or  considera- 
tion where  it  is  alleged  to  have  been  procured  by  the  fraud  of  the 
plaintiff  or  to  which  he  was  a  party  or  had  notice  of.  It  is  a  general 
principle  that  courts  will  not  allow  one  who  has  by  fraud  or  deceit 
procured  the  execution  of  a  contract  to  enforce  the  same  against  the 
one  so  induced  to  execute  it  and  thus  obtain  an  advantage  or  benefit 
by  his  fraudulent  conduct.  These  principles  apply  in  the  case  of  com- 
mercial paper,  and  in  an  action  between  the  parties  fraud  may  be 
shown  in  defense  thereto/  as  it  may  also  against  a  subsequent  holder 


^  Alabama. — Wyatt  v.  Ayers,  2 
Port.  (Ala.)  157. 

Connecticut. — Reynolds  v.  Bird,  1 
Root   (Conn.)   305. 

Georgia. — Farkas  v.  Monk,  119  Ga. 
115,  46  S.  E.  670. 

Illinois. — Sims  v.  Rice,  67  111.  88. 

loica. — Sullivan  v.  Collins,  18 
Iowa  228.  See  Palo  Alto  Stock  Farm 
v.  Brooker  (Iowa  1906),  108  N.  W. 
307. 


Kentucky. — Merchants'  &  Farm- 
ers' Bank  v.  Cleland,  25  Ky.  Law 
Rep.  1169,  77  S.  W.  176,  719. 

Massachusetts. — Bilafsky  v.  Con- 
veyancers' Title  Ins.  Co.  (Mass. 
1906),  78  N.  E.  534. 

Michigan. — Roberts  v.  Sholes,  144 
Mich.  215,  107  N.  W.  904. 

Minnesota. — Schaller  v.  Borger,  47 
Minn.  357,  50  N.  W.  247. 


137 


116] 


FRAUD   A^^D   FRAUDULENT   REPRESENTATIONS, 


who  is  not  a  hona  fide  holder,^  or  who  took  the  paper  with  notice  of 
the  fraud.^  And  where  prior  to  the  maturity  of  a  note  a  renewal  note 
is  given  to  the  payee  at  the  request  of  an  innocent  indorsee  it  has  heen 
decided  that,  in  an  action  by  the  former  on  the  renewal  note,  fraud  is  a 
good  defense.*  So  the  fact  that  a  person  was  induced  to  execute  a 
note  by  false  and  fraudulent  representations  may  be  shown  in  defense 
to  an  action  between  the  parties,^  or  by  a  holder  with  notice.*'  And 
it  is  available  in  defense  to  an  action  by  one  who,  though  he  is  a 
purchaser  for  value,  is  not  shown  to  have  bought  the  paper  in  the 
usual  course  of  business  or  for  full  value.  ^  And  in  an  action  against 
an  indorser  it  may  be  shown  that  the  plaintiff  procured  the  indorse- 
ment to  himself  by  means  of  fraud,®  or  that  he  was  a  privy  to  or  par- 
ticipant in  the  fraud,  and  therefore  had  notice.^  A  party  may,  how- 
ever, be  precluded  by  waiver  or  estoppel  from  availing  himself  of  the 


Missouri. — Carter  v.  McClintock, 
29  Mo.  464. 

Xebraska. — Hauptman  v.  Pike 
(Neb.),  108  N.  W.  163. 

New  Yorfc.— Bergman  v.  Salmon, 
79  Hun  (N.  Y.)  456,  29  N.  Y.  Supp. 
968. 

OTiio.— Loffland  v.  Russell,  Wright 

(Ohio)   438. 

See  South  Dakota.— Kirhy  v.  Ber- 
guin,  15  S.  D.  44,  90  N.  W.  856. 

Vermont.— KeWy  v.  Pember,  35  Vt. 
183. 

Wisconsin.  —  Hodge  v.  Smith 
(Wis.)  110  N.  W.  192;  Knott  v.  Tidy- 
man,  86  Wis.  164,  56  N.  W.  632. 

=  Knott  v.  Tidyman,  86  Wis.  164, 
56  N.  W.  632. 

""  Indiana. — Irwin  v.  Guthrie,  28 
Ind.  App.  341,  62  N.  B.  709. 

Mai7ie. — Nichols  v.  Baker,  75  Me. 
334. 

Michigan. — Lenheim  v.  Fay,  27 
Mich.  70. 

Missouri. — Fisk  v.  Collins.  9  Mo. 
137. 

Nevada. — Swinney  v.  Patterson, 
25  Nev.  411,  62  Pac.  1. 

*  Sawyer  v.  Wiswell,  91  Mass.  (9 
Allen)  39;  Adams  v.  Ashman,  203 
Pa.  St.  536,  53  Atl.  375. 

^  California. — Wenzel  v.  Schultz, 
78  Cal.  221,  20  Pac.  404. 


Illinois. — Knotts  v.  Preble,  50  111. 
226,  99  Am.  Dec.  514. 

Indiana. — Elsass  v.  Institute,  77 
Ind.  72;  Taylor  v.  Fletcher,  15  Ind. 
80;  Union  Central  Life  Ins.  Co.  v. 
Huyck,  5  Ind.  App.  474,  32  N.  B. 
580. 

Mississippi. — Hall  v.  Clofton,  56 
Miss.  555. 

Missouri. — Live  Stock  Remedy  Co. 
V.  White,  90  Mo.  App.  498. 

Neb7~aska. — Hauptman  v.  Pike 
(Neb.),  108  N.  W.  163. 

New  Jersey. — Mueller  v.  Buck  (N. 
J.  S.  C.  1904),  58  Atl.  1092. 

See  Vermont. — Wilbur  v.  Prior,  67 
Vt.  508,  32  Atl.  474. 

Virginia. — Brown  v.  Rice's  Admr., 
26  Gratt.   (Va.)  467. 

England. — Grew  v.  Bevan,  3 
Starkie  134. 

House  V.  Martin,  125  Ga.  642,  54 

S.  E.  735. 

« Armstrong  v.  Cook,  30  Ind.  22; 
National  Bank  v.  Mackey,  5  Kan. 
App.  437,  49  Pac.  324. 

'  Millard  v.  Barton,  13  R.  I.  601, 
43  Am.  Rep.  51. 

«Shaw  V.  Stein,  79  Mich.  77,  44 
N.  W.  419;  Nethercutt  v.  Hopkins, 
38  Wash.  577,  80  Pac.  798. 

"Lenheim  v.  Fay,  27  Mich.  70. 


139  WHAT    CONSTITUTES    MISREPRESENTATIOX.  [§    117 

defense  of  fraud."  These  general  rules  have  been  applied  in  the  case 
of  a  false  representation  that  accommodation  paper  was  business 
paper  ;^^  and  where  a  note  was  given  in  satisfaction  of  an  injury  sus- 
tained by  the  payee  and  the  nature  and  extent  of  the  injury  was  fraud- 
ulently exaggerated.^2  ^j^^j  where  the  plaintiff  had  a  joint  interest 
with  the  payee  of  the  note  in  the  contract  with  the  maker  in  connec- 
tion with  which  the  note  was  given,  it  was  held  that  the  defense  of 
fraud  was  available  against  him.^=^  But  where  a  party  seeks  to  avoid 
an  instrument  on  the  ground  of  fraud  the  defense  will  not  be  upheld 
where  it  appears  that  he  was  the  principal  party  in  the  perpetration 
and  that  it  is  doubtful  whether  plaintiff  had  any  knowledge  thereof.^* 
And  as  between  the  parties  to  a  bill  or  note  there  is  no  obligation 
on  the  defrauded  party  towards  the  one  who  defrauded  him  to  use  due 
diligence  to  discover  the  fraud.  One  who  perpetrates  a  fraud  cannot 
complain  because  his  victim  has  confidence  in  him  wliich  a  more 
vigilant  person  would  not  have.^^  The  defense,  however,  that  a  note 
was  obtained  by  fraud  is  held  to  be  inconsistent  with  a  plea  of  non  est 
factum.^'^ 

§  117.    What  constitutes  a  misrepresentation  which  is  a  defense. 

A  person  cannot  avail  liimself  as  a  defense  to  an  action  on  a  bill  or 
note  of  a  misrepresentation  in  reference  to  a  matter  which  is  wholly 
disconnected  with  the  instrument.  In  order  to  render  a  false  repre- 
sensation  available  as  a  defense  it  must  be  material,  that  is,  of  some- 
thing constituting  an  inducement  or  motive  to  the  contract.^^  It 
must  also  be  an  assertion  of  a  fact,  a  statement  which  is  a  mere  ex- 
pression of  an  opinion  being  no  defense.^^     And  a  person  cannot  sot 

»» Morgan    v.  -Nowlin,    126    Mich.  "Price    v.     Winnebago     National 

105,  85  N.  W.  468,  holding  that  one  Bank,  14  Okla.  268,  79  Pac.  105. 

who  retains  the  consideration  of  a  '=^  Smith      v.      McDonald       (Mich, 

note  cannot  by  setting  up  the  de-  1905),  103  N.  W.  738. 

fense  of  fraud   defeat  all   recovery  "  Tenney    v.    Turner     (Mo.    App. 

on   the   instrument;    examine   Grif-  1905),  86  S.  W.  506. 

fiths  V.  Parry,  16  Wis.  218.  "Ingram  v.  Jordan,  55   Ga.  356; 

"Webb  v.  Odell,  49  N.  Y.  583.    See  Dahlman  v.  Antes   (Iowa  1906),  109 

Trask  v.  Wingate,   63   N.   H.   474,  3  N.  W.  784;  Hodges  v.  Torrey,  28  Mo. 

Atl.  926,  holding  that  in  an  action  99;   Jackson  v.  Stockbridge,  29  Tex. 

by  an  indorsee  it  is  no  defense  that  394,  94  Am.   Dec.  290.    See  Blee  v. 

the  note  was  for  the  accommodation  Giltinan  (Pa.),  12  Alt.  479. 

of  the  payee  and  that  there  was  no  "  Taylor  v.  Ford,  131  Cal.  440,  63 

consideration.  Pac.  770,  holding  that  a  representa- 

"  Thompson  v.  Hinds,  67  Me.  177.  tion   as   to   the   value   of   book   ac- 

"  Kelly  V.  Pember,  35  Vt.  183.  counts   in  the  case   of  a  sale   of  a 

business  and  stock  is  an  expression 


§    118]  FRAUD   AND   FRAUDULENT   REPRESENTATIONS,  140 

up  in  defense  to  an  action  on  a  bill  or  note,  the  fact  that  there  was 
a  misrepresentation  as  to  the  legal  effect  of  the  instrument.^®  Nor 
can  one  avail  himself  of  a  misrepresentation  as  a  defense  where  it  was 
of  such  an  absurd  character  that  it  cannot  be  regarded  as  fraud.^* 
So  it  has  been  held  no  defense  to  an  action  on  a  note  that  the  maker 
was  induced  to  sign  it  by  a  false  representation  as  to  the  legal  effect 
of  an  order  of  arrest,^  ^  or  that  it  was  necessary  for  the  maker  to  sign 
the  note  to  release  her  dower  in  real  estate  which  was  conveyed  as 
security  for  certain  notes.^^  Again  it  has  been  decided  that  a  person 
cannot  defeat  recovery  on  a  note  on  the  ground  that  he  was  induced 
to  sign  it  by  a  misrepresentation  as  to  his  liability  thereon.^^  The 
fact,  however,  that  the  execution  of  a  bill  of  exchange  was  procured 
by  false  representations  that  it  was  only  an  ordinary  note  on  which 
statement  the  party  relied,  has  been  held  to  constitute  a  fraud  on  the 
latter  which  entitled  him  to  relief  as  against  an  indorsee  who  did  not 
pay  value.  2*  Again  it  is  determined  that  recovery  cannot  be  defeated 
on  the  ground  of  a  false  representation  unless:  damage  has  been  sus- 
tained.-^ 

§  118.  Traiidulent  concealment. — One  who  induces  another  to  af- 
fix his  signature  to  commercial  paper  by  the  fraudulent  concealment 
of  a  material  fact  connot  enforce  such  instrument  against  the  latter. 
This  will  be  a  good  defense  as  against  the  one  guilty  of  such  fraudu- 

of   opinion;    Garber  v.   Bressee,   96  is  not  a  false  representation,  in  the 

Va.  644,  32  S.  B.  39,  holding  that  a  legal   acceptation  of  the   term,  and 

representation  by  an  agent,  in  the  cannot  be  made  the  subject  of  either 

case  of  a  note  given  for  a  premium,  action  or  defense."     Court  Valhalla, 

that  there  would  be  no  trouble  in  Foresters  of  America,  v.  Olson,  14 

getting  the  cash  surrender  value  of  Colo.    App.    243,    59    Pac.    883,    per 

a  policy  held  by  the  maker,  was  an  Thomson,  J. 

expression  of  opinion.     Consumers'  ="  Webb  v.   Moseley,  30   Tex.   Civ. 

Brewing  Co.  v.   Tobin,  19   App.   D.  App.  311,  70  S.  W.  349. 

C.   353;    Black   v.    Epstein,    93   Mo.  =' Reed  v.  Sidener,  32  Ind.  373. 

App.  459,  67  S.  W.  736.  "  Crofut  v.   Aldrich,   54   111.   App. 

"Juggar    V.    Winslow,    30    Minn.  541. 

263.     "A  representation  that  an  in-  "^  Shropshire  v.  Kennedy,  84  Ind. 

Btrument  is  valid   or  that  a  party  111;    Grocers'    Bank   v.    Murphy,    9 

to  it  is  legally  bound  by  its  terms  Daly   (N.  Y.)   510.     But  see  Wilbur 

and  conditions,  is  not  the  statement  v.  Prior,  67  Vt.  508,  32  Atl.  474. 

of  a  fact.     It  is  an   expression   of  "Ross  v.  Drinkard,  35  Ala.  434. 

opinion    upon    a    question    of    law.  ^  Bomar  v.  Roser,  131  Ala.  215,  31 

And,  while  it  may  be  erroneous,  it  So.  430. 


141 


DEFENSE   AS   AGAINST   BONA   FIDE   HOLDERS. 


[§  119 


lent  conduct  or  a  subsequent  holder  with  notice.^®  So  where  the 
payee  of  a  note  had  knowledge,  at  the  time  of  its  execution,  of  a  de- 
fect in  the  article  for  which  it  was  given,  but  fraudulently  concealed 
such  knowledge,  it  was  decided  that  there  could  be  no  recovery. ^^ 
An  omission,  however,  by  the  payee  of  a  note  to  state  all  the  facts 
will  not  necessarily  defeat  an  action  by  him  against  the  maker  where 
the  latter  has  knowledge  of  such  facts  from  other  sources.^* 

§  119.  As  against  bona  fide  holders — Generally. — The  liability  of 
the  maker  or  acceptor  of  a  negotiable  instrument  cannot  be  varied 
from  that  which  is  apparent  from  the  instrument  itself,  by  setting  up, 
in  an  action  by  one  who  is  a  bona  fide  holder  for  value,  before  maturity 
and  without  notice,  the  fact  that  the  paper  was  procured  from  him  by 
fraud.^^    A  person  is  held  to  be  a  bona  fide  holder  within  the  appli- 


'« Conger  v.  Bean,  58  Iowa  321,  12 
N.  W.  284;  Brown  v.  Montgomery, 
20  N.  Y.  287;  March  v.  Bank,  4  Hun 
(N.  T.)  466. 

"Sides  V.  Hilleary,  6  Har.  &  J. 
(Md.)   86. 

^^  Sullivan  v.  Collins,  18  Iowa  228; 
Sachleben  v,  Hentze,  117  Mo.  520, 
24  S.  W.  54. 

'^Alabama. — Bomar  v.  Rosser,  123 
Ala.  641,  26  So.  510;  Saltmarsh  v. 
Tuthill,  13  Ala.  390;  Barney  v. 
Earle,  13  Ala.  106. 

California. — McMahon  v.  Thomas 
(Cal.),  39  Pac.  783. 

Colorado. — King  v.  Mechlenburg, 
17  Colo.  App.  312,  68  Pac.  984. 

Delaware. — McCarty  v.  Lockwood, 
6  Houst.  (Del.)  451;  Bush  v.  Pack- 
ard, 3  Har.  (Del.)  385. 

District  of  Columbia. — Mason  v. 
Jones,  7  App.  D.  C.  247. 

Georgia. — Walters  v.  Palmer,  110 
Ga.  776,  36  S.  E.  79;  Merritt  v.  Bag- 
well, 70  Ga.  578;  Robinson  v.  Vason, 
37  Ga.  66. 

Illinois. — Culver  v.  Hide  &  Leather 
Bank,  78  111.  626 ;  Taylor  v.  Thomp- 
son, 3  111.  App.  109. 

Indiana. — Brickley  v.  Edwards, 
131  Ind.  3,  30  N.  E.  708;  Palmer  v. 


Poor,  121  Ind.  135,  22  N.  E.  984,  6 
L.  R.  A.  469;  First  National  Bank 
V.  Latton,  67  Ind.  256;  Riley  v. 
Schawacker,  50  Ind.  592. 

Iowa. — Hawkins  v.  Wilson,  71  Iowa 
761,  32  N.  W.  416;  Fayette  County 
Savings  Bank  v.  Steffes,  54  Iowa 
214,  6  N.  W.  267;  Loomis  v.  Met- 
calf,  30  Iowa  382;  Bridge  v.  Living- 
ston, 11  Iowa  57. 

Kansas. — Draper  v.  Cowles,  27 
Kan.  484. 

Kentucky. — Early  v.  McCarthy,  2 
Dana  (Ky.)  414. 

Louisiana. — Clark  v.  Stackhouse, 
2  Mart.  (O.  S.  La.)   319. 

Maine. — Roberts  v.  Lane,  64  Me. 
108,  18  Am.  Rep.  242;  Wait  v.  Chand- 
ler, 63  Me.  257;  Fletcher  v.  Gusbie, 
32  Me.   587. 

Maryland. — Black  v.  First  Na- 
tional Bank,  96  Md,  399,  54  Atl. 
88;  Crampton  v.  Perkins,  65  Md. 
22,  3  Atl.  300;  Davis  v.  West  Sara- 
toga    Bldg.     Union,     32     Md.     285. 

Massachusetts. — Fort  Dearborn 
National  Bank  v.  Carter,  152  Mass. 
34,  25  S.  E.  38;  Robertson  v.  Cole- 
man, 141  Mass.  231,  4  N.  E.  619,  55 
Am.  Rep.  471;  Thurston  v.  Mc- 
Keown,  6  Mass.  428. 


§  119] 


FRAUD   A^TD   FRAUDULENT   REPRESENTATIONS. 


142 


cation  of  the  rule,  though  he  may  have  taken  the  paper  under  sus- 
picious circumstances,^''  or  may  have  paid  less  than  its  face  value.^'- 


Michigan. — Davis  v.  Seely,  71 
Mich.  209,  38  N.  W.  901. 

Minnesota. — Rosemond  v.  Graham, 
54  Minn.  323,  56  N.  W.  38,  40  Am. 
St.  R.  336. 

Missouri. — Famous  Shoe  and 
Clothing  Co.  v.  Crosswhite,  124  Mo. 
34,  27  S.  W.  397,  46  Am.  St.  R. 
424,  20  L.  R.  A.  568;  Corby  v.  But- 
ler, 55  Mo.  398;  Jaccard  v.  Shands, 
27  Mo.  440;  Clark  v.  Porter,  90  Mo. 
App.  143;  Emmert  v.  Meyer,  65  Mo. 
App.  609. 

New  Hampshire. — Paige  v.  Chap- 
man, 58  N.  H.  333;  Perkins  v.  Chal- 
lis,  1  N.  H.  254. 

New  Jersey. — Second  National 
Bank  v.  Hewitt,  59  N.  J.  L.  57,  34 
Atl.  988. 

New  York. — Clothier  v.  Adriance, 
51  N.  Y.  322;  Merchants'  Loan  Co.  v. 
Bank  of  Metropolis,  7  Daly  (N.  Y.) 
137. 

Ohio. — Gano  v.  Samuel,  14  Ohio 
592. 

Pennsylvania. — Phelan  v.  Moss,  67 
Pa.  St.  59,  5  Am.  Rep.  402;  Gray  v. 
Bank,  29  Pa.  St.  365;  Taylor  v. 
Gitt,  10  Pa.  St.  428. 

South  Carolina. — Sims  v.  Lyles,  1 
Hill.   (S.  C.)  39,  26  Am.  Dec.  155. 

Tennessee. — Holeman  v.  Hobson, 
27  Tenn.  (8  Humph.)  127. 

Texas. — Mulberger  v.  Morgan 
(Tex.  Civ.  App.),  34  S.  W.  148. 

Vermont. — Powers  v.  Ball,  27  Vt. 
662. 

Washington. — Jamieson  v.  Heim 
(Wash.),  86  Pac.  165. 

Federal. — Goodman  v.  Simonds,  20 
How.  (U.  S.)  343;  O'Rourke  v. 
Mahl,  109  Fed.  276;  Seymour  v.  Mc- 
Donal  Lumber  Co.,  58  Fed.  957,  7 
C.  C.  A.  593,  16  U.  S.  App.  245; 
White  V.  How,  3  McLean  (U.  S.) 
291,  Fed.  Cas.  No.  17549. 
Delaware. — "When  a  third  party 


acquires  the  ownership  of  a  promis- 
sory note  before  maturity,  in  good 
faith  and  for  a  valuable  consider- 
ation, he  is  regarded  in  law  as  an 
innocent  holder  for  value,  and  en- 
tirely unaffected  by  any  fraud  that 
may  have  existed  in  the  incep- 
tion of  the  note  on  the  part  of  the 
person  to  whom  the  note  was 
given."  Journal  Printing  Co.  v. 
Maxwell,  1  Penn.  (Del.)  511,  513,  43 
Atl.  615,  per  Pennewill,  J.,  in 
charging  the  jury. 

Kentucky. — "To  assure  credit  and 
circulation  to  bills  of  exchange,  as 
a  species  of  useful  currency,  the  law 
merchant  in  most  cases  forbids  a 
party  to  such  a  bill,  when  sued  by  a 
bona  fide  holder  for  a  valuable  con- 
sideration without  notice,  to  plead 
either  fraud  or  want  of  considera- 
tion as  between  himself  and  the 
party  with  whom  he  directly  con- 
tracted." Bement  v.  McClaren,  1  B. 
Mon.  (Ky.)  296,  298,  per  Robertson, 
C.  J. 

Maine. — "The  rule  is  firmly  estab- 
lished that  the  holder  of  negotiable 
paper,  taking  it  in  the  usual  course 
of  business  for  a  sufficient  consider- 
ation before  its  maturity,  and  ignor- 
ant of  any  facts  impeaching  its  va- 
lidity, can  recover  against  the 
maker."  Burrill  v.  Parsons,  71  Me. 
282,  per  Appleton,  C.  J. 

See  also  Waddell  v.  Hanover  Nat. 
Bank,  48  Misc.  R.  (N.  Y.)  578,  67  N. 
Y.  Supp.  305. 

^®  Brewer  v.  Slater,  18  App.  (D. 
C.)  48;  Smith  v.  Livingston,  111 
Mass.  342;  Wilson  v.  Ridler,  92  Mo. 
App.  335;  Second  National  Bank  v. 
Morgan,  165  Pa.  St.  199,  30  Atl.  957, 
44  Am.  St.  R.  652. 

'^Lay  V.  Wissman,  36  Iowa  305; 
Sully  V.  Goldsmith,  32  Iowa  397; 
Williams  v.  Huntington,  68  Md. 
590,  13  Atl.  336,  6  Am.  St.  R.  477. 


il 


143  DEFENSE   AS   AGAINST   BONA    FIDE    HOLDERS.  [§    119 

And  one  who  takes  a  note  as  pledgee  without  any  notice  of  fraud  or 
misrepresentation  inducing  its  execution  is  to  be  regarded  as  a  bona 
■fide  holder  for  value.^^  And  an  injunction  will  not  lie  to  restrain  pro- 
ceedings by  such  a  holder  of  a  note  on  the  ground  of  fraudulent  repre- 
sentations by  the  payee  to  the  maker.^^  If,  however,  it  is  established 
that  the  execution  of  the  paper  was  procured  by  fraud  on  the  part  of 
the  payee,  the  burden  is  then  cast  on  the  plaintiff  to  show  that  he  is  a 
hona  fide  holder  as  a  prima  facie  good  defense  is  presented  by  proof 
of  such  fraud.^*  So  where  it  appears  that  a  check  was  obtained  by  the 
payee  through  fraud,  in  an  action  by  his  indorsee,  it  has  been  declared 
that  the  burden  rests  on  him  to  show  that  he  took  the  check  in  the 
usual  course  of  business,  for  a  valuable  consideration  and  without 
knowledge  of  facts  or  circumstances  which  impeached  its  validity  as 
between  the  original  parties  and  without  knowledge  of  facts  or  cir- 
cumstances that  would  lead  a  careful  and  prudent  man  to  suspect 
that  the  check  was  invalid  as  between  the  antecedent  parties.^^  If 
the  paper  is  non-negotiable,  it  is  a  good  defense  to  an  action  thereon 
that  it  was  procured  by  false  representations,  even  though  it  is  in  the 
hands  of  a  hona  fide  holder.^^  Nor  can  a  hona  fide  holder  recover  upon 
an  instrument  where  the  fraud  is  patent  upon  its  face.^^  And  it  has 
been  decided  that  it  may  be  shown  by  the  assignee  of  a  note  payable  to 
order  and  not  to  bearer  that  it  was  procured  by  false  and  fraudulent 
representations.^^    Again,  if  a  purchaser  has  notice  of  the  fraud  prior 

See  Holcomb  v.  Wyckoff,  35  N.  J.  L.  Jowa.— "The   rule   of   the   author- 

35,  10  Am.  Rep.  219,  holding  that  In  ities   unquestionably    is   that   when 

such  a  case  there  can  only  be  a  re-  the  defense  to  a  note  is  fraud  in  its 

covery  of  the  sum  paid.  inception,  and  such  defense  is  sup- 

"Watzlavzick      v.      Oppenheimer  ported    by    evidence,    the    onus    is 

(Tex.  Civ.  App.  1905),  85  S.  W.  854.  thereby  cast  upon  the   holder,  who 

*^  Dougherty  v.   Scudder,  17  N.  J.  brings  the  action,  to  show  that  he 

Eq.  248.  gave  value  for  it,  and  that  he  is  a 

'^  Alabama.— Alabama        National  ^^na  fide  purchaser   before   matur- 

Bank  v.  Halsey,  109  Ala.  196,  19  So.  ity."   Woodward  v.  Rogers,  31  Iowa 

522.  342,  per  Beck,  J. 

CaZifornta.— Ames  v.  Crosier,  101  '=  Capital  Savings  Bank  &  T.  Co. 

Cal.  260,  35  Pac.  873.  v.    Montpelier  Sav.    Bank  &   T.    Co. 

il/tssown.— Clifford     Banking     Co.  (^t.  1905),  59  Atl.  827. 

V.    Donovan    Commission    Co.,    195  '"Wickham  v.  Grant,  28  Kan.  517; 

Mo.  262,  94  S.  W.  527.  McLaughlin  v.  Brady,  63  S.  C.  433, 

Montana. — Herrington  v.  Butte  &  41  S.  E.  523. 

B.  Min.  Co.,  27  Mont.  1,  69  Pac.  102.  ^'  Claflin   v.   Farmers'   &   Citizens' 

New      Yorfc.— Consolidation      Na-  Bank,  25  N.  Y.  293. 

tional   Bank   v.    Kirkland,    99    App.  =>"  Kennedy    v.    Jones    (Miss.),    29 

Div.  121,  91  N.  Y.  Supp.  353,  decided  So.  819. 
under  Laws  1897,  p.  703,  c.  612. 


§  120] 


FRAUD  AND   FRAUDULENT   REPRESENTATIONS. 


144 


to  the  payment  by  him  of  the  full  consideration,  he  can  only  recover 
to  the  extent  of  the  payments  made  by  him  before  he  received  such 
notice,  and  where  he  makes  no  payments  until  after  he  received  notice 
he  will  not  be  regarded  as  a  bona  fide  holder.^^ 

§  120.  Same  subject — Rule  illustrated. — The  rule  stated  in  the 
preceding  section  as  to  the  right  of  a  bona  fide  holder  to  recover, 
though  there  has  been  fraud  in  the  procuring  of  the  note,  has  been  ap- 
plied where  a  note  was  given  in  payment  of  an  order  for  goods  and  the 
order  turned  out  to  be  fraudulent;*"  where  it  was  made  for  a  larger 
amount  than  was  stated  to  the  maker,  whose  eyesight  was  impaired  and 
who  was  in  a  state  of  extreme  physical  weakness  ;*"*  where  the  owner 
has  been  deprived  of  the  instrument  by  fraud  and  it  had  been  deposited 
with  the  holder  aa  collateral ;"  where  there  has  been  fraud  or  mistake 
in  the  adjustment  of  the  account  for  which  the  note  was  given  f^  where 
the  consideration  of  the  note  was  a  sale  of  goods  by  an  insolvent  debtor 
in  fraud  of  the  insolvent  laws  ;*3  where  there  was  a  misrepresentation 
as  to  the  quality  of  the  goods  sold,  in  payment  for  which  the  note  was 
given,  and  the  maker  of  the  paper  had  ample  opportunity  to  examine 
them  for  himself  ;**  and  where  a  party  was  induced  to  sign  a  note  as 
a  co-maker  on  the  misrepresentation  that  a  certain  other  party  had 
signed  the  same,  when  in  fact  the  signature  of  the  latter  person  was 
forged.*^  And  where  the  consideration  for  a  note  was  a  worthless 
patent  right,  it  was  decided  that  the  fact  that  on  the  margin  of  the 
note  were  written  the  words  "this  note  is  given  for  a  patent  right"  did 
not  authorize  the  jury  to  infer  that  the  indorser  had  notice  or  knowl- 
edge that  the  patent  was  of  no  value.*«  Negotiable  warehouse  re- 
ceipts are  also  subject  to  the  same  rule  and  the  title  of  a  bona  fide 
holder  is  not  affected  by  fraud  on  the  part  of  the  original  holder  to- 


2'Crandall  v.  Vicery,  45  Barb.  (N. 
Y.)  156;  Dresser  v.  Construction 
Co.,  93  U.  S.  92.  See  Loftin  v.  Hill, 
131  N.  C.  105,  42  S.  E.  548;  Camp- 
bell v.  Brown,  100  Tenn.  245,  48  S. 
W.  970. 

"  Hoats  V.  Aschbach,  160  Pa.  St.  6, 
28  Atl.  437. 

*"*  McSparron  v.  Neeley,  91  Pa.  St. 
17. 

"Bealle  v.  Bank,  57  Ga.  274;  First 


National  Bank  v.  Adam,  138  111.  483, 
28  N.  E.  955. 

^Lanier  v.  Union  Mortgage  Bank- 
ing &  T.  Co.,  64  Ark.  39,  40  S.  W. 
466. 

"  Potter  V.  Belden,  105  Mass.  11. 

^Farrell  v.  Lovell,  68  Me.  326,  28 
Am.  Rep.  59. 

*=>Gridley  v.  Bane,  57  111.  529. 

"Hereth  v.  Merchants'  National 
Bank,  34  Ind.  380. 


145  FRAUD   OF    PARTICULAR   PERSONS.  .    [§    121 

ward  the  warehouseman.*^  And  coupon  bonds,  payable  to  bearer,  and 
issued  under  competent  legislative  authority,  can  be  transferred  by 
delivery,  and  the  title  of  a  bona  fide  holder  is  not  affected  by  the  fact 
that  he  received  them  from  one  who  obtained  possession  of  them  by 
fraud.*^  Nor  will  fraud  and  irregularity  touching  the  issue  of  such 
bonds  and  their  disposal  be  admissible  to  affect  the  right  of  a  bona  fide 
holder  to  coupons  detached  therefrom.*^  So  bank  notes,  though  fraud- 
ulently put  into  circulation,  become  the  property  of  one  who  gives 
valuable  consideration  therefor  without  notice  of  the  fraud.^°  Again, 
it  has  been  decided  that  a  bona  fide  holder  of  a  note  is  not  subject  to 
the  defense  that  the  maker  was  induced  to  sign  the  same  by  false 
representations  as  to  the  character  of  the  paper  he  was  signing.^^  In 
this  latter  class  of  cases,  however,  there  are  several  decisions  which 
hold  that  it  is  a  good  defense  against  a  bona  fide  holder  providing  the 
maker  has  not  been  guilty  of  negligence  in  signing  the  instrument.^^ 

§  121.     Same  subject — Fraud  of  particular  persons. — One  who  oe- 

l  cupies  the  position  of  a  bona  fide  holder  of  a  bill  or  note  is  not  sub- 
ject to  the  defense,  in  an  action  by  him  thereon,  that  there  has  been 
fraud  on  the  part  of  a  maker  toward  his  co-makers  ;^^  or  of  a  princi- 
pal toward  his  guarantor  f*  or  of  a  surety  upon  the  maker  in  an  action 
against  the  latter  ;^^  or  of  a  corporate  officer  toward  the  corporation 

"Early    Times    Distilling    Co.    v.  Douglas  v.  Matting,  29  Iowa  498,  4 

Earle,  21  Ky.  Law  Rep.  1709,  56  S.  Am.  Rep.  238;  Chapman  v.  Rose,  56 

W.  13.    See  Fletcher  v.  Great  West-  N.  Y.  137. 

ern  Elevator  Co.,  12  S.   D.  643,  82  ^=  Hewitt    v.    Jones,    72    111.    218; 

N.  W.  184,  holding  that  a  bona  fide  Hubbard    v.    Rankin,    71    111.    129; 

holder  of  negotiable  warehouse  re-  Sims  v.  Rice,  67  111.  88;   First  Na- 

ceipts   is   not   affected   by   the   fact  tional  Bank  v.  Deal,  55  Mich.  592, 

that,  the   agent   of   the   warehouse-  22  N.  W.  53. 

man   issued   the  receipts  for   grain  '^^Gridley  v.  Bane,  57  111.  529. 

which  had  not  been  received.  "  McWilliams  v.  Mason,  31  N.  Y. 

**  Fifth    Ward    Savings    Bank    v.  294;   Rothermal  v.  Hughes,  134  Pa. 

First   National   Bank.   48   N.   J.    L.  St.  510,  19  Atl.  677,  holding  that  a 

513,  7  Atl.  318.  note  is  not  invalidated  by  the  fact 

"  Macon   Co.  v.   Shores,  97   U.   S.  that  the  principal  debtor  or  maker 

272.  secured  the  signatures  of  the  sure- 

"'' Robinson   v.   Bank,   18   Ga.   65;  ties  by  fraud  or  fraudulent  repre- 

White  V.  Howe,  3  McLean    (U.  S.)  sentations. 

291,  Fed.  Cas.  No.  17549.     See  Solo-  ^^  First  National  Bank  v.  Fitts,  67 

mans  v.  Bank,  13  East  135.  Vt.  57,  30  Atl.  697. 

"Kimble  v.  Christie,  55  Ind.  140; 
Joyce  Defenses — 10. 


121] 


FRAUD  AND   FRAUDULENT   REPRESENTATIONS. 


14G 


which  he  represents;^®  or  of  a  partner  toward  his  firm;^^  or  of  one 
who  holds  the  paper  in  trust  for  another  ;^^  or  who  holds  or  obtains 
it  for  some  temporary  or  particular  purpose  f^  or  who  holds  the  paper 


'^  Grand  Rapids  &  I.  R.  Co.  v. 
Sanders,  17  Hun  (N.  Y.)  552,  so 
holding  In  the  case  of  negotiable 
bonds  put  in  the  hands  of  the  presi- 
dent of  a  corporation  with  full 
power  and  authority  to  dispose  of 
and  negotiate  them,  where  he  used 
them  as  collateral  for  personal 
loans  and  they  were  subsequently 
transferred  to  the  plaintiff,  who  was 
a  bona  fide  holder.  See  also, 
Wormer  v.  Agricultural  Works,  50 
Iowa  262;  Pittsburg  Railway  Co.  v. 
Lynde,  55  Ohio  St.  23,  44  N.  E.  596; 
Long  Island  L.  &  T.  Co.  v.  Colum- 
bus C.  &  I.  C.  R.  Co.,  65  Fed.  455. 
But  where  a  corporation  has  no 
power  to  accept  a  draft  it  cannot  be 
bound  by  the  fraudulent  act  of  one 
of  its  officers  in  accepting  such  pa- 
per, even  to  an  innocent  holder. 
Thus  it  has  been  said:  "Corpora- 
tions are  not  bound  by  the  abuse 
of  its  officers  when  such  act  of 
abuse  is  wholly  and  clearly  outside 
the  field  of  the  corporation's  power. 
Neither  the  president  nor  the  di- 
rectory of  a  corporation  can  do  such 
acts  as  the  corporation  itself  has  no 
power  to  do.  The  law  of  estoppel 
does  not  enlarge  corporate  powers 
and  in  consequence  corporate  liabil- 
ity. Where  the  powers  of  the  cor- 
poration stop,  the  powers  of  its  of- 
ficers also  stop,  and  that  point  of 
limitation  the  public  are  bound  at 
their  peril  to  know."  Towle  v. 
American  Bldg.  L.  &  I.  Co.,  78  Fed. 
688,  689,  per  Grosscup,  D.  J. 

"  Barber  v.  Van  Horn,  54  Kan.  33, 
36  Pac.  1070,  holding  that,  where  a 
partnership  executed  a  firm  note  for 
money   borrowed    and    one    of    the 


partners  drew  money  to  pay  the 
same  at  maturity  and  entered  it  on 
the  books  as  paid,  but  appropriated 
the  money  and  renewed  the  note, 
that  the  fraudulent  conduct  of  the 
partner  toward  the  firm  was  no  de- 
fense against  a  holder  for  value,  be- 
fore maturity  and  without  notice; 
Albietz  V.  Hellon,  37  Pa.  St.  367; 
Rogers  v.  Batchelor,  12  Pet.  (U.  S.) 
221.  See  Henderson  v.  Anderson,  3 
How.  (U.  S.)  73. 

=^Reid  V.  Bank,  70  Ala.  199;  Ged- 
des  V.  Blackmore,  132  Ind.  551,  32 
N.  E.  567;  Thompson  v.  Bank,  113 
N.  Y.  325,  21  N.  E.  57.  Where  bonds 
payable  to  bearer  are  deposited  as 
collateral  with  a  bona  fide  holder 
he  will  be  protected  in  his  title 
even  as  against  the  true  owner  un- 
til he  has  been  repaid  or  he  realizes 
sufficient  thereon  to  repay  him. 
Bealle  v.  Bank,  57  Ga.  274. 

^^  First  National  Bank  v.  Adam, 
138  111.  483,  28  N.  E.  955,  holding 
where  notes  pledged  with  a  bank 
were  returned  to  the  pledgor  to  be 
sold  by  him  and  the  proceeds  ap- 
plied on  his  indebtedness  and  he 
pledged  them  as  collateral  with  an- 
other creditor  before  maturity  and 
without  notice,  that  the  latter  was 
protected  in  his  title  as  against  the 
bank;  Stoner  v.  Brown,  18  Ind.  464, 
holding  that  where  a  payee,  after 
pledging  a  note  to  another  without 
indorsement,  subsequently  obtained 
it  from  the  pledgee  for  a  pretended 
temporary  purpose  and  assigned  the 
same  for  a  valuable  consideration 
to  a  bona  fide  purchaser,  the  latter 
may  recover,  as  he  has  a  legal  title 
against  all  persons. 


147 


FALSE  KEPRESENTATIONS  AS  TO  CONSIDERATION.    [§  122 


as  agent  for  another  and  fraudulently  disposes  of  the  same  in  viola- 
tion of  his  instructions.®"  So  the  fact  that  an  agent,  to  whom  the 
paper  has  been  entrusted  for  collection,  and  who  is  the  apparent  owner 
thereof,  has  acted  in  fraud  of  his  principal  and  transferred  the  same 
to  another,  who  occupies  the  position  of  a  hona  fide  holder,  will  bo  no 
defense  to  an  action  thereon  by  the  latter.''^  And  a  similar  rule  applies 
where  a  note  has  been  given  to  an  agent  for  the  purpose  of  having  it 
discounted  and  he  has  fraudulently  negotiated  the  same  in  violation 
of  his  instructions.*'^  And  fraud  of  the  pledgee  of  negotiable  paper  in 
transferring  the  same  is  no  defense  to  an  action  by  a  bona  fide  holder.®^ 
Nor  can  it  be  shown  against  such  a  holder  that  securities,  which  have 
been  pledged  as  collateral  for  the  note  have  been  fraudulently  trans- 
ferred by  the  payee.*''* 

§  122.  False  representations  as  to  consideration. — False  repre- 
sentations affecting  the  consideration  may  be  shown  in  defense  to  an 
action  between  the  original  parties  to  a  bill  or  note/^  or  by  a  holder 


^"^  Silverman  v.  Bulloc,  98  111.  11; 
Murrell  v.  Jones,  40  Miss.  565.  See 
Dovey's  Appeal,  97  Pa.  St.  153. 

^^Wyman  v.  Bank,  5  Colo.  30,  40 
Am.  Rep.  133;  Pond  v.  Agricultural 
Works,  50  Iowa  596;  Bank  of  New 
York  V.  Muskingum  Branch  of  Bank 
of  Ohio,  29  N.  Y.  619.  See  Lowndes 
V.  Anderson,  13  East  130. 

*^  Davis  V.  Building  Union,  32  Md. 
285;  Gwynn  v.  Lee,  9  Gill  (Md.) 
137;  Hanks  v.  Dunlap,  10  Rich.  Eq. 
(S.  C.)  139;  Bank  of  Pittsburgh  v. 
Neal,  22  How.  (U.  S.)  96.  See 
Murrell  v.  Jones,  40  Miss.  565. 

«*  Bancroft  v.  McKnight,  11  Rich. 
L.  (S.  C.)  663. 

**Kiel  V.  Reay,  50  Cal.  61. 

"^  Alabama. — Alabama  National 
Bank  v.  Halsey,  109  Ala.  196,  19  So. 
522. 

Georgia. — Carithers  v.  Levy,  111 
Ga.  740,  36  S.  E.  958. 

Illinois. — Conkling  v.  Vail,  31  111. 
166. 


Indiana. — Cross  v.  Herr,  96  Ind. 
96. 

Kansas. — Snyder  v.  Hargue,  26 
Kan.  416. 

Missouri. — Beall  v.  January,  62 
Mo.  434. 

Montana. — First  National  Bank  v. 
Howe,  1  Mont.  604. 

Neiv  York. — Beauford  v.  Patter- 
son, 63  How.  Prac.   (N.  Y.)  81. 

Vermont. — Still  v.  Snow,  66  Vt. 
277,  29  Atl.  250. 

See  Connecticut. — Barkhamsted  v. 
Case,  5  Conn.  528. 

New  York. — Jones  v.  Dana,  24 
Barb.  (N.  Y.)  395. 

Texas. — Breckenridge  v.  Berrier, 
2  Posey  Unrep.  Cas.  (Tex.)  324. 
Where  a  note  was  given  to  a  bank  it 
was  held  that  fraudulent  represent- 
ations could  be  set  up  as  well  as  a 
defense  to  an  action  by  the  receiver 
of  the  bank  as  against  the  bank  it- 
self. 

Connecticut. — Litchfield  Bank  v, 
Peck.  29  Conn.  384. 


122] 


FRAUD   AND   FRAUDULENT   REPRESENTATIONS. 


148 


with  notice/"  or  by  an  indorsee  who  is  not  a  holder  for  value.^^  So 
it  may  be  shown  in  defense  to  an  action  by  a  payee  of  a  note,  or  a 
holder  with  notice  that  the  defendant  was  induced  to  sign  the  same 
by  false  representations  as  to  the  value  and  character  of  the  property 
for  which  the  note  was  given/^  or  by  fraudulent  pretense  of  selling 
goods  to  be  delivered  in  the  future,  but  with  no  intention  to  actually 
deliver  them."^  But  a  misrepresentation  as  to  the  quality  or  quantity 
of  the  property  in  payment  of  which  a  note  was  given  will  not  operate 
as  a  complete  defense  to  an  action  thereon  where  the  plaintiff  has  not 
rescinded  or  offered  to  reconvey  but  still  retains  possession  thereof.^'* 
Again,  mere  exaggeration  will  not  constitute  such  fraud  as  will  be  a  de- 
fense to  an  action  on  a  note."  If  the  note  is  non-negotiable  fraudu- 
lent representations  will  be  defense  thereto  even  in  an  action  by  a 
purchaser  for  a  valuable  consideration.^ ^  j^t^^  likewise  one  who  has 
taken  a  note  without  due  indorsement  will  be  subject  to  such  a  de- 
fense."   It  is  essential  in  order  to  render  a  representation  available 


«« Alabama  National  Bank  v.  Hal- 
sey,  109  Ala.  196,  19  So.  522;  Russ 
Lumber  Co.  v.  Muscupiabe  Land  & 
W.  Co.,  120  Cal.  521,  52  Pac.  993; 
Fleming  v.  Greene,  48  Kan.  646,  30 
Pac.  11;  Nichols  v.  Baker,  75  Me. 
334. 

"Hawley  v.  Hirsch,  2  Woodw. 
Dec.  (Pa.)  158. 

^  Carithers  v.  Levy,  111  Ga.  740, 
36  S.  E.  958.  See  Keller  v.  Vowell, 
17  Ark.  445. 

"^  Nichols  v.  Baker,  75  Me.  334. 
'"  Morgan  v.  Nowlin,  126  Mich. 
105,  85  N.  W.  468;  Soper  v.  St. 
Regis  Paper  Co.,  38  Misc.  (N.  Y.) 
294,  77  N.  Y.  Supp.  896.  See  Esk- 
ridge  v.  Barnwell,  106  Ga.  587,  32 
S.  E.  635;  Harlan  v.  Reid,  3  Ham, 
(Ohio)  285,  17  Am.  Dec.  594. 

"  Dawson  v.  Graham,  48  Iowa  378, 
so  holding  in  the  case  of  exaggera- 
tion as  to  the  amount  of  mineral  de- 
posits on  land  in  payment  for  which 
the  note  was  given. 

"Wickham  v.  Grant,  28  Kan.  517. 

"Goshen  National  Bank  v.  Bank 

of  Bingham,  118  N.  Y.  349,  23  N.  B. 

180,  16  Am.  St.  R.  765,  7  L.  R.  A. 


595.  The  court  said  in  this  case: 
"It  is  too  well  settled  by  authority, 
both  in  England  and  in  this  coun- 
try, to  permit  of  questioning,  that 
the  purchaser  of  a  draft,  or  check, 
who  obtains  title  without  an  in- 
dorsement by  the  payee,  holds  it 
subject  to  all  equities  and  defenses 
existing  between  the  original  par- 
ties, even  though  he  has  paid  full 
consideration,  without  notice  of  the 
existence  of  such  equities.  The 
reasoning  on  which  this  rule  is 
founded  may  be  briefly  stated  as 
follows:  The  general  rule  is  that 
no  one  can  transfer  a  better  title 
than  he  possesses.  An  exception 
arises  out  of  the  rule  of  the  law 
merchant,  as  to  negotiable  instru- 
ments. It  is  founded  on  the  com- 
mercial policy  of  sustaining  the 
credit  of  commercial  paper.  Being 
treated  as  currency  in  commercial 
transactions,  such  instruments  are 
subject  to  the  same  rule  as  money. 
If  transferred  by  indorsement  for 
value,  in  good  faith  and  before 
maturity,  they  become  available  in 
the   hands   of   the   holder    notwith- 


149 


FALSE   KEPEESENTATIONS   AS   TO    CONSIDERATION. 


[§  122 


as  a  defense  not  only  that  it  be  false  but  also  that  it  was  known  to  be 
such  to  the  party  making  it  at  the  time  he  made  it,  and  that  the  one 
to  whom  it  was  made  did  not  have  the  same  opportunity  open  to  him 
to  obtain  knowledge  in  regard  to  the  consideration  as  was  possessed 
by  the  one  making  itJ*  So  if  the  maker  of  a  note  had  the  opportunity 
of  inspecting  land,  in  payment  of  which  the  note  was  given,  and  failed 
to  do  so,  fraudulent  representations  in  reference  to  the  land  will  be 
no  defense  to  an  action  on  the  note,  where  an  inspection  would  have 
revealed  their  falsity.'^  ^     And  representations  that  certain  improve- 


standing  the  existence  of  equities, 
and  defenses  which  would  have  ren- 
dered them  unavailable  in  the  hands 
of  a  prior  holder.  The  rule  is  only 
applicable  to  negotiable  instruments 
which  are  negotiated  according  to 
the  law  merchant.  When,  as  in  this 
case,  such  an  instrument  is  trans- 
ferred, but  without  an  indorsement, 
it  is  treated  as  a  chose  in  action 
assigned  to  the  purchaser.  The  as- 
signee acquires  all  the  title  of  the 
assignor  and  may  maintain  an  ac- 
tion thereon  in  his  own  name.  And 
like  other  choses  in  action  it  is 
subject  to  all  the  equities  and  de- 
fenses existing  in  favor  of  the 
maker  or  acceptor  against  the  pre- 
vious holder.  Evidence  of  an  in- 
tention on  the  part  of  the  payee  to 
indorse  does  not  aid  the  plaintiff. 
It  is  the  act  of  indorsement,  not  the 
intention,  which  negotiates  the  in- 
strument, and  it  cannot  be  said  that 
the  intent  constitutes  the  act."  Per 
Parker,  J. 

"Journal  Printing  Co.  v.  Max- 
well, 1  Penn.  (Del.)  511,  43  Atl.  615, 
from  which  we  quote  as  follows: 
"A  mere  affirmation  or  declaration 
as  to  the  character  of  the  property 
which  is  the  consideration  for  the 
note,  which  is  in  fact  untrue,  is  not 
sufficient  in  law  to  establish  fraud, 
but  the  representation  must  have 
been  false  and  known  by  the  party 
making  it  to  be  false  at  the  time  he 


made  it.  And  if  the  party  who  buys 
the  property  relies  upon  the  repre- 
sentations and  advice  of  some  one 
other  than  the  seller,  or  upon  an  ex- 
amination or  investigation  made  by 
himself,  or  made  by  some  one  he 
procured  to  do  it  for  him,  or  if  the 
means  and  opportunity  of  the  pur- 
chaser of  acquiring  knowledge  of 
the  property  bought  were  equal  to 
those  of  the  seller,  the  representa- 
tion made  by  the  seller  would  be  no 
defense."  Per  Pennewill,  J.,  in 
charge  to  jury. 

"Harwell  v.  Martin,  115  Ga.  156, 
41  S.  E.  686.  The  court  said  in  this 
case:  "Prom  the  allegations  of  this 
plea  it  will  appear  that  the  defend- 
ant chose  to  rely  upon  the  repre- 
sentations made  by  Harwell  &  Rog- 
ers respecting  the  quantity  and 
character  of  the  timber  upon  the 
tract  of  land  containing  twelve  hun- 
dred acres.  It  is  alleged  that  these 
representations  were  false  and 
fraudulent  and  that  defendant  was 
injured  by  relying  and  acting  upon 
the  same.  The  defect  in  the  plea  is 
that  it  did  not  disclose  any  emer- 
gency or  condition  authorizing  the 
defendant  to  rely  upon  those  repre- 
sentations without  making  for  him- 
self an  examination  of  the  premises. 
If  he  had  a  reasonable  opportunity 
to  do  this  and  failed  to  avail  him- 
self thereof,  he  is  not,  from  a  legal 
standpoint,  entitled  to  complain  of 


123] 


FRAUD   AND   FRAUDULENT   REPRESENTATIONS. 


150 


ments  were  to  be  made  near  the  land  purchased  and  for  which  the  note 
was  given  have  been  held  no  defense  unless  it  appear  that  the  pur- 
chaser has,  and  could  acquire,  no  actual  knowledge  upon  the  subject." 

§  123.  Same  subject — Bona  fide  holder. — One  who  is  a  hona  fde 
holder  of  a  note,  before  maturity  and  without  notice,  will  not  be  sub- 
ject to  the  defense  of  fraudulent  representations  afEecting  the  con- 
sideration for  which  the  note  was  given."  So  an  indorser  cannot  set 
up  the  defense  of  fraudulent  representations  affecting  the  considera- 
tion for  his  indorsement,  in  an  action  by  a  lona  fide  holder.'^  And  a 
like  rule  prevails  in  the  case  of  a  guarantor,"  and  of  an  acceptor  of  a 
bill  of  exchange.®"   'VMiere,  however,  it  is  established  by  the  evidence 


the  deception  whicli  he  alleges  was 
practised  upon  him.  The  allega- 
tions of  the  plea  do  not  sufficiently 
show  either  that  the  defendant  had 
no  such  opportunity,  or  that  he  was 
by  the  fraud  or  deceit  of  Harwell  or 
Rogers  prevented  from  thoroughly 
examining  the  timber  upon  the 
twelve  hundred  acres."  Per  Lump- 
kin, P.  J. 

'"  Clark  v.  Tanner,  100  Ky.  275,  38 
S.  W.  11. 

"  California. — Russ  Lumber  Co.  v. 
Muscupiape  Land  &  W.  Co.,  120  Cal. 
521,  52  Pac.  995. 

Connecticut. — Bissell  v.  Dicker- 
son,  64  Conn.  61,  29  Atl.  226;  Ross 
V.  Webster,  63  Conn.  64,  26  Atl. 
476;  Rowland  v.  Fowler,  47  Conn. 
347. 

Geoj-firm.— Taylor  v.  Gribb,  100  Ga. 
94,  26  S.  E.  468;  Meritt  v.  Bagwell, 
70  Ga.  578. 

Indiana. — Ruddell  v.  Dillman,  73 
Ind.  518,  38  Am.  Rep.  152;  Woollen 
V.  Whitacre,  73  Ind.  198;  Strough  v. 
Gear,  48  Ind.  100. 

Iowa. — Loomis  v.  Metcalf,  30  Iowa 
382. 

Massachusetts. — Bill  v.  Stewart, 
156  Mass.  508,  31  N.  E.  386. 

Michigan. — Wright  v.  Irwin,  33 
Mich.  32. 


Missouri. — Fitzgerald  v.  Barker, 
96  Mo.  661,  10  S.  W.  45,  9  Am.  St. 
R.  375. 

Nebraska. — Cannon  v.  Canfield,  11 
Neb.  506,  9  N.  W.  693. 

New  York. — Heuertematte  v.  Mor- 
ris, 101  N.  Y.  63,  4  N.  E.  1,  54  Am. 
Rep.  657. 

Pennsylvania. — McSparran  v.  Nee- 
ley,  91  Pa.  St.  17;  Heist  v.  Hart,  73 
Pa.  St.  286. 

Federal. — Doane  v.  King,  30  Fed. 
106. 

See  Indiana. — Moore  v.  Moore,  112 
Ind.  149,  13  N.  E.  673,  2  Am.  St.  R. 
170. 

Kansas. — Converse  v.  Bartels 
(Kan.),  46  Pac. 

Wisconsin. — Andrews  v.  Hart,  17 
Wis.  297. 

'^Humphrey  v.  Clark,  27  Conn. 
381. 

"Mc Williams  v.  Mason,  31  N.  Y. 
294,  aff'g  1  Rob.  576. 

^  Morrison  v.  Farmers'  &  Mer- 
chants' Bank,  9  Okla.  697,  60  Pac. 
273.  It  was  said  by  the  court  in 
this  case:  "It  is  a  well  settled  rule 
of  law  that  an  acceptor  of  a  bill  of 
exchange  will  not  be  permitted  to 
vary  his  liability  from  that  which 
is  apparent  upon  the  face  of  the  bill 
by  setting  up  against  bona  fide  hold- 


151  CERTIFIED  CHECK — EFFECT  OF  FEAUD BOXA  FIDE  HOLDER.   [§    124 


that  the  payee  of  a  note  procured  the  same  by  such  a  representation,  the 
burden  then  rests  on  the  holder  of  the  instrument  to  show  that  lie  is  a 
hona  -fide  holder.^^ 

§  124.     Certified  check — Effect  of  fraud — Bona  fide  holder. — The 

fact  that  fal'se  representations  were  made  by  the  drawer  of  a  check 
as  to  his  solvency  to  a  bank  in  order  to  induce  it  to  certify  such  check, 
which  it  does  in  consequence  of  such  representations,  will  be  no  de- 
fense to  an  action  thereon  by  one  who  has  purchased  the  same  for  value, 
before  dishonor,  and  without  any  notice  of  such  fraudulent  conduct.^^ 
And  where  a  bank  certified  a  check  and  the  drawer,  finding  he  had 
been  defrauded,  requested  the  bank  not  to  pay  the  same  and  when  it 
was  presented  for  payment  the  bank  wrote  on  it  '^payment  stopped" 
and  returned  it  to  the  holder,  who  subsequently  erased  these  words  so 
that  it  was  not  noticeable,  affixed  a  revenue  stamp  over  the  erasure, 
and  transferred  it  to  a  tona  -fide  holder,  the  title  of  the  latter  was  held 
good.^^  Where,  however,  it  is  apparent  upon  the  face  of  a  certified 
check  that  the  acceptance  was  a  fraud,  a  holder  takes  it  with  notice  of 
such  fraud  and  he  cannot  be  said  to  be  a  hona  fide  holder.  In  such 
a  case,  therefore,  he  cannot  recover  thereon  from  the  bank.^'* 


ers  for  value,  who  took  the  bill  be- 
fore maturity,  statements  made  by 
the  drawers  to  the  drawees  where- 
by they  were  induced  to  accept  the 
bill,  and  we  have  been  unable  to 
find  that  any  distinction  is  made  in 
this  respect  between  holders  of  bills 
who  took  them  before  acceptance 
and  those  who  took  them  after- 
wards."   Per  Burford,  C.  J. 

"  David  V.  Merchants'  National 
Bank,  103  Ky.  586,  45  S.  W.  878. 

'^Bank  of  the  Republic  v.  Baxter, 
31  Vt.  101.  See  Justh  v.  National 
Bank  of  Commonwealth,  56  N.  Y. 
478. 

*'  Nassau  Bank  v.  Broadway  Bank, 
54  Barb.  (N.  Y.)  236. 

^^Claflin  V.  Farmers'  &  Citizens' 
Bank,  25  N.  Y.  293.  The  court  said 
in  this  case:  "A  hona  fide  holder 
of  commercial  paper  must  receive 
the  same  in  the  usual  course  of  busi- 
ness, for  value,  and  without  any  no- 
tice of  facts  tending  to  impeach  the 


character  or  validity  of  the  paper 
as  between  the  original  parties.  The 
plaintiffs  cannot  claim  the  protec- 
tion of  this  rule.  They  had  distinct 
notice,  by  the  face  of  the  certificate 
and  the  signature  thereto,  that  the 
acceptance  was  improper  and  irreg- 
ularly made.  It  was  patent  on  the 
face  of  the  paper,  that  the  accept- 
ance was  a  fraud;  that  the  presi- 
dent of  defendant's  bank,  in  accept- 
ing such  checks,  was  violating  his 
duty,  and  using  his  oflScial  charac- 
ter for  his  personal  benefit,  and 
thereby  perpetrating  an  act  of  dis- 
honesty in  palpable  violation  of  his 
trust.  No  business  man  of  common 
intelligence  could  take  these  checks 
in  good  faith,  and  without  suspi- 
cion or  notice  of  this  fraud.  Upon 
this  distinct  fact  I  would  hold  that 
the  plaintiffs  are  not  hona  fide  hold- 
ers of  these  checks,  and  are  not  en- 
titled to  recover  the  same  of  the 
defendants."     Per  Smith,  J. 


§  135] 


FRAUD   AND   FRAUDULENT   REPRESENTATIONS. 


152 


§  125.  Paper  in  fraud  of  creditors. — The  maker  of  a  note  cannot 
set  up  as  a  defense  to  an  action  thereon  by  a  bona  fide  holder,  the 
fact  that  the  note  was  executed  by  him  in  fraud  of  his  creditors  or  of 
those  of  the  payee.^^  So  where  one  sells  property  for  the  purpose  of 
defrauding  his  creditors  and  the  purchaser  gives  notes  tl>erefor,  which 
are  transferred  to  a  ho7ia  fide  holder,  the  purpose  of  the  sale  is  no  de- 
fense to  an  action  thereon  by  the  latter.^''  And  the  bona  fide  title  of 
a  holder  protects  all  subsequent  holders  as  a  general  rule,  but  this  pro- 
tection does  not  extend  to  a  party  to  the  original  fraud."  Again,  the 
maker  of  a  note  or  check  cannot  obtain  any  relief  as  against  a  de- 
frauded creditor,  for  fraud  to  which  he  is  a  party.®^  Nor  can  the 
maker  of  a  note  defeat  recovery  thereon  on  the  ground  that  it  was 
transferred  by  the  original  owner  in  fraud  of  his  creditors,  this  being 
a  matter  with  which  the  maker  is  not  concerned.®^  In  an  action, 
however,  between  the  original  parties  to  such  a  fraud  they  will  be  kept 
to  themselves  and  the  contract  will  not  be  enforced.^"    And  where  an 


*^  Murray  v.  Jones,  50  Ga.  109; 
Fury  v.  Kempin,  79  Mo.  477; 
Dalrymple  v.  Hillenbrand,  62  N.  Y. 
5,  20  Am.  Rep.  438,  afl'g  2  Hun  (N. 
Y.)  488,  5  Thomp.  &  C.  57;  Warren 
V.  Lynch,  5  Johns.  (N.  Y.)  239; 
Crouch  V.  Wagner,  63  App.  Div.  (N. 
Y.)  526,  71  N.  Y.  Supp.  607;  Win- 
ton  v.  Freeman,  102  Pa.  St.  366.  Ex- 
amine Marine  Bank  v.  Clements,  31 
N.  Y.  33. 

^  Gregory  v.  Harrington,  33  Vt. 
241. 

"  Erie  Boot  &  Shoe  Co.  v.  Eichen- 
laub,  127  Pa.  St.  164,  17  Atl.  889. 

«^  Allen  V.  Bank,  127  Pa.  St.  51,  17 
Atl.  886,  14  Am.  St.  R.  829;  Long- 
mire  V.  Fain,  89  Tenn.  393,  18  S.  W. 
70,  holding  that,  where  a  check  was 
given  to  be  used  in  lieu  of  cash  to 
cover  up  the  default  of  an  official 
and  enable  him  to  continue  in  office, 
the  maker  was  liable  thereon  to  the 
creditors  of  such  officer.  Compare 
First  National  Bank  v.  Felt,  100 
Iowa  680,  69  N.  W.  1057,  holding 
that  where  a  note  was  given  to  a 
bank,  without  consideration,  by  one 
of  the  debtors,  under  an  agreement 


that  it  should  create  no  liability, 
the  maker  was  not  liable  where  the 
bank  was  solvent  and  no  right  of 
creditors  was  involved. 

^  "Such  defense  does  not  deny 
that  the  maker  of  the  note  owes  the 
money  to  some  one.  It  only  dis- 
putes the  transferee's  right  to  the 
proceeds,  as  against  the  creditors  of 
the  transferror.  This  is  a  question 
that  does  not  concern  the  defendant, 
as  debtor.  As  between  transferror 
and  transferee,  no  matter  how 
fraudulent  the  intent  of  the  trans- 
fer, the  right  to  the  note  and  its 
proceeds  passes.  Only  creditors  can 
assail  the  validity  of  the  transfer 
and  they  may  never  assert  the 
right.  Such  defense  opposes  no  ob- 
stacle to  a  judgment  against  the 
debtor  thus  sued."  Wood  v.  Steele, 
65  Ala.  436,  438,  per  Stone,  J. 

^  Sternburg  v.  Bowman,  103  Ma^s. 
325;  Appeal  of  Taylor,  45  Pa.  St. 
71;  Walker  v.  McConnico,  18  Tenn. 
(10  Yerg.)  228.  See  Stevens  v. 
Parker.  89  Mass.  (7  Allen)  361; 
Howden  v.  Haigh,  11  Adol.  &  E. 
1033.    But  see  Harcrow  v.  Gardiner, 


J 


153 


FRAUDULENT  PROCUREMENT   OP  INDORSEMENT.  [§    126 


action  is  brought  by  the  executors  of  the  payee  against  the  sureties  of 
a  note  it  has  been  decided  that  they  may  show  in  defense  to  the  action 
that  it  was  given  by  the  principal  in  fraud  of  his  creditors  and  was 
without  consideration,  of  which  facts  they  had  no  knowledge.^^  And 
fraud  of  this  character  is  also  available  as  a  defense  to  an  action  on  a 
note  by  one  to  whom  it  has  been  indorsed  for  collection,  after  matur- 
ity, by  the  payee.^^  But  where  the  maker  has  set  up  the  defense  of 
want  of  consideration  it  is  held  that  the  payee  cannot,  in  rebuttal, 
avail  himself  of  fraud  on  the  part  of  the  maker  toward  his  creditors.^^ 

§  126.  Fraudulent  procurement  of  indorsement. — In  an  action  by 
a  bona  fide  holder  against  an  indorser  the  latter  cannot  set  up  the  fact 
that  his  indorsement  was  fraudulently  obtained.*^*    So  one  who  takes 


69  Ark.  6,  58  S.  W.  553;  Carpenter 
V.  McClure,  39  Vt.  9.  In  a  case  in 
New  Jersey  in  which  the  defendant 
to  an  action  offered  a  promissory 
note  under  plea  of  payment  and  no- 
tice of  set-off  in  disproof  of  plain- 
tiff's claim,  evidence  was  admitted 
showing  the  consideration  of  the 
note  was  the  transfer  to  the  plain- 
tiff by  the  defendant  of  certain  per- 
sonal property  in  fraud  of  his  cred- 
itors and  the  court  charged  that  if 
the  jury  believed  this  evidence  a 
full  defense  to  the  note  was  estab- 
lished. On  appeal  the  court  said: 
"In  equity  the  fraudulent  parties 
are  left  as  between  themselves,  in 
the  position  in  which  they  put 
themselves  by  their  misconduct. 
Why  should  a  different  rule  prevail 
at  law?  In  the  present  case  there 
has  been  a  past  performance  of  the 
illegal  arrangement — the  goods  have 
been  delivered  to  the  one  party: 
the  opposite  party,  in  offsetting  this 
note  is  seeking  the  aid  of  the  court 
to  consummate  the  execution  of  the 
agreement.  It  is  settled  in  this 
state,  that  in  equity  no  such  relief 
would  be  granted  and  in  my  judg- 
ment, the  same  result  must  obtain 
at  law."  Church  v.  Muir,  33  N.  J. 
L.  318,  323,  per  Beasley,  C.  J. 


"  Goodwin  v.  Kent,  201  Pa.  St.  41, 
50  Atl.  290.  Compare  Harcrow  v. 
Gardiner,  69  Ark.  6,  58  S.  W.  553. 

°-  "The  indorsement  by  the  payee 
of  the  note,  sued  on  after  it  was 
due,  for  the  purpose  of  enabling 
the  plaintiffs  to  collect  it  as  his 
agents,  did  not  confer  upon  them 
any  greater  rights,  as  against  the 
maker,  than  the  payee  himself  had. 
If,  as  against  the  payee,  the  note 
was  liable  to  the  objection  of  hav- 
ing been  given  upon  an  illegal  con- 
sideration, he  certainly  could  not 
be  allowed  to  obviate  the  difficulty 
by  assigning  it  to  an  agent  to  col- 
lect for  him.  The  law  denouncing 
a  contract  founded  in  fraud  would 
be  untrue  to  itself,  if  it  allowed  it- 
self to  be  defeated  by  so  simple  and 
obvious  a  contrivance."  Powell  v. 
Inman,  52  N.  C.  28,  per  Battle,  J. 

'^Wearse  v.  Pierce,  41  Mass.  (24 
Pick.)    141. 

**Von  Windlich  v.  Klaus,  46  Conn. 
433;  Follain  v.  Dupre,  11  Rob.  (La.) 
454.  See  Cristy  v.  Campan,  107 
Mich.  172,  65  N.  W.  12,  holding  that 
in  an  action  by  a  bona  fide  holder 
against  an  accommodation  indorser 
the  latter  cannot  escape  liability  on 
the  ground  that  his  indorsement 
was  procured  by  the  fraudulent  rep- 


137] 


FRAUD   AND   FRAUDULENT   REPRESENTATIONS. 


154 


a  bill  or  note  in  payment  of  a  pre-existing  debt  is  held  to  be  a  bona  fide 
holder,  and  not  subject  to  the  defense,  in  an  action  by  him  against  an 
indorser,  that  the  indorsement  was  fraudulently  obtained  by  the 
maker.^^  And  an  indorsee  cannot  set  up,  in  an  action  against  him, 
false  representations  in  respect  to  the  note  or  the  transaction  in  which 
it  was  given,  which  were  made  subsequent  thereto  and  after  the  note 
had  been  transferred  to  the  holder.^^  Nor  is  such  a  defense  available 
to  an  accommodation  indorser  in  an  action  against  him  by  a  payee  who 
is  to  be  regarded  as  a  purchaser  for  value  and  who  has  taken  the  note 
without  notice  of  the  fraud.^^  Nor  can  indorsers  of  renewal  notes 
defeat  a  recovery  on  the  original  notes  by  the  fact  that  they  were  in- 
duced by  fraudulent  representations  to  indorse  the  renewals.®^  An 
indorser  may,  however,  avail  himself  of  this  defense  against  one  who 
was  a  party  to  the  fraud.^^ 

§  127.     Fraud  as  to  amount. — It  is  a  good  defense  to  an  action  be- 


resentations  of  the  maker.  Clothier 
V.  Adriance,  51  N.  Y.  322. 

«=Blanchard  v.  Stevens,  57  Mass. 
(3  Cush.)  162,  50  Am.  Dec.  723. 
See  Mangan  v.  Sunwall,  60  Minn. 
367,  62  N.  W.  398.  Where  one  to  whom 
such  paper  is  transferred  cannot  be 
regarded  as  an  innocent  holder,  an 
accommodation  indorser  may,  in  an 
action  against  him  by  such  trans- 
feree, set  up  the  defense  of  fraud 
in  obtaining  his  indorsement.  Hen- 
riques  v.  Ypsilanti  Savings  Bank, 
84  Mich.  168,  47  N.  W.  558. 

'"Alpena  National  Bank  v.  Green- 
baum,  80  Mich.  1,  44  N.  W.  1123; 
Palmer  v.  Hawes,  73  Wis.  46,  40  N. 
W.  676.  In  this  case  the  court  said: 
"It  is  alleged,  in  effect,  that  some 
six  months  after  plaintiff  obtained 
such  stock  he  falsely  represented  to 
the  appellant  that  the  affairs  and 
business  of  the  company  were  in 
good  condition,  whereby  she  was 
lulled  into  inactivity  and  rest  con- 
cerning her  liability  on  the  note. 
But  that  is  no  ground  for  defending 
against  the  note,  nor  of  any  action 
against  the  plaintiff,  since  the  appel- 


lant parted  with  nothing  on  the 
faith  of  such  representations."  Per 
Cassoday,  J. 

"^  "Accommodation  indorsers,  be- 
yond all  doubt,  are  liable  precisely 
to  the  same  extent  as  if  they  had  re- 
ceived value,  when  the  paper  upon 
which  their  names  appear,  has  come 
into  the  hands  of  a  holder  for  value, 
who  has  taken  it  bona  fide,  before 
maturity,  and  without  notice  of  any 
fraud  or  other  equity,  which  would 
vitiate  it.  It  is  entirely  immaterial 
that  such  purchaser  was  cognizant 
of  the  fact  that  the  bill  or  note 
was  founded  on  an  accommodation 
transaction,  and  was,  therefore,  to 
this  extent,  without  consideration 
as  between  the  indorser  and  the 
maker."  Marks  v.  First  National 
Bank,  79  Ala.  550,  58  Am.  Rep.  620, 
per  Somerville,  J. 

"^  Alpena  National  Bank  v.  Green- 
baum,  80  Mich.  1,  44  N.  W.  1123. 

'"Shaw  v.  Stein,  79  Mich.  77,  44 
N.  W.  419;  Deaderick  v.  Mitchell,  65 
Tenn.  (6  Baxt.)  35;  Wilcox  v.  Ten- 
nent,  13  Tex.  Civ.  App.  220,  35  S.  W. 
865. 


155  FKAUD  AS  TO  SECUEITY.  [§  128 

tween  the  original  parties  to  a  note  that,  hj  reason  of  fraudulent  eon- 
duct  to  which  the  plaintiff  was  a  party  or  privy,  the  instrument  called 
for  the  payment  of  a  larger  amount  than  had  been  agreed  upon.^*'" 
Where,  however,  a  person  voluntarily  gives  his  note  in  settlement  of 
an  account  rendered  after  the  account  had  been  submitted  to  him  and 
he  has  had  an  opportunity  to  examine  the  same,  it  has  been  decided 
that  proof  of  fraud  will  not  operate  as  a  complete  defense  to  any  re- 
covery upon  the  note.^"^  And  though  a  person  is  induced  by  fraudu- 
lent representations  to  execute  a  note  for  a  sum  much  larger  than  is 
due  to  the  payee,  such  fraud  will  only  operate  to  defeat  recovery  on  the 
note  for  such  amount  as  is  in  excess  of  that  which  is  actually  due.^°- 

§  128.  Fraud  as  to  surety. — That  a  surety  was  induced  by  false 
and  fraudulent  representations  to  affix  his  signature  to  the  instrument 
may  be  a  good  defense  to  an  action  thereon.^"^  Where  a  misrepresent- 
ation, however,  is  relied  on  by  a  surety  it  must  be  an  assertion  of  a 
fact  and  not  a  mere  expression  of  opinion  in  order  that  he  may  de- 
feat a  recovery  on  such  ground.^"*  And  if  a  surety,  with  knowledge 
of  all  the  facts  in  reference  to  the  fraud,  waives  such  a  defense  he 
cannot  subsequently  avail  himself  of  the  same  to  defeat  a  recovery  on 
the  instrument,  though  he  acted  without  knowledge  that  the  fraud 
was  a  defense  at  law.^°^  Such  a  defense  is  available  as  against  one  who 
has  taken  the  paper  without  giving  a  consideration  therefor.^*"'  And 
a  surety  may  defeat  a  recovery  on  a  bill  or  note  on  the  ground  of  fraud- 
ulent concealment  or  misrepresentation  of  facts,  even  though  the  con- 
tract is  still  binding  on  his  principal. ^''^  A  mere  failure,  however,  to 
communicate  facts  to  a  surety  which  may  be  material  for  him  to  know 

"° Union  Central  Insurance  Co.  v.  302;   Warren  v.  Branch,  15  W.  Va. 

Huyck,   5    Ind.   App.   474,   32    N.   E.  21.     See  Wilson's  Adm'rs  v.  Green, 

580.      See    Galloway    v.    Merchants'  25  Vt.  450. 

Bank,   42   Neb.    259,   60   N.   W.    569,         ^'^  Evans  v.  Kneeland,  9  Ala.  42_. 
holding  that  relief  may  be  obtained         ^"'Rindskopf  v.    Dornan,   28   Ohio 

in  equity  in  such  a  case.     But  on  St.  516,  so  holding  where  a  surety, 

this   latter   point    see    Dickinson   v.  after  maturity  of  a  note  and  with 

Lewis,  34  Ala.  638.  full     knowledge     of     all     the    facts 

'"'Haycock  v.  Rand,  59   Mass.    (5  which  constituted  the  fraud,  request- 

Cush.)  26.  ed  an  extension  of  time  which  was 

'"=  Brown    v.    North,    21    Mo.    528.  given. 
See  Griffiths  v.  Parry,  16  Wis.  218.  'O"  Stewart  v.   Small,   2  Barb.    (N. 

'"=  Easter  v.    Minard,    26    111.    494;  Y.)   559. 
Melick  V.  Bank,  52  Iowa  94,  2  N.  W.         ">'  Evans  v.  Kneeland,  9  Ala.  42. 
1021;    Selser   v.    Brock,    3    Ohio    St. 


§  129] 


FRAUD   AND   FRAUDULENT   REPRESENTATIONS. 


156 


will  be  no  defense  to  an  action  against  him  by  the  payee  in  the  ab- 
sence of  fraud.^"^  So  in  an  action  on  a  note  signed  by  a  surety  for  a 
part  of  a  debt,  it  was  decided  that  failure  to  inform  him  of  the  fact 
that  the  maker  had  given  his  note  to  the  payee  for  the  balance  of  such 
debt  was  no  defense,  unless  an  inquiry  had  been  made  by  the  surety 
in  respect  thereto.^"^  And  failure  of  a  payee,  before  accepting  a  note, 
to  inform  the  surety  that  the  maker's  property  was  about  to  be  sold 
under  attachment,  has  been  held  no  defense  to  an  action  thereon 
where  the  payee  was  not  present  when  the  note  was  signed  by  the 
surety  and  had  never  made  any  representation  to  him  on  the  sub- 
ject.^^"  But  where  a  note  was,  in  fraud  of  the  surety,  made  to  cover 
another  debt  in  addition  to  that  for  which  the  surety  affixed  his  signa- 
ture, it  has  been  held  in  Mississippi  to  be  voidable  as  to  the  amount 
so  added.^^^ 

§  129.  Same  subject — Bona  fide  holders. — The  defense  of  fraud  in 
inducing  a  surety  to  affix  his  signature  to  negotiable  paper  is  not 
available  in  an  action  against  him  by  a  hona  fide  holder.^^^    So  fraud- 


108  Oregon  National  Bank  v.  Gard- 
ner, 13  Wash.  154,  42  Pac.  545,  so 
holding  in  case  of  failure  of  obligee 
to  inform  surety  of  existence  of  a 
judgment  which  he  held  against  the 
principal.  The  court  said  in  this 
case:  "The  plaintiff  was  under  no 
obligation  to  give  the  sureties  a 
history  of  the  financial  standing  of 
defendant  "Wright.  If  there  was  a 
judgment  against  him  it  was  a  mat- 
ter of  public  record,  and  it  would 
have  been  but  the  exercise  of  com- 
mon prudence  on  the  part  of  the 
sureties  to  have  made  such  slight 
inquiry  concerning  the  financial 
standing  of  their  principal,  and  the 
slightest  inquiry  would  have  re- 
vealed the  existence  of  the  judg- 
ment." Per  Dunbar,  J.  Warren  v. 
Branch,  15  W.  Va.  21,  in  which  it  is 
said:  "Though  the  simple  failure  of 
a  creditor  to  communicate  to  a  sure- 
ty a  fact  material  for  the  surety  to 
know,  though  connected  with  the 
contract  of  suretyship,  will  not  gen- 
erally  vitiate   the    contract,    unless 


the  concealment  on  the  part  of  the 
creditor  was  fraudulent,  even 
though  the  principal  in  procuring 
the  security  acted  fraudulently, 
either  in  suppressing  such  material 
fact,  or  in  misstating  facts,  yet  if 
the  dealings  are  such  as  fairly  to 
lead  the  creditor,  if  a  reasonable 
man,  to  believe  that  the  principal 
must  have  used  fraud  in  procuring 
the  surety  to  enter  into  the  con- 
tract, the  creditor  is  bound  to  in- 
quire of  the  surety  how  his  signing 
the  contract  has  been  procured;  and 
his  failure  to  do  so  will,  if  fraud 
has  been  practiced  by  the  principal 
on  the  surety,  vitiate  the  contract 
as  to  him,  though  no  fraud  has  been 
traced  to  the  creditor."  Per  Green, 
President. 

"» Booth  V.  Storrs,  75  111.  438. 

""Smith  V.  First  National  Bank, 
21  Ky.  Law  Rep.  953,  53  S.  W.  648. 

"1  Clopton  V.  Elkin,  49  Miss.  95. 

"=  Fitzgerald  v.  Barker,  96  Mo. 
661,  10  S.  W.  45;  Riley  v.  Reifert 
(Tex.  Civ.  App.),  32  S.  W.  185. 


157  FRAUDULENT  TRANSFER — BY  PARTNER.   [§§  130/131 

ulent  representations  by  the  principal  to  the  surety  will  be  no  defense 
to  an  action  against  the  latter  by  the  payee  who  was  not  privy  to  the 
jfraud,  but  is  an  innocent  holder  with  no  knowledge  of  the  facts.  This 
is  founded  on  the  principle  that  where  one  of  two  innocent  persons 
must  suffer  a  loss,  he  who  has  made  the  loss  possible  must  bear  it.^^^ 

§  130.  Fraudulent  transfer. — In  an  action  on  a  note  against  tlie 
maker  by  a  bona  fide  holder,  it  is  no  defense  that  the  instrument  was 
transferred  in  fraud  of  the  rightful  owner  by  an  agent  or  holder  of  the 
paper  for  such  party.^^*  Nor  can  the  maker  of  a  note  defeat  recovery 
by  the  transferee  on  the  ground  that  the  transfer  was  made  by  the 
payee  in  fraud  of  his  creditors,  as  in  such  a  case  only  the  creditors  or 
some  one  acting  for  them  can  assail  such  transfer.^^^  And  the  maker 
or  acceptor  of  a  bill  of  exchange  cannot  avail  himself  of  the  defense 
that  the  instrument  was  pledged  to  the  plaintiff  as  security  for  a  loan 
by  one  who  had  no  authority  to  so  act.^^^ 

§  131.  Same  subject — By  partner. — Where  paper  belonging  to 
partnership  is  transferred  by  one  of  the  partners,  it  is  no  defense  to 
an  action  against  the  maker,  that  such  transfer  was  fraudulent  as  to 
the  firm.^^^    The  firm  is  bound  in  such  cases,  unless  the  person  taking 

^"Anderson  v.  Warne,  71  111.  20,  lished  against  the  plaintiffs,  would 
22  Am.  Rep.  83;  Hunter  v.  Fitz-  constitute  no  defense  to  this  action, 
maurice,  102  Ind.  449,  2  N.  E.  127;  The  title  is  good  as  against  the  de- 
Wayne  Agricultural  Co.  v.  Cardwell,  fendant,  and  that  is  sufficient;  if 
73  Ind.  555;  Farmers'  &  T.  Bank  v.  there  are  any  others  who  claim  a 
Lucas,  26  Ohio  St.  385;  Rothermal  title  to  the  instruments  superior  to 
V.  Hughes,  134  Pa.  St.  510,  19  Atl.  that  of  the  plaintiffs,  it  can  be  de- 
677.  termined    whenever   they   come   be- 

"*  Ogden  V.  Marchand,  29  La.  Ann.  fore   the  court  to  assert  it."     City 

61;  Kinney  v.  Kruse,  28  Wis.  183.  Bank  v.  Perkins,  29  N.  Y.  554,  570, 

"5  Sullivan  v.  Bonesteel,  79  N.  Y.  86  Am.  Dec.  322,  per  Johnson,  J. 

631;    Newsom  v.   Russell,   77   N.    C.  ^"Kansas. — Barber   v.   Van    Horn, 

277;  Holden  v.  Kirby,  21  Wis.  149.  54  Kan.  33,  36  Pac.  1070. 

""  "It  Is  a  question  which   in  no  Maine. — Redlon    v.    Churchill,    73 

way    concerns   the    defendant,    and  Me.  146. 

upon  which  he  cannot  be  allowed  to  Maryland. — Hopkins   v.    Boyd,    11 

defend  and  escape  the  payment  of  Md.  107. 

his  obligations.     It  is  enough   that  Michigan. — Nichols    v.    Sober,    38 

the  plaintiffs  make  out  a  title  free  Mich.  678. 

from  mala  fides  on  their  part,  and  'New  York. — First  National  Bank 

which  is  every  way  sufficient  for  his  v.  Morgan,  73  N.  Y.  593. 

protection.     The   issue  beyond   that  Rhode  Island. — Windham   County 

between  the  parties  before  the  court  Bank  v.  Kendall,  7  R.  I.  77;  Parker 

is  wholly  immaterial;  and  if  estab-  v.  Burgess,  5  R.  I.  277. 


§§   133,   133]        FRAUD  AND  FRAUDULENT  REPRESENTATIONS.  158 

the  paper  knew  or  had  reason  to  believe  that  it  was  executed  or  trans- 
ferred in  fraud  of  the  partnership."^  If,  however,  the  circumstances 
imder  which  such  paper  is  given  or  transferred  are  such  as  to  naturally 
arouse  suspicion  so  that  the  transferee  will  not  be  regarded  as  a  bona 
fide  holder,  it  may  be  shown  that  the  partner  acted  in  fraud  of  the 
firm  and  that  the  paper  was  given  for  accommodation  without  the 
firm's  consent."'^  And  where  the  holder  of  the  paper  is  a  party  to  the 
fraud  of  the  partner  upon  his  firm,  such  fraud  will  be  available  as  a 
defense  to  an  action  against  the  firm.^-"  In  case  of  fraud  by  a  mem- 
ber of  a  firm  in  procuring  the  execution  of  a  note  to  the  firm,  such 
fraud  will  be  a  defense  to  an  action  by  the  latter  on  the  instrument.  "^ 


121 


§  132.  Same  subject — By  administrator. — It  is  a  good  defense  to 
an  action  on  a  note  that  it  belonged  to  an  estate  and  was  transferred 
to  the  plaintiff  by  one  who  was  acting  as  administrator  in  payment  of 
his  individual  obligation  and  that  the  plaintiff  took  the  instrument 
with  full  knowledge  of  all  the  facts.^^- 

§  133.  Availability  of  defense — Maker. — The  maker  of  a  note  may 
avail  himself,  as  a  defense  to  an  action  by  the  payee,  of  the  fact  that 
there  was  a  fraudulent  agreement  between  his  co-maker  and  such 
payee  in  connection  with  the  giving  of  the  note,"=^  or  that  there  was 
fraud  of  the  agent  of  the  payee  upon  the  maker.124  ^^^  where  the 
maker  of  a  note  was  subsequently  appointed  administrator  of  the 
payee's  estate,  it  was  decided  that  in  an  action  against  him  in  that  ca- 
pacity by  the  indorsee  he  might  set  up  as  a  defense  that  the  indorse- 
ment was  invalid  as  against  the  payee's  creditors  and  that  he  needed 
the  avails  of  such  note  to  pay  the  debts  of  the  payee.^-^  But  it  is  no 
defense  to  an  action  by  the  payee  against  a  maker  of  a  note  that  fraud 

South  CaroZiwa.— Duncan  v.  Clark,        "«Roth  v.  Colvin,  32  Vt.  125.. 
2  Rich.  (S.  C.)  587.  ""Wells  v.  Masterman,  2  Esp,  731. 

FefZeraZ.— Winship  v.  Bank,  5  Pet.        "'  Kllgore  v.  Bruce,  166  Mass.  136, 

(U.   S.)    529;    Drexler  v.   Smith,   30  44  N.  E.  108. 

Fed.  754;  Many,  In  re,  Fed.  Cas.  No.        "- Prosser  v.  Leatherman,  5  Miss, 

9054.  (4  How.)  237,  34  Am.  Dec.  121. 

English.— RiAXey     v.     Taylor,     13        ^^  Mitchell   v.    Donahey,    62    Iowa 

East    175;     Sutton    v.    Gregory,     2  376,  17  N.  W.  641. 
Peake  Ad.  Cas.  150.   See:  "*  Aultman  v.  Olson,  34  Minn.  450, 

Mississippi.— Hibernian    Bank    v.  26  N.  W.  451.     See  Tagg  v.  Bank,  56 

Everman,  52  Miss.  500.  Tenn.  (9  Heisk.)  479. 

"» Cotton  V.  Van  Bokkelin,  21  N.        "^  Cross  v.  Brown,  51  N.  H.  486. 
C.  284. 


159  AVAILABILITY  OF  DEFENSE.  [§  134 

was  practiced  upon  the  latter  by  his  co-maker,  where  tlie  payee  was 
innocent  of  the  fraud.^^^  And  the  right  of  an  acceptor  who  has  paid 
the  bill  to  recover  cannot  be  defeated  by  the  fraud  of  one  drawer  upon 
another.^"  And  in  an  action  by  an  indorser  against  the  maker  of  a 
note  which  both  signed  for  the  accommodation  of  the  payee,  it  has 
been  decided  that  the  maker  cannot  set  up  the  defense  that  his  signa- 
ture was  obtained  by  fraud  of  the  payee.^-^  ]S"or  is  fraud  of  an  in- 
dorsee upon  his  indorser  any  defense  to  an  action  by  the  former 
against  the  maker,^-'*  or  of  the  indorser  upon  his  creditors.^^"  And 
a  maker  cannot  avail  himself  of  fraud  against  the  surety  as  a  de- 
fense.^^^  And  where  a  party  who  has  received  stolen  property  makes 
a  loan  from  the  proceeds  thereof  for  the  amount  of  which  a  note  is 
given  payable  to  bearer,  it  has  been  decided  that  the  maker  of  such 
note  cannot  in  an  action  against  him  avail  himself  of  the  fact  that  the 
loan  was  made  from  the  proceeds  of  stolen  property.^^- 

§  134.  Same  subject — Other  parties. — In  an  action  by  the  payee 
against  the  acceptor  of  a  bill,  fraud  on  the  part  of  the  drawer  in  the 
use  of  the  proceeds  of  such  bill,  which  was  accepted  for  his  accommo- 
dation, is  no  defense.^^^  And  in  an  action  against  an  accommodation 
acceptor  by  one  who  is  an  innocent  holder  for  a  valuable  consideration 
the  fact  is  not  available  as  a  defense  that  the  bill  was  put  in  circula- 
tion in  fraud  of  an  agreement  between  the  payee  and  drawer  to  which 
the  acceptor  was  not  a  party. ^^*  Kor  can  a  guarantor  in  action  against 
him  by  a  payee  without  notice  defeat  recovery  on  the  grounds  of  fraud 
upon  him  by  the  maker.^^^  And  an  indorser  who  has  affixed  his  signa- 
ture to  an  instrument  for  a  new  and  valuable  consideration  cannot 
avoid  liability  by  setting  up  fraud  between  the  original  parties.^^^ 

""Anderson  v.  Warne,  71  111.   20,  '"i  Mead   v.   Merrill,   10   Fost.    (N. 

22  Am.  Rep.  23;    Fulford  v.   Block,  H.)  472. 

8  111.  App.  284;  Vass  v.  Riddick,  89  ^='=  Warren  v.  Haight,  65  N.  Y.  171. 

N.  C.  6.  ^"'  Gray  v.  Bank,  29  Pa.  St.  365. 

'"Kimbro  v.  Bullitt,  22  How.   (U.  ^=' Winn  v.  Wilkins,  35  Miss.  186. 

S.)  256.  "=  Davis  Co.  v.  Buckles,  89  111.  237. 

"'  Laubach  v.  Pinsell,  35  N.  J.  L.  Compare  Putnam  v.  Schuyler,  4  Hun 

434.  (N.   Y.)    166,   holding  that  a   guar- 

'-' Carrier  v.    Sears,   86   Mass.    (4  antor  may  set  up  the  defense  that 

Allen)  336,  81  Am.  Dec.  707;  Prouty  the    note    was    obtained    from    his 

V.  Roberts,  60  Mass.    (6  Cush.)    19,  principal  by  fraud. 

52  Am.  Dec.  761.  "'"■  Hart  v.   Livermore   Foundry   & 

""Wood    V.    Steele,    65    Ala.    436;  Machine   Co.,    72    Miss.    809,    17    So. 

Mack  V.  Clark,  42  Mass.    (1  Mete.)  769.     See  Thayer  v.  Jewett,  9  Shep. 

423.  (Me.)  19. 


CHAPTER  VII. 

ALTERATIONS   OF    PAPER. 


Subdivision  I.     General  rules 

Subdivision  II.    Particular  alterations 


Subdivision  I. 


135-150 
151-182 


GENERAL  RULES. 


Sec. 

135.  Availability  of  alterations  as  a 

defense  generally. 

136.  Rule  as  to  hona  fide  holders. 

137.  Immaterial  alterations. 

138.  Alteration      by     co-maker     or 

drawer. 

139.  Alteration    by    maker    without 

surety's  consent. 

140.  Alteration   by  payee   or   subse- 

quent    h  0  1  d  e  r — Effect     on 
rights  of  surety. 

141.  Alteration  by  agent  of  holder. 

142.  Alteration  by  third  party. 

143.  Alteration  by  mistake  or  acci- 

dent. 


Sec. 

144.  Filling   in   blanks — Instrument 

incomplete — Rule  as  to. 

145.  Same    subject — ^Application    of 

rule. 

146.  Same    subject — Where    instru- 

ment complete. 

147.  Defense   to   action   on   original 

consideration  or  debt. 

148.  Alteration   not   fraudulent — To 

make  paper  conform  to  orig- 
inal agreement — May  recover 
on  original  consideration. 

149.  Effect  of  consent  or  ratification. 

150.  Same      subject — What     consti- 

tutes. 


§  135.  Availability  of  alterations  as  a  defense  generally. — An  in- 
strument will  not  be  avoided  by  alterations  therein  which  are  made 
with  the  consent  of  the  parties.^  Where,  however,  one  has  entered 
into  a  contract  he  has  a  right  to  stand  upon  the  terms  of  the  original 
agreement,  and,  in  the  case  of  a  bill  or  note,  if  there  has  been  any 
alteration  of  the  instrument  which  changes  its  operation  and  effect 
and  the  liability  of  the  parties,  it  will  be  regarded  as  material  and 
will  be  a  good  defense  to  an  action  on  the  paper  against  a  party  not 
consenting  thereto.-  And  it  is  essential,  for  an  alteration  to  have  this 


'  Camden  Bank  v.  Hall,  14  N.  J.  L. 
583;  Whitehead  v.  Emmerich  (Cal.), 
87  Pac.  790. 

-Alabama. — Davis  v.  Carlisle,  6 
Ala.  707;  Mackey  v.  Dodge,  5  Ala. 
388. 

Connecticut. — ^tna  National  Bank 
V.  Winchester,  43   Conn.   391. 


Delaivare. — Bank  of  Newark  v. 
Crawford,  2  Houst.   (Del.)   282. 

Georgia. — Ohowason  v.  Wilson 
(Ga).  56  S.  E.  302;  Simons  &  Co. 
V.  McDowell,  125  Ga.  203,  53  S.  E. 
1031. 

Illinois. — Pankey  v.  Mitchell,  1  111. 
383. 

Indiana. — Young  v.  Baker,  29  Ind. 


160 


161 


AVAILABILITY    OF   ALTERATIONS   AS    DEFENSE. 


[§  135 


result,  that  it  be  such  as  to  effect  some  change  in  the  meaning  or 
legal  operation  of  the  instrument.^  Where  such  a  change  is  effected 
it  operates  to  create  a  new  contract,  one  which  is  different  from  that 
into  which  the  parties  originally  entered,  and  to  which  the  consent 
of  one  is  necessary  in  order  to  hind  him.*  As  is  said  in  a  case  in 
Georgia  in  regard  to  a  party  who  has  not  consented  to  such  an  alter- 
ation: "He  is  not  bound  by  the  old  contract,  for  that  has  been  abro- 
gated; neither  is  he  bound  by  the  new  contract,  because  he  is  no 
party  to  it.^'^   Not  only  will  an  alteration  of  this  kind  in  negotiable 


App.  130,  64  N.  E.  54;  Bowman  v. 
Mitchell,  79  Ind.  84;  Johnston  v. 
May,  76  Ind.  293;  Coburn  v.  Webb, 
56  Ind.  96,  26  Am.  Rep.  15. 

Indian  Territory. — Hampton  v. 
Mayes,  3  Ind.  Ter.  65,  53  S.  W.  483. 

Iowa. — Bell  v.  Mahin,  69  Iowa  408, 
29  N.  W.  331. 

Kansas. — New  York  Life  Ins.  Co. 
V.  Martindale  (Kan.  1907),  88  Pac. 
559;  Fraker  v.  Cullum,  21  Kan.  555. 

Maine. — Lee  v.  Starbird,  55  Me. 
491;  "Waterman  v.  Vose,  43  Me.  504. 

Massachusetts. — Stoddard  v.  Pen- 
niman,  108  Mass.  366,  11  Am.  Rep. 
363. 

Michigan. — Aldrich  v.  Smith,  37 
Mich.  468. 

Minnesota. — Board  of  Commis- 
sioners V.  Greenleaf,  80  Minn.  242, 
83  N.  W.  157. 

Missouri. — First  National  Bank  v. 
Fricke,  75  Mo.  178;  Presbury  v. 
Michael,  33  Mo.  542.  Trigg  v.  Tay- 
lor,  27    Mo.    245,   72   Am.    Dec.    263. 

Montana. — McMillan  v.  Hefferlin, 
18  Mont.  385,  45  Pac.  548. 

New  Jersey. — Hunt  v.  Gray,  35  N. 
J.  L.  227,  10  Am.  Rep.  232;  Vanan- 
ken  V.  Hornbeck,  14  N.  J.  L.  178,  25 
Am.  Dec.  509. 

Neio  York. — Reeves  v.  Pierson, 
23  Hun  (N.  Y.)  185;  Woodworth  v. 
Bank,     19     Johns.     (N.     Y.)     391. 

North  Dakota. — First  National 
Bank  v.  Laughlin,  4  N.  D.  391,  61  N. 
W.  473. 


Ohio. — Sturges  v.  Williams,  9 
Ohio  St.  443,  75  Am.  Dec.  473. 

Pennsylvania. — Craighead  v.  Mc- 
Loney,  99  Pa.  St.  211;  Hepler  v. 
Bank,  97  Pa.  St.  420,  39  Am.  Rep. 
813. 

Tennessee. — Stephens  v.  Davis,  85 
Tenn.  271,  2  S.  W.  382. 

Texas. — Farmers'  &  Merchants' 
Nat.  Bank  v.  Novich,  89  Tex.  381,  34 
S.  W.  914;  Adams  v.  Faircloth 
(Tex.  Civ.  App.  1906),  97  S.  W.  507. 

Virginia. — Batchelder  v.  White,  80 
Va.  103. 

West  Virginia. — Bank  of  Ohio  Val- 
ley V.  Lockwood,  13  W.  Va.  392. 

English. — Bathe  v.  Taylor,  15  East 
412;  Baton  v.  Winter,  1  Taunt.  420 
Outhwaite  v.  Luntley,  4  Camp.  179 
Walton   v.    Hastings,   4   Camp.    223 
Halcrow  v.  Kelly,  28  Up.  Can.  C.  P. 
551.    See: 

loiva. — Sawyers  v.  Campbell,  107 
Iowa  397,  78  N.  W.  56. 

New  York. — Weyerhauser  v.  Dun, 
100  N.  Y.  150,  2  N.  E.  274. 

^  Huntington  v.  Finch,  3  Ohio  St. 
445. 

'Mackay  v.  Dodge,  5  Ala.  388. 
See  Chism  v.  Toomer,  27  Ark.  108, 
in  which  it  is  declared  that  the  test 
is  whether  the  alteration  made  cre- 
ates a  new  contract. 

'^  Bethune  v.  Dozier,  10  Ga.  235, 
per  Lumpkin,  J. 


Joyce  Defenses — 11. 


§'  136]  ALTEKATION  OF  PAPER.  163 

paper  be  a  good  defense  to  an  action  against  one  not  consenting 
thereto,  but  it  is  also  decided  that  a  bill  or  note  may  be  avoided  by 
an  alteration  in  a  contract  to  secure  which  the  paper  is  given  as 
collateral;"  and  likewise  that  a  material  alteration  in  a  collateral 
mortgage  given  to  secure  a  note  will  be  a  good  defense  to  an  action 
on  the  note/  That  the  instrument  has  been  materially  altered  with- 
out the  defendant's  consent  is  sufficient  to  defeat  recovery,  no  allega- 
tion or  proof  of  fraud  being  necessary.^  It  has,  however,  been  decided 
that  a  maker  cannot  avail  himself  of  this  defense  unless  he  rescinds  the 
whole  contract.^  And  the  fact  that  a  note  has  been  altered  is  not  a 
defense  to  an  action  by  a  tona  fide  holder  where  it  appears  that  the 
note  was  restored  to  its  original  form  prior  to  its  passing  into  his 
hands. ^**  A  general  plea  of  non  est  factum  will  entitle  the  party  inter- 
posing it  to  prove  that  after  the  execution  of  the  instrument  in 
question  it  was  altered  without  his  consent.^^  And  an  affidavit  of 
defense,  however,  which  sets  up  an  alteration  of  the  instrument 
should,  it  is  held,  be  specific  and  certain  enough  to  show  a  valid  de- 
fense that  would  answer  the  declaration  and  defeat  the  entire  right 
to  recover  thereon,  if  the  case  were  put  to  trial  on  the  pleadings. ^^ 
The  question  whether  an  alteration  is  material  is  one  of  law  for  the 
court  to  determine  and  not  one  for  the  jury.^^ 

§  136.  Rule  as  to  bona  fide  holders. — The  rule  that  a  material 
alteration  of  a  bill  or  note  will  be  a  good  defense  to  an  action  against 
a  party  not  consenting  thereto  extends  to  those  cases  where  the  in- 

« Brigham  v.  Wentworth,  65  Mass.  "  Fudge  v.  Marquell,  164  Ind.  447, 

(11  Cush.)  123.  72  N.  B.  565. 

■  Williams  v.  Barrett,  52  Iowa  637,  ^-  Bryan   v.    Harr,    21    App.    D.   C. 

3  N.  W.  690.    But  see  Kime  v.  Jesse,  190,  201,  decided  under  Act  of  Con- 

52  Neb.  606,  72  N.  W.  1050.  gress   January   12,   1899,   §§    58,   59, 

^Eckert   v.    Pickel,    59    Iowa    545.  124. 

Compare    Burch    v.    Pope,    114    Ga.  "  Arkansas. — Overton  v.  Matthews, 

334,  40  S.  E.  227,  holding  that  un-  35  Ark.  146,  37  Am.  Rep.  9. 

der    a    provision    of    the    code    in  Georgia. — Winkles  v.  Guenther,  98 

Georgia  it  must  appear  that  an  al-  Ga.  472,  25  S.  E.  527;   Pritchard  v. 

teration  relied  on  as  a  defense  was  Smith,  77  Ga.  463. 

made    with    intent   to    defraud,    the  Mississippi. — Hill    v.     Calvin,    15 

fact  that  it  was  material  not  being  Miss.  (4  How.)  231. 

sufficient.  Nebraska. — Fisherdiek  v.  Hutton, 

» Glover  v.  Green,  96  Ga.  127,  22  44  Neb.  122,  62  N.  W.  488. 

S.  E.  664.  Neiv  Hampshire. — Bowers  v.  Jew- 

"  Shepard  v.  Whetstone,  51  Iowa  ell,  2  N.  H.  543. 
457,  1  N.  W.  753,  33  Am.  Rep.  143. 


n 


163 


RULE  AS  TO  BONA   FIDE   HOLDERS. 


[§  136 


strument  has  come  into  the  hands  of  a  bona  fide  holder."  And  the  ap- 
plication of  this  rule  will  not  be  affected  by  the  fact  that  the  altera- 

u  Arkansas. — Fordyce  v.  Kosmin-  Pe7insylvania.— Gettysburg  Na- 
ski,  49  Ark.  40,  3  S.  W.  892;  Overton  tioal  Bank  v.  Chisolm,  169  Pa.  St. 
V.   Matthews,   35   Ark.   146,   37    Am.     564,  32  Atl.  730,  47  Am.  St.  R.  929; 


Rep.  9. 

Delaware. — Sudler  v.  Collins,  2 
Houst.  (Del.)  538. 

Georgia. — Max  Simons  &  Co.  v. 
McDowell,    125    Ga.    203,    53    S.    E. 


United  States  Bank  v.  Russell,  3 
Yeates  (Pa.)  391. 

Tennessee. — Stephens  v.  Davis,  85 
Tenn.  271,  2  S.  W.  382. 

Texas. — Farmers'     &     Merchants' 


1031;    Hill    V.   O'Neill,   101   Ga.   832,     Nat.   Bank   v.   Sovich,   89   Tex.    381, 


28  S.  E.  996. 

Illinois. — Burwell   v.    Orr,    84    111. 


34  S.  W.  914. 
Federal. — Exchange  National  Bank 


465;    Havorka  v.   Hemmer,   108   111.     v.  Bank  of  Little  Rock,  50  Fed.  140, 


App.  443. 
Indiana. — Cronkhite    v.    Neheker, 


7  C.  C.  A.  111. 

English. — Burchfield    v.    Moore,   3 


81  Ind.  319,  42  Am.  Rep.  127;   Hert  El.  &  Bl.  683;   Vance  v.  Lowther,  1 

V.  Oehler,  80  Ind.  83.  Exch.  Div.  176;   Master  v.  Miller,  4 

Iowa. — Derr  v.   Keough,   96    Iowa  Term  R.  320;  Outhwaite  v.  Luntley, 

397,  65  N.  W.  339;  Charlton  v.  Reed,  4  Camp.  179. 

61  Iowa  166,  16  N.  W.  64,  47  Am.  Indiana.— "The  material  and   un- 

Rep.  808;   Knoxville  National  Bank  authorized   alteration   of   a   promis- 

V.    Clark.    51    Iowa    264;     Laub    v.  gory  note  renders  it  invalid  in  the 

Paine,  46  Iowa  550,  26  Am.  Rep.  163.  hands   of    the    l)ona   fide   holder    as 

Kansas. — Horn    v.    Newton     City  well  as  in  the  hands  of. the  payee." 

Bank,  32  Kan.  518,  4  Pac.  1022.  Per  Roby,  J.,  in  Young  v.  Baker,  29 

Kentucky.— L^isle  v.  Rogers,  18  B.  ind.  App.  130,  64  N.  E.  54. 

Mon.  (Ky.)  528.  Missouri.— "It   is    a   general    rule 

Maryland. — Schwartz    v.    Wilmer,  that   any   alteration   in   a   material 

90  Md.  136,  44  Atl.  1059;  Burrows  v.  part  of  a  bill  of  exchange  or  prom- 

Klunk,  70  Md.  451,  17  Atl.  378,  14  issory  note  as  in  the  date,  sum,  or 

Am.    St.    R.    371,    3    L.    R.    A.    576.  time  when  payable  or  consideration 

Massachusetts. — Belknap  v.  Bank,  or  place  of  payment  will  render  the 

100    Mass.    376,    97    Am.    Dec.    105.  bill  or  note  invalid  as  against  any 

Michigan. — Bradley    v.    Mann.    37  party  thereto  not  consenting  to  such 

Mich.    1;    Holmes    v.    Trumper,    22  alteration,  even  in  the  hands  of  an 

Mich.  427,  7  Am.  Rep.  661;  Wait  v.  innocent   party."     Per   Richardson, 

Pomeroy,  20  Mich.  425,  4  Am.  Rep.  J.,  in  Trigg  v.  Taylor,  27  Mo.  245, 

395.  72  Am.  Dec.  263. 

Missouri. — "Washington        Savings  Nebraska. — "It  is  well  settled  that 

Bank    v.    Ecky.    51    Mo.    272;    Mid-  material    alterations    of    an    instru- 

daugh  V.   Elliott,   61  Mo.  App.   601.  ment  invalidate  it  as  to  the  maker, 

Nebraska. — Davis    v.     Henry,     13  who  has  not  assented  to  or  ratified 

Neb.  497,  14  N.  W.  523.  the  change,  even  in  the  hands  of  a 

New  York. — Bruce  v.  Westcott,  3  bona   fide  holder   for   value."      Per 

Barb.    (N.   Y.)    374;    Mount   Morris  Norval,  J.,  in  Erickson  v.  Bank,  44 

Bank   v.    Lawson,   10    Misc.   R.    (N.  Neb.  622.  62  N.  W.  1078,  28  L.  R.  A. 

Y.)  359,  63  N.  Y.  St.  R.  432,  31  N.  Y.  77,  48  Am.  St.  R.  753. 
Supp.  18, 


g    r67]  ALTERATION    OF   PAPER.  164 

tion  was  of  such  a  character  that  it  could  not  have  been  detected.  ^^ 
In  an  action,  however,  by  a  bona  fide  holder  of  a  bill  of  exchange 
against  the  acceptor  it  has  been  decided  that  the  latter  cannot  de- 
feat recovery  on  the  ground  of  a  material  alteration  made  before 
the  acceptance.^'^  Again,  where  it  is  apparent  upon  the  face  of 
an  instrument  that  it  has  been  altered  a  prima  facie  presumption 
arises  that  the  alteration  was  made  after  the  instrument  was  exe- 
cuted, and  the  burden  is  held  to  be  on  the  holder  to  show  the  con- 
trary. If,  however,  the  alteration  is  not  apparent  upon  the  face 
of  the  instrument,  the  burden  then  rests  on  the  one  who  sets  up 
such  alteration  as  a  defense.^^  So  where  a  bill  of  exchange  ap- 
pears on  its  face  to  have  been  altered,  the  burden  is  then  held  to 
rest  on  the  one  asserting  a  right  thereunder  to  show  that  such  al- 
teration was  made  before  the  bill  was  executed  or  that  the  parties 
assented  thereto.  ^^  The  general  rule  above  stated,  as  to  the  availability 
of  a  material  alteration  as  a  defense  to  an  action  by  a  bona  fide  holder, 
has  been  changed  in  many  states  by  the  adoption  of  the  provision  of 
the  negotiable-instruments  law  to  the  effect  that  when  an  instrument 
has  been  materially  altered  and  is  in  the  hands  of  a  holder  in  due 
course  not  a  party  to  the  alteration,  he  may  enforce  payment  thereof 
according  to  its  original  tenor.-"  Under  such  a  provision  in  iSTew 
York-^  it  has  been  decided  that  an  innocent  holder  of  a  check  which 
has  been  altered  to  a  later  date  may  recover  thereon,  though  it  appears 
that  the  original  payee  represented  to  drawer  that  the  check  was  lost 
and  obtained  another,  which  he  cashed  and  then  negotiated  the  first 
check.^^  And  under  Massachusetts  laws,  to  the  same  effect,-^  it  is 
decided  that  where  a  person  indorsed  a  note  and  delivered  it  to  the 
maker,  who  altered  it  before  delivery  to  the  payee,  who  took  without 
notice  thereof,  he  could  recover  from  the  indorser.^* 

§  137.     Immaterial  alterations. — Wliere  an  alteration  is  not  in  a 
material  part  of  the  instrument,  and  the  identity  of  the  paper  is  not 

"  Wade   V.   Withington,    83   Mass.  ■'  New  York  Laws  1897,  p.  745,  c. 

(1  Allen)  561.  612. 

"Ward    v.    Allen,     44    Mass.     (2  -  Moskowitz    v.    Deutsch     (N.    Y. 

Mete.)  53,  35  Am.  Dec.  387.  App.  Div.  1905),  92  N.  Y.  Supp.  721. 

"Dewey  v.  Merritt,  106  111.  App.  "Mass.  Rev.  Laws,  c.  73,   §§  141, 

156.     See  Towles  v.  Banner,  21  App.  69. 

D.    C.    530;    Galloway    v.    Bartholo-  =* Thorpe  v.   White    (Mass.   1905), 

mew,  44  Oreg.  75,  74  Pac.  467.  74   N.   E.   592;    see   also,   Massachu- 

'» Fontaine  v.  Gunter,  31  Ala.  258.  setts   National    Bank   v.    Snow,    187 

=°See  appendix.  Mass.  159,  72  N.  E.  959. 


165 


IMMATERIAL  ALTERATIONS. 


[§  137 


destroyed,  or  the  liability  thereunder  in  any  way  affected,  it  will  not 
be  of  such  a  material  character  as  will  constitute  it  a  defense. ^^  If 
an  alteration  is  in  fact  immaterial,  so  far  as  the  effect  produced 
thereby  is  concerned,  it  will  not  be  rendered  material  simply  by  rea- 
son of  the  intent  with  which  it  was  made.^^  So  the  fact  that  an 
erasure  appears  upon  the  note  sued  upon  which  does  not  vary  or 
alter  its  tenor  as  set  out  in  the  complaint,  is  held  not  to  render  the 
note  inadmissible  in  evidence.^^  The  right  to  recover  on  an  instru- 
ment will  not  be  affected  by  an  alteration  which  is  considered  as  a 
mere  spoliation,^ ^  or  by  the  insertion  of  s^ome  word  which  the  law 
necessarily  implies.-''  Nor  is  there  a  material  alteration  by  the  re- 
tracing in  ink  of  a  writing  which  was  originally  in  pencil.^"  So  where 
a  note  contained  a  description  of  land  merely  to  identify  it  as  the  note 
which  was  given  for  the  balance  due  on  the  land,  and  the  word  "west'* 
was  inserted  after  the  word  "south,"  it  was  decided  that  the  alteration, 
admitting  it  was  one,  was  not  material. ^^    And  where  a  promissory 

-^^  Indiana. — Toner  v.  Wagner,  158     was  not  and  could  not  be  effectuated 

by  the  act  done,  the  intent  simply 
would  not  avoid  it."  Robinson  v. 
Insurance  Co.,  25  Iowa  430,  Per 
Cole,  J. 

"If  there  be  fraud  at  all  in  such  a 
case  it  can  only  be  such  as  a  bad  mo- 
tive can  affix  to  an  immaterial  act, 
and  if  the  act  itself  is  incapable  of 
working  an  injury,  to  wit:  of  chang- 
ing the  obligations  or  rights  of  the 
parties  to  the  contract,  it  cannot  in 
a  legal  sense  be  said  to  be  fraudu- 
lent, for  the  obvious  reason  that 
courts  of  justice  only  regard  that  as 
fraudulent  which  is  capable  of  pro- 
ducing an  injury  or  loss  to  the  other 
party  to  the  controversy."  Moye  v. 
Herndon,  30  Miss.  110,  per  Fisher, 
J.  But  see  Vogle  v.  Ripper,  34  111. 
100,  85  Am.  Dec.  298. 

"Brown  v.  Feldwert  (Oreg.  1905), 
80  Pac.  414. 

-'  Bucklen  v.  Huff,  53  Ind.  474. 

="  Hunt  V.  Adams,  6  Mass.  519. 

'"Reed  v.  Roark,  14  Tex.  329,  65 
Am.  Dec.  127. 

^^  Nance  v.  Gray  (Ala.  1905),  38 
So.  916. 


Ind.  447,  63  N.  E.  859;  Bucklen  v. 
Huff.  53  Ind.  174. 

Iowa. — Laub  v.  Rudd,  37  Iowa  617. 

Kansas. — Reed  v.  Culp,  63  Kan. 
595,  66  Pac.  616. 

Kentucky. — Keene's  Adm'r  v.  Mil- 
ler, 103  Ky.  628,  45  S.  W.  1041; 
Smith  V.  Lockbridge,  8  Bush  (Ky.) 
423. 

North  Carolina. — Dunn  v.  Clem- 
ents, 52  N.  C.  58. 

English. — Walter  v.  Cubley,  2 
Cromp.  &  M.  151;  Butt  v.  Picard, 
Ryan  &  M.  37. 

Canadian. — Cunningham  v.  Peter- 
son, 29  Ont.  R.  346.   Compare: 

Missouri. — Kingston  Savings  Bank 
V.  Bosserman,  52  Mo.  App.  269. 

California. — "It  is  well  settled 
that  an  alteration  which  does  not 
vary  the  meaning,  the  nature,  or 
subject-matter  of  the  contract  is  im- 
material." Per  Murray,  C.  J.,  in 
Humphr^ays  v.  Crane,  5  Cal.  173. 

^  "An  immaterial  alteration  is 
not  made  material  simply  by  the 
intent;  and  if  the  intent  to  give  a 
different   effect   to    the    instrument 


138] 


ALTERATION    OF    PAPER. 


166 


note  is  made  payable  at  a  place  different  from  the  place  at  which  it  is 
executed  the  insertion  therein  of  the  words  "with  exchange"  does 
not  constitute  a  material  alteration  which  will  avoid  the  note,  it 
being  held  not  to  in  any  way  alter  the  legal  effect  of  the  instrument 
or  change  the  contract  obligation  of  the  parties.  It  is  only  an  ex- 
pression of  what  the  contract  itself  implies. ^^  j^^^^  where  an  altera- 
tion, which  is  not  material,  is  made  in  a  note  which  is  subsequently 
restored  to  its  original  form,  a  recovery  on  the  instrument  will  not  be 
thereby  prevented.^^  And  an  alteration  will  not  be  considered  material 
so  as  to  defeat  recovery  on  the  instrument  where  it  is  made  merely 
for  the  purpose  of  correcting  a  mistake  so  as  to  express  the  actual  in- 
tention of  the  parties.^*  A  party,  however,  has  no  right  to  make  an 
alteration  in  an  instrument  to  correct  a  mistake  unless  it  is  made  to 
make  it  conform  to  what  all  the  parties  agreed  or  intended  it  should 
have  expressed. ^^ 

§  138.  Alteration  by  co-maker  or  drawer. — A  maker  will  not  be 
bound  by  a  material  alteration  of  a  bill  or  note  made  by  a  co-maker 
or  under  his  direction,  and  to  which  the  former  has  not  consented. 
Such  an  alteration  will  be  a  good  defense  to  an  action  against  the 
maker  not  consenting  thereto,^*'  even  though  it  was  made  without 


^- First  National  Bank  v.  Nord- 
strom  (Kan.  1904),  78  Pac.  804. 

"Kountz  V.  Kennedy,  63  Pa.  St. 
187,  13  Am.  Rep.  541.  See  Whit- 
more  V.  Nickerson,  125  Mass.  496. 

^*  7owa.— Shepard  v.  Whetstone,  51 
Iowa  457,  1  N.  W.  753,  33  Am.  Rep. 
143. 

Massachusetts. — Ames  v.  Colburn, 
77  Mass.  (11  Gray)  390,  71  Am.  Dec. 
723n. 

Mississippi. — McRaven  v.  Crisler, 
53  Miss.  542;  Conner  v.  Routh,  8 
Miss.  (7  How.)  176,  40  Am.  Dec.  59. 

New  Hampshire. — Cole  v.  Hills,  44 
N.  H.  227. 

Ohio. — Jessup  v.  Dennison,  2  Dis- 
ney (Ohio)  150. 

Oregon. — Wallace  v.  Tice,  32 
Oreg.  283,  51  Pac.  773. 

Yermont. — Derby  v.  Thrall,  44  Vt. 
413,  8  Am.  Rep.  389. 

English. — Webber  v.  Maddocks,  3 


Camp.  1;  Cariss  v.  Tattersal,  2  Man. 
&  G.  890;  Butt  v.  Picard,  Ryan  &  M. 
37.  See  Gardner  v.  Walsh,  5  El.  & 
Bl.  63;  Bathe  v.  Taylor,  15  East  416. 

^=Dyker  v.  Franz,  7  Bush  (Ky.) 
273. 

^Indiana. — Schwind  v.  Racket,  54 
Ind.  248. 

Kansas. — Horn  v.  Bank,  32  Kan. 
518,  4  Pac.  1022. 

Massachusetts. — Fay  v.  Smith,  83 
Mass.  (1  Allen)  477,  79  Am.  Dec. 
752. 

Minnesota. — Flanigan  v.  Phelps, 
42  Minn.  186,  43  N.  W.  1113. 

Isleio  Hampshire. — Goodman  v. 
Eastman,  4  N.  H.  455. 

Pennsylvania. — Brown  v.  Reef.  79 
Pa.  St.  370;  Neff  v.  Horner,  63  Pa. 
St.  327,  3  Am.  Rep.  555;  Biery  v. 
Haines,  5  Whart.   (Pa.)   563. 

Tennessee. — McVey  v.  Ely,  73 
Tenn.   (5  Lea)  438. 


167 


BY    MAKER    WITHOUT    SURETY'S    COXSEXT.  [§§    139,    140 


fraudulent  intent  or  the  knowledge  of  the  payee."  And  an  acceptor 
will  not  be  bound  by  the  consent  of  the  drawer  to  an  alteration  of  the 
paper  which  was  made  without  the  knowledge  or  consent  of  the  for- 
mer.^^ 

§  139.  Alteration  by  maker  without  surety's  consent. — A  surety 
may,  in  an  action  against  him  on  a  bill  or  note,  defend  on  the  ground 
that  there  has  been  a  material  alteration  of  the  instrument  by  the 
maker  or  principal  debtor  without  the  consent  of  the  surety.^^  A 
surety,  however,  will  not  be  relieved  from  liability  on  a  note  where  he 
stands  by  and  by  his  silence  induces  another  to  part  with  his  money 
on  the  faith  of  the  former's  approval  of  an  alteration  by  the  ^prin- 
cipal of  some  part  of  the  instrument.**' 

§  140.  Alteration  by  payee  or  subsequent  holder— Effect  on  rights 
of  surety. — A  material  alteration  in  a  bill  or  note  by  one  of  several 
joint  payees  will  be  a  good  defense  to  an  action  against  the  surety 
where  made  without  his  consent.-*^  So  an  alteration  by  one  who  subse- 
quently becomes  a  holder  of  the  instrument  will  be  a  good  defense  to 
an  action  against  the  surety.*^ 


Vermont. — Broughton  v.  Fuller,  9 
Vt.  373. 

English. — Perring  v.  Hone,  2  Car. 
&  P.  401.  See  Hirschfield  v.  Smith, 
L.  R.  1  C.  P.  340. 

Tennessee. — Taylor  v.  Taylor,  80 
Tenn.  (12  Lea)  714.  But  see: 

Georgia. — Daniel  v.  Daniel,  Dud. 
(Ga.)  239. 

"Draper  v.  Wood,  112  Mass.  315, 
17  Am.  Rep.  92  n. 

^Cardwell  v.  Martin,  9  East  190; 
Calvert  v.  Roberts,  3  Camp.  343. 
See  Abrams  v.  Bank,  31  La.  Ann. 
61.  But  see  Johnson  v.  Gibb,  2 
Chit.  123. 

^Alabama. — Glover  v.  Robbins,  49 
Ala.  219. 

Georgia.— RiU  v.  O'Neill,  101  Ga. 
832,  28  S.  E.  996. 

Illinois. — Benedict  v.  Miner,  58  111. 
19. 

Indiana. — Franklin  Life  Ins.  Co. 
V.  Courteney.  60  Ind.  134. 


Iowa. — Marsh  v.  GrifBn,  42  Iowa 
403. 

Nebraska. — Brown  v.  Straw,  6 
Neb.  536,  29  Am.  Rep.  369. 

Ohio. — Thompson  v.  Massie,  41 
Ohio  St.  307. 

South  Carolina. — Sanders  v.  Bag- 
well, 32  S.  C.  238,  10  S.  E.  946,  7 
L.  R.  A.  3. 

Federal. — Wood  v.  Steele,  6  Wall. 
(U.  S.)  80. 

"  Sanders  v.  Bagwell,  37  S.  C.  145, 
15  S.  E.  714. 

"  Thompson  v.  Massie,  41  Ohio  St. 
307,  holding  that  in  the  case  of  a 
material  alteration  in  the  terms  of 
such  an  instrument  made  without 
the  assent  of  the  surety  he  may 
well  say  that  the  note,  thus  altered, 
he  did  not  sign.  Adams  v.  Fair- 
cloth  (Tex.  Civ.  App.),  97  S.  W.  507. 

^=  Brooks  V.  Allen,  62  Ind.  401. 
See  also,  McDonald  v.  Nalle  (Tex. 
Civ.  App.  1906),  91  S.  W.  632. 


§§ 


141,  142] 


ALTERATION    OF   PAPER. 


168 


g  141.  Alteration  by  agent  of  holder. — Where  a  bill  or  note  is  al- 
tered by  an  agent  of  the  holder  without  the  authority,  consent  or 
knowledge  of  his  principal,  it  has  been  decided  that  the  right  of  the 
holder  to  recover  on  the  instrument  is  not  thereby  affected,  such  alter- 
ation being  regarded  as  a  mere  spoliation  by  a  stranger.*^ 

§  142.  Alteration  by  a  third  party. — It  is  a  generally  accepted 
doctrine  that  an  alteration  of  a  bill  or  note  made  by  a  stranger  to  the 
instrument,  without  the  authority  or  consent  of  the  principal  who 
claims  under  it,  will  be  regarded  as  a  mere  spoliation  which  does  not 
affect  the  rights  of  the  parties,  and  is  therefore  no  defense  to  an  ac- 
tion on  the  paper.**    This  rule  has  been  applied  in  the  case  of  an 


^^  Indiana. — Ballard  v.  Insurance 
Company,  81  Ind.  239;  Brooks  v. 
Allen,  62  Ind.  401. 

South  Dakota. — Port  Huron  En- 
gine &  Thresher  Co.  v.  Sherman,  14 
S.  D.  461,  85  N.  W.  1008. 

Vermont. — Bigelow  v.  Stllphen, 
35  Vt.  521.   Compare: 

Iowa. — Hamilton  v.  Hooper,  46 
Iowa  515,  26  Am.  Rep.  161. 

New  York. — Van  Brunt  v.  Eoff,  35 
Barb.  (N.  Y.)  501. 

"  Arkansas. — Andrews  v.  Callo- 
way, 50  Ark.  358,  7  S.  W.  449. 

California. — Langenberger  v.  Kroe- 
ger,  48  Cal.  147. 

Illinois. — Patterson  v.  Higgins,  58 
111.  App.  268. 

Indiana. — Toner  v.  Wagner,  158 
Ind.  447,  63  N.  E.  859;  Brooks  v. 
Allen,  62  Ind.  401;  Piersol  v.  Grimes, 
30  Ind.  129,  95  Am.  Dec.  673. 

Kentucky. — Lee  v.  Alexander,  9  B. 
Mon.  (Ky.)  25,  48  Am.  Dec.  412. 

Massachusetts. — Drum  v.  Drum, 
133  Mass.  566. 

Missouri. — Lubbering  v.  Kohl- 
brecher,  22  Mo.  596. 

Ohio. — Thompson  v.  Massie,  41 
Ohio  St.  307. 

South  Carolina.— White  v.  Harris, 
69  S.  C.  65,  48  S.  E.  41. 

South   Dakota. — Port   Huron    En- 


gine &  Thresher  Co.  v.  Sherman,  14 
S.  D.  461,  85  N.  W.  1008. 

Tennessee. — Boyd  v.  McConnell  29 
Tenn.  (10  Humph.)  68. 

Vermont. — Bigelow  v.  Stilphen,  35 
Vt.  521. 

Wisconsin. — Union  National  Bank 
V.  Roberts,  45  Wis.  373. 

Federal. — United  States  v.  Spald- 
ing, 2  Mason  (C.  C.)  478,  Fed.  Cas. 
No.  16365.  But  see: 

English. — Master  v.  Miller,  4 
Term  R.  320.  The  doctrine  of 
the  very  old  cases  as  to  the  effect 
of  an  alteration  by  a  stranger  was 
early  repudiated  in  the  United 
States,  the  rule  stated  in  the  text 
being  favored  by  the  courts.  "The 
old  cases  proceed  upon  a  very  nar- 
row ground.  It  seems  to  have  been 
held  that  a  material  alteration  of  a 
deed  by  a  stranger,  without  the  priv- 
ity of  either  obligor  or  obligee, 
avoided  the  deed;  and  by  parity  of 
reasoning  the  destruction  or  tear- 
ing off  the  seal  either  by  a  stranger 
or  by  accident,  *  *  *  a  doctrine 
so  repugnant  to  common  sense  and 
justice,  which  inflicts  on  an  inno- 
cent party  all  the  losses  occasioned 
by  mistake,  by  accident,  by  thp 
wrongful  acts  of  third  persons,  or 
by  the  providence  of  Heaven,  ought 


169  BY    MISTAKE    OR    ACCIDENT.  [§    143 

alteration  by  a  stranger  with  the  intent  to  extinguish  the  obligation/^ 
to  a  change  of  the  provision  as  to  attorney's  fees/^  and  to  alterations 
of  particular  parts  or  clauses  of  a  bill  or  note.*^  Where,  however,  a 
holder  with  notice  of  an  alteration  by  a  stranger  sues  on  the  note  as 
altered,  he  thereby  ratifies  the  change  and  is  held  to  lose  his  remedy 
on  the  original  instrument.*^  Where  the  evidence  is  conflicting  upon 
the  question  whether  an  alteration  is  one  by  a  party  to  the  instrument 
or  by  a  stranger,  and  therefore  a  mere  spoliation,  is  one  which  should 
be  submitted  to  the  jury  under  proper  instructions  as  to  the  law.*^ 

§  143.  Alteration  by  mistake  or  accident. — Recovery  on  a  bill  or 
note  cannot  be  defeated  on  the  ground  of  an  alteration  which  is 
shown  to  have  been  the  result  of  accident  or  mistake.^"  So  where 
the  cashier  of  a  bank  by  mistake  cancelled  a-  note  belonging  to  the 
bank,  it  was  held  not  to  affect  the  right  to  recover  thereon.^ ^  And 
where  the  payee  of  a  note  in  ignorance  of  the  proper  manner  to  trans- 
fer it  erased  his  own  name  and  inserted  that  of  the  transferee,  but 
afterwards  restored  it  to  its  original  form,  it  was  held  not  to  avoid 
the  note.^-  So  the  accidental  stamping  of  a  waiver  of  demand  and 
protest  by  a  holder  over  two  indorsements  instead  of  one  has  been 
held  not  to  affect  the  liability  of  the  maker.^^  And  where  the  tearing 
off  of  a  signature,  afterwards  pasted  on,  is  set  up  as  a  defense  to  an 
action,  it  is  proper  to  show  that  it  jvas  accidentally  torn  off.^*  Nor 
will  an  erasure,  which  is  accidental,  of  one  of  two  signatures  or  seals 
to  an  obligation  for  the  payment  be  a  defense  to  an  action  thereon,^^ 

to    have    the    unequivocal    support  "White  v.  Harris,  69  S.  C.  65,  48 

of    unbroken    authority,    before    a  S.  E.  41. 

court   of   law    is   bound    to   surren-  ''"Brett    v.    Maiston,    45    Me.    401. 

der  its  judgment  to  what  deserves  See  Nevins  v.  De  Grand,  15  Mass. 

no   better    name    than    a    technical  436;    Abbe  v.  Rood,  6  McLean    (U. 

quibble.      It   appears   to    me    to    be  S.)  106,  Fed.  Cas.  No.  6. 

shaken   to    its   very    foundation    in  "  Boulware  v.  Bank,  12  Mo.  542. 

modern    times."      United    States    v.  "  Horst  v.  Wagner,  43   Iowa  373, 

Spalding,  2  Mason  (C.  C.)  478,  Fed.  22  Am.  Rep.  250. 

Cas.  No.  16365.  =^  Gordon  v.  Bank,  144  U.  S.  97,  12 

*°Whitlock  V.  Manciet,  10  Ore.  166.  Sup.  Ct.  657. 

"Murray    v.    Peterson,    6    Wash.  "  Frazer  v.  Boss,  66  Ind.  1,  hold- 

418,  33  Pac.  969.  ing  in  such  a  case  that  it  might  be 

"  As  to  such  alterations  see  sub-  shown  to  have  been  the  innocent  act 

division  II  of  this  chapter.  of  a  child. 

**  Perkins   Windmill   &  A.    Co.   v.  ^^Rhoades  v.   Frederick,  8  Watts 

Tillman,  55  Neb.  652,  75  N.  W.  1098.  (Pa.)  448. 


§■  144]  ALTERATIOX  OF  PAPER.  170 

or  an  alteration  made  by  an  agent  under  a  mistaken  belief  as  to  his 
authority.^® 

§  144.     Filling  in   blanks — Instrument   incomplete — Rule   as   to. 

One  who  has  signed  and  put  into  circulation  negotiable  paper  con- 
taining an  implied  blank  or  blanks,  which  makes  the  paper  imperfect, 
thus  rendering  easy  of  execution  an  addition  of  words  to  the  instru- 
ment, increasing  his  liability  or  altering  the  terms  of  the  contract, 
which  alteration  is  not  discernible  in  the  appearance  of  the  paper, 
and  having  by  his  negligence  put  it  in  the  power  of  another  to  impose 
upon  an  innocent  third  party  and  to  obtain  money  from  him  upon  the 
faith  of  the  signature  affixed  to  the  instrument,  which  is  honest  in  its 
appearance,  will  not  be  permitted  to  defeat  an  action  by  such  third 
party  by  setting  up  the  defense  of  an  alteration  in  the  terms  of  the  in- 
strument.^'^ So  in  such  a  case  it  is  declared:  "Since  the  defendant, 
by  executing  a  note,  and  delivering  it  with  a  blank  in  it,  for  the  in- 
sertion of  the  interest,  and  thereby  placed  it  in  the  power  of  the 
payee  to  do  the  wrong,  as  between  him  and  the  plaintiff,  a  bona  fide 
purchaser  for  value,  he  ought  to  suffer  any  loss  resulting  therefrom, 
especially  as  he  fails  to  show  directly  any  notice  to  plaintiff  of  the 
alteration."^^  So  it  is  said  in  a  recent  case:  "It  seems  to  be  well  sup- 
ported by  the  authorities  that  the  alteration  of  a  promissory  note,  after 
delivery,  by  filling  the  blanks  left  therein,  where  there  is  nothing  on 
the  face  of  the  note  to  suggest  an  alteration,  will  not  invalidate  the 
note  in  the  hands  of  a  bona  fide  indorsee  for  value  before  maturity, 
and  without  notice  of  such  alteration.  The  reason  of  this  rule  is 
that,  where  the  maker  of  a  note  signs  it  and  delivers  it  to  the  payee, 
with  blank  spaces  in  the  note  for  the  rate  of  interest,  the  time  of  ma- 

=»Van  Brunt  v.  Eoff,  35  Barb.  (N  Slifford    Banking    Co.    v.    Donovan, 

Y.)    501.     See    Brooks    v.   Allen,    62  195  Mo.  262,  94  S.  W.  527. 

Ind.  401.  A'eto  York. — People  v.  Bank,  75  N. 

"Colorado. — Stratton  v.  Stone,  15  Y.  547;   Van  Duzer  v.  Howe,  21  N. 

Colo.  App.  237,  61  Pac.  481.  Y.  531. 

Indiana. — Bowen    v.    Laird     (Ind.  Pennsylvania. — Wessell    v.    Glenn, 

App.  1906),  77  N.  E.  295.  108  Pa.  St.  105;   Brown  v.  Reed,  79 

Kentucky.— Blakely     v.     Johnson,  Pa.  St.  370,  21  Am.  Rep.  75;  Garrard 

13  Bush  (Ky.)  197,  26  Am.  Rep.  254.  v.  Hadden,  67  Pa.  St.  82,  5  Am.  Rep. 

Maine. — Abbott    v.    Rose,    62    Me.  412. 

194,  16  Am.  Rep.  427.  Federal. — Angle  v.  Insurance  Co., 

Michigan.— Weidman     v.     Symes,  92    U.    S.    330;    23    L.   Ed.    556.    See 

120  Mich.  657,  79  N.  W.  894.  Davidson  v.  Lanier,  4  Wall.   (U.  S.) 

il/tssoMH.— Scotland  County  Bank  447,  18  L.  Ed.  380. 

V.   O'Connel,  23   Mo.  App.   165.    See  ^  Rainbolt  v.  Eddy,   34   Iowa  440, 

442,  11  Am.  Rep.  152,  per  Cole,  J. 


171  APPLICATION  OF  KULE.  [§§  145,  146 

turity  or  the  place  of  payment,  he  will,  in  a  contest  with  an  innocent 
purchaser  of  the  paper  hefore  maturity  and  for  value,  be  held  to  have 
authorized  the  payee  to  fill  in  the  blank  spaces,  unless  the  paper  on  its 
face  bears  evidence  of  mutilation  or  alteration."^**  The  execution  and 
delivery  of  ^n  instrument  in  such  a  form  confers  upon  the  holder  the 
authority,  as  against  the  one  so  signing  the  paper,  to  fill  up  the  blank 
space. ^^  So  one  who  has  executed  a  note  of  such  a  character  is  held 
to  have  the  burden  of  proof  in  an  action  against  which  he  set  up  the 
defense  of  an  alteration,  to  show  that  the  holder  had  notice  of  the  facts 
at  the  time  of  the  receipt  of  the  note.®" 

§  145.  Same  subject — Application  of  rale. — The  general  rule 
stated  in  the  preceding  section  has  been  applied  where  a  blank  has 
been  left  in  a  note  for  the  name  of  the  payee,*'^  as  to  the  place  of  pay- 
ment,"- time  of  payment,*'^  or  for  the  amount*  And  where  the  space 
for  the  date  of  a  note  is  left  blank  a  filling  in  of  the  time  will  not 
constitute  an  alteration  of  the  instrument  which  will  be  available  as 
a  defense.®^ 

§  146.  Same  subject — Where  instrument  complete. — Where  a  bill 
or  note,  as  delivered,  is  a  complete  and  perfect  legal  instrument,  it 
has  been  determined  that  the  fact  that  it  contains  a  space  which  will 

^^*  Humphrey     Hardware     Co.     v.  Georgia. — Gwin    v.    Anderson,    91 

Herrick  (Neb.  1904),  101  N.  W.  1016,  Ga.  827,   18   S.   E.   43,  holding  that 

per  Oldham,  J.  filling  blank  space  with  place  of  pay- 

^°  See  §  22  herein  as  to  execution  ment  is  a  material  alteration. 

or  indorsement  in  blank.  "^  Lowden  v.  Bank,  38  Kan.  553,  16 

""Rainbolt  v.  Eddy,  34  Iowa  440,  Pac.    748;    Wilson   v.   Henderson,   9 

11  Am.  Rep.  152.  Sm.  &  M.   (Miss.)   375,  48  Am.  Dec. 

"Thompson  v.  Rathbun,  18  Oreg.  716.      Compare    Farmers'    National 

202,  22  Pac.  837,  in  which  it  is  held  Bank  v.   Thomas,   79   Hun    (N.   Y.) 

that  a  hona  fide  holder  may  fill  such  595,  29  N.  Y.  Supp.  837. 

a  blank  with  his  own  name.  "*  Prim  v.  Hammel,  134  Ala.   652, 

^-  Alabama.— Winter   v.    Pool,   104  32  So.  1006;  Yocum  v.  Smith,  63  111. 

Ala.  580,  16  So.  543.  321;    Bank  of   Commerce   v.   Halde- 

Illinois.— Canon    v.    Grigsby,    116  man,  22  Ky.  Law  Rep.  717,  58  S.  W. 

111.   151,  5   N.  E.   362,  56   Am.  Rep.  587;  Abbott  v.  Rose,  62  Me.  194,  16 

769.  Am.  Rep.  427. 

Kentucky. — Cason  v.  Bank,  97  Ky.  "°  Overton    v.    Matthews,    35    Ark. 

487,  31   S.  W.  40,   53  Am.   St.   Rep.  146,   37   Am.   Rep.   9.     Compare    In- 

418;  Rogers  v.  Poston,  1  Mete.  (Ky.)  glish   v.   Breneman,   5    Pike    (Ark.) 

643.  377,  41  Am.  Dec.  96,  holding  the  fill- 

"New  York. — Kitchen  v.   Place,  41  ing  in  of  a  false  date  to  be  an  alter- 

Barb.  (N.  Y.)  465.  But  see:  ation  which  is  a  defense. 


§  147]  ALTERATION  OF  PAPER.  172 

permit  of  the  insertion  of  other  words  will  not,  as  a  matter  of  law, 
confer  authority  upon  the  holder  to  fill  such  space,  and  where  other 
words  are  inserted  which  materially  alter  the  paper  it  will  be  a  de- 
fense to  an  action  thereon.®^  So  it  has  been  decided  that  the  maker 
of  a  non-negotiable  promissory  note,  perfect  in  its  terms,  does  not, 
by  leaving  a  blank  space  in  the  body  of  the  note  wherein  words  of 
negotiability  may  be  inserted,  give  an  implied  authority  to  fill  such 
space  which  he  may  not  deny  as  against  a  bona  fide  purchaser.®^  And 
where  a  bill  or  note  is  complete  in  all  its  parts  the  weight  of  authority 
supports  the  rule  that  if  the  blank  for  the  amount  is  filled  so  as  to  ex- 
press a  larger  amount  than  is  stated  therein,  such  fact  will  be  a  good 
defense  even  as  against  a  bona  fide  holder.^^  There  are,  however, 
some  decisions  which  do  not  adopt  this  rule,  it  being  held  that  if  the 
maker  has  left  a  space  in  such  a  manner  as  to  admit  of  its  being 
filled  so  as  to  increase  the  amount,  he  is  guilty  of  negligence 
and  is  precluded  from  setting  up  this  defense  against  such  a  holder.*'* 

§  147.  As  defense  to  action  on  original  consideration  or  debt. 
The  material  alteration  of  a  bill  or  note  will  not  only  be  a  defense  to 
filled  so  as  to  increase  the  amount,  he  is  guilty  of  negligence  and 
is  precluded  from  setting  up  this  defense  against  such  a  holder.*''' 

^Arkansas. — Fordyce   v.   Kosmin-  v.  Clark,  51  Iowa  264,  1  N.  W.  491, 

ski,  49  Ark.  40,  3  S.  W.  892,  4  Am.  33  Am.  Rep.  129. 

St.  R.  18.  Kansas. — Bank    of    Herington    v. 

Maryland.— Burrows  v.  Klunk,  70  Wangerin,  65  Kan.  423,  70  Pac.  330. 

Md.  451,  17  Atl.  378.  Massac7iusetts.—Ban\i  v.   Stowell, 

Massachusetts. — Belknap  v.  Bank,  123  Mass.  196,  24  Am.  Rep.  67. 

100  Mass.  376,  97  Am.  Dec.  105.  South  Dakota. — Searles   v.   Selpp, 

3Iississippi.— Simmons    v.    Atkin-  6  S.  D.  472,  61  N.  W.  804. 

son,  69  Miss.  862,  12  So.  263,  23  L.  Federal— Exchange  National  Bank 

R.  A.  599.  V.  Bank  of  Little  Rock,  58  Fed.  140, 

New  Yorfc.— McGrath  v.  Clark,  56  7  C.  C.  A.  111. 

N.  Y.  34;  Bruce  v.  Westcott,  3  Barb.  "^  Isnard  v.  Tones,  10  La.  Ann.  103; 

(N.  Y.)  374.  Garrard  v.   Haddan,  67  Pa.   St.  82; 

Pennsylvania. — Leas  v.  Walls,  101  Young  v.   Grote,  4   Bing.   253.     See 

Pa.  St.  57,  47  Am.  Rep.  699.   See:  Franklin  Life  Ins.  Co.  v.  Courtney, 

^^ngritanr?.— Hirschfield     v.     Smith,  60  Ind.  134. 

L.  R.  1  C.  P.  340.  '"  Alabama.— White    v.     Hass,    32 

"Cronkhite   v.    Nebeker,    81    Ind.  Ala.  430,  70  Am.  Dec.  548. 

319,  42  Am.  Rep.  127.  Illinois. — Black  v.  Bowman,  15  111. 

^Arkansas. — Fordyce   v.   Kosmin-  App.  166;  Wallace  v.  Wallace,  8  111. 

ski,  49  Ark.  30,  3  S.  W.  892,  4  Am.  App.  69. 

St.  R.  18.  Indiana. — Ballard     v.     Insurance 

/owa.— Knoxville    National    Bank  Co.,  81  Ind.  239. 


173  AS    DEFENSE    TO    ACTIOX    OX    ORIGIXAL    DEBT.  [§    147 

rule  also  applies  to  an  indorsee  after  maturity,  as  he  stands  in  the 
same  position  as  his  indorser  in  respect  to  such  alteration/^  As 
to  the  availability  of  an  alteration  as  a  defense  in  such  a  case  the  fol- 
lowing words  of  the  court  in  an  early  New  York  decision  are  perti- 
nent :  "To  allow  parties  to  take  the  chances  of  success  in  fraudulently 
raising  the  amount  of  the  written  obligations  of  their  debtors,  with- 
out risk  of  loss  in  case  of  detection,  would  be  an  encouragement  to 
this  description  of  fraud  which  the  law  should  not  afford.  It  is  said, 
on  the  other  hand,  that  the  debtor  has  sustained  no  injury  by  the 
fraud  and  that  he  should  not  be  permitted  to  profit  by  the  unsuccess- 
ful attempt  of  his  creditor  to  defraud  him.  It  is  true  that  where  the 
fraud  is  detected  in  season  the  debtor  sustains  no  pecuniary  loss ;  but 
he  has  been  intentionally  exposed  to  injury.  The  alteration  may  have 
been  so  skilfully  made  as  to  render  detection  difficult,  or  the  debtor 
might  h»ve  become  infirm  or  died,  and  the  altered  instrument  suc- 
cessfully imposed  upon  his  representatives.  It  is  for  the  purpose  of 
discouraging  such  attempts  that  the  law  denies  relief  to  a  plaintiff 
who  comes  into  court  with  his  hands  soiled  with  a  fraud  so  inexcusa- 
ble. That  the  effect  of  such  denial  will  be  to  benefit  the  other  party 
is  not  a  sufficient  ground  for  overlooking  the  fraud.  It  is  a  conse- 
quence for  which  the  plaintiff  is  alone  responsible,  and  which  always 
ensues  when  the  action  is  founded  upon  a  special  contract  which  has 
been  fraudulently  .altered.  It  is  conceded  that  in  such  a  case  the 
plaintiff  has  deprived  himself  of  all  remedy  either  upon  the  contract 
or  the  consideration.  So,  in  the  case  of  an  altered  deed  the  grantee 
loses  the  land,  and  the  grantor  is  benefitted.  If  the  argument  now  re- 
ferred to  was  sound,  the  plaintiff  should  be  permitted  in  those  cases 

Iowa. — Woodworth    v.    Anderson,  North     Dakota. — First     National 

63  Iowa  503,  19  N.  W.  296.  Bank  v.   Laughlin,  4  N.   D.   391,   61 

MassacJiusetts. — Wheelock  v.  Free-  N.  W.  473. 

man,    30    Mass.    (13    Pick.)    165,    23  South  Carolina.— Mills  v.  Starr,  2 

Am.  Dec.  674.  Bailey  (S.  C.)  359. 

Missouri. — Whitmer    v.    Frye,    10  England. — Alderson    v.    Langdale, 

Mo.  348.  3  Barn.  &  Ad.  660. 

Nebraska. — Walton    Plow    Co.    v.  Canada. — Gladstone  v.  Dew,  9  Up. 

Campbell,    35    Neb.    174,    52    N.    W.  Can.  C.  P.  439.    See: 

883.  Tennessee. — Taylor  v.   Taylor,   12 

New  Hampshire. — Smith  v.  Mace,  Lea  (Tenn.)  714.    But  see: 

44  N.  H.  553;  Martendale  v.  Follet,  England. — Atkinson  v.  Hawdon,  2 

1  N.  H.  95.  Adol.  &  E.  628. 

North   Carolina. — Sharpe   v.   Bag-  "' Kennedy  v.  Crandell,  3  Lans.  (N. 

well,  16  N.  C.  115.  Y.)  1. 


?§  148,  149] 


ALTERATION    OF    PAPER. 


174 


to  recall  the  alteration  and  .avail  himself  of  the  contract  or  deed 
in  its  original  and  true  form,  which  it  is  well  settled  he  cannot  do."" 

§  148.  Alteration  not  fraudulent — To  make  paper  conform  to 
original  agreement — May  recover  on  original  consideration. — A  ma- 
terial alteration  of  a  bill  or  note  where  it  is  not  fraudulent,  though 
it  will  be  a  defense  to  an  action  on  the  instrument  itself,  will  not  be 
a  bar  to  a  recovery  on  the  original  consideration  or  debt.^^  And  a 
party  cannot  alter  such  a  paper  though  for  the  purpose  of  making  it 
conform  to  the  original  agreement  and  recover  on  the  note,  for  to 
permit  this  would  be  in  effect  to  render  all  written  instruments  oral 
ones,  subject  to  change  at  will  of  one  of  the  parties,  to  accord  with 
his  remembrance  of  the  contract.  The  holder  is  not,  however,  in  such 
a  case  precluded  from  a  recovery  on  the  original  consideration.'^* 

§  149.  Effect  of  consent  or  ratification. — A  party  to  an  instrument 
who  has  authorized,  or  consented  to,  a  material  alteration  of  the  paper 
cannot  subsequently,  in  an  action  thereon  against  him,  avail  himself 
of  such  alteration  as  a  defense  thereto."   This  rule  has  been  applied 


"Meyer  v.  Huneke,  55  N.  Y.  412, 
419,  per  Rapallo,  J. 

"/OM;a. — Sullivan  v.  Rudisill,  63 
Iowa  158,  18  N.  W.  856;  Morrison  v. 
Huggins,  53  Iowa  76,  4  N.  W.  854; 
Clough  V.  Seay,  49  Iowa  111. 

Maryland. — Morrison  v.  Welty,  18 
Md.  169. 

Nebraska. — State  Savings  Bank  v. 
Shaffer,  9  Neb.  1,  1  N.  W.  980,  31 
Am.  Rep.  394. 

New  Yorfc.— Gillette  v.  Smith,  18 
Hun  (N.  Y.)  10. 

Ohio. — Merrick  v.  Boury,  4  Ohio 
St.  60. 

Pennsylvania. — Miller  v.  Stark, 
148  Pa.  St.  164,  23  Atl.  1058. 

Rhode  Island. — Keene  v.  Weeks, 
19  R.  I.  309,  33  Atl.  446. 

England. — Sloman  v.  Cox.  1 
Cromp.  M.  &  R.  471.   See: 

Illinois. — ^Wallace  v.  Wallace,  8 
111.  App.  69. 

''*Iovxi. — Murray  v.  Graham,  29 
Iowa  520. 


New  Jersey.— Hunt  v.  Gray.  35  N. 
J.  L.  227,  10  Am.  Rep.  232. 

C7fa7i.— McClure  v.  Little,  15  Utah 
379,  49  Pac.  298.   See: 

Belaxoare. — Warren  v.  Las^ton,  3 
Harr.   (Del.)  404. 

'Wisconsin. — Matteson  v.  Ells- 
worth, 33  Wis.  488,  14  Am.  Rep.  766. 

"^  Colorado. — Whitehead  v.  Em- 
merich  (Colo.  1906),  87  Pac.  790. 

Delatvare. — Hollis  v.  Vandergrift, 
5  Houst.   (Del.)   521. 

Indiana. — Prather  v.  Zulauf,  38 
Ind.  155. 

Massachusetts. — Stoddard  v.  Pen- 
niman,  113  Mass.  386. 

Missouri. — King  v.  Hunt,  13  Mo. 
97. 

South  Carolina. — Jacobs  v.  Gil- 
reath,  45  S.  C.  46,  22  S.  E.  757. 

Tennessee. — Ratcliff  v.  Planters' 
Bank,  2  Sneed  (Tenn.)  424. 

Virginia. — Schmelz  v.  Rix,  95  Va. 
509,  28  S.  E.  890. 

Wisconsin. — Marks  v.  Schram,  109 
Wis.  452,  84  N.  W.  830. 


I 


175 


EATIFICATION,    WHAT    CONSTITUTES. 


[§  150 


in  the  case  of  the  erasure  of  the  name  of  a  released  guarantor/* 
where  words  have  been  added  changing  a  joint  contract  to  a  joint  and 
several  one/^  where  there  was  inserted  at  the  end  of  a  note  the  clause, 
"attest,  this  9th  day  of  October,"^^  and  where  other  parts  of  the  instru- 
ment have  been  similarly  changedJ^ 

§  150.  Same  subject — What  constitutes. — A  consent  or  ratifica- 
tion which  will  preclude  a  party  from  availing  himself  of  the  defense 
of  a  material  alteration  of  the  instrument  may  be  either  in  express 
terms  or  may  be  implied  from  acts  of  his  in  connection  with  the 
paper.*"  So  a  consent  or  ratification  may  arise  from  a  recognition  of 
liability  on  the  paper,*^  as  by  requesting  and  obtaining  an  extension  of 
time,*^  by  a  subsequent  promise  to  pay,^^  by  making  partial  pay- 
ments,** by  giving  collateral  security,*^  or  by  payment  of  interest.*® 
And  the  obligors  upon  a  bond  may  be  precluded  from  setting  up  an 
alteration  as  a  defense  where  it  was  done  by  a  co-obligor  acting  as  their 
agent.*^  A  new  consideration  is  not  essential  to  render  a  consent 
binding  upon  a  party.** 


Federal. — Crum  v.  Abbott,  2  Mc- 
Lean (U.  S.)  233,  Fed.  Cas.  No. 
3454. 

England. — Sherrington  v.  Jermyn, 
3  Car.  &  P.  374;  Kershaw  v.  Cox,  3 
Esp.  246;  Catton  v.  Sampson,  8 
Adol.  &  E.  136;  Stevens  v.  Lloyd, 
Moody  &  M.  292;  Walter  v.  Cubley, 
2  Cromp.  &  M.  151.    See: 

Kentucky. — Pulliam  v.  Withers,  8 
Dana  (Ky.)  98,  33  Am.  Dec.  479. 

England. — Johnson  v.  Garnett,  2 
Chit.  122. 

Iowa. — "This  assent  would  make 
it  his  instrument  as  fully  and  en- 
tirely as  if  the  words  had  been  in- 
serted at  the  time  of  its  execution." 
Per  Wright,  C.  J.,  in  Grimsted  v. 
Briggs,  4  Iowa  559. 

"  Kane  v.  Kerman,  109  Wis.  33,  85 
N.  W.  140. 

""  Landauer  v.  Improvement  Co., 
10  S.  D.  205,  72  N.  W.  467. 

"  Wilson  v.  Jamieson,  7  Pa.  St. 
126. 

"See  Subdivision  II  of  this  chap- 


ter as  to  such  alterations  of  other 
parts  of  a  note  or  bill. 

*°  Connecticut. — Union  Bank  v. 
Middlebrook,  33  Conn.  95. 

Kentucky. — Mattingly  v.  Riley,  20 
Ky.  Law.  Rep.  1621,  49  S.  W.  799. 

Maine. — Powers  v.  Nash,  37  Me. 
322. 

New  York. — Weed  v.  Carpenter, 
10  Wend.  (N.  Y.)  403.    See: 

Michigan. — Swift  v.  Barber,  28 
Mich.  503. 

*^  Stewart  v.  Bank,  40  Mich.  348. 

«=Bell  V.  Mahin,  69  Iowa  408,  29 
N.  W.  331. 

''^  National  State  Bank  v.  Rising, 
4  Hun  (N.  Y.)  793. 

"  Evans  v.  Foreman,  60  Mo.  449. 

^^  Humphrey  v.  Guillow,  13  N.  H. 
385,  38  Am.  Dec.  449. 

"« Caries  v.  Tattersall,  2  Man.  &  G. 
890.  See  also,  Prouty  v.  Wilson,  123 
Mass.  297. 

"Wilmington  v.  Kitchin,  91  N.  C. 
39. 

^Pelton  V.  Prescott,  13  Iowa  567. 


151] 


ALTERATIOX    OF    PAPER. 

Subdivision  II. 


176 


PARTICULAR   ALTERATIONS. 


Sec.  Sec. 

151.  Alteration  of  number.  167. 

152.  Alteration  of  date. 

153.  Same    subject — To    conform    to     168. 

actual  date.  169. 

154.  Alteration  of  time  of  payment.       170. 

155.  Same    subject — Application    of     171. 

rule. 

156.  Alteration    in   statement   as  to     172. 

consideration. 

157.  Alteration  of  form  of  promise.     173. 

158.  Alteration  of  name  of  payee. 

159.  Same  subject — To  correct  mis-     174. 

take. 

160.  Alteration     as     to     negotiable     175. 

words. 

161.  Substitution     or     addition     of     176. 

words       "or       order" — "Or 
bearer."  177. 

162.  Alteration  of  place  of  payment. 

163.  Same  subject — By  agent  before     178. 

delivery.  179. 

164.  Designation    of    place    of    pay- 

ment where  none  specified.  180. 

165.  Alteration  of  amount.  181. 

166.  Same  subject — "Where  there  are 

marginal  figures.  182. 


Alteration  in  medium  of  pay- 
ment. 

Alteration  of  interest  clause. 

Same  subject — Rate  of  interest. 

Addition  of  an  interest  clause. 

Alteration  of  conditions  or  stip- 
ulations. 

Erasure  or  alteration  of  mak- 
er's signature. 

Same  subject — When  alteration 
not  a  defense. 

Rule  where  signatures  are  add- 
ed. 

Same  subject — When  not  a  de- 
fense. 

Alteration  or  destruction  of 
seal. 

Alteration,  erasure  or  addition 
of  names  of  witnesses. 

Stamping  of  note. 

Addition  or  erasure  of  memo- 
randa. 

Alteration  of  indorsement. 

Erasure  or  alteration  of  name 
of  surety. 

Addition  of  name  as  surety  or 
guarantor. 


§  151.  Alteration  of  number. — Eecovery  by  a  bona  fide  holder  on 
a  negotiable  bond  will  not  be  prevented  by  an  alteration  of  the  num- 
ber, such  an  alteration  being  held  to  be  immaterial. ^^  So  where 
bonds  of  a  commonwealth  which  are  payable  to  bearer,  and  not  re- 
quired by  law  to  be  numbered,  are  stolen,  and  the  numbers  altered, 
it  has  been  decided  that  a  bona  fide  holder  is  not  affected  by  the  alter- 
ation, though  it  was  done  in  bad  faith. '^^   In  this  class  of  cases  it  has 


*»  Morgan  v.  United  States,  113  U. 
S.  476,  5  Sup.  Ct.  588;  Wylie  v.  Rail- 
way Co.,  41  Fed.  623.  See  Birdsall 
V.  Russell,  29  N.  Y.  220;  Leeds  v. 
County  Bank,  11  Q.  B.  84.     But  see 


Suffell  V.  Bank,  9  Q.  B.  555,  revers- 
ing 7  Q.  B.  270. 

""Commonwealth  v.  Emigrant  In- 
dustrial Sav.  Bank,  98  Mass.  12,  93 
Am.  Dec.  126. 


177 


OF  DATE. 


[§  153 


been  declared  that  the  numbers  are  placed  on  bonds  for  the  con- 
venience of  the  maker  and  his  protection,  showing  it  is  one  of  a  series 
and  does  not  enter  into  or  affect  the  agreement.**^ 

§  153.  Alteration  of  date. — The  date  of  a  note  is  a  material  part 
of  the  contract,  and  any  alteration  thereof  affects  the  identity  of  the 
contract  and  will  be  a  good  defense  to  an  action  on  the  instrument 
without  regard  to  whether  it  may  hasten  or  delay  the  date  of  pay- 
ment/- it  being  the  change  in  the  contract  which  the  law  regards  and 


•^  City  of  Elizabeth  v.  Force,  29  N. 
J.  Eq.  587. 

^^  Delaware. — Warren  v.  Layton,  3 
Harr.  (Del.)  404. 

Illinois. — Wyman  v.  Yeomans,  84 
111.  403. 

Kentucky. — Lisle  v.  Rogers,  18  B. 
Mon.  (Ky.)  528. 

Mississippi. — Henderson  v.  Wil- 
son, 7  Miss.  (6  How.)   65. 

Missouri. — Britton  v.  Dierker,  46 
Mo.  591,  2  Am.  Rep.  553;  Owings  v. 
Arnot,  33  Mo.  406;  Aubuchon  v.  Mc- 
Knight,  1  Mo.  312,  13  Am.  Dec.  502. 
■  Montana. — McMillan  v.  Hefferlin, 
18  Mont.  385,  45  Pac.  548. 

New  York. — Crawford  v.  Bank, 
100  N.  Y.  50,  2  N.  E.  881,  53  Am. 
Rep.  152;  Rogers  v.  Vosburg,  87  N. 
Y.  228. 

North  Carolina. — Bland  v.  O'Ha- 
gan,  64  N.  C.  471. 

Ohio. — Newman  v.  King,  54  Ohio 
St.  273,  43  N.  E.  683. 

Pennsylvania. — Bowers  v.  Rine- 
ard,  209  Pa.  St.  545,  58  Atl.  912; 
Miller  v.  Stark,  148  Pa.  St.  164,  2S 
Atl.  1058;  Heffner  v.  Wenrich,  32 
Pa.  St.  423;  Kennedy  v.  Bank,  18  Pa. 
St.  347. 

Wisconsin. — Low  v.  Merrill,  1 
Finn.  (Wis.)   340. 

England. — Hirschman  v.  Budd,  L. 
R.  8  Exch.  171;  Master  v.  Miller,  4 
Term  R.  320;  Walton  v.  Hastings,  4 
Camp.  223;  Outhwaite  v.  Luntley.  4 
Camp.  179;  Vance  v.  Lowther,  L.  R. 
1  Exch.  Div.  176;  Bathe  v.  Taylor, 
15  East  412. 

Joyce  Defenses — 12. 


Canada. — Gladstone  v.  Dew,  9  Up. 
Can.  C.  P.  439.   But  see: 

Federal. — Union  Bank  v.  Cook,  2 
Cranch  C.  C.  218,  Fed.  Cas.  No. 
14349. 

Pennsylvania. — "It  does  not  de- 
pend on  the  accelerating  or  extend- 
ing the  day  of  payment,  but  upon 
the  identity;  to  insure  the  identity 
and  prevent  the  substitution  of  one 
instrument  for  another  is  the  foun- 
dation of  the  rule,  and  it  is  a  wise 
rule,  as  it  prevents  all  tampering 
with  written  instruments."  Ste- 
phens V.  Graham,  7  Serg.  &  R.  (Pa.) 
505,  506,  10  Am.  Dec.  485,  per  Dun- 
can, J. 

Pennsylvania. — "If  the  day  of  pay- 
ment be  accelerated  by  it,  the  debtor 
loses  a  part  of  the  time  for  which 
he  stipulated,  and  the  computation 
of  interest  is  affected  by  it;  if  it  be 
retarded,  the  starting  of  the  statute 
of  limitations  or  the  presumption  of 
payment  from  lapse  of  time  is  also 
retarded  by  it."  Miller  v.  Gilleland, 
19  Pa.  St.  119,  124,  per  Gibson,  J. 

Nebraska. — "The  alteration  of  the 
date,  whether  it  hasten  or  delay  the 
time  of  payment,  is  a  material  alter- 
ation, and  if  made  without  the  con- 
sent of  the  party  sought  to  be 
charged  extinguishes  his  liability." 
Brown  v.  Straw,  6  Neb.  536,  29  Am. 
Rep.  369,  per  Maxwell,  J.  Alteration 
of  the  date  of  a  bill  of  lading. 
Merchants'  Nat.  Bank  v.  Baltimore 
C.  &  R.  S.  Co.,  102  Md.  573,  63  Alt. 
108. 


§•   153]  ALTERATION   OF    PAPER.  178 

not  the  surrounding  circumstances."^  So  where  a  note  is  executed  by 
an  accommodation  maker  and  is  afterwards,  without  his  consent  or 
knowledge,  materially  altered  by  an  indorsee  or  holder  thereof,  such 
note  is  thereby  rendered  invalid.^*  And  an  acceptor  of  a  bill  is  released 
by  an  alteration  of  date  of  the  accepted  bill  by  the  holder,  thereby  short- 
ening the  time  of  payment.®^  And  likewise  where  one  gives  authority  to 
draw  upon  him  for  ninety  days  after  a  certain  date,  and  the  date  is 
altered  to  a  later  time  than  that  specified,  he  will  be  released."®  So 
a  change  of  a  demand  note  to  a  later  date  is  material  and  avoids  the 
note,  thougji  it  may  be  a  benefit  to  the  maker  by  reducing  the  amount 
of  interest  chargeable  against  him."^  So  a  surety  will  be  discharged 
by  an  alteration  which  would  have  the  effect  of  causing  the  interest 
to  run  for  a  longer  period  of  time."^  A  maker  or  surety  will  not,, 
however,  be  relieved  from  liability  by  an  alteration  of  the  date  of  a 
note  by  the  maker  where  it  was  authorized  by  the  surety.""  And  such 
an  alteration  by  the  acceptor  before  he  accepts  the  instrument,  and 
which  is  acquiesced  in  by  the  other  parties  to  the  paper,  will  be  bind- 
ing on  them.^"°  And  an  act  of  a  stranger  which  is  a  mere  spoliation 
will  be  no  defense.^"^  Again,  the  alteration  of  the  date  of  an  indorse- 
ment has  been  held  to  be  an  immaterial  one  which  will  not  affect  the 
right  of  an  indorsee  to  recover.^"^ 

§  153.  Same  subject — To  conform  to  actual  date. — A  change,  by 
a  party  to  an  instrument,  of  the  date  thereof,  even  though  made  for  the 
purpose  of  having  it  conform  to  the  actual  date  of  execution,  if  made 
without  the  consent  of  the  party  sought  to  be  charged  will  release 
him  from  liability  on  the  instrument.^ "^  In  this  connection  it  is  said 
in  one  case :  "In  an  action  between  the  original  parties  the  court  has 
ample  power  to  correct  mistakes  and  to  enforce  the  original  contract ; 
but  the  law  does  not  permit  the  payee  of  a  note  to  change  its  terms  and 

^'Boulton    V.    Langmuir,    24    Ont.  (Ky.)   25,  48  Am.  Dec.  412;  Boyd  v. 

App.  R.  618.  McConnell,   29   Tenn.    (10   Humph.) 

"*  Fraker  v.  Cullum,  21  Kan.  555.  68. 

""^Hervey  v.  Hervey,  15  Me.  357.  '»=  Griffith  v.  Cox,  1  Overt.  (Tenn.) 

»"  Lewis  V.  Kramer,  3  Md.  265.  210. 

^'Boulton    V.    Langmuir,    24    Ont.  i"' Hamilton  v.  Wood,  70  Ind.  306; 

App.  R.  618.  Henderson    v.    V/ilson,    7    Miss.     (6 

"'Benedict  v.  Miner,  58  111.  6.  How.)  65;  Bowers  v.  Jewell,  2  N.  H. 

"^  Prather  v.  Zulauf,  38  Ind.  155.  543.     But  see  Jessup  v.  Dennison,  2 

""RatclifE   v.    Planters'    Bank,    34  Disney  (Ohio)  150;  Brutt  v.  Picard, 

Tenn.  (2  Sneed)  424.  Ryan  &  M.  37. 

"^Lee    V.    Alexander,    9    B.    Mon. 


I 


179      OF    TIME    OF    PAYMENT — APPLICATIOX    OF    RULE.       [§§    154,    155 

conditions  without  the  assent  of  the  maker,  even  if  the  alteration  is 
in  his  favor  or  to  correct  a  mistake."^"*  Where,  however,  the  origi- 
nal date  was  altered  by  the  draftsman  to  conform  to  the  intention  of 
the  parties  but,  upon  the  maker's  objection,  the  original  date  was  re- 
stored with  which  date  the  maker  expressed  himself  as  satisfied,  it 
was  decided  that  the  note  was  good  as  against  him."^ 

§  154.  Alteration  of  time  of  payment. — Where  the  time  of  pa)'- 
ment  of  a  bill  or  note  is  changed  it  constitutes  a  material  alteration 
which  a  party  not  consenting  thereto  may  show  in  defense  to  an  ac- 
tion against  him  even  by  a  bona  fide  holder.^"^  This  rule  applies  where 
the  time  of  payment  is  extended  by  such  alteration,^"^  and  likewise 
where  it  is  shortened.  So  where  a  note  was  altered  so  as  to  become 
payable  after  the  maker's  death  instead  of  one  year  after  its  date,  it 
was  held  to  be  a  material  alteration  which  would  justify  the  direction 
of  a  verdict  in  favor  of  the  defendants  in  an  action  against  his  execu- 
tors.^°*  Where,  however,  the  parties  have  consented  to  such  an  alter- 
ation they  will  be  precluded  from  setting  up  the  same  as  defense. ^"'^ 

§  155.  Same  subject — Application  of  rule. — An  alteration  which 
is  material  and  may  be  shown  in  defense  has  been  held  to  exist  where 
a  clause  was  inserted  "Privilege  of  extension  for  thirty  days  given." ^^^ 

^<^  Brown  v.  Straw,  6  Neb.  536,  538,  Camp.  223;  Outhwaite  v.  Luntley,  4 

29  Am.  Rep.  369,  per  Maxwell,  J.  Camp.     179;     Paton    v.     Winter,     1 

*<*=  Collins    v.    Makepeace,    13    Ind.  Taunt.  420. 

448.  Canada. — Westloh    v.    Brown,    43 

^'^  Georgia. — Steinau  v.  Moody,  100  Up.  Can.  Q.  B.  402. 

Ga.  136,  28  S.  E.  30.  ^«^  Stayner    v.    Joice,    82    Ind.    35; 

Kentucky. — Lisle  v.  Rogers,  18  B.  Flanigan  v.  Phelps,  42  Minn.  186,  43 

Mon.  (Ky.)  537.  N.  W.  1113;   Desbrow  v.  Weatherly, 

Maine. — Hervey  v.  Harvey,  15  Me.  6  Car.  &  P.  758.     But  see  Douglass 

357.  V.  Scott,  8  Leigh  (Va.)  43. 

Massachusetts. — Ives  v.  Bank,  84  '"''Bowers  v.  Rineard.  209  Pa.  St. 

Mass.  (2  Allen)  236.  545,  58  Atl.  912;    Taylor  v.  Taylor, 

Missouri.— King  v.   Hunt,  13   Mo.  80  Tenn.   (12  Lea)  714;  Alderson  v. 

97.  Langdale,  3  Barn.  &  Aid.  660;   Clif- 

Pennsylvania.—Ban'k     of     United  ford  v.  Parker,  2  Man.  &  G.  909. 

States   V.    Russell,    3    Yeates    (Pa.)  ™  Ward    v.    Allen,    43    Mass.     (2 

39L  Mete.)  53,  35  Am.  Dec.  387;  King  v. 

J?'ederaL— Norwalk    Bank    v.    Ad-  Hunt,  13  Mo.  97. 

ams  Express  Co.,  4  Blatchf.   (U.S.)  ''"Flanigan    v.    Phelps,    42    Minn. 

455,  Fed.  Cas.  No.  10354.  186,  43  N.  W.  1113. 

England. — ^Walton  v.  Hastings,  4 


§§  156,  157]         ALTERATIOX  OF  PAPER.  '  180 

And  an  alteration  of  the  phrase  "^after  sight"  to  "after  date"  or  vice 
versa  will  be  a  material  one.^^^  So  a  shortening  of  the  time  by  chang- 
ing from  a  specified  date  of  payment  to  thirty  days  after  date  is  ma- 
terial. ^^-  And  recovery  may  be  defeated  by  showing  that  the  word 
"fixed"  was  inserted,  having  the  effect  of  excluding  the  three  days  of 
grace  allowed  by  law.^^^  And  changing  a  time  note  to  a  demand  note, 
which  is  repugnant  to  the  expressed  intention  of  the  parties,  is  material 
and  will  be  a  defense.^^*  The  insertion  of  such  words,  however,  has  been 
held  to  be  immaterial  where  they  only  express  the  effect  of  the  instru- 
ment as  it  originally  stood.  ^^^  Again  the  erasure  of  a  contemporaneous 
memorandum,  which  is  a  part  of  the  contract  and  controls  the  time 
of  payment,  will  avoid  an  instrument.^  ^^ 

§  156.  Alteration  in  statement  as  to  consideration. — If  the  state- 
ment in  a  note  in  respect  to  the  consideration  thereof  is  altered  it  is 
held  to  be  of  such  a  material  character  as  to  be  available  as  a  defense 
to  an  action  on  the  instrument.^  ^^  And  if  no  consideration  is  expressed 
in  such  an  instrument  it  is  decided  that  recovery  may  be  defeated  by 
showing  that  it  was  subsequently  altered  by  the  insertion  of  words 
showing  a  consideration.^ ^^ 

§  157.  Alteration  of  form  of  promise. — The  form  of  the  promise 
of  a  note  is  a  material  part  thereof  affecting  the  liability  of  the  parties, 
and  the  alteration  of  a  joint  note  into  a  joint  and  several  one  will  be 
a  good  defense  to  an  action  thereon,^ ^''  as  will  likewise  the  alteration 

'"  Long  V.   Moore,   3   Esp.   155   n,  indorsed  on  it  a  memorandum  that 

holding  an   acceptor   discharged    in  $250  was  to  be  paid  on  January  1, 

such    a   case    where    the    alteration  1872  and  $250  on  January  1,  1873. 

was  made  after  acceptance.  "'  Knill  v.  Williams,  10  East  431. 

"=  Seebold  v.  Tatlie,  76  Minn.  131,  "'  Low    v.    Argrove,    30    Ga.    129, 

78  N.  W.  967.  holding  in  such  a  case  that  the  in- 

"^  Steinau  v.  Moody,  100  Ga.  136,  sertion  of  words  expressing  a  cer- 

28  S.  E.  30.  tain  tract  of  land  as  the  considera- 

"*  Benjamin  v.  Delahy,  9  111.  536,  tion  was  material. 

46  Am.  Dec.  474;  Farmers'  National  ^^Terring   v.    Hone,    4    Bing.    28; 

Bank  v.   Thomas,   79   Hun    (N.  Y.)  Samson  v.  Yager,  4  Up.  Can.  Q.  B. 

595,  29  N.  Y.  Supp.  837.  O.  S.  3.     But  see  Miller  v.  Reed,  27 

"=AldoUs  V.  Cornwall,  L.  R.  3  Q.  Pa.  St.  244,  67  Am.  Dec.  459,  holding 

B.  573.     See  Gist  v.  Gans,  30  Ark.  that  under  the  laws  of  Pennsylvania 

285.  such  an  alteration  was  not  material 

""Bay  v.  Shrader,  50  Miss.  326,  so  and  would  not  avoid  the  note, 
holding  where  a  note  for  $500  had 


181 


NAME  OF  PAYEE. 


[    158 


of  a  joint  and  several  obligation  into  a  joint  one.^^"  So  changing 
the  words  "1  promise"  to  "we  promise"  is  a  material  alteration  which 
will  be  a  good  defense.^^^ 

§  158.  Alteration  of  name  of  payee. — It  will  be  a  good  defense  to 
an  action  on  a  bill  or  note  that  there  has  been  a  material  alteration 
of  the  name  of  the  payee^^^  such  as  that  it  has  been  erased  and  another 
name  inserted  in  its  place  without  the  consent  of  the  defendant.^^^ 
An  alteration  of  this  character  will  be  a  good  defense  to  an  action 
against  an  indorser/^*  surety/^^  or  maker.^^*^  And  it  may  be  available, 
though  there  was  no  fraud  in  making  the  change.  ^^'^  In  applying  this 
rule  it  has  been  decided  that  there  is  an  alteration  which  defeats  recov- 
ery where  there  is  added  to  the  name  of  the  payee  the  word  "collec- 
tor,"i28  «cashier,"i29  "junior"^^^^  and  "guardian."!^!  And  there  is  a 
material  alteration  where  there  is  an  indorsement  to  a  special  person 


'="  Eckert  v.  Louis,  84  Ind.  99,  hold- 
ing that  such  an  alteration  by  the 
agent  of  the  principal  without  the 
knowledge  or  consent  of  the  surety 
is  material  and  releases  the  surety 
from  all  liability  thereunder. 

"^  Humphreys  v.  Guillow,  13  N.  H. 
385,  38  Am.  Dec.  499,  in  which  the 
court  said:  "It  is  true  that  the  al- 
teration is  of  such  a  nature  as  to 
be  apparently  against  the  interest 
of  the  holder  of  the  note.  This,  how- 
ever, cannot  make  any  difference  in 
the  result;  for  the  note  as  altered 
does  not  contain  the  contract  as  the 
parties  saw  fit  to  make  it."  Per 
Gilchrist,  J.  Heath  v.  Blake,  28  S. 
C.  406,  5  S.  E.  842.  But  see  Eddy 
V.  Bond,  19  Me.  461,  36  Am.  Dec. 
767. 

'"Robinson  v.  Berryman,  22  Mo. 
App.  509;  Erickson  v.  First  Nat. 
Bank,  44  Neb.  622,  62  N.  W.  1078,  48 
Am.  St.  R.  753,  28  L.  R.  A.  577; 
Davis  V.  Bauer,  41  Ohio  St.  257; 
Sneed  v.  Milling  Co.,  73  Fed.  925,  20 
C.  C.  A.  230,  affg.  71  Fed.  493,  18 
C.  C.  A.  213. 

"^Stoddard  v.  Penniman,  108 
Mass.  366,  11  Am.  Rep.  363;  Erick- 
son V.  First  National  Bank,  44  Neb. 
622.   62   N.  W.   1078,   48   Am.   St.   R. 


753,  28  L.  R.  A.  577;  Hoffman  v. 
Planters'  National  Bank,  99  Va.  480, 
39  S.  E.  134.  First  Nat.  Bank  v. 
Gridley,  112  App.  Div.  (N.  Y.)  398, 
98  N.  Y.  Supp.  445. 

'^^Aldrich  v.  Smith,  37  Mich.  468, 
26  Am.  Rep.  536. 

"'Bell  V.  Mahin,  69  Iowa  408,  29 
N.  W.  331. 

""Horn  V.  Bank,  32  Kan.  518,  4 
Pac.  1022,  holding  that  an  alteration 
with  consent  of  one  maker  will  re- 
lease a  co-maker. 

'"  German  Bank  v.  Dunn,  62  Mo. 
79. 

'^York  V.  Jones,  43  N.  J.  L.  332, 
holding  that  where  such  an  altera- 
tion was  shown  to  have  been  made 
by  the  payee,  the  admission  of  the 
note  in  evidence  was  properly  re- 
fused on  the  ground  that  it  was  an 
altered  instrument. 

'"Hodge  V.  Bank,  7  Ind.  App.  94, 
34  N.  E.  123,  holding  that  by  such 
change  the  instrument  was  rendered 
payable  to  the  bank  of  which  payee 
was  cashier.  See  also,  Birmingham 
Trust  and  Sav.  Co.  v.  Whitney,  183 
N.  Y.  522,  76  N.  E.  1089. 

""  Broughton  v.  Fuller,  9  Vt.  373. 

'"  Jackson  v.  Cooper,  19  Ky.  Law 
Rep.  9,  39  S.  W.  39. 


§§  159,  160]         ALTEEATIOX  OF  PAPER.  182 

and  the  name  of  such  person  is  erased  and  another  inserted. ^^^  If,  how- 
ever, the  alteration  is  an  immaterial  one  it  will  not  defeat  recovery  as 
where  the  surname  of  the  payee,  to  whom  the  note  was  originally  given, 
is  inserted.^^^  And  where  a  note  is  made  payable  to  a  firm  it  has  been 
decided  that  it  is  no  defense  to  an  action  against  a  surety  that  it  was 
subsequently  altered  by  inserting  a  different  firm  name  where  it  was 
merely  another  designation  of  the  same  partnership.^^*  Again  it  has 
been  held  immaterial  where  the  words  "and  Co."  have  in  good  faith 
been  added  to  the  name  of  the  payee.^^^ 

§  159.  Same  subject — To  correct  mistake. — An  alteration  which  is 
made  for  the  mere  purpose  of  correcting  a  mistake  in  the  name  of  the 
payee  and  to  make  that  name  conform  to  the  intention  of  the  parties, 
as  where  it  is  spelled  incorrectly  or  an  initial  is  left  out  or  a  wrong 
initial  is  inserted  will  not  avoid  a  bill  or  note.^^^ 

§  160.  Alteration  as  to  negotiable  words. — The  existence  in  a  note 
of  words  which  affect  its  negotiability  is  an  important  element  of  the 
contract  which  may  be  determinative  of  the  liability  of  the  parties  to 
the  instrument.  Therefore  the  alteration  of  a  non-negotiable  note  so 
as  to  give  it  the  form  and  appearance  of  negotiable  paper  will  be  ma- 
terial and  constitute  a  good  defense  in  behalf  of  one  not  consenting 
thereto  even  as  against  a  hona  fide  holder.^^^ 

"^Piersol  v.  Grimes,  30  Ind.  129,  erasure  of  the  letter  R  was  imma- 

95  Am.  Dec.  673;  Grimes  v.  Piersol,  terial.     Derby  v.  Thrall,  44  Vt.  413, 

25  Ind.  246.  8  Am.  Rep.  389  holding  that  it  was 

^^  Mouchet  V.  Cason,  1  Brev.    (S.  no  defense  that  a  note  payable  to 

C.)  307.  Franklin  Derby  was  altered  to  Fran- 

"^  Arnold  v.  Jones,  2  R.  I.  345  cis  E.  Derby,  which  was  the  correct 
holding  that  the  maker  by  giving  name  of  the  payee, 
the  note  to  a  firm  Intended  to  be-  "^  Winter  v.  Loeb,  100  Ala.  503,  14 
come  liable  to  whoever  might  com-  So.  411;  Hardy  v.  Norton,  66  Barb, 
pose  the  firm  and  that  the  defend-  (N.  Y.)  527,  534;  Morehead  v.  Park- 
ant's  liability  as  surety  did  not  de-  ersburg  National  Bank,  5  W.  Va.  74, 
pend  upon  the  evidence  which  this  13  Am.  Rep.  636. 
note  afforded,  but  upon  evidence  ali-  "That  the  insertion  of  words  mak- 
unde  of  proof  of  names  of  the  indi-  ing  a  note  negotiable,  which  before 
viduals  who  composed  the  firm.  was  not  so,  is  a  material  alteration, 

^^°  Elliott  v.  Blair,  47  111.  342.  cannot,  I  think,  be  doubted.    It  is  a 

""  Cole  v.  Hills,  44  N.  H.  227  hold-  different  instrument  and  may  ma- 
ing  that  where  a  note  intended  to  terially  change  the  rights  and  lia- 
be  made  payable  to  Benjamin  Cole  bility  of  the  maker."  Bruce  v.  West- 
was  made  to  Benjamin  R.  Cole,  the  cott,  3  Barb.  (N.  Y.)  374,  per  Hand, 


183  PLACE    OF    PAYilEXT.  [§§    161,    162 

§  161.     Substitution  or  addition  of  words  "or  order,"  "or  bearer." 

The  addition  of  the  words  "or  bearer"  or  the  substitution  of  such 
words  for  the  words  "or  order,"  which  have  been  erased,  will  be  a  ma- 
terial alteration  of  an  instrument  of  which  a  party  not  consenting 
thereto  may  avail  himself  as  a  defense.^^^  And  it  has  also  been  so  held 
where  the  word  "order"  was  changed  to  "holder."^^^  And  the  inser- 
tion of  the  words  "or  order"  is  a  material  alteration  which  will  be  a 
defense.""  In  such  a  case  the  burden  is  held  to  be  on  the  plaintiff 
to  show  that  the  alteration  was  made  with  the  knowledge  or  consent 
of  the  defendant.^*^  And  if  made  with  the  consent  of  the  defendant, 
as  for  the  purpose  of  correcting  a  mistake,  and  to  have  the  instrument 
accord  with  the  intent  of  the  parties,  it  will  be  no  defense.^*-  Nor 
can  recovery  be  defeated  by  showing  that  such  words  have  been  in- 
serted, where  done  by  a  stranger,  the  act  in  such  case  being  regarded 
as  a  mere  spoliation.^*^  And  where  a  note  was  payable  only  on  a  cer- 
tain contingency  and  was  not  negotiable,  and  the  alteration  by  the  in- 
sertion of  such  words  did  not  make  it  so,  it  was  decided  that  it  was  no 
defense.^** 

§  162.     Alteration  of  place  of  payment. — An  alteration  of  the  place 
specified  in  a  bill  or  note  for  payment  is  material  and  in  an  action 

J.  Striking  out  the  words  in  a  note,  Wisconsin. — Union  National  Bank 

"agreeing   to   pay   all   expenses   in-  v.  Roberts,  45  Wis.  373.  But  see: 

curred  by  suit  or  otherwise  in  at-  Michigan. — Weaver  v.  Bromley,  65 

tempting  the  collection  of  this  note,  Mich.  212,  31  N.  W.  839. 

including  reasonable  attorney's  ""  McDaniel  v.  Whitsett,  96  Tenn. 

fees,"    which    words    rendered    the  10,  33  S.  W.  567. 

note  non-negotiable,  is  a  material  al-  "°  Johnson    v.    Bank,    2    B.    Mon. 

teration.     First    National    Bank    v.  (Ky.)  310;  Haines  v.  Dennett,  11  N. 

Laughlin,  4  N.  D.  391,  61  N.  W.  473.  H.  180;   Bruce  v.  Westcott,  3  Barb. 

"« /OMJa.— Needles    v.    Shaffer,    60  (N.  Y.)  374;  Pepoon  v.  Stagg,  1  Nott 

Iowa  65,  14  N.  W.  129.  &  McC.  (S.  C.)  102. 

Maine. — Crosswell    v.    Lebree,    81  "^  Schroeder  v.  Webster,  88   Iowa 

Me.  44,  16  Atl.   331,   10  Am.   St.  R.  627,  55  N.  W.  569. 

238.  "=  Kershaw   v.    Cox,    3    Esp.    246; 

Mississippi. — Simmons    v.    Atkin-  Bryon  v.  Thompson,  11  Adol.  &  E. 

son,  69  Miss.  862,  12  So.  263,  23  L.  31;  Cariss  v.  Tattersall,  2  Man.  &  G. 

R.  A.  599.                           ,  890. 

Nebraska. — Walton    Plow    Co.    v.  '"Andrews  v.   Calloway,   50  Ark. 

Campbell,    35    Neb.    174,    52    N.    W.  358,   7    S.   W.    449;    Union   National 

883  16  L.  R.  A.  468.  Bank  v.  Roberts,  45  Wis.  373. 

New  Yorfc.— Booth  v.  Powers,  56  »*  Goodenow   v.    Curtis,   33   Mich. 

N.  Y.  22.  505. 


163,  164] 


ALTERATION    OF   PAPER. 


184 


against  one  not  consenting  thereto  will  be  a  good  defense  even  as 
against  a  bona  fide  holder.^*^  So  an  alteration  by  a  drawer  of  the 
place  named  in  an  acceptance  will  be  a  good  defense  to  an  action 
against  the  acceptor  who  has  not  consented  thereto.^**^  A  party,  how- 
ever, who  has  consented  to  such  an  alteration  cannot  avail  himself  of 
this  defense. ^*^  And  an  alteration,  erasure,  or  addition  of  a  place  of 
payment  by  a  stranger  will  be  regarded  merely  as  an  act  of  spoliation 
which  will  not  prevent  a  recovery  on  the  instrument. ^*^ 

§  163.  Same  subject — By  agent  before  delivery. — Where  an  au- 
thorized agent  of  a  corporation  having  power  to  negotiate  a  loan  and 
secure  it  by  the  corporate  note  alters  the  place  of  payment  of  such  note 
as  expressed  therein  prior  to  delivery  of  the  instrument  to  the  payee, 
such  alteration  will  be  no  defense  to  an  action  thereon  against  the 
corporation.^*^  And  where  the  payee's  clerk  makes  an  unauthorized 
alteration  of  a  note  as  to  the  place  of  payment,  which  is  subsequently 
erased,  and  the  note  restored  to  its  original  form,  such  alteration  is 
held  to  be  no  defense.^^'^ 

§  164.     Designation   of  place   of  payment  where  none  specified. 

Where  no  place  of  payment  is  specified  in  a  bill  or  note  the  rule  seems 
to  be  that  the  designation  of  a  place  will  constitute  a  material  altera- 
tion which  will  be  a  o-ood  defense.^^^     And  it  has  been  declared  that 


"'Sudler  v.  Collins,  2  Houst. 
(Del.)  538;  Charlton  v.  Reed,  61 
Iowa  166,  16  N.  W.  64,  47  Am.  Rep. 
808;  Adair  v.  England,  58  Iowa  314, 
12  N.  W.  277;  Bank  of  Ohio  Valley 
V.  Lockwood,  13  W.  Va.  392,  31  Am. 
Rep.  768;  McQueen  v.  Mclntyre,  30 
Up.  Can.  C.  P.  426. 

"°  Tidmarsh  v.  Grover,  1  Maule  & 
S.  735. 

"'  Walter  v.  Cubley,  2  Cromp.  &  M. 
151. 

"'  Port  Huron  Engine  &  Thresher 
Co.  v.  Sherman,  14  S.  D.  461,  85  N. 
W.  1008;  Major  v.  Hansen,  2  Biss. 
(U.  S.)  195,  Fed.  Cas.  No.  8982. 

""Pelton  V.  Lumber  Co.,  113  Cal. 
21.  45  Pac.  12. 

^="Acme  Harvester  Co.  v.  Butter- 
field,  12  S.  Dak.  91,  80  N.  W.  170. 


^^^  Alabama. — Winter  v.  Pool,  100 
Ala.  503,  14  So.  411. 

Delaware. — Sudler  v.  Collins,  2 
Houst.   (Del.)   538. 

Indiana. — Cronkhite  v.  Nebeker, 
81  Ind.  319,  42  Am.  Rep.  127. 

Mississippi. — Simmons  v.  Atkin- 
son &  Lampton  Co.,  69  Miss.  862,  12 
So.  263,  23  L.  R.  A.  599. 

New  York. — Nazro  v.  Fuller,  24 
Wend.  (N.  Y.)  374. 

Ohio. — Sturges  v.  Williams,  9  Ohio 
St.  443,  75  Am.  Dec.  473. 

Pennsylvania. — Southwark  Bank 
V.  Gross,  35  Pa.  St.  80.   See: 

California. — Pelton  v.  Lumber 
Co.,  113  Cal.  21,  45  Pac.  12,  holding 
that  a  note  in  such  a  case  is  only 
payable  in  the  state  where  executed, 
and  the  naming  of  a  place  out  of 


185 


OF  AMOUNT. 


[§  1G5 


the  rule  is  especially  applicable  where  the  note  is  rendered  negotiable 
by  such  alteration.^^^  So  where  by  statute  a  place  of  payment  is  re- 
quired in  a  note  to  I'ender  it  negotiable  the  insertion,  in  a  note  which 
contains  no  such  designation,  of  a  place  of  payment  is  a  material  al- 
teration which  will  avoid  the  instrument  as  to  all  parties  who  do  not 
consent  thereto.^^^  So,  in  such  a  case,  in  an  action  against  an  indorser, 
it  has  been  decided  that  where  no  place  is  specified,  an  indorser's  con- 
tract is  that,  if  the  same  be  duly  presented  to  the  maker  at  maturity 
either  to  him  personally,  at  his  residence  or  place  of  business  and  the 
same  is  not  paid,  the  indorser  will  pay  it,  and  that  an  alteration  to  an- 
other place  is  material  and  will  release  him.^'^*  The  rule  has  been  ap- 
plied in  the  case  of  an  acceptance  where  no  place  of  payment  is  speci- 
fied and  one  is  inserted,  it  being  held  that  it  is  a  material  alteration 
which  will  defeat  recovery  except  as  to  such  parties  who  may  have  con- 
sented thereto  or  have  ratified  the  same.^^^  And  where  words  as  to  the 
place  payable  are  inserted  with  the  consent  of  the  makers  of  a  note  it 
will  operate  to  release  the  guarantors.^^*^ 

§  165.     Alteration  of  amount. — An  alteration  of  the  amount  for 

which  a  bill  or  note  is  given  is  a  material  one  which  may  be  shown  in 


the  state  is  a  material  alteration 
and  releases  indorsers  having  no 
knowledge  or  not  consenting. 

See  further,  Bowen  v.  Laird  (Ind. 
App.  1906),  77  N.  E.  295. 

"^Cronkhite  v.  Nebeker,  81  Ind. 
319,  42  Am.  Rep.  127;  Ballard  v.  In- 
surance Co.,  81  Ind.  239;  McCoy  v. 
Lockwood,  71  Ind.  319;  Morehead  v. 
Bank,  5  W.  Va.  74. 

163  "The  words  so  said  to  have  been 
added  made  the  note  import  nego- 
tiability, whereas  under  our  statute, 
without  words  designating  a  place 
of  payment,  the  instrument  would 
not  have  been  negotiable.  An  altera- 
tion which  makes  a  note  speak  a 
language  different  in  legal  effect 
from  that  which  it  originally  spoke 
is  material,  and  when  made  by  one 
not  a  stranger  to  the  paper  is  ordi- 
narily sufficient  to  avoid  the  con- 
tract as  to  all  parties  not  consenting 
thereto."  Per  Sharpe,  J.,  in  Carroll 
v.  Warren  (Ala.  1904),  37  So.  687, 
688. 


1=4  Townsend  v.  Wagon  Co.,  10  Neb. 
615,  7  N.  W.  274;  Woodworth  v. 
Bank  of  America,  19  Johns.  (N.  Y.) 
391.  But  see  Schuler  v.  Gillette,  12 
Hun  (N.  Y.)  278,  holding  that  where 
merely  a  place  is  designated  in  the 
same  town  in  which  plaintiff  re- 
sides and  the  bill  is  payable  there 
is  not  a  material  alteration,  which 
will  release  an  indorsei-.  Etz  v. 
Place,  81  Hun  (N.  Y.)  203,  30  N.  Y. 
Supp.  765. 

"^Whitesides  v.  Bank,  10  Bush 
(Ky.)  501,  19  Am.  Rep.  74;  Cowie 
v.  Halsall,  4  Barn.  &  Aid.  197;  Cal- 
vert V.  Baker,  4  Mees.  &  W.  417; 
Crotty  V.  Hodges,  4  Man.  &  G.  561; 
Burchfield  v.  Moore,  3  El.  &  Bl.  683; 
Desbrow  v.  Weatherly,  6  Car.  &  P. 
758;  Hanbury  v.  Lovett,  18  Law  T. 
N.  S.  366.  But  see  Trapp  v.  Spear- 
man, 3  Esp.  57. 

1^"  Pahlman  v.  Taylor,  75  111.  629. 


166] 


ALTERATION   OF   PAPER. 


186 


defense  to  an  action,  even  though  the  instrument  is  in  the  hands  of  a 
bona  fide  holder.^^^  And,  though  the  alteration  is  not  disadvan- 
tageous to  the  one  responsible,  as  where  the  instrument  is  changed  to 
express  a  smaller  amount,  yet  it  will  defeat  recover}^  on  the  principle 
that  it  makes  another  and  different  contract.^"^  If,  however,  the  al- 
teration is  made  by  a  stranger  to  the  instrument  it  is  then  held  to  be 
no  defense.^^^ 

§  166.  Same  subject — Where  there  are  marginal  figures. — Mar- 
ginal figures  are  held  to  "form  no  part  of  the  instrument,  being  merely 
in  the  nature  of  memorandum  for  convenience,  and  the  fact  that  the 
same  have  been  altered  in  order  to  have  them  conform  to  the  amount 
expressed  in  the  body  of  the  paper  will  not  defeat  a  recovery  thereon."" 
And  where  a  blank  space  has  been  left  in  the  body  of  such  an  instru- 
ment where  the  amount  is  to  be  inserted,  the  fact  that  it  has  been  filled 
to  express  a  different  amount  than  is  indicated  by  marginal  figures 
and  that  such  figures  have  been  erased  or  cut  off  will  be  no  defense  as 


^^^  Arkansas. — Fordyce  v.  Kosmin- 
ski,  49  Ark.  40,  3  S.  W.  892,  4  Am. 
St.  R.  18. 

Connecticut. — ^tna  National 
Bank  v.  Winchester,  43  Conn.  391. 

Indiana. — Fudge  v.  Marquell,  164 
Ind.  447,  72  N.  E.  565. 

Iowa. — Knoxville  National  Bank 
V.  Clark,  51  Iowa  264,  1  N.  W.  491, 
33  Am.  Rep.  129. 

Kansas. — Bank  of  Herington  v. 
Wangerin,  65  Kan.  423,  70  Pac.  330. 

Maine. — Dodge  v.  Haskell,  69  Mtr. 
429. 

Maryland. — Burrows  v.  Klunk,  70 
Md.  451,  17  Atl.  378,  3  L.  R.  A.  576, 
14  Am.  St.  R.  371. 

Massachusetts. — Greenfield  Bank 
v.  Stowell,  123  Mass.  196,  25  Am. 
Rep.  67;  Citizens'  National  Bank  v. 
Richmond,  121  Mass.  110;  Draper  v. 
Wood,  112  Mass.  315,  17  Am.  Rep. 
92  n;  Wade  v.  Withington.  83  Mass. 
(1  Allen)  561. 

Neiv  Hampshire. — Goodman  v. 
Eastman,  4  N.  H.  455. 

New     York. — Flanna^an     v.     Na- 


tional Union  Bank,  2  N.  Y.  Supp. 
488. 

Pennsylvania. — Leas  v.  Walls,  101 
Pa.  St.  57,  47  Am.  Rep.  699. 

South  Carolina. — Mills  v.  Starr,  2 
Bailey  (S.  C.)  359. 

Virginia. — Batchelder  v.  White,  80 
Va.  103.   See: 

England. — Hall  v.  Fuller,  5  Barn. 
&  C.  750.  But  see: 

Pennsylvania. — Worrall  v.  Green, 
39  Pa.  St.  388. 

Illinois. — An  alteration  of  the 
provision  as  to  the  amount  to  be 
paid  for  attorney's  fees  is  material. 
Burwell  v.  Orr,  84  111.  465. 

i^Hewins  v.  Cargill,  67  Me.  554; 
State  Savings  Bank  v.  Shaffer,  9 
Neb.  1,  1  N.  W.  980,  31  Am.  Rep. 
394;  Adams  v.  Faircloth  (Tex.  Civ. 
App.  1906),  97  S.  W.  507. 

''^  Drum  V.  Drum,  133  Mass.  566. 

^'"'  Horton  v.  Horton's  Estate,  71 
Iowa  448,  32  N.  W.  452;  Woolfolk 
v.  Bank,  10  Bush  (Ky.)  504;  Smith 
V.  Smith,  1  R.  I.  398,  53  Am.  Dec. 
652. 


187 


MEDIUM   OF    PAYMENT — IXTEREST    CLAUSE.  [§§    167,    168 


against  a  bona  fide  holder.^^^  As  against  the  payee,  however,  such  a 
defense  may  be  available,^''^  or  as  against  one  who  takes  the  paper  with 
notice  or  knowledge  of  such  facts. ^''^ 

§  167.  Alteration  in  medium  of  payment. — That  there  has  been  a 
material  alteration  in  the  medium  in  which  a  bill  or  note  is  payable 
will  be  a  good  defense  to  an  action  thereon.^°*  So  the  insertion  of  the 
words  "in  gold"  or  "in  gold  coin"  will  be  a  material  alteration  which 
will  defeat  recovery.^*^^  But  the  writing  across  the  face  of  a  draft 
the  words  "payable  in  United  States  gold  coin"  has  been  held  imma- 
terial and  no  defense  where  it  was  the  act  of  a  stranger.^^^ 

§  168.  Alteration  of  interest  clause. — A  party  may  show  in  an 
action  against  him  on  a  bill  or  note  that  the  interest  clause  therein  has 
been  altered  without  his  knowledge  or  consent,  and  this  defense  is 
available  even  where  the  action  is  brought  by  a  bona  fide  holder.^^^ 


181  Johnston  Harvester  Co.  v.  Mc- 
Lean, 57  Wis.  258,  15  N.  W.  177,  46 
Am>  Rep.  39;  Garrard  v.  Lewis,  L. 
R.  10  Q.  B.  Div.  30. 

"Without  the  figures  the  blank 
signature  was  an  authority  to  fill 
up  with  any  sum,  and  the  office  of 
the  figures  was  merely  to  limit  the 
authority  and  to  convey  notice  to 
parties  interested  of  the  fact  of 
limitation.  They  were  no  part  of 
the  note,  for  there  was  no  note  of 
"Which  they  could  form  any  part. 
The  paper  was  a  mere  power  of  at- 
torney, with  private  instructions 
given  in  such  form  as  to  be  con- 
spicuous and  not  easily  suppressed. 
It  is  the  business  of  the  principal 
to  give  notice  to  parties  dealing 
with  the  agent  of  the  fact  of  pri- 
vate instructions  or  limitations 
upon  his  authority.  He  must  do  so 
at  his  own  risk,  and  if  he  adopts 
means  to  that  end,  which  prove  in- 
effectual through  the  fault  of  his 
agent,  the  principal,  and  not  the 
stranger  who  has  dealt  with  the 
agent  in  good  faith,  must  suffer  the 


loss."  Schryver  v.  Hawkes,  22  Ohio 
St.  308,  315,  per  Welch,  C.  J. 

"=Hall  V.  Bank,  5  Dana  (Ky.)  258. 

i«*Woolfolk  V.  Bank,  10  Bush 
(Ky.)  504. 

"^Martendale  v.  Follett,  1  N.  H. 
95,  holding  that  recovery  on  a  note 
payable  in  merchantable  meat  stock 
may  be  defeated  by  showing  that 
the  word  "young"  was  inserted  after 
word  merchantable.  Darwin  v.  Rip- 
pey,  63  N.  C.  318  so  hold  where 
words  "in  specie"  were  added  after 
word  "dollars."  See  Church  v.  How- 
ard, 17  Hun  (N.  Y.)  5,  reversed  in 
79  N.  Y.  415,  but  not  on  this  point. 

"'Wills  v.  Wilson,  3  Oreg.  308; 
Bogarth  v.  Breedlove,  39  Tex.  561. 
Compare  Bridges  v.  Winters,  42 
Miss.  135,  2  Am.  Rep.  595,  97  Am. 
Dec.  443. 

"°  Langenberger  v.  Kroeger,  48 
Cal.  147. 

^"Illinois. — Canon  v.  Grigsby,  116 
111.  151,  5  N.  E.  362,  56  Am.  Rep. 
769;  Benedict  v.  Miner,  58  111.  19; 
Black  v.  Bowman,  15  111.  App.  166. 


168] 


ALTERATION   OF   PAPER. 


188 


This  rule  has  been  applied  where  words  have  been  struck  out,  as  in 
the  case  of  an  acknowledgment  that  interest  has  been  paid  to  matur- 
ity/^ ^  and  where  the  words  "after  maturity"  or  "after  due"  have  been 
struck  out  so  as  to  make  the  paper  bear  interest  from  its  date.^®*^  And 
likewise  recovery  may  be  defeated  by  the  addition  of  such  words  as 
"with  interest/'^^"  "after  maturity"  after  the  interest  clause/^^  by 
changing  the  words  "after  maturity"  to  "after  date,"^"^  or  by  changing 
the  instrument  from  a  simple  interest  obligation  to  a  semi-annual  or 
an  annual  obligation,^^^  And  thouglf*such  an  alteration  is  made  by 
one  for  the  purpose  of  having  it  conform  to  the  intention  of  the 
parties  it  will  nevertheless  be  a  defense  to  an  action  on  the  instru- 
ment/'^^ though  it  will  not  defeat  recovery  on  the  original  considera- 
tion.^^^  And  the  addition  of  words  to,  or  alteration  of,  the  interest 
clause,  where  the  act  of  a  stranger,  will  be  no  defense.^^^ 


Indiana. — Dietz  v.  Harder,  72  Ind. 
208. 

Iowa. — Woodworth  v.  Anderson, 
63  Iowa  503,  19  N.  W.  296;  Marsh 
V.  Griffin,  42  Iowa  403. 

Ohio. — Patterson  v.  McNeely,  16 
Ohio  St.  348. 

Pennsylvania.  —  Gettysburg  Na- 
tional Bank  v.  Chisolm,  169  Pa.  St. 
564,  32  Atl.  730. 

South  Carolina. — Edwards  v.  Sar- 
ter,  69  S.  C.  540,  48  S.  E.  537. 

rea;cs.— Otto  v.  Halff,  89  Tex.  384, 
34  S.  W.  910,  59  Am.  St.  R.  56. 

"'  Hert  v.  Oehler,  80  Ind.  83. 

«» Brooks  v.  Allen,  62  Ind.  401; 
Page  v.  Danaher,  43  Wis.  221. 

""Waterman  v.  Vose,  43  Me.  504; 
Mount  Morris  Bank  v.  Lawson,  10 
Misc.  R.  (N.  Y.)  359,  31  N.  Y.  Supp. 
18. 

"1  Franklin  Life  Ins.  Co.  v.  Court- 
ney, 60  Ind.  134;  Coburn  v.  Webb, 
56  Ind.  96,  26  Am.  Rep.  15. 

"-  Fraker  v.  Collum,  21  Kan.  555. 

"^  Iowa. — Marsh  v.  Griffin,  42  Iowa 
403. 

Kentucky. — Blakely  v.  Johnson, 
13  Bush   (Ky.)  197. 

Neiv  York. — Dewey  v.  Reed,  40 
Barb.   (N.  Y.)  16. 


Ohio. — Boalt  v.  Brown,  13  Ohio 
St.  364. 

South  Carolina.  —  Kennedy  v. 
Moore,  17  S.  C.  464.   But  see: 

Michigan. — Leonard  v.  Phillips, 
39  Mich.  182,  33  Am.  Rep.  370. 

^"*  "It  is  designed  distinctly  to  as- 
sert that  if  mistakes  do  arise  in  the 
preparation  of  written  instruments 
that  aside  from  consent  of  all  par- 
ties interested  in  the  needed  correc- 
tion, the  court's  of  the  country  alone 
can  furnish  adequate  redress;  and 
that  we  will  not  give  sanction  or 
countenance  to  the  attempts  of  an 
interested  party  to  effect  by  his  own. 
hand  the  desired  reformation,  as  an 
honest  blunder  of  this  sort,  if  up- 
held in  one  instance,  might  necessi- 
tate sanctioning  an  alteration  hav- 
ing that  appearance,  but  which, 
from  the  infirmity  of  human  testi- 
mony, might  be  grossly  otherwise." 
Evans  v.  Foreman,  60  Mo.  449,  452, 
per  Sherwood,  J. 

"=  Otto  V.  Halff,  89  Tex.  384,  34  S. 
W.  910,  59  Am.  St.  R.  56. 

'■"Brooks  V.  Allen,  62  Ind.  401; 
Lubbering  v.  Kohlbrecher,  22  Mo. 
596. 


189  RATE  OF  INTEREST INTEREST  CLAUSE,   [§§'  169,  170 

§  169.  Same  subject — Rate  of  interest. — An  alteration  as  to  the 
rate  of  interest  is  a  material  one  which  will  defeat  recovery  on  the 
instrument  in  an  action  by  a  bona  fide  holder.^^^  And  this  rule  ap- 
plies alike  to  cases  where  the  rate  has  been  increased,^ "*'  or  wliere  it  has 
been  reduced.^'^^  Such  an  alteration,  however,  is  not  available  to  a 
party  as  a  defense  where  made  with  his  consent  or  ratified  by  him.^^" 
And  the  insertion  in  a  note  of  a  rate  of  interest  which  does  not  in- 
crease or  reduce  the  rate  in  tlie  note  as  originally  drawn  has  been  held 
immaterial.^^^  Again  in  an  action  against  a  surety  it  has  been  decided 
that  a  memorandum  on  the  back  of  the  note  of  a  reduction  in  the  rate 
of  interest  after  a  certain  date  is  not  a  material  alteration  but  simply 
evidence  of  an  independent  collateral  agreement,  having  no  more  effect 
than  if  written  on  a  separate  paper. ^^-  Nor  will  an  offer  indorsed  by 
the  payee  on  the  back  of  a  note  to  accept  less  interest  than  is  stipu- 
lated on  the  face  of  the  instrument  constitute  a  material  alteration 
which  will  defeat  recovery.^*^  In  the  case  of  an  alteration  by  a  party 
to  the  paper  which  is  against  his  interest  and  to  the  advantage  of  the 
parties  liable,  as  where  the  rate  of  interest  has  been  reduced,  the  pre- 
sumption of  fraud  is  rebutted  in  the  absence  of  other  facts  and  re- 
covery on  the  original  consideration  is  not  precluded.^^* 

§  170.  Addition  of  an  interest  clause. — Where  there  is  no  interest 
clause  in  an  instrument  as  originally  drawn  it  may  be  shown  in  de- 
fense to  an  action  thereon  that  it  has  been  altered  by  the  addition  of 
such  a  clause.^ ^^     So  it  may  be  shoM'n  in  defense  to  an  action  on  such 

"'Shank  v.   Albert,   47   Ind.   461;  "==  Cambridge     Savings     Bank     v. 

Sanders  v.  Bagwell,  37  S.  C.  145,  15  Hyde,    131    Mass.    77,    41    Am.    Rep. 

S.  E.  714;   Halcrow  v.  Kelly,  28  Up.  193. 

Can.  Q.  B.  551.  "^  Reed  v.   Gulp,   63   Kan.   595,   66 

™  Bowman  v.  Mitchell,  79  Ind.  84;  Pac.  616. 

Harsh  v.  Klepper,  28  Ohio  St.  200.  ''*  Keene  v.  Weeks,  19  R.  I.  446,  3 

"°  Indiana.— Post    v,     Losey,     111  Atl.  446. 

Ind.  74,  12  N.  E.  121,  60  Am.  St.  R.  '=' A Za&ama.— Lamar  v.  Brown,  56 

677.    Kansas. — New  York   Life  Ins.  Ala.  157;  Glover  v.  Robbins,  49  Ala. 

Co.  V.   Martindale    (Kan.   1907),   88  219,    20    Am.    Rep.    272;    Brown    v. 

Pac.  559.  Minnesota. — Board  of  Com-  Jones,  3  Port.    (Ala.)   420. 

missioners    v.    Greenleaf,    80    Minn.  Delaicare. — ^Warpole  v.    Ellison,   4 

242,  83  N.  W.  157.  Missouri.— Moore  Houst.    (Del.)    322. 

v.  Hutchinson,  69  Mo.  429;  Whitmer  District    of    Columbia — Lewis    v. 

V.  Frye,  10  Mo.  348.    England.— '^nt-  Shepherd,  1  Mackey  (D.  C.)  46. 

ton  v.  Toomer,  7  Barn.  &  C.  416.  Indiana.— Hart  v.  Clouser,  30  Ind. 

""Jacobs  V.  Gilreath,  45  S.  C.  46,  210;   Kountz  v.  Hart,  17  Ind.  329. 

22  S.  E.  757.  Iowa. — Derr  v.  Keaough,  96   Iowa 

"'  First  National  Bank  v.  Carson,  397,  65  N.  W.  339. 
60  Mich.  .432,  27  N.  W.  589. 


170] 


ALTERATION   OF    PAPER. 


190 


an  instrument  that  figures  have  been  inserted  indicating  a  rate  of  in- 
terest to  which  the  parties  had  not  agreed.^**''  And  the  rule  is  held  to 
apply  where  a  rate  higher  than  that  which  is  allowed  by  law  is  in- 
serted.^" And  an  accommodation  indorser  will  be  discharged  by  the 
insertion  of  a  rate  of  interest  without  his  consent  which  is  the  maxi- 
mum rate  which  the  law  allows  in  cases  of  special  agreement.^^^  If, 
however,  the  rate  is  the  legal  rate  and  one  which  the  instrument  would 
draw  any  way  it  will  be  no  defense,  there  being  no  material  altera- 
tion,^®^ And  it  has  been  determined  that  an  innocent  holder  will  not 
be  precluded  from  a  recovery  in  such  a  case  where  the  clause  added 


Maine. — Waterman  v,  Vose,  43 
Me.  504. 

Maryland.— Owen  v.  Hall,  70  Md. 
97,  16  Atl.  376. 

Massachusetts. — Draper  v.  Wood, 
112  Mass.  315. 

Michigan. — Bradley  v.  Mann,  37 
Mich.  1;  Holmes  v.  Trumper,  22 
Mich.  427,  7  Am.  Rep.  61. 

Missouri. — Iron  Mountain  Bank  v. 
Miirdock,  62  Mo.  70;  Capital  Bank 
V.  Armstrong,  62  Mo.  59;  Evans  v. 
Foreman,  60  Mo.  449. 

Nebraska. — Hurlbut  v.  Hall,  39 
Neb.  889,  58  N.  W.  538. 

New  York. — Schwartz  v.  Oppold, 
74  N.  Y.  307;  McGrath  v.  Clark,  56 
N.  Y.  34,  15  Am.  Rep.  372;  Meyer 
V.  Huneke,  55  N.  Y.  412;  Meise  v. 
Doscher,  83  Hun  (N.  Y.)  580,  31  N. 
Y.  Supp.  1072. 

North  Carolina. — Long  v.  Mason, 
84  N.  C.  15. 

Ohio. — Jones  v.  Banks,  40  Ohio 
St.  139. 

Pennsylvania.  —  Gettysburg  Na- 
tional Bank  v.  Chisolm,  169  Pa.  St. 
564,  32  Atl.  730,  47  Am.  St.  R.  929; 
Boustead  v.  Cuyler,  116  Pa.  St.  551, 
8  Atl.  848;  Craighead  v.  McLoney, 
99  Pa.  St.  211. 

South  Carolina. — Sanders  v.  Bag- 
well, 32  S.  C.  238,  10  S.  E.  946,  7  L. 
R.  A.  743. 


Tennessee. — McVey  v.  Ely,  73 
Tenn.  (5  Lea.)  438. 

Texas. — Farmers'  &  Merchants' 
Nat.  Bank  v.  Novich,  89  Tex.  381,  34 
S.  W.  914. 

Wisconsin. — Kilkelly  v.  Martin,  34 
Wis.  525. 

Canada. — Halcrow  v.  Kelly,  28  Up. 
Can.  C.  P.  551.   But  see: 

loioa. — Rainbolt  v.  Eddy,  34  Iowa 
440,  11  Am.  Rep.  152. 

1^"  Little  Rock  Trust  Co.  v.  Martin, 
57  Ark.  277,  21  S.  W.  468;  Derr  v. 
Keaough,  96  Iowa  396,  65  N.  W.  339; 
Holmes  v.  Trumper,  22  Mich.  427,  7 
Am.  Rep.  661;  Hurlbut  v.  Hall,  39 
Neb.  889,  58  N.  W.  538;  Davis  v. 
Henry,  13  Neb.  497,  14  N.  W.  523. 

1**^  Hoopes  V.  Collingwood,  10  Colo. 
107,  13  Pac.  909,  3  Am.  St.  R.  565*; 
Lee  V.  Starbird,  55  Me.  491;  War- 
rington V.  Early,  2  El.  &  Bl.  763. 
But  see  Keene's  Adm'r  v.  Miller,  103 
Ky.  628,  45  S.  W.  1041,  holding  that 
the  insertion  by  the  maker  of  a  rate 
of  interest  which  is  illegal  and  un- 
enforceable does  not  vary  the  legal 
obligation  of  a  surety. 

!><><  Weyerhauser  v.  Dun,  100  N.  Y. 
150,  2  N.  E.  274. 

^^0  James  v.  Dalbey,  107  Iowa  463, 
78  N.  W.  51;  First  National  Bank  v. 
Carson,  60  Mich.  432,  27  N.  W.  589. 


191  ADDITION    OF    INTEREST    CLAUSE.  [§    170 

has  been  subsequently  erased,""  though  it  has  been  held  that  where 


"» Shepherd  v.  Whetstone,  51  Iowa 
457,  1  N.  W.  753,  33  Am.  Rep.  143. 
It  appeared  in  this  case  that  the 
words  "ten  per  cent,  interest  from 
date"  had  been  added  in  blank  space, 
after  word  "at,"  which  was  evident- 
ly for  the  insertion  of  the  name  of 
the  place  where  the  note  should  be 
payable,  and  was  subsequently 
erased  before  coming  into  the  hands 
of  the  plaintiff,  who  was  a  purchaser 
for  value.  That  there  had  been  an 
erasure  was  manifest  from  the  face 
of  the  instrument.  The  court  said: 
"This  alteration,  if  it  had  been 
allowed  to  remain,  was  certainly 
sufficient  to  invalidate  the  note  in 
the  hands  of  the  payee.  The  ques- 
tion presented  is  as  to  whether  the 
fact  that  the  words  constituting  the 
alteration  were  erased,  and  the  note 
transferred  to  the  plaintiff,  is  suffi- 
cient to  enable  him  to  recover  not- 
withstanding the  alteration.  Where 
the  note  is  restored,  as  in  this  case, 
to  its  original  form  it  expresses  the 
precise  contract  which  the  parties 
entered  into,  and  the  objection,  if 
any,  to  enforcing  such  contract  must 
rest  upon  grounds  of  public  policy, 
and  not  upon  the  necessity  of  pro- 
tecting the  maker  in  the  individual 
case.  *  *  *  Conceding  the  im- 
portance of  discouraging  the  altera- 
tion of  instruments  is  such  that  a 
court  is  justified  in  declaring  invalid 
an  instrument  which  has  been  al- 
tered, and  which  remains  in  the 
hands  of  the  person  who  made  the 
alteration,  notwithstanding  the  res- 
toration of  the  instrument,  it  is  evi- 
dent that  it  should  not  be  held  in- 
valid in  the  hands  of  an  innocent 
purchaser  for  value.  The  punish- 
ment of  an  innocent  person  for  an 
act  done  by  another  has  no  tenden- 


cy to  subserve  the  public  interest  or 
promote  the  public  security.  That 
the  plaintiff  is  a  purchaser  for  value  . 
is  not  denied.  Whether  he  pur- 
chased with  notice  that  the  instru- 
ment had  been  altered  admits  of 
some  question.  He  had  notice,  of 
course,  of  what  appears  upon  the 
face  of  the  instrument,  and  it  is  in- 
sisted by  the  defendant  that  the 
instrument  reveals  an  erasure,  in 
proof  of  which  the  instrument  it- 
self has  been  submitted  to  our  in- 
spection. There  does  manifestly  ap- 
pear an  erasure.  But  an  erasure  is 
not  necessarily  an  alteration.  It  is 
so  only  when  made  subsequent  to 
delivery.  *  *  *  This  blank  was 
filled  with  certain  words  which  were 
afterward  erased.  This  was  all  that 
the  plaintiff  could  see.  The  reason- 
able inference  was  that  the  note,  as 
first  drawn,  was  made  payable  at  a 
particular  place,  and  afterward,  by 
erasure,  was  made  payable  general- 
ly. We  see  nothing  in  this  to  indi- 
cate that  the  erasure  was  not  made 
before  delivery.  But  the  defendant 
insists  that,  conceding  that  such  was 
the  reasonable  inference  there  was 
enough  in  the  mere  fact  of  erasure 
to  put  the  plaintiff  upon  inquiry. 
But  this  doctrine,  in  our  opinion, 
has  no  application.  A  person  is  put 
upon  inquiry  only  when  he  has  rea- 
son to  apprehend  that  the  claim 
which  he  is  about  to  acquire  will 
conflict  with  another  person's  sub- 
stantial rights.  But  the  instrument 
in  this  case  cannot,  as  we  have  seen, 
be  declared  invalid  upon  the  ground 
that  the  defendant's  just  protection 
requires  it,  the  contract  expressed 
by  it  being  precisely  the  contract 
which  he  entered  into."  Per  Ad- 
ams, J. 


171] 


ALTERATIOX    OF    PAPER. 


192 


such  a  clause  is  added  by  the  payee  to  a  sealed  note  it  will  be  a  good 
defense  to  an  action  by  him,  though  he  subsequently  erases  the  same.^^^ 

§  171.  Alteration  of  conditions  or  stipulations. — Where  a  note  is 
materially  altered  by  the  erasure  of  some  condition  or  stipulation 
which  forms  a  part  of  the  instrument  or  by  the  addition  thereto  of  a 
condition  or  stipulation  such  fact  may  be  set  up  in  defense  to  an  action 
thereon.^'^^  And,  though  the  instrument  is  in  the  hands  of  a  bona  fide 
holder  he  will  be  subject  to  this  defense,^^^  So  where  a  condition  was 
annexed  to  a  note  and  was  an  essential  part  thereof,  the  fact  that  it  has 
been  detached  from  the  instrument  may  be  shown  in  defense.^^^  And 
a  stipulation  in  a  note  as  to  attorney's  fees  while  not  material  as  af- 
fecting the  negotiability  of  the  paper  is  material  so  far  as  the  contract 
liabilities  of  the  parties  are  concerned  and  in  case  the  indorsers  of  a 
note  strike  out  such  a  clause  the  maker  will  be  relieved  from  liability 
to  them,^^^  It  has  been  declared,  however,  that  a  duty  rests  upon  a 
maker  to  protect  himself  from  executing  paper  in  such  a  form  as  to 
easily  permit  of  fraudulent  practices,^"**  and  that  he  may  be  preclud- 
ed from  setting  up  this  defense  against  a  bona  fide  holder  where  it 
appears  that  he  so  negligently  executed  the  note  as  to  enable  one  to 
easily  remove  a  condition  afiixed  thereto  without  in  any  way  defacing 


"ipiyler  v.  Elliott,  19  S.  C.  257. 

"=  Tate  V.  Fletcher,  77  Ind.  102,  so 
holding  where  the  provision  as  to 
the  payment  of  attorney's  fees  was 
altered  by  striking  out  the  words  "if 
suit  be  instituted,"  thus  rendering 
a  conditional  promise  to  pay  such 
fees  into  an  absolute  one;  Hemming 
V.  Trenery,  9  Adol.  &  El.  926,  so  hold- 
ing where  a  condition  was  inserted. 
Compare  Jackson  v.  Boyles,  64  Iowa 
428,  20  N.  W.  746,  holding  that, 
where  a  note  is  conditioned  for  pay- 
ment on  the  performance  of  a  writ- 
ten agreement,  an  endorsement  after 
delivery  and  without  the  surety's 
consent  that  such  condition  had 
been  performed,  was  not  so  material 
as  to  discharge  the  surety. 

"'Schofield  v.  Ford,  56  Iowa  370, 
9  N.  W.  309;  Davis  v.  Henry,  13  Neb. 
497,  14  N.  W.  523;  Palmer  v.  Sar- 
gent, 5  Neb.  223,  25  Am.  Rep.  479; 


Gerrish  v.  Glines,  56  N.  H.  9;  Bene- 
dict V.  Cowden,  49  N.  Y.  396,  10  Am. 
Rep.  382.  But  see  Elliott  v.  Levinge, 
54  111.  213. 

"*  Indiana. — Cochran  v.  Nebeker, 
48  Ind.  459. 

Maine. — Johnson  v.  Heagan,  23 
Me.  329. 

Massachusetts. — ^Wheelock  v.  Free- 
man, 30  Mass.  (13  Pick.)  165,  23 
Am.  Dec.  674. 

Michigan. — Wait   v.    Pomeroy, 
Mich.  425,  4  Am.  Rep.  395. 

Nebraska. — Davis     v.     Henry, 
Neb.  497,  14  N.  W.  523. 

New  Hampshire. —  Benedict  v. 
Cowden,  49  N.  H.  396. 

Tennessee. — Stephens  v.  Davis,  85 
Tenn.  271,  2  S.  W.  382. 

'•'=  White  V.  Harris,  69  S.  C.  65,  48 
S.  E.  41. 

''<■  Zimmerman  v.  Rote,  75  Pa.  St. 
188. 


20 


13 


193  OF  maker's  signature.  [§■  173 

the  note.^^^  And  the  erasure  of  the  words  '^upon  condition"  wliere 
no  condition  is  specified  is  held  not  to  affect  the  liability  of  the  parties, 
these  words  by  themselves  being  declared  to  be  immaterial.^^'* 

§  172.  Erasure  or  alteration  of  maker's  signature. — In  an  action 
against  one  of  the  parties  to  a  bill  or  note  he  may  show,  in  defense 
thereto,  that  there  has  been  a  material  alteration  of  the  paper  by  the 
erasure  or  cutting  off  of  one  of  the  signatures  of  one  or  more  of  the 
makers.^"^  And  the  rule  is  held  to  be  applicable,  though  the  note  is  a 
joint  and  several  one.^"^  So  where  the  signature  of  a  maker  was  cut  off 
and  the  name  of  another  added  as  co-maker  in  his  place  it  was  held  to 
avoid  the  note.'"*'  And  where  the  signature  of  a  signer  of  a  note  was 
erased  before  delivery  of  the  same,  without  the  knowledge  of  the 
sureties,  it  was  held  that  they  were  released  from  any  liability  thereon, 
though  the  one  to  whom  it  was  delivered  procured  such  person  to  again 
sign  the  same  as  such  subsequent  signing  could  not  restore  the  note  to 
its  former  position. -°^  This  rule  has  also  been  held  to  apply  in  the  case 
of  an  instrument  of  guaranty.^''^  Where,  however,  the  signature  of  an 
infant  co-maker  is  erased  after  his  contract  has  been  repudiated,  it  is 
decided  that  such  erasure  is  no  defense.^"^  And  one  whose  name  as 
co-maker  is  erased  upon  part  payment  of  the  amount  called  for  by  the 
obligation  cannot  defeat  an  action  for  the  unpaid  balance  by  setting 
up  such  erasure.-"*  Again,  though  a  signature  has  not  been  erased 
yet  recovery  may  be  defeated  by  showing  that  such  signature  has  been 
materially  altered.-"^    So  there  has  been  held  to  be  a  material  altera- 

"^Noll  V.  Smith,  64  Ind.  511,  31  &  E.  675,  holding  that  a  maker  was 
Am.  Rep.  131;  Gornell  v.  Nebeker,  discharged  in  such  a  case  where  the 
58  Ind.  425.  See  Scofield  v.  Ford,  56  payee  received  from  a  co-maker  his 
Iowa  370,  9  N.  W.  309,  holding  that  proportionate  share  of  the  note,  re- 
in such  a  case  the  burden  of  proof  leased  him  from  liability,  and  cut 
rests  on  the  one  claiming  under  the  his  name  off  the  note, 
instrument  to  show  negligence.  ="' Davis  v.  Coleman,  29  N.  C.  424; 

""*  Palmer  v.  Sargent,  5  Neb.  223.  Smith  v.  Weld,  2  Pa.  St.  54. 

"'Gillettv.  Sweat,  6  111.  475;  Mor-  ="  Connor  v.  Thornton    (Tex.),  51 

rison  v.  Garth,  78   Mo.  434;    People  S.  W.  354. 

v.  Call,  1  Denio    (N.  Y.)    120;    Bar-  ="=  Hindostan  v.  Smith,  36  Law  J. 

rington  v.  Bank  of  Washington,  14  C.  P.  241. 

Serg.  &  R.  (Pa.)  405;  Piercy's  Heir  ="=  Young  v.  Currier,  63  N.  H.  419. 

V.  Piercy,  5   W.   Va.  199.    Compare  "**  Eldred  v.  Peterson,  80  Iowa  264, 

Dunn  v.  Clements.  52  N.  C.  58.  45  N.  W.  755,  20  Am.  St.  R.  416. 

^~  Mason    v.    Bradley,    11    Mees   &  "'^  Sheridan   v.    Carpenter,   61   Me. 

W.  590;  Nicholson  v.  Revill,  4  Adol.  83. 
Joyce  Defenses — 13. 


■§§  173,  174] 


ALTERATION   OF   PAPER. 


194 


tion  which  may  be  set  up  as  a  defense  where  to  the  maker's  signa- 
ture there  have  been  added  the  words  "and  Co./'^°'^  "President  A.  B. 
Association,"^"^  and  the  maker's  address,  by  which  the  note  is  rendered 
negotiable.-''^ 

§  173.  Same  subject — ^When  alteration  not  a  defense. — Though 
words  used  in  connection  with  signatures  of  parties  to  commercial 
paper  may  be  erased  or  words  of  such  a  character  may  be  added,  yet 
if  by  such  act  the  rights  or  liabilities  of  the  parties  is  in  no  way  af- 
fected or  where  such  words  are  added  they  are  those  which  the  law 
would  necessarily  imply,  the  alteration  will  be  regarded  as  immaterial 
and  will  be  no  defense  to  an  action  on  the  instrument.^"®  And  a  re- 
touching with  ink  of  a  signature  is  not  a  material  alteration. ^^" 

§  174.  Rule  where  signatures  are  added. — It  is  a  general  rule  that 
the  addition  of  the  name  of  another  person  to  a  note  as  maker,  subse- 
quent to  its  execution,  is  a  material  alteration  of  the  instrument  which 
may  be  shown  in  defense  to  an  action  against  the  original  parties  to  the 
instrument  who  have  not  consented  thereto.-^^     And  this  is  declared 


^'^  Haskell  v.  Champion,  30  Mo.  136. 

207  First  National  Bank  v.  Fricke, 
75  Mo.  178,  42  Am.  Rep.  197. 

-'^  Commercial  &  Farmers'  Bank  v. 
Patterson,  2  Cranch  C.  C.  346,  Fed. 
Cas.  No.  3056. 

-°^  In  the  following  cases  are  noted 
the  particular  alterations  which 
were  held  immaterial. 

Colorado. — King  v.  Rea,  13  Colo. 
69,  21  Pac.  1084  (making  of  cross 
after  signature). 

Illinois. — Burlingame  v.  Brewster, 
79  111.  515,  22  Am.  Rep.  177  (cutting 
off  the  words  "as  Trustee  of  the 
First  Universalist  Soc"). 

Indiana. — Hayes  v.  Matthews,  63 
Ind.  412,  30  Am.  Rep.  226  (erasure 
of  words  "Trustees  of  the  First  Uni- 
versalist Church"). 

Pennsylvania. — Barclay  v.  Purs- 
ley,  110  Pa.  St.  13,  20  Atl.  411 
(adding  "Fr."  to  signature); 
Strauthers  v.  Kendall,  41  Pa.  St. 
214,  80  Am.  Dec.  610  (addition  of 
endorser's  address). 


Rliode  Island. — Manufacturers'  & 
Merchants'  Bank  v.  Follett,  11  R.  I. 
92,  23  Am.  Rep.  418  (addition  of 
word  "agent"). 

Tennessee. — Blair  v.  Bank,  30 
Tenn.  (11  Humph.)  84  (addition  of 
individual  signatures  under  joint 
signature). 

England. — Parston  v.  Petit,  1 
Camp.  82,  note  (writing  address  be- 
low signature). 

='°  United  States  Nat.  Bank  v.  Na- 
tional Park  Bank,  59  Hun  (N.  Y.) 
495,  13  N.  Y.  Supp.  411. 

-"  Alabama. — Brown  v.  Johnson, 
127  Ala.  292,  28  So.  579. 

Indiana. — Nicholson  v.  Combs,  90 
Ind.  515,  46  Am.  Rep.  229;  Bower's 
Adm'r  v.  Briggs,  20  Ind.  139; 
Henry  v.  Coats,  17  Ind.  161. 

Iowa. — Hamilton  v.  Hooper,  46 
Iowa  515,  26  Am.  Rep.  161. 

Kentucky. — Rumley  Co.  v.  Wil- 
cher,  23  Ky.  Law  R.  1745,  66  S.  W. 
7;  Singleton  v.  McQuerry,  85  Ky. 
41,  2  S.  W.  652;  Bank  of  Limestone 


I 


195  SIGNATURES    ADDED WHEN    NOT   DEFENSE.  [§    175 

to  be  the  rule  regardless  of  the  question  of  benefit  or  injury  to  the 
maker,^^^  And  it  has  been  held  applicable  in  the  case  of  a  joint  note,-^" 
and  of  a  joint  and  several  one.^^* 

§  175.  Same  subject — When  not  a  defense. — Though  the  fact  that 
the  affixing  by  a  party  of  his  signature  to  a  note  as  maker,  subsequent 
to  its  execution,  will  release  other  original  makers  not  consenting 
thereto,  yet  recovery  may  be  had  against  the  one  so  signing  it,  for  as 
to  him  it  will  be  regarded  as  a  new  instrument."^ ^  And  where  a  note 
in  blank  is  signed  by  one  and  entrusted  by  him  to  another  to  be  nego- 
tiated for  the  latter's  accommodation  and  he  adds  the  name  of  another 
as  maker  it  has  been  decided  that  the  accommodation  maker  will  not 
be  discharged,  as  by  so  signing  it  he  gives  authority  to  fill  the  blanks.-^'' 
Again  it  has  been  decided  that  the  adding  of  the  name  of  a  third  party 
to  a  bill  as  acceptor  after  it  was  accepted  by  the  parties  to  whom  it  was 
addressed  and  was  discounted  with  the  indorser's  consent  will  not  avoid 
the  paper.^^'^  And  where  the  object  of  a  person's  affixing  his  signa- 
ture is  to  guaranty  payment  or  to  furnish  additional  security  other- 
wise than  by  becoming  or  assuming  to  become  a  joint  maker,  if  in 
doing  so  by  mistake  or  inadvertence  he  signs  the  note  in  such  a  way  as 
to  indicate  prima  facie  that  he  was  an  original  promisor,  it  has  been  de- 


V.  Penick,  5  T.  B.  Mon.    (Ky.)    25,  ^"  Shipp's     Adm'r     v.      Suggett's 

33.  Adm'r,  9  B.  Mon.   (Ky.)   5;  Gardner 

Maine. — Chadwick  v.  Eastman,  53  v.  Walsh,  5  El.  &  Bl.  83. 

Me.  12.  ='^  Hochmark  v.   Richler,  16   Colo. 

New  Yorfc.— McVean  v.    Scott,  46  263,  26  Pac.  818;    Browning  v.  Gos- 

Barb.   (N.  Y.)   379;   Heath  v.  Blake,  nell,    91    Iowa   448,   59    N.   W.    340; 

28  S.  C.  406,  5  S.  E.  842.  Hamilton  v.  Hooper,  46  Iowa  515,  26 

Texas. — Harper      v.      Stroud,      41  Am.  Rep.  161;  Dickerman  v.  Miner, 

Tex.  367;   Ford  v.  Bank   (Tex.  Civ.  43  Iowa  508.    Compare  Howe  v.  Tag- 

App.),  34  S.  W.  684.   But  see:  gart,  133  Mass.  284. 

Alabama. — Rudolph  v.  Brewer,  96  "°  Geddes  v.  Blackmore,   132   Ind. 

Ala.  189,  11  So.  314.  551,   32   N.   E.    567;    Snyder  v.   Van 

Michigan.— \]n\on  Banking  Co.  v.  Doren.  46  Wis.  602,  1  N.  W.  285,  23 

Martin's  Estate,   113    Mich.   521,   71  Am.    Rep.    739.      See    Whitmore    v. 

N.  W.  867;  Miller  V.  Finley,  26  Mich.  Nickerson,    125    Mass.    496,    28    Am. 

249,  12  Am.  306.  Dec.    257;    Babcock    v.    Murray,    58 

"•^  Dickerman    v.    Miner,    43    Iowa  Minn.  386,  59  N.  W.  1038. 

508.  ="  Smith    v.    Lockridge,    8    Bush 

"'Wallace  v.  Jewell,  26  Ohio  St.  (Ky.)  423. 
163,  8  Am.  Rep.  48. 


176] 


ALTERATION   OF   PAPER. 


196 


cided  that  a  maker  will  not  be  released.-^^  Nor  will  the  fact  that  the 
payee  of  a  note  by  inadvertence  places  his  signature  under  that  of 
the  maker  release  the  latter  from  liability.^^^  And  it  has  been  deter- 
mined that  if  no  liability  is  imposed  on  the  signer  by  the  added  signa- 
ture, as  in  the  case  of  a  married  woman,  the  liability  of  the  original 
parties  to  the  instrument  will  not  be  affected.--"  Again  it  has  been 
held  that,  where  a  note  does  not  conform  to  the  intention  of  the  parties 
by  reason  of  the  accidental  omission  of  the  name  of  a  corporation 
maker  and  it  was  intended  to  be  a  corporation  note  by  the  officers 
thereof  who  signed  it,  the  note  is  not  avoided  by  inserting  the  name  of 
the  corporation  so  as  to  correct  the  mistake. ^^^ 

§  176.  Addition  or  destruction  of  seal. — Where  a  seal  affixed  to  a 
note  at  the  time  of  its  execution  is  subsequently  destroyed,  a  party 
may,  in  the  absence  of  any  controlling  statute,  avail  himself  of  such 
fact  as  a  defense. ^^^  And  a  similar  rule  prevails  where  a  seal  is  added, 
there  being  none  affixed  to  the  instrument  originally.  By  such  an  act 
the  character  of  the  instrument  is  changed  from  a  simple  note  of  hand 
to  that  of  a  specialty  which  in  point  of  law  is  of  a  much  higher  grade 
than  a  simple  promissory  note,--^  against  which  no  plea  of  want  of 
consideration  can  be  made.^^*     But  where  private  seals  have  been 


2i»  Wallace  v.  Jewell,  21  Ohio  St. 
163,  8  Am.  Rep.  48.  See,  also,  Bow- 
ser V.  Rendell,  31  Ind.  128;  Cason  v. 
Wallace,  4  Bush  (Ky.)  388;  Denick 
T.  Hubbard,  27  Hun  (N.  Y.)  347. 

=^^Muir  V.  Demaree,  12  Wend.  (N. 
Y.)  468.  See  Brownell  v.  Winnie, 
29  N.  Y.  400,  86  Am.  Dec.  314. 

The  signature  of  the  payee  in 
such  a  case  is  to  be  construed  as  a 
mere  indorsement.  Ex  p.  Yates,  2 
DeGex  &  J.  191. 

""  If  all  the  original  parties  to  the 
note  had  consented  to  the  addition 
of  her  name,  it  would  not  in  the 
slightest  degree  have  altered  their 
relations  to  the  note  or  to  each 
other.  As  the  consent  of  the  parties 
could  add  nothing  to  the  validity  of 
her  signature,  neither  can  the  ab- 
sence of  consent  constitute  her  sig- 
nature   an   alteration   of   the   note. 


When  written,  it  was  in  the  eye  of 
the  law,  and  still  is,  nothing,  and  the 
defendant  remains  liable  just  as  he 
was  before  it  was  appended.  It  is 
unnecessary  to  cite  authority  to  a 
case  like  this.  The  general  rule  is 
well  understood;  we  have  found  no 
case  in  all  respects  like  the  present, 
and  no  light  is  to  be  drawn  from 
analogous  cases."  Williams  v.  Jen- 
son,  75  Mo.  681,  684.    Per  Hough,  J. 

'-^  Produce  Exchange  Trust  Co.  v. 
Bieberbach,  176  Mass.  577,  58  N.  E. 
162. 

"-Morrison  v.  Welty,  18  Md.  169; 
Porter  v.  Doby,  2  Rich.  Eq.  (S.  C.) 
49;  Piercy's  Heirs  v.  Piercy,  5  W. 
Va.  199. 

=^Biery  v.  Haines,  5  Whart.  (Pa.) 
563. 

~*  Vaughan  v.  Fowler,  14  S.  C.  355. 


197  NAMES   OF   WITNESSES — STAMPING   OF  NOTE.        [§§    177-179 

abolished  by  a  statute  providing  that  the  addition  of  a  private  seal  to 
an  instrument  will  not  affect  its  character  in  any  respect,  it  will  be  no 
defenise.^^^  And  where  a  seal  was  affixed  to  an  instrument  by  an  agent 
of  the  maker,  who  had  no  authority  to  so  act,  it  was  held  that  the  note 
was  not  avoided  thereby.^-^ 

§  177.    Alteration,  erasure,  or  addition  of  names  of  witnesses. — To 

erase  or  cut  off  the  name  of  an  attesting  witness  to  a  note  has  been 
held  to  be  a  material  alteration  which  will  be  a  good  defense  to  an 
action  on  the  instrument,--^  as  has  also  the  subsequent  addition  of 
names  of  persons  as  witnesses.^^^  Where,  however,  a  name  of  a  wit- 
ness is,  by  mistake,  omitte3  it  is  held  that  the  right  to  recover  will  not 
be  affected  by  the  subsequent  addition  of  such  name  in  good  faith.--^ 
And  where  by  law  it  is  immaterial  whether  an  instrument  has  or  has 
not  an  attesting  witness,  an  attestation  has  no  legal  effect  and  the  ad- 
dition of  a  name  as  witness  will  be  an  immaterial  alteration.^^" 

§  178.  Stamping  of  note. — Under  the  laws  in  force  at  various  times 
the  affixing  of  a  stamp  to  commercial  paper  has  been  required  and  in 
such  a  case  it  has  been  decided  that  the  fact  that  a  bill  or  note  is 
stamped  subsequent  to  its  execution  will  be  no  defense  to  an  action  by 
a  bona  fide  holder.^^^ " 

§  179.  Addition  or  erasure  of  memoranda. — The  addition  of  a 
mere  memorandum  to  a  bill  or  note  which  in  no  way  affects  the  rights 
or  liabilities  of  the  parties,  which  was  not  intended  to  be  considered 
as  a  part  of  the  contract,  and  which  does  not  change  the  terms  or 

-^Jordan  v.  Jordan,  78  Tenn.   (10  ton   v.   Appleton,   29   Me.   298;    Rol- 

Lea)  124,  43  Am.  Rep.  294.  lins  v.  Bartlett,  20  Me.  319;  Eddy  v. 

=^'' Fullerton  v.  Sturges,  4  Ohio  St.  Bond,  19  Me.  461,  36  Am.  Rep.  767. 

530.  "^  Smith     v.     Dunham,     8     Pick. 

-'Sharpe  v.  Bagwell,  16  N.  C.  115.  (Mass.)  246. 

=*Brackett  v.    Mountfort,    11   Me.  ==">  Fuller  v.  Green,  64  Wis.  159,  24 

115;  Homer  v.  Wallis,  11  Mass.  309.  N.  W.  907,  54  Am.  Rep.  600. 

Compare  Church  v.  Fowle,  142  Mass.  -'  Anderson    v.    Starkweather,    28 

52,  6  N.  E.  764;  Marshall  v.  Gouger,  Iowa  409;  Crews  v.  Bank.  31  Great. 

lOSerg.  &R.  (Pa.)  164.  (Va.)    348.    See,   also,   Blackwell   v. 

In   several    cases   in   Maine,   how-  Denie,   23   Iowa   63,   in   which   it   is 

ever,  it  has  been  decided  that  if  the  declared  that  this  is  also  the  Eng- 

act  of  adding  such  names  was  not  lish  rule,  and  citing  Wright  v.  Riley, 

fraudulent,  the  right  to  recover  will  Peake  173;   Green  v.  Davis,  4  B.  & 

not  be  affected.    Milberry  v.  Storer,  C.  235. 
75  Me.  69,  46  Am.  Rep.  361;  Thorn- 


180] 


ALTERATION   OF    PAPER. 


198 


effect  thereof  is  not  available  as  a  defense  to  an  action  thereon. -^^ 
Where,  however,  such  memorandum  tends  to  affect  the  operation 
of  the  instrument,  or  to  change  its  terms  and  conditions  or  to  af- 
fect the  liability  of  the  parties  it  will  constitute  such  an  alteration 
as  a  party  not  consenting  thereto  may  set  up  in  defense  to  an  ac- 
tion against  him.^^^  And  where  a  memorandum  which  is  a  material 
part  of  the  contract  is  erased  or  cut  off  such  fact  is  available  as  a  de- 
fense.-^* But  if  the  memorandum  is  one  which  does  not  in  any  way 
form  a  part  of  the  contract,  an  erasure  thereof  will  be  immaterial.^^^ 

§  180.  Alteration  of  indorsement. — A  party  has  no  right  to  change 
the  contract  of  indorsement,  and  it  will  be  a  good  defense  to  an  action 
against  an  indorser  to  show  that  the  indorsement  has  been  altered  in 
a  material  part.-^*^  So  recovery  may  be  defeated  by  showing  that  a 
guaranty  has  been  written  over  the  indorsement.-^^  Thus,  writing 
over  the  names  of  the  indorsers  in  blank  of  a  note  the  words,  "For 
value  received  we  hereby  guarantee  the  payment  of  the  within  note 
and  waive  presentment  for  payment,  demand,  and  notice  of  protest," 
changes  the  liability  assumed  by  the  parties  as  indorsers  and  consti- 
tutes a  material  alteration  which  they  may  set  up  in  defense  to  an 


'^-Alabama. — Maness  v.  Henry,  96 
Ala.  454,  11  So.  410. 

Indiana. — Bucklen  v.  Huff,  53  Ind. 
474. 

Maine. — Howe  v.  Thompson,  11 
Me.  152. 

Massachusetts. — B  atchellor  v. 
Priest,  12  Pick.  (Mass.)  399. 

Minnesota. — Herrick  v.  Baldwin, 
17  Minn.  209,  10  Am.  Rep.  161. 

Missouri.  —  American  National 
Bank  v.  Banks,  42  Mo.  450,  97  Am. 
Dec.  349. 

West  Virginia. — Merchants'  and 
Mechanics'  Bank  v.  Evans,  9  W.  Va. 
373. 

Wisconsin. — Krouskop  v.  Shoutz, 
51  Wis.  204,  8  N.  W.  241,  37  Am. 
Rep.  817.   See: 

Mississippi. — Bay  v.  Shrader,  50 
Miss.  326. 

^'Johnston  v.  May,  76  Ind.  293; 
Warrei.  ^r,  Fant,  79  Ky.   1;    Wood- 


worth  V.  Bank,  19  Johns.  (N.  Y.) 
391;  Sanders  v.  BagTvell,  37  S.  C. 
145,  15  S.  E.  714,  32  S.  C.  238,  10 
S.  E.  946,  7  L.  R.  A.  743;  Warring- 
ton V.  Early,  23  Law  J.  Q.  B.  47. 

^*  Benjamin  v.  McConnel,  9  111. 
536,  46  Am.  Dec.  474. 

==^  Littlefield  v.  Coombs,  71  Me. 
110;  Theopold  Mercantile  Co.  v. 
Deike,  76  Minn.  121,  78  N.  W.  977; 
Lau  V.  Blomberg.  3  Neb.  (unoflBc.) 
124.  91  N.  W.  206;  Hubbard  v. 
Williamson,  27  N.  C.  397.  Examine 
Hall  V.  Hale,  8  Conn.  336;  Gushing 
v.  Field,  70  Me.  50,  35  Am.  Rep.  293. 

^"Kennon  v.  McRea,  7  Port.  (Ala.) 
175;  Andrews  v.  Simms,  33  Ark.  771; 
Buck  V.  Appleton,  14  Me.  284;  Farm- 
er V.  Rand,  14  Me.  225;  Clauson  v. 
Gustin,  5  N.  J.  L.  821. 

^'  Belden  v.  Hann,  61  Iowa  42,  15 
N.  W.  591. 


199  OF  INDORSEMENT.  [§    180 

action  against  them.^^^  And  a  holder  of  a  note  severally  indorsed  in 
blank  has  no  right  to  alter  the  indorsement  so  as  to  make  the  assign- 
ment to  him  the  joint  act  of  all  the  indorsers.^^^  So  a  writing  which 
seeks  to  render  a  guarantor  a  surety  is  material  and  will  avoid  the 
instrument.^*"  And  in  an  action  against  an  indorser  he  may  show 
that  an  indorsement  prior  to  his  own  has  been  erased.^*^  Where,  how- 
ever, it  appears  that  the  erasure  of  an  indorsement  was  accidental 
it  is  held  not  to  relieve  the  indorser.^*^  And  an  indorsement  for  col- 
lection is  not  a  material  part  of  an  instrument,  the  striking  out  of 
which  will  defeat  recovery.^*^  So  the  right  to  recover  will  not  be  af- 
fected by  the  erasure  of  an  indorsement  made  by  an  unauthorized  third 
person.^**  And  the  addition  of  a  word  of  description  to  the  name  of 
an  indorsee  is  not  a  material  alteration  of  a  note  or  draft,  when  it  is 
intended  by  the  parties  that  the  paper  shall  go  to  the  indorsee  in  the 
exact  capacity  or  relationship  indicated  by  the  descriptive  word  so 
added.^*^  Again  the  changing  of  an  indorsement  "pay  the  bearer" 
to  a  formal  assignment  to  the  indorsee  has  been  held  immaterial,  as 
they  are  both  in  effect  the  same.^***  And  where  the  striking  out  of  the 
name  of  an  indorsee  is  the  act  of  a  stranger  it  will  be  no  defense  to  an 
action  on  the  paper.^*^  And  where,  below  the  indorsement  of  a  party's 
name  upon  a  note,  the  words  "Glens  Falls,  N.  Y.,"  were  written  in 
pencil,  by  the  manager  of  the  bank  at  which  it  was  payable,  as  a  mere 
memorandum,  pursuant  to  the  custom  of  the  bank  to  do  so  where  the 
address  of  the  indorser  was  not  known,  and  it  was  done  for  the  purpose 
of  direction  to  the  clerks  in  the  bank  in  keeping  their  records,  it  was 
held  to  be  an  addition  which  in  no  way  changed  the  obligation  of  the  in- 
dorser and  neither  changed  in  the  slightest  nor  assumed  to  change  his 
contract,  was  immaterial  and  did  not  discharge  him.^'*®   ISTor  will  the 

=^ Harnett    v.     Holdredge     (Neb.,  such    circumstances    added    to    the 

1903),  97  N.  W.  443.  name  of  the  one  to  whom  a  draft 

=''>  Morrison  v.   Smith,  13  Mo.  234,  was    indorsed    by    the    payee.      See 

53  Am.  Dec.  145.  also,  Birmingham  Trust  &  Sav.  Co. 

^'^  Robinson  v.  Reed,  46  Iowa  219.  v.  Whitney,  183  N.  Y.  522,  76  N.  E. 

="  Curry  v.   Bank,   8   Port.    (Ala.)  1089,  aff'g  95  App.   Div.   280,  88  N. 

360.  Y.   Supp.   578;    Bank   of   Genesee  v. 

="  Brett  V.  Marston,  45  Me.  401.  Patchin  Bank,  13  N.  Y.  309. 

'"Cessel  V.   Dows,  1   Blatchf.    (U.  =^'' Foote  v.  Bragg,  5  Blackf.   (In«l. 

S.)  335,  Fed.  Cas.  No.  2502.  363. 

="  Waldorf    V.    Simpson,    15    App.  =^' Piersol  v.   Grimes,   30  Ind.  129, 

Div.  (N.  Y.)  297,  44  N.  Y.  Supp.  921.  95  Am.  Dec.  673. 

="  Birmingham   Trust   &   Sav.   Co.  "^^  Merchants'   Bank  of  Canada  v. 

V.   Whitney,    95   App.   Div.    (N.   Y.)  Brown,  86  App.  Div.  (N.  Y.)  599,  83 

280,  88  N.  Y.  Supp.  578,  so  holding  N.  Y.  Supp.  1037. 
where  the  word  cashier  was  under 


§§  181,  182]  ALTERATIOX  OF  PAPER.  200 

release  of  an  indorser  on  the  groimd  of  a  material  alteration  operate 
as  a  discharge  of  prior  indorsers.^*^ 

§  181.  Erasure  or  alteration  of  signature  of  surety. — It  will  be  a 
good  defense  to  an  action  against  a  surety  that  the  name  of  a  co-surety 
has  been  erased  without  the  former's  consent.^^"  The  principal  debtor, 
however,  is  held  not  released  by  the  alteration  or  erasure  of  the  signa- 
ture of  a  surety. ^^^  So  in  a  recent  case  in  Oregon  it  is  held  that  the 
erasure  of  the  word  "surety"  after  the  name  of  one  of  the  makers  of  a 
note  is  not  a  material  alteration  and  does  not  affect  the  liability  of  the 
parties.^^^*  And  where  the  name  of  a  surety  in  the  body  of  a  note, 
signed  by  the  defendant  in  blank,  was  erased  and  the  name  of  another 
inserted  to  conform  to  the  signatures  it  was  held  not  to  be  a  material 
alteration,  as  the  instrument  would  have  been  as  valid  and  binding  if 
no  name  had  been  inserted.^^^  And  where  the  signature  of  a  surety  is 
misplaced  by  mistake  and  an  alteration  is  made  for  the  purpose  of  cor- 
recting the  error  it  will  not  constitute  a  defense.^^^  So  where  a  person 
signed  a  note  as  guarantor  below  the  signatures  of  the  makers  and 
subsequently  had  his  name  erased  as  a  maker  and  inserted  on  the  back 
with  a  guaranty  of  payment  it  was  held  not  a  material  alteration.^^* 

§  182.  Addition  of  name  as  surety  or  guarantor. — The  fact  that 
the  name  of  another  is  affixed  to  an  instrument  as  surety  subsequent  to 
the  signing  of  the  same  by  the  maker,  a  principal  debtor,  will  not,  it  is 

249  "Every  indorsement  of  a  paper  25  Oreg.  592,  37  Pac.  74;   Williams 

is  a  new  and   substantive   contract  v.  Island  City  M.  Co.,  25  Oreg.  573, 

and  the  liability  of  each  indorser  as  591,  37  Pac.  49.)     It  would  only  show 

it   respects  the   holder   is   separate  that  as  between  themselves,  one  was 

and  distinct  from  the  others."    Per  principal  and  the  other  surety,  and 

Collier,  C.  J.,  in  Kennon  v.  McRea,  would  perhaps  charge  the  payee  or 

7  Port.   (Ala.)   175.  holder  with  knowledge  of  that  fact, 

^°  McCramer  v.  Thompson,  21  Iowa  but  it  would  not  affect  their  liability 

244;    Hall's  Adm'x  v.  McHenry,  19  to  the  payee."    Per  Mr.  Justice  Bean. 

Iowa  521,  87  Am.  Dec.  451.  Compare   Lamb   v.    Paine,    46    Iowa 

^'Broughton  v.  West,  8  Ga.  248.  550,  26  Am.  Rep.  163;  Huntington  v. 

251*  Galloway   v.    Bartholomew,    44  Finch,  3  Ohio  St.  445. 

Oreg.  75,  74  Pac.  467,  in  which  it  is  ="  Jones  v.  Insurance  Co.,  1  Mete. 

said:    "The  fact,  if  it  is  a  fact,  that  (Ky.)  58. 

the  word  'surety'  was  written  after  ="  Lynch  v.  Hicks,  80  Ga,   200,  4 

the  name  of  one  of  the  signers  did  S.  E.  255. 

not  render  them  any  less  joint  and  "'  Ryan  v.  Bank,  148  111.   349,  35 

Eeveral  obligors.     (Bowen  v.  Clarke,  N.  E.  1120. 


I 


201  ADDITION  OF  XAME  OF  SURETY  OR  GUARANTOR.  [§    183 

held,  release  the  latter  from  liability/^^  as  it  does  not  increase  or  di- 
minish his  liability,  he  being  liable  for  the  whole  debt  in  any  event.^^^ 
So  where  the  name  of  a  guarantor  is  added  it  has  been  declared  that  it 
"is  not  a  material  alteration  and  does  not  release  those  primarily 
bound.  It  does  not  in  any  way  change  or  affect  their  rights.  It  is 
an  independent  contract  made  with  a  third  party,  to  which  the  con- 
sent of  the  obligors  is  unnecessary.  Their  liability  is  neither  in- 
creased nor  diminished  by  the  addition  of  the  name  of  the  guarantor, 
and  he  has  no  right  of  contribution  or  exoneration.  The  rights  of  the 
obligors  are  no  more  affected  by  the  guaranty  placed  on  the  note  than 
they  would  be  by  a  guaranty  placed  on  a  separate  instrument."^" 
And  the  addition  of  a  name  as  surety,  subsequent  to  the  signing  by 
the  original  surety,  has  been  construed  as  an  immaterial  alteration, 
so  far  as  the  liability  of  the  latter  is  affected.- ^'^  So  it  has  been  said 
that  such  a  signing  for  a  new  consideration  constitutes  a  now  and  in- 
dependent contract  to  which  the  consent  of  the  original  promisor  is 
not  required. ^°® 

*=*  Montgomery  Railroad  Co.  v.  beck,  97  Fed.  896,  3  C.  C.  A.  131, 
Hurst,  9  Ala.  518;  Stone  v.  White,  8  per  Caldwell,  C.  J. 
Gray  (Mass.)  589;  Miller  v.  Finley,  =««  ^  rand  all  v.  Bank,  61  Ind.  349; 
26  Mich.  249,  12  Am.  Rep.  306;  Royse  Graham  v.  Rush,  73  Iowa  451,  35  N. 
V.  Bank,  50  Neb.  16,  69  N.  W.  301;  W.  518;  Brey  v.  Hagan.  23  Ky.  Law 
Brownell  v.  Winne,  29  N.  Y.  400.  R.  18,  62  S.  W.  1;  Ward  v.  Hackett, 
See  Cotton  v.  Simpson,  8  Ad.  &  E.  30  Minn.  150,  14  N.  W.  578,  44  Am. 
136.  But  see  Sullivan  v.  Rudisill,  Rep.  187;  McCaughey  v.  Smith,  27 
63  Iowa  158,  18  N.  W.  856;  Chappell  N.  Y.  9.  Compare  Berryman  v.  Man- 
V.  Spencer,  23  Barb.  (N.  Y.)  584;  ker,  56  Iowa  150,  9  N.  W.  103,  hold- 
Gardner  V.  Walsh,  5  El.  &  Bl.  83.  ing  that  such  a  change  after  deliv- 

^^  Barnes  v.  Van  Keuren,  31  Neb.  ery  to  the  payee  will  operate  as  a 

165,    47    N.    W.    848;     Mersman    v.  discharge. 

Werges.  112  U.  S.  139,  5  Sup.  Ct.  65.  ==>"  Stone    v.    White,    74    Mass.     (8 

"'  First  National  Bank  v.  Weiden-  Gray)  589. 


CHAPTEE  YIII 


CONSIDERATION   GENERALLY. 


Sec. 

183.  Presumption    as    to    considera- 

tion— Rules. 

184.  Showing    real    consideration — 


Sec. 

186.  "Value  received"  —  Considera- 
tion not  expressed  —  Rebut- 
ting presumption. 


Rebutting  presumption  as  to     187.  Showing    real     consideration — 


consideration. 
185.  Same    subject — Matters    dehors 
contract. 


To  what  parties  rule  applies. 


§  183.  Presumption  as  to  consideration — Rules. — Although  a  pa- 
per which  is  not  good  as  a  bill  of  exchange  does  not  import  a  valid 
consideration  ;^  and  although,  notwithstanding  decisions  to  the  con- 
trary, this  rule  as  to  consideration  has,  under  many  adjudications,  been 
held  to  govern  in  case  of  non-negotiable  paper  generally,^  yet,  ordina- 


^  Averett  v.  Booker,  15  Gratt. 
(Va.)  163,  76  Am.  Dec.  203.  In  this 
case  the  court  said:  "I  think  it 
clear  that  this  paper  cannot  be  re- 
garded as  a  bill  of  exchange  nor  as 
carrying  with  it  the  exemption  per- 
taining to  that  class  of  securities 
from  the  necessity  of  both  averring 
and  proving  a  sufficient  considera- 
tion as  the  condition  of  recovering 
upon  it."  See,  also.  Summers  v. 
Sanders  (Tex.  Civ.  App.),  28  S.  W. 
1038. 

-  Connecticut. — National  Sav.  Bk. 
V.  Cable,  73  Conn.  568,  572,  48  Atl. 
428  (a  non-negotiable  order  drawn 
on  particular  fund,  Neg.  Inst.  Law, 
g§  1,  3;  Pub.  Acts  1897,  ch.  74); 
Bristol  V.  Warner,  19  Conn.  7,  16. 
(The  court  said  that  it  was,  after 
some  doubt,  the  settled  law  of  the 
state). 

Illinois. — Wickersham  v.  Beers,  20 
111.  App.  243,  249. 

Kentucky. — Prior    v.     Lindsay,     3 

9 


Bibb  (Ky.)  76  (a  case  of  an  order 
drawn  on  a  particular  fund). 

Maine. — Bourne  v.  Ward,  51  Me. 
191  (holding  that  notes  non-nego- 
tiable and  notes  negotiable  while  in 
the  hands  of  the  original  promisee 
import  consideration). 

Massachusetts. — Hemenway  v. 

Hickes,  21  Mass.  (4  Pick.)  497  (want 
of  averment  of  consideration  was 
held  fatal);  Courtney  v.  Doyle,  92 
Mass.  (10  Allen)  122,  123. 

Mississippi. — Hardin  v.  Pelan,  41 
Miss.  112,  115. 

New  Jersey. — Conover  v.  Stillwell, 
34  N.  J.  L.  54  (a  case  of  a  written 
promise  to  pay  money  on  a  contin- 
gency). 

North  Carolina. — Stronach  v.  Bled- 
soe, 85  N.  C.  473.  476. 

Pennsylvania. — Sidle  v.  Anderson, 
45  Pa.  St.  464  (a  case  of  an  order  un- 
der seal  on  one  person  to  pay  money 
to  another). 

South  Carolina. — Wingo  v.  Mc- 
02 


203 


PRESUMPTION   AS    TO    COXSIDERATIOX. 


[§  183 


rily  a  paper  which  constitutes  a  valid  bill  of  exchange  forms  a  written 
contract  carrying  with  it  evidence  of  the  consideration  on  which  it  is 
based  and  it  is  scarcely  ever  necessary  that  a  plaintiff  in  an  action  on  it 
should  prove  that  he  gave  a  consideration.^  This  rule  also  applies  to 
negotiable  paper  in  general.* 


Dowell,  8  Rich.  (S.  C.)  446  (holding 
it  necessary  to  aver  and  prove  con- 
sideration). 

Tennessee. — Reed  v.  "Wheeler,  10 
Tenn.  (2  Yerg.)  50  (holding  that 
consideration  must  be  averred). 

Decisions  contra  see  California. — 
Rogers  v.  Schulenberg,  111  Cal.  281, 
43  Pac.  899  (holding  that  written 
instruments  are  presumptive  evi- 
dence of  consideration  under  Civ. 
Code). 

/nfZiawo.— Louisville,  Evansville  & 
St.  L.  R.  Co.  V.  Caldwell,  98  Ind.  245, 
252. 

Missouri. — Taylor  v.  Newman,  77 
Mo.  257,  263  (a  case  of  a  draft  or 
order  to  pay  a  certain  sum  and 
charge  same  to  drawee.  It  had  all 
the  essentials  of  an  inland  bill  of  ex- 
change. By  the  statute  also  an  in- 
strument in  writing  for  the  payment 
of  money  imported  a  consideration). 

Islew  York,. — Cartwright  v.  Gray, 
127  N.  Y.  92,  38  N.  Y.  St.  Rep.  56, 
12  L.  R.  A.  845,  27  N.  E.  835,  24  Am. 
St.  Rep.  424  (the  instrument  being 
a  promissory  note  under  the  statute 
—1  Rev.  Stat.  768,  3  &  4  Anne,  c.  9— 
it  was  held  to  import  a  consideration 
whether  non-negotiable  or  not,  case 
affirms  57  Hun  518,  33  N.  Y.  St.  Rep. 
98,  11  N.  Y.  Supp.  278).  See  Dean  v. 
Carruth,  108  Mass.  242,  244;  First 
Nat.  Bk.  V.  Spear,  12  S.  D.  108,  80 
N.  W.  166. 

^Krumbarr  v.  Ludeling,  3  Mart. 
0.  S.  (La.)  641,  642;  Averett  v. 
Booker,  15  Graft.  (Va.)  163,  76  Am. 
Dec.  205,  where  the  court  says:  "If 
the  order  in  question  were  good  as 
a  bill  of  exchange  it  cannot  be  ques- 


tioned that  the  party  might  have 
recovered  upon  it  without  averring 
in  his  declaration  or  proving  at  the 
trial  that  any  value  had  been  re- 
ceived for  it,  as  such  a  bill  is  pre- 
sumed to  stand  upon  a  valuable  con- 
sideration and  prima  facie  to  im- 
port it." 

*  Alabama. — Brown  v.  Johnson 
Bros.,  135  Ala.  608,  33  So.  683,  685 
(a  note  is  prima  facie  evidence  of 
consideration.  There  was  no  plea 
setting  up  want  or  failure  of  consid- 
eration);  Cunyus  v.  Guenther,  96 
Ala.  564,  566,  11  So.  649  (offering 
note  in  evidence  makes  out  prima 
facie  case) ;  Martin  v.  Foster,  83  Ala. 
213,  214,  3  So.  422  (a  note) ;  Thomp- 
son V.  Armstrong,  5  Ala.  383,  387. 
Arkansas. — Richardson  v.  Corn- 
stock,  21  Ark.  69,  76  (a  note).  Byrd 
V.  Bertrand,  7  Ark.  32  (a  bill  of  ex- 
change). 

California. — Pastene  v.  Pardein, 
135  Cal.  431,  434,  67  Pac.  681  (a 
note);  Scribner  v.  Hanke,  116  Cal. 
613,  48  Pac.  714  (holding  that  in- 
dorsement on  note  imports  valuable 
consideration) ;  Fuller  v.  Hutchings, 
10  Cal.  523,  70  Am.  Dec.  746  (holding 
that  presumption  is  that  a  check  was 
given  for  a  valid  consideration). 

Colorado. — Reed  v.  First  Nat.  Bk. 
of  Pueblo,  23  Colo.  380,  48  Pac.  507 
(holding  that  presumption  is  that 
note  was  founded  upon  sufficient 
consideration) ;  Perot  v.  Cooper,  17 
Colo.  80,  83,  31  Am.  St.  Rep.  258,  28 
Pac.  391  (note  presumed  to  be 
founded  on  sufficient  consideration) ; 
Travellers'  Ins.  Co.  v.  Denver,  11 
Colo.  434,  18  Pac.  556   (holding  city 


§  183] 


CONSIDERATIOX   GENERALLY. 


201 


warrant  a  negotiable  instrument  un- 
der statute  and  an  averment  of  con- 
sideration unnecessary). 

Connecticut. — Bristol  v.  Warmer, 
19  Conn.  7  (a  note). 

District  of  Columbia. — Johnson  v. 
Wright,  2  App.  Cas.  D.  C.  216  (ne- 
gotiable check). 

Florida. — McCallum  v.  Driggs,  35 
Fla.  277,  284,  17  So.  407  (holding 
that  where  consideration  of  note  is 
not  denied  it  is  unnecessary  to  prove 
the  consideration). 

Georgia. — Rowland  v.  Harris,  55 
Ga.  141;  Scattergood  v.  Findlay,  20 
Ga.  423,  425. 

Illinois. — McMickey  v.  Safford,  197 
111.  540,  64  N.  E.  540  (holding  that 
offering  a  note  in  evidence  and  prov- 
ing signatures  made  out  a  prima 
-facie  case) ;  Wrightman  v.  Hart,  37 
ni.  123  (holding  that  the  presump- 
tion is  that  a  promissory  note  was 
assigned  for  value)  ;  Board  v.  O'Don- 
ovan,  82  HI.  App.  163  (indorsement 
on     note     imports     consideration). 

Indiana. — Smith  v.  Scott,  106  Ind. 
245,  6  N.  E.  145  (holding  that  pre- 
sumption is  that  indorsement  was 
for  value) ;  Du  Pont  v.  Beck,  81  Ind. 
271,  273;  Woodworth  v.  Veitch,  29 
Ind.  App.  529,  64  N.  E.  932  (pre- 
sumption is  that  note  based  on  suffi- 
cient consideration) .  Iowa  :  Luke  v. 
Koenen,  120  Iowa  103,  94  N.  W.  278, 
Code,  §  3069. 

Kentucky. — Day  v.  Long,  Ky.  Cb. 
App.  1904,  26  Ky.  L.  Rep.  123,  80  S. 
W.  774,  775  (law  presumes  a  con- 
sideration for  a  note,  per  Hobson, 
J.);  Cox  V.  Cox,  Ky.  Cb.  App.  1904, 
25  Ky.  L.  Rep.  1934,  79  S.  W.  220 
(statute  imports  a  consideration  into 
every  note) ;  Power  v.  Hambrick, 
Ky.  Ct.  App.  1903,  25  Ky.  L.  Rep.  30. 
74  S.  W.  660  (presumption  is  that 
note  was  given  for  sufficient  consid- 
eration) ;    Brown   v.    Hall,    2   A.    K. 


Marsh.  (Ky.)  599  (bill  of  exchange). 

Louisiana. — Landwirth  v.  Shaph- 
ran,  47  La.  Ann.  336,  339,  16  So. 
839  (holding  that  every  note  imports 
value  received). 

Maryland. — Ingersoll  v.  Martin,  58 
Md.  67,  42  Am.  Rep.  322  (holding 
that  note  is  prima  facie  evidence  of 
consideration). 

Massachusetts.  —  Huntington  v. 
Shute,  180  Mass.  371,  62  N.  E.  380 
(holding  that  production  of  note 
with  admission  or  proof  of  signature 
makes  a  prima  facie  case). 

Michigan. — Manistee  Nat.  Bk.  v. 
Seymour,  64  Mich.  59,  72,  31  N.  W. 
140. 

Minnesota. — Germania  Bk.  v. 
Michaud,  62  Minn.  459,  466,  54  Am. 
St.  Rep.  653,  65  N.  W.  70,  30  L.  R.  A. 
286  (under  law  merchant  negotiable 
promissory  note  by  administrator 
imports  sufficient  consideration  to 
bind  him  personally,  but  rule  quali- 
fied). 

Mississippi. — Moore  v.  Michell,  1 
Miss.  231. 

Missouri. — Eyerman  v.  Pirou,  151 
Mo.  107,  115,  52  S.  W.  229  (note  im- 
ports consideration,  citing  Rev.  Stat. 
1889,  §  2389);  State,  Grimm  v.  Man- 
hattan Rubber  Mfg.  Co.,  149  Mo.  181, 
211,  212,  50  S.  W.  321,  10  Am.  & 
Eng.  Corp.  Cas.  N.  S.  338  (prima 
facie  evidence  of  yalid  obligation; 
note  to  directors  by  president  and 
stockholders  of  corporation)  ;  Tap- 
ley  V.  Herman,  95  Mo.  App.  537,  69 
S.  W.  482;  Lowry  v.  Danforth,  95 
Mo.  App.  441,  69  S.  W.  39  (under 
Mo.  Rev.  Stat.  1899,  §  894). 

Montana. — Clark  v.  Marlow,  20 
Mont.  249,  255,  50  Pac.  713  (consider- 
ation implied  at  common  law  as  to 
all  commercial  paper). 

Nebraska. — Search  v.  Miller,  9 
Neb.  26,  30,  1  N.  W.  975. 

Neiv  Hampshire. — Shaw  v.  Shaw, 


■I 


205 


PRESUMPTION   AS    TO    COXSIDERATIOX. 


[§  183 


60  N.  H.  565  (production  and  proof 
of  note  shows  prima  facie  a  consid- 
eration) ;  Horn  v.  Fuller,  6  N.  H. 
511  (a  note). 

New  York. — Carnwright  v.  Gray, 
127  N.  Y.  92,  98,  12  L.  R.  A.  845, 
27  N.  E.  835,  24  Am.  St.  Rep.  424, 
38  N.  Y.  St.  Rep.  56.  aff'g  57  Hun 
518,  33  N.  Y.  St.  Rep.  98,  11  N.  Y. 
Supp.  278;  1  Rev.  Stat.  768;  3  & 
4  Anne,  c.  9;  Langley  v.  Wads- 
worth,  99  N.  Y.  61,  63,  1  N.  E.  106 
(possession  and  proof  of  genuine- 
ness makes  out  prima  facie  case) ; 
Hickok  V.  Bunting,  92  N.  Y.  App. 
Div.  167,  86  N.  Y.  Supp.  1059 
{prima  facie  a  note  is  supported  by 
a  valid  consideration  where  nothing 
appears  on  its  face  showing  the  con- 
trary); Bottum  V.  Scott,  11  N.  Y. 
afl'd  120  N.  Y.  623  (mem.),  29  N.  Y. 
St.  Rep.  997,  23  N.  E.  1152;  Under- 
bill V.  Phillips,  10  Hun  (N.  Y.)  591; 
Sawyer  v.  McLouth,  46  Barb.  (N. 
Y.)  350,  354. 

North  Carolina. — Campbell  v.  Mc- 
Cormac,  90  N.  C.  491,  492. 

Ofiio. — Dalrymple  v.  Wyker,  60 
Ohio  St.  108,  41  Ohio  L.  J.  310,  53  N. 
E.  713;  Dugan  v.  Campbell,  1  Ohio 
115,  119  (declaring  that  by  common 
consent  actions  have  always  been 
brought  and  sustained  upon  such  in- 
struments without  setting  forth  or 
proving  the  consideration). 

Oregon. — Flint  v.  Phipps,  16  Oreg. 
437,  448,  19  Pac.  543. 

Pennsylvania. — Ritchie  v.  Safe  De- 
posit &  T.  Co.,  189  Pa.  410,  42  Atl. 
20  (consideration  of  check  presumed 
and  not  necessary  in  first  instance 
to  prove  a  consideration) ;  Hartman 
v.  Shaffer,  71  Pa.  St.  312,  315;  Sidle 
v.  Anderson,  45  Pa.  St.  464,  467  (rule 
applies  to  bills  of  exchange  or  nego- 
tiable instruments). 

South  Carolina. — Hubble  v.  Fogar- 
tie,  3  Rich.   (S.  C.)  413,  417,  45  Am. 


Dec.  775.  ("Every  parol  contract  at 
common  law  required  a  considera- 
tion to  be  alleged  and  proved,  but  to 
this  rule  bills  of  exchange  and  prom- 
issory notes  are  exceptions;  they 
furnish  in  themselves  an  implied  le- 
gal consideration,"  and  it  is  not  nec- 
essary to  allege  and  prove  a  consid- 
eration for  them.) 

South  Dakota. — Niblack  v.  Cham- 
peny,  10  S.  D.  165,  166,  72  N.  W.  402 
(a  written  Indorsement  of  extension 
on  a  note  affords  presumptive  evi- 
dence of  a  consideration). 

Tennessee. — Boyd  v.  Johnson,  89 
Tenn.  284,  286,  14  S.  W.  804  (admin- 
istrator's note). 

Utah. — Nephi  First  Nat.  Bk.  v. 
Foote,  12  Utah  157,  167,  42  Pac.  205. 

Texas. — See  Henderson  v.  Glass, 
16  Tex.  559,  560. 

Vermont. — Willard  v.  Pinard,  65 
Vt.  160,  163,  26  Atl.  67;  Arnold  v. 
Sprague,  34  Vt.  402  (bills  of  ex- 
change are  presumed  to  be  upon  a 
sufficient  consideration);  Terry  v. 
Ragsdale,  33  Graft.  (Va.)  342,  345  (a 
check  is  prima  facie  evidence  that 
the  drawer  at  the  time  it  was  drawn 
was  indebted  to  the  payee  in  the 
amount- of  the  check  on  an  indebt- 
edness previously  existing  or  in- 
curred at  the  time  the  check  was 
drawn). 

Virginia. — Peasley  v.  Boatwright, 
2  Leigh  (Va.)  195  (consideration 
need  not  be  alleged). 

Washington. — Poncin  v.  Furth,  15 
Wash.  201,  206,  46  Pac.  241. 

West  Virginia. — Cheurout  v.  Bee, 
44  W.  Va.  103,  28  S.  E.  751  (plaintiff 
need  not  plead  or  prove  considera- 
tion in  action  at  law). 

Canadian. — Parsons  v.  Jones,  16 
Up.  Can.  Q.  B.  274,  276. 

Examine  California. — Henke  v. 
Eureka  End.  Assoc,  100  Cal.  429,  432, 
34  Pac.  1089,  which  was  a  case  of  an 


184] 


CONSIDERATION    GENERALLY, 


206 


§  184.  Showing  real  consideration — Rebutting  presumption  as  to 
consideration. — It  is  well  settled  that  as  between  original  or  imme- 
diate parties  in  an  action  upon  a  bill  or  note  the  consideration  may  be 
inquired  into  and  the  real  consideration  shown. ^     So  where  it  was 


action  on  an  endowment  certificate, 
but  Searles,  C,  said  in  argument 
that  long  before  the  Civ.  Code, 
§  1614,  providing  that  a  written  in- 
strument is  presumptive  evidence  of 
a  consideration,  the  same  presump- 
tion applied  to  negotiable  paper. 

Every  negotiable  Instrument  is 
presumed  prima  facie  to  have  been 
issued  for  a  valuable  consideration. 
Neg.  Inst.  Law,  §  50.  See  Appendix 
herein. 

Consideration  for  a  note  under 
seal  is  presumed.  Wester  v.  Bailey, 
118  N.  C.  183,  24  S.  E.  9. 

Although  there  are  cases  in  which 
the  plaintiff  may  be  required  in  the 
first  instance  and  in  his  testimony  in 
chief  to  go  into  the  question  of  the 
consideration  of  a  promissory  note, 
nevertheless  "it  has  been  the  gen- 
eral law,  both  in  England  and  Amer- 
ica, for  two  hundred  years — that  is, 
since  the  statute  of  3  and  4  Anne, 
chap.  9,  relating  to  promissory  notes 
— and  this  general  law  has  been  em- 
bodied in  the  Act  of  Congress  of 
January  12,  1899  (30  Stat.  785),  re- 
lating to  negotiable  instruments; 
and  again,  in  the  new  code  law  for 
the  District  of  Columbia,  into  which 
that  Act  of  Congress  has  been  in- 
corporated as  sections  1304  to  1493, 
both  inclusive,  that  every  negotia- 
ble instrument  is  deemed  prima 
facie  to  have  been  issued  for  a  valu- 
able consideration,  and  every  party 
whose  signature  appears  thereon  to 
have  become  a  party  thereto  for 
value.  *  *  *  Proof  of  genuineness 
of  signatures  and  proof  of  notice  of 
protest  would  have  constituted  a 
sufficient  prima  facie  case."    Towles 


v.  Tanner,  21  App.  D.  C.  530,  542, 
per  Morris,  J. 

°  Connecticut. — Lawrence  v.  Ston- 
ington  Bk.,  6  Conn.  521,  525. 

Indiana. — Bush  v.  Brown,  49  Ind. 
573,  576,  19  Am.  Rep.  695  (where  it 
is  said:  "If  there  was  no  legal,  valid 
or  valuable  consideration  for  the 
giving  of  the  notes  they  are  in- 
valid");  Parker  v.  Morton,  29  Ind. 
89,  92  (where  it  is  said:  "It  has 
been  repeatedly  held  by  this  court, 
under  the  code,  in  an  action  on  an 
obligation  in  writing  prima  facie 
importing  a  consideration,  that  a 
plea  alleging  that  it  was  given  with- 
out any  consideration  whatever  is 
good,"  per  Elliott,  J.). 

Louisiayia. — Payne  v.  Waterston, 
16  La.  Ann.  239;  Brown  v.  Fort,  1 
Mart.  O.  S.  (La.)  34. 

Maryland. — Ingersoll  v.  Martin,  58 
Md.  67,  73,  42  Am.  Rep.  322  (holding 
that  the  question  of  consideration  is 
always  open  between  immediate  par- 
ties and  may  be  impeached  by 
parol). 

Neb7-aska. — Wilson  v.  Ellsworth, 
25  Neb.  246,  41  N.  W.  177. 

Neto  York. — Schoonmaker  v. 
Roosa,  17  Johns.  (N.  Y.)  301;  Elting 
V.  Brinkeroff,  2  Hall  (N.  Y.)  459. 

Texas. — Branch  v.  Howard,  4  Tex. 
Civ.  App.  271,  23  S.  W.  478. 

Federal. — Bank  of  British  North 
America  v.  Ellis,  6  Sawy.  (U.  S.)  96, 
Fed.  Cas.  No.  859. 

See  Alabama. — Booth  v.  Dexter 
Steam  F.  E.  Co.,  118  Ala.  369,  24 
So.  405,  16  Bkj.  L.  J.  93  (holding 
that  real  consideration  of  note  may 
be  shown  when  not  apparent  on 
face). 


I 


207  MATTERS  DEHORS  CONTRACT.  [§  185 

urged  that  there  was  no  consideration  for  certain  notes  and  a  mort- 
gage and  that  they  were  to  be  operative  only  on  the  consummation  of 
a  certain  purchase  and  were  not  to  be  presently  operative,  it  was  held 
that  such  notes  and  mortgage  could  not  be  enforced  on  the  basis  of  a 
different  consideration  than  that  on  which  they  were  given."  And  as 
the  consideration  of  every  promissory  note  is  open  to  inquiry  between 
the  parties  to  it,  so  the  consideration  of  such  a  note  not  under  seal, 
given  for  a  balance  of  work  done,  may  be  inquired  into  in  a  suit  be- 
tween the  original  parties,  even  though  tlie  maker,  at  the  time  it  was 
given,  expressed  himself  satisfied  with  it,  there  being  no  evidence  that, 
at  the  time  of  the  settlement  or  giving  of  the  note  any  new  considera- 
tion passed  from  the  payee  to  the  maker.^* 

§  185.  Same  subject — Matters  dehors  contract. — Although  it  is  a 
settled  principle,  both  in  the  English  and  American  courts,  that  parol 
evidence  is  not  admissible  to  contradict,  vary  or  materially  affect,  by 
way  of  explanation,  a  contract  in  writing,  upon  the  ground  that  writ- 
ten evidence  is  of  a  higher  grade  than  the  mere  verbal  declarations  of 
witnesses,  and  consequently  where  parties  have  agreed  upon  the  terms 
of  a  contract  which  is  afterward  reduced  to  writing,  the  verbal  agree- 
ment is  merged  in  the  written  contract,  yet  it  has  often  been  held  as 
no  violation  of  these  doctrines,  or  if  so,  in  terms  as  well  settled  as 
these  doctrines  themselves,  even  though  upon  the  face  of  an  instru- 
ment in  writing,  the  usual  expression  of  consideration,  such  as  for 
"Value  received,"  may  be  found,  that  the  maker  may  show  as  against 
the  payee  or  other  person  standing  in  the  same  situation,  that  the  note 
or  bond  was  given  without  consideration,  or  that  the  consideration  has 
failed,  or  that  fraud  in  respect  to  it  was  practiced  upon  him  by  the 
other  party,  and  under  some  circumstances  that  the  consideration  was 
illegal.'^     The  above  rule  does  not  therefore  conflict  with  the  rule 

"Lewter  v.   Price,   25   Fla.   574,   6  to  show  real  consideration  of  note. 

So.  459,  see: 

"*  Clement  v.  Reppard,  15  Pa,  St.  Alabama. — Folmar    v.    Siler,    132 

111.  Ala.  297,  31  So.  719. 

''Arkansas. — Cheney     v.      Higgin-  Indiana. — Smith  v.  BorufE,  75  Ind. 

botham,  10  Ark.  273,  276,  per  Scott,  412;     Burns'    Rev.    Stat.    Ind.    1901, 

J.  §  6630. 

See    also    Folmar    v.    Siler,    132  Missouri.— Mo.    Rev.    Stat.     1899, 

Ala.  297,  31  So.  719.  §  645. 

Maine. — Folsom      v.      Mussey,      8  Nebraska. — Gifford    v.    Fox    (Neb. 

Greenl.   (Me.)   400,  23  Am.  Dec.  522.  1901),  95  N.  W.  1066. 

That  parol  evidence  is  admissible  Xeiv  York. — Keuka  College  v.  Ray, 


186] 


CON'SIDEKATIOX   GENERALLY. 


208 


as  to  the  inadmissibility  of  oral  testimon}'  to  vary  the  terms  of  a  writ- 
ten instrument/*  nor  does  sncli  a  defense  affect  the  terms  of  the  writ- 
ing;^ and  parol  evidence  being  admitted  to  show  the  absence  of  any 
valid  or  sufficient  consideration  for  the  alleged  liability  of  the  defend- 
ant to  the  plaintifE  its  admission  violates  no  principle  established  for 
the  protection  of  third  persons  as  bona  fide  holders  of  negotiable  pa- 
per.°  Again,  to  establish  the  defense  of  want  of  consideration  it  is 
competent  to  prove  the  facts  and  circumstances  under  which  the 
signature  was  obtained,  luit  evidence  is  incompetent  to  change  the  effect 
or  limit  the  character  of  the  paper.^''  Nor  can  the  defense  of  failure 
of  consideration  rest  upon  a  showing  by  the  makers  of  matters  tending 
to  vary  the  contract  expressed  by  the  terms  of  the  note  but  which  in 
no  way  relate  to  the  consideration.^^ 

§  186.  "Value  received" — Consideration  not  expressed  or  ex- 
pressed— Rebutting  presumption. — In  the  absence  of  a  statute  to  the 
contrary,  the  use  of  the  words  "value  received"  is  not  essential  to  a 
bill  of  exchange,  check,  promissory  note,  or  commercial  paper  gen- 
erally, and  even  though  a  consideration  is  not  expressed  by  these  or 
other  words,  the  rule  that  such  paper  imports  a  consideration  applies. ^^ 


167  N.  Y.  96,  60  N.  E.  325,  aff'g  58 
N.  Y.  Supp.  745. 

Examine  Northwestern  Creamery 
Co.  v.  Lanning,  83  Minn.  19,  85  N. 
W.  823. 

Rule  applies,  even  though  note 
expressed  to  be  for  "value  received." 
Booth  V.  Dexter  Steam  Fire  Engine 
Co.,  118  Ala.  369,  24  So.  405. 

Oral  evidence  may  be  admitted  to 
impeach  the  acknowledgment  of  the 
consideration  of  a  promissory  note 
and  to  show  the  real  purpose  or  con- 
sideration thereof.  Lippincott  v. 
Lawrie,  119  Wis.  573,  97  N.  W.  179. 
Oral  evidence  of  consideration  for 
indorsement  may  always  be  shown 
as  between  indorser  and  his  immedi- 
ate indorsee.  Peabody  v.  Munson, 
211  111.  324,  71  N.  E.  1006,  aff' g  113 
111  App.  296. 

Where  note  was  void  under  statute 
true  consideration  may  be  shown. 
Burns  v.  Sparks  (Ky.  1904),  26  Ky. 


Law  Rep.  688,  82  S.  W.  425,  Ky. 
Stat.  1903,  §  4223. 

"*  Harwood  v.  Brown,  23  Mo.  App. 
69. 

^  Simpson  College  v.  Tuttle,  71 
Iowa  596,  599,  33  N.  W.  74. 

"  Hamburger  v.  Miller,  48  Md.  317, 
325,  326,  per  Alvey,  J. 

"McCullock  V.  Hoffman,  10  Hun 
(N.  Y.)  133.  See  also  Marness  v. 
Henry,  96  Ala.  454,  458-460,  11  So. 
410. 

"  Easton  Packing  Co.  v.  Kennedy, 
131  Cal.  ^xviii,  63  Pac.  130,  a  case  of 
bona  fide  holders.  See  §§  202  et  seg. 
herein. 

^-  Colorado. — Salazar  v.  Taylor,  18 
Colo.  538,  541,  542,  33  Pac.  369. 

Maine. — Noyes  v.  Oilman,  65  Me. 
589  (holding  that  an  order  operating 
as  an  assignment  of  a  note  need  not 
contain  the  words  "value  re- 
ceived"); Kendall  v.  Galvin,  15  Me. 
131,  133. 


I 


209 


VALUE    RECEIVED. 


[§186 


If  the  words  "value  received"  are  expressed,  while  it  is  declared  that 
they  add  nothing  more  than  the  law  implies/^  yet  they  raise  a  pre- 
sumption of  a  valuable  and  legal  consideration ;"  for  the  law  attributes 


Massachusetts. — Dean  v.  Carruth, 
108  Mass.  242,  244  (note  "is  evidence 
under  the  hand  of  the  promisor  of  a 
contract  made  upon  a  good  consider- 
ation, even  if  the  words  'value  re- 
ceived" are  omitted"). 

Missouri. — Taylor  v.  Newman,  77 
Mo.  257. 

Montana. — Clarke  v.  Marlow,  20 
Mont.  249,  255,  50  Pac.  713  (declar- 
ing that  all  commercial  paper  at 
common  law  imports  a  considera- 
tion, though  none  is  expressed  by 
the  words  value  received  or  other 
words,  citing  Hatch  v.  Trayes,  11 
Adol.  &  E.  702;  Edw.  Bills  &  N., 
§  202;  Randolph  Com.  Paper,  §  178, 
and  adding:  "Having  no  statute  in 
Montana  requiring  the  use  of  the  ex- 
pression 'value  received'  it  is  not  es- 
sential. Story  on  Prom.  Notes, 
§  51"). 

New  Hampshire. — Martin  v.  Stone, 
67  N.  H.  367,  368,  29  Atl.  845.  (Cit- 
ing Story  on  Prom.  Notes,  §  51;  1 
Daniels  Neg.  Inst.,  §  108). 

New  York. — Carnwright  v.  Gray, 
127  N.  Y.  92,  96-99,  12  L.  R.  A.  845, 
27  N.  E.  835,  24  Am.  St.  Rep.  424,  38 
N.  Y.  St.  Rep.  56  (holding  that  an 
instrument  which  is  a  promissory 
note  within  the  statute — 1  Rev.  Stat. 
768,  which  is  a  substantial  re-enact- 
ment of  the  statute  of  3  &  4  Anne, 
c.  9 — imports  a  consideration  and 
the  words  "value  received"  need  not 
appear  upon  the  face  of  the  note; 
case  affirms  57  Hun  518,  33  N.  Y.  St. 
Hep.  98,  11  N.  Y.  Supp.  278);  Un- 
derbill V.  Phillips,  10  Hun  (N.  Y.) 
591,  592;  Kramer  v.  Kramer,  90  N. 
Y.  App.  Div.  176,  86  N.  Y.  Supp.  129 
("value  received"  in  a  note  imports 
a  consideration) ;  Bruyn  v.  Russell, 
Joyce  Defenses — 14. 


38  N.  Y.  St.  Rep.  50;  Kinsman  v. 
Birdsall,  2  E.  D.  Smith  (N.  Y.)  395, 
397  (declaring  that  the  omission  of 
the  words  "value  received"  does  not 
alter  the  legal  effect  of  a  promissory 
note. 

South  Carolina. — Hubble  v.  Fogar- 
tie,  3  Rich.  (S.  C.)  413,  417,  45  Am. 
Dec.  775.  (It  is  nevertheless  a 
valid  instrument  importing  a  con- 
sideration. Presumptively  it  was 
given  for  a  sufficient  consideration.) 

Federal. — Moses  v.  Lawrence  Coun- 
ty, 149  U.  S.  298,  302,  37  L.  Ed.  743, 
13  Sup.  Ct.  900  ("every  negotiable 
promissory  note,  even  if  not  purport- 
ing to  be  for  'value  received,'  im- 
ports a  consideration,  and  the  in- 
dorsement of  such  a  note  is  itself 
prima  facie  evidence  of  having  been 
made  for  value"). 

English. — Laraway  v.  Harvey,  Rap. 
Jud.  Quebec,  14  C.  S.  97  (rule  ap- 
plied to  checks  and  other  negotiable 
instruments,  citing  Taylor  on  Ev., 
No.  178;  2  Daniel  on  Neg.  Inst.  1643, 
3  Phillips  on  Ev.,  p.  426,  Civil  Code 
Arts.  2285,  2351,  2353,  and  quoting 
3  Kent's  Com.,  p.  77). 

Examine  Hart  v.  Harrison  Wire 
Co.,  91  Mo.  414,  418,  4  S.  W.  123,  un- 
der Rev.  Stat.,  §  547,  requiring  note 
to  be  "expressed  to  be  for  value  re- 
ceived." 

See  Negot.  Inst.  Law  N.  Y., 
§§  330,  331. 

'^Carnwright  v.  Gray,  127  N.  Y. 
92,  96-99,  12  L.  R.  A.  845,  27  N.  E. 
835,  24  Am.  St.  Rep.  424,  38  N.  Y. 
St.  Rep.  56. 

^'^  Alabama. — Thompson  v.  Arm- 
strong, 5  Ala.  383  (the  general  rule 
was  asserted  and  the  words  "value 
received"  were  expressed). 


18G] 


COXSIDEIIATION    GENERALLY. 


210 


so  much  force  to  a  formal  written  contract  and  to  the  words  "value 
received"  as  to  presume  in  the  absence  of  proof  that  there  was  a 


Arkansas. — Richardson  v.  Corn- 
stock,  21  Ark.  69,  76  (note  expresses 
"value  received"). 

California. — Waldrop  v.  Black,  74 
Cal.  409,  16  Pac.  226  (indorsement 
for  value  received  by  payee  to  surety 
together  with  latter's  possession  of 
note  raises,  in  absence  of  evidence 
to  the  contrary,  the  presumption  of 
payment  of  value). 

Connecticut. — Mascolo  v.  Monte- 
santo,  61  Conn.  50,  53,  29  Am.  St. 
Rep.  170,  23  Atl.  714;  Raymond  v. 
Sellick,  10  Conn.  480,  484,  per  Waite, 
J. 

Hawaiian. — Macfarlane  v.  Lowell, 
9  Hawaiian,  438,  440. 

Illinois. — Hoyt  v.  JafEray,  29  111. 
104  (value  received  is  evidence  of 
sufficient  consideration  to  support 
assumpsit). 

Kentucky. — Cotton  v.  Graham,  84 
Ky.  672,  680,  2  S.  W.  647  (there  was 
also  the  expressed  consideration  of 
love  and  affection). 

Ifaiwe.— Bourne  v.  Wood,  51  Me. 
191  (declaring  that  where  a  note 
contains  the  words  "value  received" 
or  words  of  equivalent  import,  the 
note  itself  will  be  evidence  prima 
facie  of  the  consideration.  The  note 
here  was  non-negotiable  and  did  not 
contain  the  words  "value  received"). 

Massachusetts. — Huntington  v. 
Shute,  180  Mass.  371,  62  N.  E.  371 
(holding  that  the  production  of  a 
note  with  the  words  "value  re- 
ceived," with  the  admission  of  proof 
of  the  signature,  makes  a  prima 
facie  case;  but  the  decision  is  prin- 
cipally as  to  burden  of  proof). 

Michigan. — Conrad  Seipp  Brew. 
Co.  V.  McKittrich,  86  Mich.  191,  195, 
196,  48  N.  W.  1086  (note  was  a  judg- 
ment   note    and    not    a    promissory 


note,  and  it  was  held  that  the  ex- 
pression "value  received"  was  suffi- 
cient prima  facie  to  show  an  ade- 
quate consideration). 

Minnesota. — Friedman  v.  Johnson, 

21  Minn.  12,  15. 

Neiv  Hampshire. — Child  v.  Moore, 
6  N.  H.  33  (holding  that  order  for 
the  payment  of  money  expressed  to 
be  for  "value  received"  is  prima 
facie  evidence  that  the  drawer  has 
received  the  amount  of  money  or  the 
money's  worth) ;  Odiorne  v.  Odiorne, 
5  N.  H.  315,  316. 

New  York. — Bruyn  v.  Russell,  60 
Hun  (N.  Y.)  280,  282,  283,  28  N.  Y. 
St.  Rep.  50,  14  N.  Y.  Supp.  591; 
Bruyn  v.  Russell,  52  Hun  (N.  Y.)  17, 

22  N.  Y.  St.  Rep.  374,  4  N.  Y.  Supp. 
784  (in  this  case,  however,  plain- 
tiff attempted  to  establish  affirma- 
tively the  consideration) ;  Jerome 
V.  Whiting,  7  Johns.  (N.  Y.)  321  (a 
non-negotiable  note). 

North  Carolina. — Stronach  v.  Bled- 
soe, 85  N.  C.  473,  476. 

Pennsylvania. — Messmore  v.  Mor- 
rison, 172  Pa.  St.  300,  34  Atl.  45  (a 
promissory  note,  under  statute). 

Vermont. — Redding  v.  Redding,  69 
Vt.  500,  502,  503,  38  Atl.  230. 

Federal. — National  Loan  &  Inv. 
Co.  V.  Rockland  County,  36  C.  C.  A. 
370,  94  Fed.  335. 

English. — Halliday  v.  Atkinson,  5 
Barn.  &  Cr.  501,  11  Eng.  C.  L.  558. 
See  Bond  v.  Stockdale  Dow.  &  Ry. 
140,  16  Eng.  C.  L.  278. 

In  the  following  cases  the  words 
"value  received"  were  used  and  the 
consideration  was  in  question,  but 
the  effect  of  the  words  was  not  dis- 
cussed. 

Massachusetts. — Hill  v.  Buckmin- 
ster,  22  Mass.  (5  Pick.)  391. 


4 


211 


SHOWING    REAL    CONSIDERATIOX. 


[§   18' 


valuable  consideration   for  the   promise.^^ 
however,  be  rebutted  by  proof  .^® 


This   presumption   may, 


§  187.     Showing  real  consideration — To  what  parties  rule  applies. 

The  rule  permitting  an  inquiry  into  the  consideration  of  a  bill  or 
note  generally,  or  even  though  the  words  "value  received"  are  ex- 
pressed, applies  to  original  or  immediate  parties,  or  to  parties  between 
whom  there  is  a  privity,  but  not  as  to  remote  parties  ;^'^  that  is,  inquiry 
into  the  consideration  of  negotiable  paper  can  only  be  made  between 
privies  or  immediate  parties  thereto,  as  the  maker  and  payee,  an  in- 
dorser  and  his  indorsee.  All  other  parties  to  negotiable  paper  are 
called  remote,  and,  as  between  them,  a  consideration  for  making  or 
indorsing  the  same  is  presumed.  But  the  defendant  may  make  the 
defense  of  a  want  of  consideration  against  a  remote  party,  if  he  could 
have  done  so  against  a  nearer  party  and  such  remote  party  took  the 
paper  with  a  knowledge  that  it  was  open  to  this  defense.^^ 


Michigan. — Fink  v.  Chambers,  95 
Mich.  508,  55  N.  W.  375. 

Missouri. — Harwood  v.  Brown,  23 
Mo.  App.  6. 

New  York. — Schoonmaker  v.  Roo- 
sa,  17  Johns.  (N.  Y.)  301. 

Ohio. — Loffland  v.  Russell,  Wright 
(Ohio)  438. 

"  Parish  v.  Stone,  14  Pick.  (Mass.) 
198,  201. 

"'  Halliday  v.  Atkinson,  5  Barn.  & 
Cr.  501,  11  Eng.  C.  L.  558. 

SEE  Neiv  Hampshire. — Martin  v. 
Stone,  67  N.  H.  367,  39  Atl.  845. 

New  York. — Bruyn  v.  Russell,  60 
Hun  (N.  Y.)  280,  282,  38  N.  Y.  St. 
Rep.  50,  14  N.  Y.  Supp.  591;  Sawyer 
V.  McLouth,  46  Barb.  (N.  Y.)  350, 
353. 

North  Carolina. — Campbell  v.  Cor- 
mac,  90  N.  C.  491. 

West  'Virgi7iia. — Cheurout  v.  Bee, 
44  W.  Va.  103,  28  S.  E.  751. 

Canada. — Laraway  v.  Harvey,  Rap. 
Jud.  Quebec,  14  C.  S.  97. 

England. — Bond  v.  Stockdale,  7 
Dow.  &  Ry.  140,  16  Eng.  C.  L.  278, 
and  examine  cases  cited  under  the 


sections  herein  as  to  want  of  con- 
sideration. 

"Singleton  v.  Bremar,  Harp.  (S. 
C.)  201;  Daniels  on  Neg.  Inst.  (5th 
ed.),  §  163. 

"As  between  remote  parties,  for 
example,  between  payee  and  ac- 
ceptor, between  indorsee  and  ac- 
ceptor, between  indorsee  and  re- 
mote indorser,  two  distinct  consid- 
erations at  least  must  come  in  ques- 
tion; first  that  which  the  defendant 
received  for  his  liability,  and  sec- 
ondly, that  which  the  plaintiff  gave 
for  his  title.  An  action  between  re- 
mote parties  will  not  fail  unless 
there  be  an  absence  or  failure  of 
both  these  considerations."  Byles 
on  Bills  (6th  Am.  Ed.)  206  quoted 
in  Arpin  v.  Owens,  140  Mass.  144, 
145,  3  N.  E.  25.    See  §  191  herein. 

'^  Bank  of  British  North  America 
V.  Ellis,  6  Sawy.  (U.  S.)  96,  Fed. 
Cas.  No.  859,  8  Am.  L.  Rec.  460,  per 
Deady,  D.  J.,  citing  1  Daniels  Neg. 
Inst.,  §  174;  1  Parsons  Notes  &  Bills 
175,  183.  See  Neg.  Inst.  Law,  §  96. 
Appendix  herein.    See  §  191  herein. 


CHAPTEK  IX. 

ADEQUACY   OR    SUFFICIENCY   OF    CONSIDERATION. 

Sec.  Sec. 

188.  Inadequate   or   insufficient  con-     192.  Adequacy  in  value  unnecessary. 

sideration  distinguislied  from  193.  Inadequacy   or   insufBciency   of 
want  or  failure  of  considera-  consideration — Rule  as  to  in- 

tion.  quiry  into — Fraud. 

189.  Sufficient  if  consideration  is  a  194.  Sufficient    consideration — Illus- 

benefit  or  injury.  trations. 

190.  Distinction     between     valuable     195.  Compromise,   settlement  or   re- 

consideration    other     than  linquishment  note. 

money  and  a  money  consid-  196.  Same  subject — Unfounded  or  il- 

eration.  legal  claim. 

191.  Slight    consideration — Purchas-  197.  Compromise  of  forgery  claim. 

ing  paper  at  undervalue. 

§  188.  Inadequate  or  insufficient  consideration  distinguished  from 
want  or  failure  of  consideration. — A  distinction  is  to  be  observed  be- 
tween inadequacy  of  consideration  which  does  not  in  law  constitute  a 
defense  and  a  want  or  failure  of  consideration,  which,  as  appears  else- 
where herein,^  is  a  defense,  or  a  defense  pro  tanto  in  an  action  between 
the  parties.^*  A  large  number  of  the  decisions,  however,  fail  to  make 
this  distinction  but  use  the  terms,  adequate  or  inadequate  considera- 
tion, sufficient  or  insufficient  consideration,  and  want  or  failure  of  con- 
sideration, as  if  they  were  all  synonymous,  or  at  least  as  if  they  were 
much  the  same. 

§  189.  Sufficient  if  consideration  is  a  benefit  or  injury. — Courts 
both  of  law  and  equity  refuse  to  disturb  contracts  on  grounds  of  mere 
inadequacy  whether  the  consideration  is  of  benefit  to  the  promisor  or 
of  injury  to  the  promisee.^  And  it  is  a  general  rule  that  the  considera-  ^ 
tion  to  support  a  promise  may  be  either  a  benefit  accruing  to  the  pur- 
chaser or  a  loss  or  disadvantage  to  the  promisee.     A  consideration 

^  See  Chap.  X.  cited  in  Earl  v.  Peck.  64  N.  Y.  596. 

^*Furber   v.    Fogler,    97    Me.    585,     598. 
588,    55    Atl.    514,    per    Peabody,    J.         =  Caldwell  v.  Ruddy,  2  Idaho  5, 
Johnson  v.  Titus,  2  Hill  (N.  Y.)  606,     Pac.  339. 

212 


213  SLIGHT    CONSIDERATION,  [§§    190,    191 

emanating  from  some  injury  or  inconvenience  to  the  one  party,  or 
from  some  benefit  to  tlie  other  party  is  a  valuable  consideration.  But 
to  give  a  consideration  value  sufficient  for  the  support  of  a  promise, 
it  must  be  either  such  as  deprived  the  person  to  whom  the  promise  was 
made  of  a  right  which  he  before  possessed,  or  else  conferred  upon  the 
other  party  a  benefit  which  he  could  not  otherwise  have  had.^  So  in 
an  Alabama  case  the  court  says:  "Any  benefit  resulting  to  the  party 
promising,  or  detriment  to  the  party  to  whom  the  promise  is  made,  is 
sufficient,  however  slight  or  insignificant  it  may  seem  to  bo  in  point  of 
fact.  The  adequacy  or  sufficiency  of  a  consideration  to  support  a  con- 
tract rests  in  the  judgment  of  the  parties;  and  if,  in  contemplation  of 
law,  it  is  of  any  value,  in  the  absence  of  fraud  or  duress,  the  contract 
will  be  enforced."*  So  a  note  given  by  one  person  to  pay  another  a 
certain  amount  at  a  fixed  time  for  the  performance  of  personal  serv- 
ices in  the  future,  is  valid  and  binding  upon  the  maker.  The  promise 
to  pay  and  promise  to  perform  the  services  are  sufficient  consideration.^ 

§  190,  Distinction  between  valuable  consideration  other  than 
money  and  a  money  consideration. — A  distinction  has  been  made  be- 
tween a  valuable  consideration,  other  than  money,  and  a  money  con- 
sideration. While  in  the  former  case  the  slightest  consideration  will 
support  a  promise  to  pay  the  larger  amount,  to  the  full  extent  of  the 
promise,  in  the  latter,  the  consideration  will  support  a  promise  only 
to  the  extent  of  the  money  forming  the  consideration.  The  law  leaves 
the  measure  of  the  value  of  a  valuable  consideration  other  than  money, 
to  the  parties  to  the  contract ;  but  money  being  the  standard  of  value, 
is  not  subject  to  be  changed  by  contract,  and  will  support  a  promise 
to  pay  money  only  to  the  amount  of  the  consideration." 

§191.     Slight   consideration — Purchasing   paper  at   undervalue.^ 

A  slight  consideration  is  sufficient  to  sustain  a  contract  and  courts  of 

^  Conover  v.  Stillwell,  34  N.  J.  54,  son,   J.,   in   Booth  v.   Dexter   Steam 

57,  per  Depue,  J.  Fire  Engine  Co.,  118  Ala.  369,  377, 

Value   is  any    consideration   sufR-  24   So.  405,  a  case  of  a  note  given 

cient  to  support  a  written  contract,  to  cover  a  supposed  liability. 

Neg.  Inst.  Law,  §  51;   Eng.  Bills  of  '^Morrison  v.  Hart,  122  Ga.  660,  50 

Exch.     Act.,     §  27.       See     appendix  S.  E.  471. 

herein.  ''Sawyer  v.  McLouth,  46  Barb.  (N. 

'Boiling  v.  Munchus,  65  Ala.  558,  Y.)    350,    353.      See   Twentieth    Cen- 

561    (per   Brickell,    C.    .T.,   asserting  tury    Co.    v.    Quilling    (Wis.    1907), 

the  general   principle   in   a   case   to  110  N.  W.  174. 

foreclose   a  mortgage   and   citing   1  '  See  §§  238,  240  herein. 
Chit.  Con.  28-32).    Quoted  by  Haral- 


§  191]     ADEQUACY  OR  SUFFICIENCY  OF  CONSIDERATION.        214 

law  will  not  look  closely  into  the  adequacy  of  the  consideration  for  a 
promissory  note,^  nor  is  the  fact  that  there  was  no  fair  consideration 
for  negotiable  paper,  as  between  the  original  parties  to  it,  any  de- 
fense against  it  in  the  hands  of  hona  fide  indorsee;''  for  as  a  general 
rule  the  indorsee  of  a  negotiable  promissory  note,  who,  for  value,  pur- 
chases it  before  maturity,  without  knowledge  of  facts  impeaching  its 
validity,  may  recover  the  amount  due  by  the  terms  of  the  note,  al- 
though he  paid  an  amount  therefor  less  than  its  face,  unless  the  cir- 
cumstances of  its  inception  were  such  as  to  make  it  absolutely  void  by 
statute,  or  there  was  no  power  to  issue  the  note,  or  it  was  obtained  by 
the  payee  of  the  maker  by  illegal  and  fraudulent  means.^**  And  al- 
though the  fact  of  taking  a  bill  at  considerable  undervalue  is  not -of  it- 
self sufficient  to  affect  the  title  of  the  holder,  yet  it  is  an  important 
element  in  considering  whether  such  purchaser  acted  hona  fide^  in  ig- 
norance and  error,  or  was  assisting  in  committing  a  fraud,  and 
avoided  making  inquiries  because  they  might  be  injurious  to  him.^^ 
But  the  inadequacy  of  the  price  paid  by  an  indorsee  must  be  such  as  to 
impeach  his  good  faith  ;^-  the  price  paid  by  the  purchaser  must  be  so 
out  of  proportion,  having  regard  to  the  solvency  of  the  maker,  that  the 
indorsee  takes  the  note  at  his  peril.^^  If  the  purchaser  pays  a  grossly 
inadequate  price  and  trades  with  a  man  in  embarrassed  circumstances, 
and  proper  inquiry  would  have  disclosed  the  real  value  of  the  note,  the 
transaction  is  suspicious,  even  though  there  is  no  evidence  of  fraud, 
and  the  recovery  will  be  limited  to  the  amount  actually  paid,  with  in- 
terest.^*' Where  the  statute  provides  that  the  holder  of  a  negotiable 

« Austell  V.  Rice,  5  Ga.  472.     Mar-  St.   177,   26   N.   E.    979,   29   Am.    St. 

tin  V.  Kercheval,  4  McLean    (U.   S.  Rep.  540. 

C.  C),  117  Fed.  Cas.  No.  9163.  As  "Jones  v.  Gordon,  L.  R.  2  App. 
between  the  indorser  and  indorsee  Cas.  616,  per  Lord  Blackburn, 
the  face  of  the  note  is  prima  facie  Smith  v.  Jansen,  12  Neb.  125,  10 
evidence  of  the  consideration  paid  N.  B.  537,  per  Maxwell,  Ch.  J.  (The 
on  its  negotiation,  but  it  is  only  amount  of  the  consideration  may 
prima  facie.  The  defendants  (in-  become  a  material  inquiry  upon  the 
dorser)  can  show  an  entire  want  of  question  of  good  faith  of  the  pur- 
consideration  or  that  a  small  sum  chaser) ;  Tod  v.  Wick,  36  Ohio  St. 
only  was  paid.  But  where  the  note  370  (the  amount  paid  may  affect 
in  the  ordinary  course  of  business  the  question  of  the  indorsee's  good 
has  been  negotiated  for  a  valuable  faith). 

consideration  the  maker  is  bound  by  '- Rooker  v.  Rooker,  29  Ohio  St.  1. 

the  face  of  the  note.  "Hunt  v.  Sandford,  14  Tenn.    (6 

*Middletown  Bank  v.  Jerome,  18  Yerg.)  387. 

Conn.  443.  "  Collger  v.  Francis,  61  Tenn.   (2 

"Kitchen  v.  Loudenback,  48  Ohio  Baxt.)  422. 


215  ADEQUACY  IN"  VALUE  UXXECESSARY.  [§  192 

instrument  may  enforce  payment  for  its  full  amount  against  all  parties 
liable,  recovery  by  the  purchaser  of  such  paper  is  not  limited  to  the 
amount  paid  therefor.  And  bad  faith  on  the  part  of  the  purchaser  of 
a  note  against  which  the  maker  had  a  valid  defense  is  not  shown  by 
the  fact  that  it  was  purchased  at  a  heavy  discount  without  inquiry  of 
the  maker  whom  the  purchaser  knew  was  perfectly  solvent  when  in- 
quiry was  made  of  the  payee  as  to  the  consideration  and  the  latter  was 
in  need  of  money,  and  the  note,  thougli  held  at  the  time  in  the  state 
where  the  suit  was  brought,  was  payable  in  a  foreign  jurisdiction,  the 
inaccessibility  of  which  for  half  the  year  the  court  would  take  judicial 
notice,  and  the  purchase  was  made  some  time  before  maturity  and 
without  notice  of  any  infirmity  in  the  paper.^^  But  one  who  pur- 
chases a  note  for  one-sixteenth  of  its  face  value  is  not  a  bona  fide 
holder  where  he  knew  defendant  was  in  fair  credit  and  able  to  re- 
spond." And  where  the  amount  paid  was  very  much,  less  than  that 
of  the  note  and  it  was  purchased  of  a  stranger,  the  question,  whether 
or  not  reasonable  inquiry  would  have  shown  the  circumstances,  was 
held  to  be  one  for  the  jury.^'^  If  one  purchases  a  note  from  a  person 
in  whose  possession  it  is  and  to  whose  order  it  is  payable,  for  a  cer- 
tain «6um  of  money,  one-half  of  which  is  received  in  cash,  and  the  other 
half  is  not  paid  and  the  note  is  collected,  he  is  in  no  different  position 
than  if  he  had  purchased  the  note  on  credit  for  one-half  its  value,  and 
he  is  liable  to  the  actual  owner  of  the  one-half  interest  in  the  note, 
even  though  at  the  time  of  purchase  he  had  no  notice  of  the  actual 
owner's  interest,  although  he  knew  that  the  note  belonged  to  some 
other  person  than  his  assignor,  as  in  such  case  he  is  not  a  bona  fide 
holder.^^ 

§  192.  Adequacy  in  value  unnecessary. — It  is  not  necessary  that 
the  consideration  of  a  note  shall  equal  in  pecuniary  value  the  face  of 
the  obligation  given. ^^  If  no  part  of  the  consideration  is  wanting  i,it 
the  time  and  no  part  of  it  sul)sequently  fails,  although  inadequate  in 
amount,  the  note  is  a  valid  obligation.-^    And  if  notes  are  somewhat 

"McNamara    v.    Jose,    28    Wash.  "  Yarwood  v.  Trusts  &  Guarantee 

461,  68  Pac.  903;  Laws  1899,  p.  350,  Co.,  Ltd.,  87  N.  Y.  Supp.  947,  950,  94 

§  57.    See  N.  Y.  Neg.  Inst.  Law,  §  96,  App.  Div.  47,  per  Hiscock,  J.;   Earl 

appendix  herein.  v.    Peck,    64    N.    Y.    596,    598,    per 

'"DeWitt  v.  Perkins,  22  Wis.  451.  Church,  Ch.  J.;    Twentieth  Century 

"Gould  v.  Stevens,  43  Vt.  125,  5  Co.  v.  Quilling   (Wis.  1907),  110  N. 

Am.  Rep.  265.  W.  174. 

''Kersey    v.    Fuaqua     (Tex.    Civ.  ="  Earl  v.  Peck,  64  N.  Y.  596,  598; 

App.  1903),  75  S.  W.  56.  per  Church,  Ch.  J. 


§    192]  ADEQUACY    OR   SUFFICIENCY   OF    CONSIDERATION.  316 

larger  than  the  sum  exigible,  their  valid  consideration  will  not  be  im- 
paired.^^  So  if  a  note  is  given  for  a  larger  sum  than  the  amount  of 
gold  borrowed  but  it  is  for  a  sum  equal  to  the  worth  of  the  gold  in 
paper  currency  there  is  a  valid  obligation.^^  And  if  a  draft  is  accepted 
solely  for  honor,  and  by  means  of  the  acceptance  an  assignment  and 
possession  of  a  bill  of  lading  is  obtained,  the  fact  that  the  bill  of  lad- 
ing which  is  taken  as  collateral  security  is  not  of  as  great  value  as  was 
supposed  affects  the  adequacy  of  the  consideration,  but  not  its  suf- 
ficiency in  point  of  law,  and,  it  not  being  necessary  that  the  considera- 
tion be  adequate  in  value  to  support  a  contract,  and  there  being  no 
pretense  of  fraud,  the  receipt  of  such  collateral,  though  of  little  value, 
constitutes  a  legal  consideration.^^  So  the  amount  of  a  note  may  be 
for  a  sum  in  excess  of  the  value  of  the  property  purchased  or  right 
granted^^*  much  larger  than  the  value  of  services  agreed  to  be  ren- 
dered.^* While  mere  gratuitous  services  are  an  insufficient  considera- 
tion for  any  executory  agreement  or  promise,  the  performance  of 
services  and  furnishing  of  valuable  things,  not  as  a  gratuity,  but  in 
expectation  of  being  compensated  therefor,  is  sufficient  to  sustain  a 
promissory  note  for  an  amount  in  excess  of  the  real  value  of  the 
services  performed  or  things  furnished.  In  the  absence  of  fraud  an 
existing  legal  obligation  Mall  sustain  a  promise  to  j)ay  an  amount 
for  the  excess  of  its  real  value. -^  iVgain,  it  is  well  settled  that  courts 
will  not  overturn  such  an  oliligation  because  too  liberal  an  amount 
has  been  paid  for  services  rendered  and  to  compensate  which  the  note 
is  given ;  and  if  no  part  of  the  consideration  was  wanting  at  the  time 
and  no  part  of  it  subsequently  failed,  the  note  is  a  valid  contract, 
although  inadequate  in  amount.^  And  the  maker  of  a  note,  given 
to  the  payee  for  surveys  made  by  the  latter  at  his  instance,  cannot  re- 
sist payment  on  the  ground  that  the  amount  was  out  of  proportion 

=^  Lanati    v.    Bayhi,    31    La.    Ann.  ==  In  re  Bradbury,  93  N.  Y.  Supp. 

229.  418,  422.     The  court  per  Chase,.  J., 

"  Cox  v.  Smith,  1  Nev.  161,  90  Am.  cites  Gallagher  v.  Brewster,  153  N. 

Dec.  476.     See  Southern  Ins.  Co.  v.  Y.  364,  47  N.  E.  450;  Cowee  v.  Cor- 

Lanier,  5  Fla.  110,  58  Am.  Dec.  448.  nell,  75  N.  Y.  98,  31  Am.  Rep.  428; 

==  Kelly  v.  Lynch,  22  Cal.  661.  Earl   v.    Peck,    64    N.    Y.    597;    Yar- 

=3*  Twentieth  Century  Co.  v.  Quil-  wood  v.  Trust  &  Guarantee  Co.,  Ltd., 

ling  (Wis.  1907),  110  N.  W.  174.  94  App.  Div.  47,  87  N.  Y.  Supp.  947; 

=*  Miller  v.  McKenzie,  95  N.  Y.  575,  Bush  v.   Whitaker,   45   Misc.   75,   91 

47  Am.  Rep.  85.    See  Weed  v.  Bond,  N.  Y.  Supp.  616.     See  also  "Illustra- 

21  Ga.  195,  Stat.  1831,  Cobbs,  Dig.,  tions"  of  services,  §  194,  herein, 

p.   91,  as  to   equities  of  note  given  ^''Yarwood  v.  Trusts  &  Guarantee 

attorney     for     services,     Whett     v.  Co.,  Ltd.,  87  N.  Y.  Supp.  947,  950,  94 

Blount  (Ga.),  53  S.  E.  205.  App.  Div.  47,  per  Hiscock,  J. 


Il 


217  INADEQUACY  OR  I^TSUFFICIENCY  OF   CONSIDERATIOX.       [§    193 

to  the  value  of  the  services  rendered. ^^  So  in  an  action  upon  a  note 
given  for  the  price  of  trees,  it  was  held  that  there  being  neither  war- 
ranty or  fraud  the  maker  could  not  insist  upon  inadequacy  of  con- 
sideration as  a  ground  for  reducing  the  damages.-^ 

§  193.  Inadequacy  or  insufficiency  of  consideration— Rule  as  to 
inquiry  into — Fraud. — In  an  action  upon  a  note  mere  inadequacy  of 
consideration,  there  being  no  warranty,  misrepresentation,  fraud,  or 
undue  influence,  cannot  be  given  as  a  defense,-''  where  the  parties  have 
dealt  on  equal  terms.""  So,  as  between  the  original  parties,  and  where 
the  adverse  rights  of  creditors  are  not  in  question,  the  law  will  not  in- 
quire into  the  adequacy  or  sufficiency  of  the  consideration.^^  And  it  is 
also  declared  that  equity  will  not  grant  relief  unless  the  inadequacy  is 
so  gross  as  to  shock  the  conscience  and  lead  to  the  irresistible  conclu- 
sion of  fraud  ;^-  and  that  the  fraud  must  also  extend  to  the  entire 


"Rightor  V.  Aleman,  4  Rob.  (La.) 
45;  Civ.  Code  Arts.  1854-1857. 

^Johnson  v.  Titus,  2  Hill  (N.  Y.) 
606. 

="2Vew  York.— Earl  v.  Peck.  64  N. 
Y.  596,  598,  per  Church,  Ch.  J.; 
Johnson  v.  Titus,  2  Hill  (N.  Y.) 
606. 

See  also  Connecticut. — Appeal  of 
Clark,  57  Conn.  565,  19  Atl.  332 
(applied  where  there  is  a  legal  con- 
sideration);  Abbe  V.  Newton,  19 
Conn.  20  (consideration  of  note  was 
grossly  inadequate  and  fair  infer- 
ence was  that  parties  so  under- 
stood). 

Georgia. — Green  v.  Lowry,  38  Ga. 
5848  (under  Code,  §§  2700,  2701, 
mere  inadequacy  of  consideration 
alone  will  not  void  a  contract.  If 
the  inadequacy  be  great,  it  is  a 
strong  circumstance  to  evidence 
fraud,  and  on  a  suit  for  damages  for 
breach  of  the  contract  the  inade- 
quacy of  the  consideration  will  al- 
ways enter  as  an  element  in  estimat- 
ing the  damages). 

Indiana. — Hereth  v.  Bank,  34  Ind. 


380;  Wheelock  v.  Barney,  27  Ind. 
462. 

lotoa. — Lay  v.  Isman,  36  Iowa  305. 

Kentucky. — Roby  v.  Sharp,  6  T.  B. 
Mon.  (Ky.)  375. 

Massachusetts. — Dean  v.  Carruth, 
108  Mass.  242,  245. 

New  York. — Vosburg  v.  Diefen- 
dorf,  119  N.  Y.  357,  23  N.  E.  80; 
Maas  v.  Chatfleld,  90  N.  Y.  303  (pur- 
chased at  a  discount  exceeding  the 
legal  rate  of  interest) ;  Root  v. 
Strang,  77  Hun  (N.  Y.)  14,  28  N.  Y. 
Supp.  273. 

Ohio. — Dieringer  v.  Klekamp 
(Ohio),  11  Wkly.  Law  Bui.  123 
(fraud  was  not  alleged). 

Virginia. — Loftus  v.  Maloney,  89 
Va.  576,  16  S.  E.  749. 

Federal. — Boggs  v.  Wann,  58  Fed. 
681  (not  a  good  defense  in  absence 
of  misrepresentations  or  fraud). 

="  Cowee  v.  Cornell,  75  N.  Y.  91,  31 
Am.  Rep.  428. 

"Parish  v.  Stone,  31  Mass.  (14 
Pick.)  198,  207,  25  Am.  Dec.  378, 
per  Shaw,  C.  J. 

'=  Jones  V.  Deggs,  84  Va.  685,  5  S. 
E.  799. 


§    19-i]  ADEQUACY    OR    SUFFICIENCY    OF    CONSIDERATIOISr.  218 

consideration.^^  When  the  inadequacy  of  the  consideration  is  such  as  to 
create  a  presumption  of  fraud  and  overreaching,  or  of  unconscientious 
advantage,  taken  under  circumstances  of  distress  and  improvidence,  on 
the  one  side,  or  of  mental  incompetency  on  tlie  other,  the  contract 
founded  thereon  cannot  be  enforced  in  law  or  in  equity;  and  a  court 
of  equity  will,  at  the  instance  of  the  party  deceived,  interfere  and  set  it 
aside  after  it  is  executed.  In  cases  of  gross  inadequacy  the  court  will 
also  take  advantage  of  every  circumstance  which  indicates  imposition 
or  improper  advantage,  to  found  a  presumption  of  fraud,  and  thereby 
to  rescind  the  contract.  The  mere  inadequacy  of  the  consideration  is 
not,  however,  in  such  cases,  the  ground  upon  which  a  contract  is  invali- 
dated, but  the  fraud  which  is  thereby  indicated,  and  however  inade- 
quate the  consideration  may  be,  yet  if  the  circumstances  of  the  case 
indicate  no  unfair  advantage  on  the  one  side,  or  no  great  incompetency 
on  the  other,  the  contract  will  he  valid. ^*  Again,  inadequacy  will  not 
be  of  avail  as  a  defense  in  an  action  by  an  indorsee  against  an  in- 
dorser,^^  nor,  in  general,  will  inadequacy  support  a  plea  of  want  of 
consideration;^^  but  in  an  action  by  the  indorsee  against  the  maker, 
upon  a  note  indorsed  after  maturity,  it  is  a  defense  that  there  was  want 
of  sufficient  consideration,  such  note  being  also  based  upon  a  considera- 
tion which  was  but  the  promise  to  pay  the  debt  of  another.^^ 

§  194.  Sufficient  consideration — Illustrations. — Negotiable  paper 
has  been  held  to  be  founded  upon  a  sufficient  consideration;  where 
such  consideration  consists  of  the  value  of  an  interest  in  land  and  the 
balance  is  for  compensation  for  domestic  ser^dces,  rendered  by  an  adult 
daughter  to  her  widowed  mother,  such  note  being  given  by  the  mother 
to  the  daughter  f^  where  the  consideration  is  expressed  to  be  for  money 
and  services  rendered  equivalent  to  the  amount  of  the  note  and  in  full 
therefor  when  paid,  and  the  note  was  executed  to  the  testator's  grand- 
daughter who  had  lived  with  him  for  years  and  rendered  household  and 
personal  services  both  before  and  after  the  delivery  of  the  note;^'' 
where  a  check  was  delivered  inter  vivos  to  decedent's  housekeeper,  upon 
whom  he  had  been  more  dependent  than  upon  any  other  person,  and 

=^  Harlem  v.  Read,  3  Ham.  (Ohio)  =^Wyman   v.    Gray,    7    Har.    &   J. 

285,  17  Am.  Dec.  594.  (Md.)  409.    See  §§  234,  235,  239-241, 

=**  Green  v.  Lowry,  38  Ga.  548,  552,  243,  herein, 

quoting    from    Story    on    Contracts,  ^  Petty    v.    Young,    43    N.    J.    Eq. 

§  432.  654,  12  Atl.  374. 

^^  Dunn  v.  Ghost,  5  Colo.  134.  ^»  Velie  v.  Titus,  60  Hun    (N.  Y.) 

==Rice  v.  Rice,  106  Ala.  636,  17  So.  405,  15  N.  Y.  Supp.  467. 
626. 


219  SUFFICIENT    COXSIDERATIOX — ILLUSTRATIOXS,  [§    194 

who  had  been  faithful  and  honest  ;^°  where  the  payee,  being  under  no 
legal  obligation  to  live  with  his  wife,  nor  compelled  to  support  her 
child,  with  whom  slie  was  pregnant  by  another  man  at  the  time  of  her 
marriage,  but  without  her  husband's  then  knowledge,  agrees  as  a  con- 
sideration for  a  note  to  live  with  and  support  them  ■,*'^  where  the  paper 
is  given  by  a  stockholder  of  an  association  for  his  proportionate  share 
of  guaranteed  indebtedness  and  he  is  released  therefrom,  and  transfers 
his  stock,  although  he  had  paid  in  full  for  such  stock  ;*-  where  the  note 
is  executed  to  an  incorporated  college  as  an  aid  toward  effectuating 
the  purposes  of  its  incorporation,  and  on  the  strength  thereof  the  col- 
lege has  incurred  obligations;*^  where  it  was  given  as  part  of  a  con- 
sideration of  an  agreement  to  quitclaim  an  interest  in  certain  laud, 
and  to  dismiss  an  action  to  quiet  title  as  fast  as  certain  portions  of  the 
land  were  sold,  even  though  a  part  of  the  note  remaining  unpaid,  the 
suit  to  quiet  title  was  renewed  and  finally  determined  against  the 
plaintiff;**  where  the  paper  is  given  for  a  deed  to  remove  a  supposed 
cloud  upon  title  to  land  ;*5  where  there  were  differences  between  plain- 
tiff and  defendant,  and  the  former  had  a  lien  upon  the  latter's  prop- 
erty which  prevented  him  from  receiving  a  payment  on  a  building 
contract,  and  for  the  purpose  of  discharging  that  lien  and  thus  obtain- 
ing the  desired  payment,  there  being  no  duress,  and  the  order  in  ques- 
tion was  given  upon  an  account  stated;**'  where  a  surety's  note  on  a 
cashier's  bond  is  executed  for  forbearance  in  suing  on  such  bond;*'' 
where  a  note  of  a  son  is  indorsed  by  a  mother  to  secure  a  debt  of  her 
husband   in    consideration    of    an    agreement   to    forbear    action;*^* 

*"  Clay  V.  Layton,  134  Mich.  317,  96  the  court  to  make  a  finding  upon 

N.  W.  458,  10  Det.  Leg.  N.  481.  this  matter  is  accounted  for  by  the 

"  Brannum  v.  O'Connor,  77  Iowa  absence  of  any  such  issue,  and  the 

632,  42  N.  W.  504.  deficiency  of  the  complaint,  if  any, 

"  Hilbert  v.  Burry,  111  Mich.  698,  cannot  be  considered  on  this  appeal. 

70  N.  W.  318,  3  Det.  L.  N.  866.  As  to   evidence,   it   showed   a   good 

"Irwin  V.  Webster,  56  Ohio  St.  9,  and  sufficient  consideration  for  the 

46  N.  E.  63,  60  Am.  St.  Rep.  727,  36  contract  at  the  time  it  was  made." 

L.  R.  A.  239,  37  Ohio  L.  J.  157.  «  Rowe  v.   Barnes,   101   Iowa  302, 

"  Sharp  V.  Bowie,  142  Cal.  462,  76  70  N.  W.  197. 

Pac.   62.     The   action   was  one   for  *"  Creveling  v.   Saladino,  89  N.  Y. 

specific  performance  and  one  of  the  Supp.    834,    836,    97    App.    Div.    202. 

appellant's  claims  was  based  partly  "The  renewal  of  the  lien  was  a  suf- 

upon  the  failure  of  the  plaintiff  to  ficient  consideration  for  the  order," 

allege,  and  of  the  court  to  find  that  per  Bartlett,  J. 

there  was  a  fair  and  adequate  con-  ^^  Fink  v.  Farmers'  Bank,  178  Pa. 

sideration  for  the  contract  and  note  154,  35  Atl.  636. 

and  partly  upon  the   evidence,  and  ■"*  Emerson    v.    Sheffer,    113    App. 

Beatty,  C.  J.,  said:    "The  failure  of  Div.  (N.  Y.)  19,  98  N.  Y.  Supp.  1057. 


§    194]  ADEQUACY    OR    SUFFICIENCY    OF    CONSIDERATION.  220 

where  the  note  is  executed,  without  fraud,  to  cover  a  shortage  in  a 
deceased  husband's  account  as  co-executor  of  an  estate,  and  in  pursu- 
ance of  a  compromise  and  dismissal  of  legal  proceedings  against  the 
surviving  executor;*®  where  a  person  who  is  either  a  defaulter  or  a 
debtor  executes  a  note  for  the  amount  due  and  his  sister  also  executes  a 
note  as  collateral  ;*^*  where  the  consideration  of  a  note,  given  by  sur- 
viving partners  and  an  executrix  and  residuary  legatee  of  a  deceased 
partner,  is  the  surrender  of  a  guaranty  of  collection  or  payment  of  cer- 
tain securities  and  the  transfer  to  the  members  of  the  old  firm  of  the 
partnership  property  ;*®  where  a  note  is  given  by  a  debtor  of  the  testa- 
tor to  one  who  was  about  to  administer  the  estate,  the  latter  promis- 
ing to  execute  a  receipt  for  the  money  as  administrator  after  qualify- 
ing as  such  f°  where  the  maker  of  the  note  has  received  all  of  the  tes- 
tator's property,  and  as  a  consideration  therefor  decedent's  note  is  can- 
celled and  additional  time  given  to  pay  the  debt;^^  where  a  party  en- 
ters into  a  compromise  agreement  with  his  other  creditors,  at  the  in- 
stance of  a  bank,  and  gives  to  said  bank  its  note  to  obtain  funds  to 
consummate  said  settlement ;"-  for  the  execution  of  a  note  by  another, 
where  the  time  of  payment  of  a  note  is  extended  to  one  of  the  makers.^^ 
Where  a  third  person  gives  his  check  to  discharge  a  note  secured  by  a 
mortgage  which  the  holder  was  threatening  to  enforce  by  taking  the 
property  covered  by  the  mortgage.^^*  So  a  note  is  founded  upon  a 
good  consideration  where  it  is  given  for  information  of  an  outstand- 
ing title  to  land  in  another's  adverse  possession.^*  And  the  re- 
lease of  dower  by  a  wife  is  a  valuable  consideration  for  a  note  ex- 
ecuted by  her  husband  to  her.^^  So  a  note  is  based  upon  a  suffi- 
cient consideration  where  it  is  given  between  citizens  of  the  United 
States  for  the  right  of  occupancy  of  land  of  an  Indian  Nation, 
and  peaceable  possession  is  taken.^^     The  consideration  is  also  valid 

^'Rohrbacher  v.  Aitken,   145   Cal.  L.  N.  482.     See  In  re  Kemp's  Estate, 

485,  78  Pac.  1054.  4y  Misc.  R.    (N.  Y.)    396,  100  N.  Y. 

^^*  Henry    v.    State    Bank     (Iowa  Supp.  221. 

1906),  107  N.  W.  1034.  =■*  National   Bank  of   Newbury  v. 

*^  Fitch  v.  Frazer,  82  N.  Y.  Supp.  Sayer,  73  N.  H.  595,  64  Atl.  189. 

138,  84  App.  Div.  119.  ""  Lucas  v.  Pico,  55  Col.  126. 

=0  Nelson  v.  Lovejoy,  14  Ala.  568.  "  Trust  Co.  v.  Bendow,  135  N.  C. 

^•McCormal    v.    Redden,    46    Neb.  303,  47   S.  E.  435,  granting  rehear- 

776,  65  N.  W.  881.  ing  of  same  case,  131  N.  C.  415,  42 

"■-  Mahoney    v.    Barber,    67    Minn.  S.  E.  896. 

308,  69  N.  W.  886.  ="  Tye   v.    Chickasha   Town   Co.,   2 

"  Union    Banking   Co.    v.    Martin,  Ind.  Ty.  113,  48  S.  W.  1021. 
113  Mich.  521,  71  N.  W.  867,  4  Det. 


I 


221       COMPROMISE,  SETTLEMENT  OR  RELINQUISHMENT  NOTE.        [§    195 

where  there  is  a  benefit  to  the  maker  or  a  third  person,  as  well  as  where 
the  maker  is  benefited.^^  Again,  a  purchase  of  property  is  a  valid 
consideration  for  a  married  woman's  note  and  a  promissory  note  is 
property.  The  fact  that  the  maker  may  be  irresponsible  does  not 
change  the  rule  that  one  buying  a  note  buys  property.^*  And  where 
the  agent  of  the  maker  receives  the  amount  of  a  note  and  it  is  used 
for  the  latter's  benefit,  it  is  immaterial  that  it  was  furnished  for  the 
payee  by  a  third  person.^**  But  services  rendered  by  a  daughter  to  her 
mother,  which  are  such  as  she  is  morally  bound  to  render,  do  not  con- 
stitute a  valuable  consideration  for  a  note  subsequently  given  by  her 
father,  and  no  recovery  can  be  had  thereupon  in  the  absence  of  an  ex- 
press promise.®" 

§  195.  Compromise,  settlement  or  relinquishment  note. — A  note 
given  in  compromise  or  settlement  of  a  doubtful  claim  in  dispute,  or  of 
a  controversy  likely  to  become  the  subject  of  litigation,  or  in  settle- 
ment of  a  litigated  claim,  such  compromise  or  settlement  being  a  dis- 
charge or  extinguishment  of  the  claim  or  controversy,  is  based  upon  a 
valid  and  sufficient  consideration  where  such  compromise  or  settlement 
is  made  fairly,  in  good  faith,  without  mistake,  undue  influence,  mis- 
representation, false  statement,  fraud  or  duress,  and  each  party  under- 
stands the  facts,  and  the  maker  of  the  note  is  not  ignorant  of  the  nature 
of  his  rights.**^    The  invalidity  of  the  original  obligation  is  no  de- 

"  Barrett  v.  Mahnken,  6  Wyo.  541,  New  York. — Chapman  v.  Ogden,  37 

48  Pac.  202.    See  Fulton  v.  Loughlin,  N.  Y.  App.  Div.  355,  56  N.  Y.  Supp. 

118  Ind.  286.  73,  aff'd  165  N.  Y.  642,  59  N.  E.  1120; 

'^''  Crampton  v.  Newton's  Est.,  132  General  Electric  Co.  v.  Nassau  Elec- 

Mich.  149,  93  N.  W.   250,  9  Det.  L.  trie  Co.,  36  N.  Y.  App.  Div.  510,  55 

N.  570.  N.  Y.  Supp.  858,  aff'd  161  N.  Y.  650. 

For  other  instances  of  a  sufficient  57  N.  E.  1110. 

consideration  for  a  note  see  the  fol-  Federal. — Morris  v.  North,  21  C.  C. 

lowing  cases:  A.   553,  43  U.  S.  App.   739,  75  Fed. 

California. — Baldwin  v.  Hart,  136  912. 

Cal.   222,   68   Pac.    698;    Wheelan    v.  Examine    Murphy   v.    Gumaer,    18 

Swain,   132    Cal.    389,   64    Pac.    560;  Colo.  App.  183,  70  Pac.  800. 

Placer  County  Bank  v.  Freeman,  126  =^*  Hale  v.  Harris,  28  Ky.  Law  R. 

Cal.  90,  58  Pac.  388.  1172,  91  S.  W.  660. 

CoZorado.— Reed     v.      First     Nat.  "^  Shugart  v.    Shugart,   111   Tenn. 

Bank,  23  Colo.  380,  48  Pac.  507.  179,  76  S.  W.  821.     See  §  192  herein. 

Illinois. — Hart  v.   Strong,  183   111.  ^^  Alabama. — Booth       v.        Dexter 

349,  55  N.  E.  629;   Smith  v.  McLen-  Steam  Fire  Engine  Co.,  118  Ala.  369. 

nan,  101   111.   App.  196;    Rodgers  v.  24  So.  405;  Wyatt  \.  Evins,  52  Ala. 

Jewell    Belting    Co.    (111.    App.),    56  285  (when  no  fraud). 
N.  E.  1017. 


§    195]  ADEQUACY   OR   SUFFICIENCY    OF    CONSIDERATION". 


223 


fense/^*  as  it  does  not  matter  on  whose  side  the  right  ultimately  turns 
out  to  be/-  and  the  validity  of  the  compromise  will  not  be  affected  by 
the  subsequent  ascertainment  of  the  fact  that  the  claim  is  without 
foundation  f^  for,  if  the  setting  up  of  the  original  defense  to  the  whole 


Arkansas. — Richardson  v.  Corn- 
stock,  21  Ark.  69. 

California. — Rohrbacher  v.  Aitken, 
145  Cal.  485,  78  Pac.  1054. 

District  of  ColumMa. — Northern 
Leberty  Market  Co.  v.  Steubner,  4 
Mackey  (D.  C.)  301. 

Georgia. — Johnson  v.  Redwine,  98 
Ga.  112,  25  S.  E.  924  (compromise 
of  doubtful  claim  to  sufficient  con- 
sideration to  support  a  note  fairly 
given  in  settlement  of  the  contro- 
versy compromised) ;  Austell  v. 
Rice,  5  Ga.  472  (forbearance  to 
prosecute  a  legal  claim  and  the  com- 
promise of  a  doubtful  right  are  both 
sufficient  considerations). 

Iowa. — Rowe  v.  Barnes,  101  Iowa 
302,  70  N.  W.  197;  French  v.  French, 
84  Iowa  655,  15  L.  R.  A.  300,  51  N. 
W.  145. 

Kentucky. — Power  v.  Hambrick, 
25  Ky.  L.  Rep.  301,  74  S.  W.  660. 
(Settlement  of  suit  is  sufficient  con- 
sideration for  note) ;  Rains  v.  Lee, 
18  Ky.  L.  Rep.  285.  36  S.  W.  176 
(compromise  of  claim  and  dismissal 
of  suit  is  sufficient  consideration). 

Massachusetts. — Bent  v.  Weston, 
167  Mass.  529,  46  N.  E.  386  (there 
was  no  contention  of  any  fraud  or 
duress  and  the  check  was  volun- 
tarily given.  All  the  facts  were 
known,  and  a  settlement  was  ef- 
fected by  giving  the  check);  East- 
on  V.  Easton,  112  Mass.  438  (note 
was  fairly  and  freely  given  in  set- 
tlement of  a  disputed  claim  likely 
to  become  the  subject  of  litigation) ; 
Cobb  V.  Arnold,  49  Mass.  (8  Mete.) 
403,  405  (a  compromise  fairly  made 
of  a  claim  in  dispute  bfetween  the 
parties,  there  being  no  misrepresen- 


tation or  false  statement  of  facts, 
and  the  defendant  not  being  igno- 
rant of  the  nature  of  his  rights  con- 
stitutes a  good  consideration  for  a 
note,  per  Hubbard,  J.). 

Minnesota. — Northern  Pac.  Ry.  Co. 
V.  Holmes,  88  Minn.  389,  93  N.  W. 
606. 

Mississippi. — Boone  v.  Boone,  58 
Miss.  820. 

Missouri. — Pickel  v.  St.  Louis 
Chamber  of  Commerce  Assn.,  80  Mo. 
65,  66  ("in  the  absence  of  fraud  in 
procuring  it,  mistake  in  making  it, 
or  ignorance  of  his  rights  when  the 
settlement  was  made"  a  counter- 
claim against  such  note  arising  out 
of  the  matters  compromised  will  not 
be  allowed). 

New  Jersey. — Conover  v.  Stillwell, 
34  N.  J.  L.  54,  58. 

New  York. — Housatonic  National 
Bk.  V.  Foster,  85  Hun  (N.  Y.)  376,  32 
N.  Y.  Supp.  1031,  66  N.  Y.  St.  R.  435. 

Ver7no7it. — Willard  v.  Dow,  54  Vt. 
182,  186,  41  Am.  Rep.  841  (compro- 
mise of  a  doubtful  right  is  suffi- 
cient). 

Virginia. — Zane  v.  Zane,  Munf. 
(Va.)  406,  412  ("here  were  two  con- 
siderations, not  only  good,  but  fa- 
vored in  law,  to  compromise  doubt- 
ful right,  and  to  settle  boundaries"). 

Federal. — N/arthern  Liberty  Mar- 
ket Co.  V.  Kelly,  113  U.  S.  199,  28  L. 
Ed.  948,  5  N.  Y.  Supp.  422. 

"*  French  v.  French,  84  Iowa  655, 
15  L.  R.  A.  300,  51  N.  W.  145. 

«=  Willard  v.  Dow,  54  Vt.  182,  186, 
41  Am.  Rep.  841,  per  Veazey,  J. 

'"Rowe  V.  Barnes,  101  Iowa  302, 
70  N.  W.  197. 


223      COMPROMISE,    SETTLEMENT    OR   RELINQUISHMENT    NOTE.      [§    195 

claim  were  not  precluded,  all  compromises  would  be  unavailing  and  all 
settlements  by  way  of  mutual  concession  would  be  defeated.''*  So  a 
counterclaim  against  such  a  note  arising  out  of  the  matters  compro- 
mised will  not  be  allowed.*'^  And  where  legal  proceedings  have  been 
dismissed  upon  a  compromise  agreement,  the  parties  cannot  afterward 
make  the  agreement  depend  upon  the  question  whether  or  not  the  party 
could  have  prevailed  in  such  proceeding.*"*  Again,  as  is  said  in  a 
Pennsylvania  case :  "The  mutual  giving  up  of  something  for  the  sake 
of  peace  is  itself  a  consideration  for  an  agreement  that  each  party  shall 
be  satisfied  with  the  event,  however  it  may  turn  out."^'^  In  a  New 
Jersey  case  the  court  also  asserts  the  rule  that  a  compromise  of  a  doubt- 
ful claim  constitutes  a  sufficient  consideration,  whatever  the  actual 
rights  of  the  parties  may  have  been,  and  adds :  "What  substance  there 
must  be  in  a  claim,  to  make  a  compromise  of  it,  unless  it  is  actually  in 
suit,  a  valid  consideration  has  occasioned  a  great  contrariety  of  deci- 
sion. *  *  *  But  *  *  *  there  is  no  controversy  that  the  claim, 
whatever  it  was,  must  be  extinguished  or  discharged."*'^  If  a  note  is 
given  in  settlement  of  an  amount  found  due  upon  a  contract  for  work 
which  was  represented  to  have  been  properly  done,  in  an  action  by  the 
payee  upon  the  paper  it  is  no  defense  that  the  work  was  not  done  in 
compliance  with  the  contract,  it  not  being  averred  that  the  defendant 
was  deceived  in  any  way  or  was  ignorant  of  the  character  of  the  work, 
or  that  he  had  no  opportunity  to  examine  it,  or  had  not  examined  it, 
or  that  there  was  any  concealment  by  the  plaintiff  as  to  the  work.'''* 
In  case  a  note  given  to  cover  a  supposed  liability  is  coupled  with  a  re- 
lease of  all  claims  and  demands  it  is  founded  upon  a  valuable  and  sufii- 
cient  consideration, '°  and  the  general  rule  that  a  settlement  of  a  claim 
is  a  sufficient  consideration  for  a  note  applies  where  the  ownership  of 
trees,  cut  from  land,  is  asserted  by  a  claimant  thereto,  and  in  settle- 
ment therefor  a  note  is  given  to  the  claimant  of  the  land  by  the  al- 
leged trespasser.'^^  There  is  also  a  good,  sufficient  and  valuable  con- 
sideration for  a  note  where  it  is  given,  without  duress,  in  settlement  of 

°*Cobb    v.    Arnold,    49    Mass.     (8  "•'Marion   &  Monroe   Gravel   Road 

Mete.)  403,  405,  per  Hubbard,  J.  Co.  v.  Kessinger,  16  Ind.  549.     See 

'"Pickel  V.  St.  Louis  Cbamber  of  Ostrow   v.    Tarver    (Tex.    Civ.   App. 

Commerce  Assn.,  80  Mo.  65,  66.  1894),  28  S.  W.  701,  29  S.  W.  69. 

"° Rohrbacher  v.  Aitken,  145   Cal.  '"Booth  v.  Dexter  Steam  Fire  En- 

485,  78  Pac.  1054.  gine  Co.,  118  Ala.  369,  24  So.  405. 

"  Clement  v.  Reppard,  15  Pa.   St.  "  Northern     Pacific     Ry.     Co.     v. 

Ill,  113,  per  curiam.  Holmes,  88  Minn.  389,  93  N.  W.  606. 

"^  Conover  v.  Stillwell,  34  N.  J.  L. 
54,  58,  per  Depue,  J. 


§    196]  ADEQUACY   OR    SUFFICIENCY    OF    COXSIDEEATIOK.  224 

damages,  for  which  it  was  believed  that  the  maker  was  liable  by  reason 
of  the  fact  that  certain  sheep  had  been  stolen  from  the  payee,  who  be- 
lieved the  maker  was  in  some  way  connected  with  the  theftJ-  If  a 
note  and  deed  are  given  in  good  faith,  without  undue  influence,  each 
party  understanding  the  acts  upon  which  the  claim  is  based,  and  the 
purpose  of  the  transaction  is  to  remove  a  supposed  cloud  on  title  to 
land,  and  that  is  accomplished,  there  is  a  sufficient  consideration  for  the 
note,  even  though  the  claim  in  question  was  without  any  valid  con- 
siderationJ^  Again,  the  release  of  claims  is  a  good  consideration  for 
a  noteJ*  And  where  legal  proceedings  have  been  instituted,  and  the 
parties,  after  investigation,  in  the  absence  of  fraud,  make  a  compro- 
mise agreement,  and  the  proceedings  are  in  consideration  thereof 
dismissed,  the  dismissal  of  the  proceedings  constitutes  a  consideration 
for  the  agreement;  and  a  note  given  in  conformity  with  such  compro- 
mise is  enforceable;^^  for  settlement  and  discontinuance  of  an  action 
is  a  sufficient  consideration,  and  an  actual  settlement  involves  practi- 
cally a  discontinuance,  the  latter  being  a  mere  incidental  matter  not 
affecting  the  rights  of  either  partyJ*'  The  relinquishment  of  an  at- 
tachment also  forms  a  good  consideration  for  a  note.'^^  A  note  for  a 
sum  resulting  from  a  compromise  constitutes  no  exception  to  the  rule 
which  permits  an  inquiry  into  the  consideration  of  the  noteJ^ 

§  196.     Same  subject — Unfounded  or  illegal  claim. — A  mere  con- 

trovers}^  between  the  parties  will  not  be  sufficient,'"  the  compromise 
must  be  a  bona  fide  controversy  or  disputed  claim. ^^  So  forbearance 
to  sue  on  a  claim  not  maintainable  is  without  consideration;^^  and  a 
note  given  for  a  supposed  demand  which  did  not  in  fact  exist  is  without 
consideration.^-  There  must  be  at  least  a  colorable  ground  of  a  claim,  in 
law  or  in  fact,  to  sustain  an  executory  contract  given  as  a  compromise 

"Bullard  v.  Smith,  28  Mont.  387,         "=  Wesselman   v.    Stuart,   30    Misc. 

72  Pac.  761.  808,     61     N.     Y.     Supp.     1110,     per 

"  Rowe  v.   Barnes,   101   Iowa  302,  O'Dwyer,  J. 
306,  70  N.  W.  197.  "  Smith  v.  Taylor,  39  Me.  242. 

'■•  Housatonic  National  Bk.  v.  Fos-         '^  Clement  v.  Reppard,  15  Pa.  St. 

ter,  85  Hun    (N.  Y.)    376,  32  N.  Y.  Ill,  113. 
Supp.  1031,  66  N.  Y.  435.  ""  Boone  v.  Boone,  58  Miss.  820. 

"Rohrbacher  v.  Aitken,   145   Cal.         "^  Duck  v.  Autle,   5   Okla.   152,  47 

485,  78  Pac.  1054.  Pac.  1056. 

A    promise    to    discontinue    poor        '^^  Foster  v.  Metts,  55  Miss.  77. 
debtor    proceedings    is    a    sufficient        ^"  Bullock  v.  Ogburn,  13  Ala.  346. 
consideration.      Fay    v.    Hunt,    190 
Mass.  378,  77  N.  E.  502. 


I 


225  COMPROMISE  OF  FORGERY  CLAIM.  [§  197 

for  it,  there  must  be  a  surrender  of  some  legal  benefit  which  the  other 
party  might  have  retained. ^^  If  a  claim  is  without  legal  merit  and  is 
clearly  and  absolutely  unsustainable  at  law  or  in  equity,  its  compro- 
mise and  promise  to  pay  it,  whether  its  legal  validity  was  known  or  not 
at  the  time,  constitutes  no  sufficient  legal  consideration  for  a  release 
or  agreed  compromise.^*  And  if  the  claim  settled  is  wholly  illegal  and 
unfounded,  and  no  suit  is  brought  thereon  which  is  the  subject  of  a 
compromise,  its  settlement  is  not  a  sufficient  consideration  for  a  note.*'-"' 
Therefore,  where  the  sole  consideration  of  a  note  is  the  dismissal  of  a 
contest  which  the  party  asserting  it  knew  was  groundless  and  without 
any  cause  and  which  was  prosecuted  solely  for  a  wrongful  and  illegal 
purpose  no  recovery  can  be  had  on  the  note.'*''  So  a  due-bill  given  by 
the  defendant  in  a  criminal  case  to  the  clerk  of  a  court,  in  settlement 
of  a  bill  for  costs  rendered  by  the  clerk  before  there  had  been  any  con- 
viction of  the  accused,  who  was  eventually  acquitted,  is  without  any 
legal  consideration.®^  And  the  holder  of  a  note  who  has  been  paid 
cannot  hold  on  to  the  security  and  the  note  secured,  and  l)y  denying 
the  pajmient  create  a  controversy  which  will  support  a  promise  to  pay 
him  the  second  time,  in  whole  or  in  part,  as  the  price  of  doing  that 
which  the  law  and  equity  and  good  conscience  require  him  to  do  witli- 
out  compensation.^®  Again,  if  the  promise  is  extorted  by  threats  to 
sue  on  a  claim  which  the  party  knew  was  wholly  unfounded,  and  whicli 
he  was  making  for  the  purpose  of  extorting  money,  the  contract  is  ut- 
terly void.®^ 

§  197.  Compromise  of  forgery  claim. — A  compromise  is  a  good  and 
sufficient  consideration  for  a  new  note  given  in  settlement  of  a  civil 
suit  upon  a  note  to  which  the  defense  of  forgery  is  set  up.  Such  a  case 
not  being  an  indictment  for  forgery  and  a  note  given  upon  an  agree- 
ment not  to  prosecute.°*^ 

''  Smith  v.  Boruff,  75  Ind.  412,  416.  ""  Duck  v.   Autle,   5   Okla.   152,   47 

"  Acknowledged  to  be  a  "well  rec-  Pac.  1056. 

ognized  principle"  in  Booth  v.  Dex-  "Wells  v.  Potter,  120  Ga.  889,  48 

ter  Steam  Fire  Engine  Co.,  118  Ala.  S.  E.  354. 

369,  377,  24  So.   405,  per  Haralson,  "*«  Smith    v.    Boruff,    75    Ind.    412. 

J.,  but  a  note  given  to  cover  a  sup-  416. 

posed  liability  was  held  in  that  case  '"  Willard  v.  Dow,  54  Vt.  182,  186, 

to  be  based  upon  a  valid  considera-  187,  41  Am.  Rep.  841,  per  Veazey,  J. 

tion.     Union  Collection  Co.  v.  Buck-  ""Grant  &  Kelly  v.  Chambers,  30 

man  (Cal.  1907),  88  Pac.  708.  N.  J.  L.  323. 

''  Tucker  v.  Ronk,  43  Iowa  80.   See 
Conover  v.  Stillwell,  34  N.  J.  L.  54. 
Joyce  Defenses — 15. 


CHAPTER  X. 

WANT    OR   FAILURE   OF    CONSIDERATION". 


Sec.  Sec. 

198.  Total   want  of   consideration —     216. 

Defense  between  original  or 
immediate  parties. 

199.  Upon   acceptance — Between   ac- 

ceptor   and    other    parties — 
Want  of  consideration. 

200.  Indorser   and    indorsee    as   im- 

mediate   parties — W  ant    of 
consideration. 

201.  Partial  want  of  consideration. 

202.  Total  failure  of  consideration — 

Defense  between  original  or 
immediate  parties. 

203.  Upon    acceptance — Between   ac- 

ceptor   and    other    parties — 
failure  of  consideration. 

204.  Indorser    and    indorsee    as    im- 

mediate   parties — Failure    of 
consideration. 

205.  Consideration     acknowledged — 

Failure  of  consideration. 

206.  Non-negotiable    paper    made   at 

request    of    another — Failure 
of  consideration. 

207.  Partial  failure  of  consideration 

— Defense — Between   original 
parties. 

208.  Same    subject — Review    of    de- 

cisions. 

209.  Where    number    of    notes    are 

given — Partial  failure  of  con- 
sideration. 

210.  Rescinding  contract  and  restor- 

ing    consideration  —  General 
rule. 

211.  Same     subject — Exceptions     to 

and  qualifications  of  rule. 

212.  As  to  guarantors. 

213.  As  to  sureties. 

214.  As  to  donor  and  donee. 

215.  As  to  donor  and  donee — Nego- 

tiable check  on  bank. 

226 


217. 
218. 

219. 
220. 


221. 


222. 


223. 


224. 


225. 


226. 


227. 


228. 


229. 


230. 
231. 
232. 


233. 

234. 
235. 


Joint  and  joint  and  several 
notes. 

Notes  under  seal. 

Notes  under  seal — Gratuitous 
promise  to  pay. 

Renewal  notes  generally. 

Renewal  notes — Waiver  by 
principal  precluding  defense 
of  failure  of  consideration — 
Surety's  defense. 

Renewal  notes — Implied  or  ex- 
pressed consideration. 

Renewal  notes — Consideration 
for  original  paper. 

Renewal  notes — Discount  be- 
fore maturity. 

Notes  or  checks  given  for  other 
notes  or  bills  purchased. 

Drafts  accepted  to  extinguish 
other  drafts. 

When  only  part  of  considera- 
tion is  good  —  Action  by 
payee. 

Defense  to  one  note  in  action 
on  another. 

Note  given  for  political  assess- 
ments. 

Where  paper  sued  on  is  impos- 
sible to  perform  in  reason- 
able time. 

As  to  agents. 

As  to  trustees  or  committees. 

As  to  holders  of  municipal  war- 
rants and  coupons  attached 
to  bonds. 

Third  persons  as  holders  of 
notes. 

Note  of  third  person. 

Note  given  to  promote  peace  be- 
tween husband  and  wife — 
Note  of  stranger. 


227 


TOTAL    WANT    OF    COXSIDEHATION, 


[§  198 


§  198.  Total  want  of  consideration — Defense  between  original  or 
immediate  parties. — It  is  a  well-settled  rule  that  as  between  original  or 
immediate  parties  to  a  bill  or  note,  or  negotiable  paper  generally,  it  is 
a  good  defense  to  an  action  thereon  to  show  an  entire  or  total  want  of 
consideration.^     So  it  is  a  good  defense  in  law  or  equity  that  a  note 


^Alabama. — Ragsdale  v.  Gresham, 
141  Ala.  308,  37  So.  367.  (Under  the 
Alabama  statute,  Code  1896,  §  1800^ 
the  consideration  of  every  and  any 
written  instrument,  the  foundation 
of  the  suit,  may  be  impeached  at 
law,  and  shown  to  have  been  made 
without  any  consideration,  or  that 
the  consideration  has  failed) ;  Bul- 
lock V.  Ogburn,  13  Ala.  346. 

California. — Union  Collection  Co. 
V.  Buckman  (Cal.  1907),  88  Pac. 
708. 

Connecticut. — Litchfield  Bank  v. 
Peck,  29  Conn.  384;  Bunnell  v.  But- 
ler, 23  Conn.  65,  67;  Raymond  v.  Sel- 
lick,  10  Conn.  482;  Barnum  v.  Bar- 
num,  9  Conn.  242,  250;  Lawrence  v. 
Stonington  Bk.,  6  Conn.  521,  525-527. 

Delatvare. — McCready  v.  Cann,  5 
Harr.  (Del.)  175. 

Georgia. — Whitt  v.  Blount,  124 
Ga.  671,  53  S.  E.  205;  Radcliff  v. 
Biles,  94  Ga.  480,  20  S.  E.  359. 

Indiana. — Meyer  v.  Brand,  102  Ind. 
301,  26  N.  E.  125;  Moore  v.  Boyd, 
95  Ind.  134,  135;  Smith  v.  Boruff,  75 
Ind.  412  (want  of  consideration  may 
be  shown  by  parol) ;  Barner  v. 
Morehead,  22  Ind.  354. 

Iowa. — Farmers'  Savings  Bank  v. 
Hansmann,  114  Iowa  49,  51,  86  N.  W. 
31,  per  Sherwin,  J.;  Simpson  College 
v.  Tuttle,  71  Iowa  596,  599,  33  N.  W. 
74;  Swan  v.  Ewing,  1  Morris  (Iowa) 
344. 

Kansas. — Hale  v.  Aldaffer,  5  Kan. 
App.  40,  47  Pac.  320,  rehearing  de- 
nied, 49  Pac.  684. 

Kentucky.— Coyle  v.  Fowler,  3  J. 
J.  Marsh.  (Ky.)  473  (holding  that 
plea   denying  any   consideration   in 


fact  is  good  since  1801).  Sullivan 
V.  Sullivan,  29  Ky.  Law  Rep.  239, 
92  S.  W.  966. 

Louisiana. — Krumhaar  v.  Lude- 
ling,  3  Mart.  O.  S.   (La.)   641,  643. 

Maryland. — Beall  v.  Pearre,  12 
Md.  550,  566;  Wyman  v.  Gray,  7 
Harr.  &  J.  (Md.)  409.  (Parol  evi- 
dence is  admissible  to  show  want 
or  failure  of  consideration.) 

Massachusetts. — Arpin  v.  Owens, 
140  Mass.  144,  145,  3  N.  E.  25  (quot- 
ing Byle  on  Bills  (6th  Am.  Ed.) 
206);  Parish  v.  Stone,  31  Mass.  (14" 
Pick.)  198,  201;  Hill  v.  Buckminster, 
22  Mass.  (5  Pick.)  391. 

Michigan. — Nowack  .v.  Lehmann 
(Mich.  1905),  102  N.  W.  992;  Brown 
V.  Smedley,  136  Mich.  65,  98  N.  W. 
856,  10  Det.  L.  N.  960.  (Parol  evi- 
dence admissible  to  show  want  of 
consideration);  Kelley  v.  Guy,  116 
Mich.  43,  74  N.  W.  291. 

Minnesota. — Wilderman  v.  Don- 
nelly, 86  Minn.  184,  90  N.  W.  366, 
per  Collins,  J.;  Anderson  v.  Lee,  73 
Minn.  397,  76  N.  W.  24;  Ruggles  v. 
Swanwick,  6   Minn.   526    (Gil.   365). 

Mississippi. — Hamer  v.  Johnston, 
5  Miss.  (6  How.)  698,  721,  per  Shar- 
key, C.  J. 

Missouri. — ^^Chicago  Title  &  Trust 
Co.  V.  Brady,  165  Mo.  197,  65  S.  W. 
303.  (Want  of  consideration;  no 
consideration  was  ever  received  or 
intended,  and  the  fact  that  the  notes 
were  given  to  increase  a  bank's  ap- 
parent assets  does  not  prevent  such 
defense  of  want  of  consideration, 
and  the  same  rule  applies  where  the 
notes  were  given  as  accommodation 
notes  for  the  same  purpose.)     Har- 


199] 


WANT    OR   FAILURE   OF    CONSIDERATION. 


228 


was  without  consideration  and  was  procured  by  fraud."  The  defense 
of  want  of  consideration  is  also  held  available  by  the  maker  against 
the  receiver  of  a  payee  bank.^  Again,  a  promissory  note  not  negotia- 
ble and  not  a  specialty  may  be  defended  against  for  want  of  consider- 
ation in  avoidance  thereof.*  Under  an  averment  of  want  of  considera- 
tion and  failure  of  consideration,  in  an  action  upon  notes  against 
the  maker's  estate  by  the  payee,  it  is  clearly  competent  evidence  that 
said  notes  were  asked  for  and  given  merely  as  a  matter  of  form,  but 
failure  of  consideration  cannot  be  proven  without  first  showing  the 
consideration.^ 


g  199.  Upon  acceptance — Between  acceptor  and  other  parties — 
Want  of  consideration. — The  presumption,  raised  by  an  unconditional 
acceptance  of  a  bill  of  exchange  by  the  drawee,  that  he  has  funds  in 
his  hands  to  the  amount  of  the  bill,"  may  be  rebutted  between  the  ac- 


wood  v.  Brown,  23  Mo.  App.  69.  See 
Rogers  v.  Mercantile  Adjuster  Pub. 
Co.    (Mo.  App.  1906),  93   S.  W.  328. 

Nebraska. — Fellers  v.  Penrod,  57 
Neb.  463,  77  N.  W.  1085. 

Neio  Hampshire. — Morton  v.  Stone, 
67  N.  H.  367,  368,  29  Atl.  845  (words 
"value  received"  were  expressed); 
Copp  V.  Sawyer,  6  N.  H.  386;  Tillot- 
son  V.  Grapes,  4  N.  H.  444;  Haynesv. 
Thorn,  8  Fost.  (N.  H.)  386. 

New  York. — Ross  v.  Saron,  93  N. 
Y.  Supp.  553;  Higgins  v.  Ridgway, 
153  N.  Y.  130;  47  N.  E.  32;  aff'g  90 
Hun  398,  35  N.  Y.  Supp.  944;  Chase 
V.  Senn,  35  N.  Y.  St.  Rep.  36,  13  N.  Y. 
Supp.  266;  McCullock  v.  Hoffman,  10 
Hun  (N.  Y.)  133;  Sawyer  v.  Mc- 
Louth,  46  Barb.  (N.  Y.)  350,  353; 
Johnson  v.  Titus,  2  Hill  (N.  Y.)  606, 
607  (Cowan,  J.,  says  substantially 
that  although  want  of  consideration 
may  always  be  insisted  upon  as  a 
complete  answer  to  an  action  upon 
an  executory  contract,  yet  the  only 
difficulty  lies  in  the  application  of 
the  rule) ;  Slade  v.  Halstead,  7  Cow. 
(N.  Y.)  322;  Fink  v.  Cox,  18  Johns. 
(N.  Y.)  145;  Pearson  v.  Pearson,  7 
Johns.  (N.  Y.)  26. 


Ohio. — Loffland  v.  Russell,  Wright 
(Ohio)  438. 

Oklahoma. — Hagan  v.  'Bigler,  5 
Okla.  575,  49  Pac.  1011. 

Pennsylvania. — Barnett  v.  Offer- 
man,  7  Watts  (Pa.)  130;  Child  v. 
McKean,  2  Miles  (Pa.)  192;  Moore 
V.  Phillips  (Pa.),  13  Mont.  Co.  L. 
Rep.  173. 

Vermont. — Stone  v.  Peake,  16  Vt. 
213,  219. 

Federal, — National  Bank  v.  Brush, 
10  Biss.  (U.  S.)  188,  6  Fed.  132. 

Absence  or  failure  of  considera- 
tion a  defense  against  any  person 
not  a  holder  in  due  course.  Neg. 
Inst.  Law,  §  54.  See  appendix  here- 
in. 

==Radcliff  V.  Biles,  94  Ga.  480,  20 
S.  E.  359. 

=' Litchfield  Bk.  v.  Peck,  29  Conn. 
384. 

*  Barnum  v.  Barnum,  9  Conn.  242, 
250. 

^  Independent  Brewing  Assoc,  v. 
Kleit,  114  111.  App.  1. 

•=  Arkansas. — Byrd  v.  Bertrand,  7 
Ark.  322. 

Connecticut. — Jarvis  v.  Wilson,  46 
Conn.  90,  33  Am.  Rep.   18    (in  this 


229 


DEFENSE   BETWEEN    ACCEPTOR   AND    OTHER   PARTIES.       [§    190 


case  Loomis,  J.,  said:  "The  pre- 
sumption is  that  every  bill  of  ex- 
change is  drawn  on  account  of  some 
indebtedness  from  the  drawee  to 
the  drawer,  and  that  the  accept- 
ance is  an  appropriation  of  the 
funds  of  the  latter  in  the  hands  of 
the  former"). 

Georgia. — Flournoy  v.  First  Nat. 
Bk.,  79  Ga.  810,  816,  78  Ga.  222, 
228,  2  S.  E.  547.  (In  this  case 
Bleckley,  C.  J.,  said:  "The  effect 
of  accepting  a  bill  is  to  acknowledge 
that  the  drawer  has  funds  in  the 
hands  of  the  acceptor  applicable  to 
its  payment,  and  the  payee  is  en- 
titled to  repose  with  absolute  trust 
and  confidence  upon  that  admis- 
sion.") 

Kentucky. — Byrne  v.  Schwing,  6 
B.  Mon.   (Ky.)   199,  203. 

Louisiana. — Eastin  v.  Succession 
of  Osborn,  26  La.  Ann.  153. 

Maine. — Kendall  v.  Galvin,  15  Me. 
131,  132,  32  Am.  Dec.  141  (holding 
also  that  instruments  liable  to  any 
objection  preventing  them  from  be- 
ing regarded  as  bills  of  exchange  are 
not  within  the  rule). 

Minnesota. — Vanstrum  v.  Liljen- 
gren,  37  Minn.  191,  192,  33  N.  W. 
555.  (It  was  said  in  this  case:  "By 
accepting  the  bill  the  defendant  had 
admitted  the  possession  of  funds  of 
the  drawer  applicable  to  the  pay- 
ment of  the  same,  and  had  assumed 
the  absolute  obligation  of  making 
such  payment.  He  became  the  prin- 
cipal debtor  as  respects  the  holder 
of  the  accepted  bills.") 

Nebraska. — Trego  v.  Lowrey,  8 
Neb.  238,  243. 

New  York. — Hidden  v.  Waldo,  55 
N.  Y.  294,  297. 

North  Carolina. — Jordan  v.  Tark- 
ington,  15  N.  C.  357  (a  case  of  an  ac- 
ceptance of  an  order). 

Pennsylvania. — Bockoven  v.  Na- 
tional M.  &  T.  Bk.,  11  Wkly.  N.  Gas. 
(Pa.)  570. 


Federal. — Hortsman  v.  Henshaw, 
11  How.  (U.  S.)  177,  183,  18  Curt. 
Dec.  590,  52  L.  Ed.  653  (holding  that 
the  acceptor  is  presumed  to  accept 
upon  funds  of  the  drawer  in  his 
hands,  and  if  he  accepts  without 
funds  upon  the  credit  of  the  drawer 
he  must  look  to  him  for  indemnity) : 
Baborg  V.  Peyton,  2  Wheat.  (U.  S.) 
385,  386,  4  Curt.  Dec.  144,  15  L.  Ed. 
268  (Story,  J.,  said:  ''Prima  facie 
every  acceptance  affords  a  presump- 
tion of  funds  of  the  drawer  in  the 
hands  of  the  acceptor,  and  is  of  it- 
self an  express  appropriation  of 
those  funds  for  the  use  of  the 
holder."  The  case,  however,  rested 
upon  whether  an  action  of  debt 
would  lie  by  the  payee  or  indorsee 
against  the  acceptor). 

English. — Vere  v.  Lewis,  3  Term 
R.  182  (the  court  said  that  the  mere 
circumstance  of  the  defendant's  ac- 
cepting was  evidence  that  he  had 
received  value  from  the  drawers). 

Examine  also  Steiner  v.  Jeffries, 
118  Ala.  573,  24  So.  37. 

See  Gillian  v.  Myers,  31  111.  525 
(holding  that  rule  does  not  apply  to 
acceptance  of  a  writing  which  is  a 
mere  letter  of  request  payable  on  a 
contingency  which  might  never  hap- 
pen). 

""The  effect  of  the  acceptance  of 
the  order  was  to  constitute  the 
acceptor  the  principal  debtor.  By 
the  act  of  acceptance  he  assumed 
to  pay  the  order  or  bill,  and  be- 
came the  principal  debtor  for  the 
amount  specified ;  the  acceptance 
being  an  admission  of  everything  es- 
sential to  the  existence  of  such  lia- 
bility. It  admits  that  the  acceptor 
had  funds  of  the  drawer  in  his 
hands,  for  the  drawing  of  the  order 
or  bill  implied  this."  Ragsdale  v. 
Gresham,  141.  Ala.  308,  37  So.  367, 
369,  per  Haralson,  J.,  citing  1  Daniel 
on  Neg.  Inst.,  §§  552,  554,  and  quot- 
ing   1    Parsons    on    Notes    &    Bills, 


199] 


WANT    OR    FAILURE    OF    CONSIDERATION. 


230 


ceptor  and  drawer.'^  So  a  plea  of  want  of  consideration  for  the  ac- 
ceptance of  an  order  is  good  under  the  Alabama  statute.^  And  a  de- 
murrer to  such  a  plea,  that  it  did  not  aver  in  what  way  or  under  what 
circumstances  the  order  was  wanting  in  consideration,  will  be  properly 
overruled.^  But  an  unconditional  acceptance,  however  valid  under 
the  statute  or  otherwise,  binds  the  acceptor  as  to  a  bona  fide  payee  or 
holder  for  valiie,^"  so  that  one  who  has  accepted  a  bill  cannot  there- 
after, as  against  such  bona  fide  'payee  or  holder,  show  that  there  was 


p.  323;  Story's  Bills  of  Exchange, 
§  113;  Capital  City  Ins.  Co.  v.  Quinn, 
73  Ala.  560,  per  Brickett,  C.  J.;  Story 
on  Bills,  §  252. 

'  Trego  v.  Lowrey,  8  Neb.  238,  243 
(as  between  the  acceptor  and  the 
drawer  and  indorsers,  for  whose  ac- 
commodation the  acceptance  was 
given,  this  presumption  may  be  re- 
butted and  the  exact  relations  of 
the  parties  shown);  Hidden  v. 
Waldo,  55  N.  Y.  294,  297  ("as  be- 
tween the  parties  to  the  contract 
the  presumption  may  be  rebutted 
and  their  true  relation  shown  and 
the  liability  of  the  one  to  the  other 
will  be  that  resulting  from  the  true 
rather  than  the  apparent  relation 
of  each  to  the  other"  a  case  of 
acceptance  for  accommodation); 
American  Boiler  Co.  v.  Foutham,  50 
N.  Y.  Supp.  351. 

See  Kortepeter  v.  List,  16  Ind. 
295.  This  case  was  a  suit  by  the 
payees  of  a  bill  of  exchange  against 
the  drawer  and  acceptor,  the  bill 
having  been  indorsed  by  the  payers 
and  returned  unpaid.  The  drawer 
answered  that  he,  together  with  said 
payee,  were  sureties  for  the  acceptor 
and  known  to  each  other  as  such, 
and  that  he  had  paid  his  contribu- 
tive  share  to  the  holder,  and  it  was 
held  that  as  this  was  a  controversy 
between  the  drawer  and  drawees  of 
a  bill  the  consideration  could  be  in- 
quired into. 

^Code  1896,  §  1800. 


°  Ragsdale  v.  Gresham,  141  Ala. 
308,  37  So.  367. 

^"Ray  V.  Morgan,  112  Ga.  923,  38 
S.  E.  335  (holding  also  that  acceptor 
bound  whether  he  had  funds  in  his 
hands  or  not) ;  Towsley  v.  Sumrall, 
2  Pet.  (U.  S.)  169,  183,  8  Curt.  Dec. 
68,  27  L.  Ed.  386  (holding  that  ac- 
ceptance binds  acceptor  even  though 
he  had  no  funds  of  the  drawer  in 
his  hands  and  even  though  the 
holder  knew  of  such  fact) ;  Corbin 
V.  Southgate,  3  Hen.  &  M.  (Va.  P.) 
319. 

In  McMurray  v.  Sisters  of  Char- 
ity &c.,  68  N.  J.  L.  312,  53  Atl. 
389,  it  is  held  that  the  drawee  is 
only  bound  to  the  extent  of  the 
availability  of  a  particular  fund  on 
which  it  is  drawn. 

As  to  necessity  of  acceptance  be- 
ing in  writing,  see  Lewin  v.  Grieg, 
115  Ga.  127,  41  S.  E.  497,  Civ.  Code. 
§  2693,  par.  8;  Erickson  v.  Inman, 
34  Oreg.  44,  54  Pac.  949,  15  Bkg. 
L.  J.  717;  Ravenswood  Bk.  v.  Rene- 
ker,  18  Pa.  Super.  Ct.  192,  Act  May 
10,  1881,  P.  L.  17.  In  Durkee  v. 
Conklin,  13  Colo.  App.  313,  57  Pac. 
486,  it  is  held  that  a  verbal  accept- 
ance may  bind  even  though  the 
party  has  not  at  that  time  in  his 
hands  the  funds  of  the  drawer,  if 
thereafter  such  funds  should  come 
into  his  hands. 

As  to  implied  acceptance,  see  Bell 
V.  Pletscher,  65  N.  Y.  Supp.  669,  32 
Misc.  746. 


1 


231 


DEFENSE   BETWEEN"   ACCEPTOR   AND    OTHER    PARTIES.       [§    199 


no  consideration  as  between  him  and  the  drawer,  for  if  the  payee 
parts  with  his  money  and  gives  value  to  the  drawer  on  the  faith  of 
the  acceptance,  and  acquires  the  bill  in  due  course  of  trade  before 
maturity  he  is  entitled  to  all  the  protection  which  the  commercial  law 
affords  and  he  has  nothing  whatever  to  do  with  the  state  of  accounts 
between  the  drawer  and  acceptor. ^^  Again,  the  acceptor  has  no  right 
to  inquire  into  the  want  of  consideration  betw^een  the  drawer  and 
payee,  or  between  the  latter  and  a  subsequent  indorsee.  If  he  pay 
the  bill  on  the  order  of  his  creditor  it  is  ample  protection  against  any 
future  claim  of  the  creditor  for  the  same  money,  whether  the  order 
was  made  with  or  without  consideration.^-     ISTor  can  an  acceptor  set" 


"  Georgia. — Flournoy  v.  First  Nat. 
Bk.,  79  Ga.  814,  78  Ga.  222,  2  S.  E. 
547. 

Illinois. — Nowak  v.  Excelsior  Stone 
Co.,  78  111.  307  (so  even  though  he 
had  no  funds  in  his  hands  at  date  of 
acceptance). 

Massachusetts. — Arpin  v.  Owens, 
140  Mass.  144  (rule  applied  to  for- 
eign bill  of  exchange,  although  bill 
taken  before  acceptance). 

New  Jersey. — Huertematte  v.  Mor- 
ris, 101  N.  J.  63,  4  N.  E.  1,  54  Am. 
Rep.  657. 

New  York. — Hollister  v.  Hopkins, 
13  Hun  (N.  Y.)  210  (evidence  of  no 
consideration  for  acceptance  exclud- 
ed); Grant  v.  Ellicott,  7  Wend.  (N. 
Y.)  227  (so  held  even  though  fact 
of  acceptance  without  consideration 
was  known  to  payee). 

Pennsylvania. — Boggs  v.  Bank,  7 
Watts  &  S.  (Pa.)  331. 

Vermont. — Arnold  v.  Sprague,  34 
Vt.  402. 

See  also.  Federal. — Hortman  v. 
Henshaw,  11  How.  (U.  S.)  177,  183, 
18  Curt.  Dec.  590,  52  L.  Ed.  653; 
United  States  v.  Metropolis  Bk.,  15 
Pet.  (U.  S.)  377;  Seymour  v.  Mal- 
colm, 16  U.  S.  App.  245,  7  C.  C.  A. 
593,  58  Fed.  597. 

In  Law  V.  Brinker,  6  Colo.  555, 
it   is   held    that    the    drawees    of    a 


bill,  each  of  whom  has  indorsed 
thereon  his  unconditional  accept- 
ance, becomes  severally  liable  for 
the  payment  thereof,  and  having 
voluntarily  placed  themselves  in 
this  attitude  they  cannot  plead  want 
of  consideration  for  their  accept- 
ance in  an  action  by  the  payee. 

In  Sherwin  v.  Brigham,  39  Ohio 
St.  137,  there  was  a  letter  of  cred- 
it agreeing  to  honor  drafts,  but 
there  was  no  acceptance  and  it  was 
held  that  in  order  to  render  the 
writer  of  a  letter  of  credit  liable, 
either  upon  an  implied  acceptance  or 
an  agreement  to  accept  drafts  taken 
on  the  faith  of  such  letter,  the  drafts 
must  have  been  taken  for  a  valuable 
consideration,  and  that  a  promise 
to  have  drafts  discounted  and  to 
take  up  notes  on  which  the  persons 
taking  the  drafts  are  liable  as  in- 
dorsers  is  not  a  valuable  considera- 
tion. 

^-  Colorado. — Welch  v.  Mayer,  4 
Colo.  App.  440,  36  Pac.  613  (this 
case,  however,  was  an  order  pay- 
able out  of  a  particular  fund). 

Louisiana. — Smith  v.  Adams,  14 
La.  Ann.  409  (holding  also  that  not 
even  accommodation  acceptors,  and 
that  to  the  knowledge  of  the  payee, 
have  the  right  to  plead  in  compen- 
sation  or   reconvention   a   debt  due 


199] 


WANT    OR    FAILURE   OF    COXSIDERATIOX. 


233 


up  the  want  of  consideration  for  an  acceptance  as  against  an  indorsee 
from  whom  the  consideration  did  not  move  and  who  is  not  an  imme- 
diate party.^^  So  where  the  payees  were  plaintiffs  and  innocent  holders 
it  was  declared  that  whatever  might  be  the  want  or  failure  of  consider- 
ation it  could  make  no  difference  where  the  plaintiff  purchased  the 
paper  after  acceptance  and  before  it  was  due.^*  And  if  the  drawer 
of  a  bill,  payable  to  his  own  order  before  it  is  indorsed,  give  the  ac- 
ceptor a  general  release,  it  is  no  defense  to  an  action  by  the  indorsee 
against  the  acceptor  unless  there  be  proof  that  the  indorsee  knew  of 
the  release.^^  If,  however,  an  acceptor  of  a  bill  of  exchange  sets  up 
■the  want  of  consideration  as  against  a  third  indorsee,  he  must  show 
such  want  not  only  between  the  drawer  and  himself  but  also  between 
the  subsequent  indorsee  and  himself.^®  It  is  declared  in  an  English 
case  that  "In  questions  between  bankers,  or  those  representing  them, 
and  their  customers,  they  have  been  considered  for  some  purposes  as 
factors,  or  in  the  nature  of  factors;  upon  the  same  principle  as  in 
other  cases,  between  holders  of  bills  of  exchange,  and  acceptors,  or  the 
first  indorser  of  bills  payable  to  a  man's  own  order,  the  truth  of  the 
transactions  between  them  has  been  allowed  to  be  entered  into  to  de- 
stroy the  prima  facie  consideration  of  a  bill,  the  supposed  value  re- 
ceived. But  no  evidence  of  want  of  consideration,  or  other  ground  to 
impeach  the  apparent  value  received,  was  ever  admitted  in  a  case  be- 


by  the  payee  to  the  drawer);  Da- 
vidson V.  Keyes,  2  Rob.  (La.)  254, 
38  Am.  Dec.  209  (holding  also  that 
if  the  acceptor  pay  the  bill  he  can- 
not be  affected  by  any  want  or  fail- 
ure of  consideration  which  the 
drawer  or  payee  may  set  up);  De- 
buys  V.  Johnson,  4  Mart.  N.  S.  (La.) 
286. 

Minnesota. — Vanstrum  v.  Liljen- 
gren,  37  Minn.  191,  33  N.  W.  555. 

Federal. — Kemble  v.  Lull,  3  Mc- 
Lean (U.  S.)  272,  Fed.  Cas.  No.  7683 
(a  case  of  an  order  contingent  on 
payment,  "if  in  funds,"  but  as  it  was 
drawn  on  funds  in  the  acceptor's 
hands,  it  was  declared  that  they 
could  not,  after  acceptance,  allege 
a  want  of  consideration,  "and  hav- 
ing incurred  this  liability  to  the 
plaintiffs  hona  fide  and  on  a  suflB- 


cient  consideration,  they  cannot  set 
up  as  a  defense  a  want  of  considera- 
tion between  the  drawer  of  the  bill 
and  the  plaintiffs"). 

In  Tompkins  v.  Garner,  8  N.  Y. 
Supp.  193,  it  was  held  no  defense 
to  an  action  by  the  transferee 
against  the  acceptor  that  a  draft 
was  drawn  as  an  adVance  payment 
on  a  proposed  charter  party,  which 
the  payees  subsequently  refused  to 
sign,  the  defense  being  personal  to 
the  drawer. 

"  Robinson  v.  Reynolds,  2  Ad.  & 
Ell.  (N.  S.)  196. 

"  Bridge  v.  Livingston,  11  Iowa  57. 

^^Dod  V.  Edwards,  2  Carr.  &  P. 
602. 

^"Whittaker  v.  Edmunds,  1  Mood. 
&  R.  366,  1  Adol.  &  E.  638. 


mt 


233 


INDORSEE  AND  INDORSEE  AS   IMMEDIATE   PARTIES. 


[§   200 


tween  such  acceptor  or  drawer,  and  the  third  person  liokling  tlie  bill 
for  value.  And  the  rule  is  so  strict  that  it  will  \)e  presumed  that  ho 
does  hold  for  value  until  the  contrary  appears."^'' 

§  200.  Indorser  and  indorsee  as  immediate  parties — Want  of  con- 
sideration.— In  an  action  by  the  indorsee  of  negotiable  paper  against 
his  immediate  indorser,  the  title  of  no  innocent  third  party  interven- 
ing, the  defendant  can  avail  himself  by  way  of  defense  against  the 
plaintiff  of  the  entire  want  of  consideration,  or  may  show  that  there 
was  no  valuable  consideration  for  the  indorsement  or  that  it  was 
made  without  any  consideration.^*    The  rule  has  also  been  held  to  ap- 


"  Collins  V.  Martin,  1  Bos.  &  P. 
648,  651,  per  Eyre,  Ch.  J. 

Acceptor  precluded  from  denying 
liability,  to  holder  in  due  course. 
Eng.  Bills  of  Exch.  Act,  §  52. 

'"Indiana. — Parker  v.  Morton,  29 
Ind.  89,  92  (want  of  consideration 
for  indorsement  may  be  shown) ; 
Shanklin  v.  Cooper,  8  Blackf.  (Ind.) 
41  (plea  that  indorsement  was  made 
without  any  consideration  whatever 
is  in  substance  valid) ;  Miles  v.  Por- 
ter, 6  Blackf.  (Ind.)  44  (indorse- 
ment may  be  shown  to  have  been 
made  without  any  consideration  ex- 
cept in  case  of  accommodation  note 
and  indorsee  is  bona  fide  holder  for 
value). 

Louisiana. — Brown  v.  Fort,  1 
Mart.  0.  S.  (La.)  34  (in  this  case 
the  note  was  indorsed  merely  to  se- 
cure the  payment  of  it,  and  the  plain- 
tiff having  received  the  note  from 
the  makers  was  regarded  as  the 
original  payee). 

Maine. — Larrabee  v.  Fairbanks,  11 
Shep.  (Me.)  363,  41  Am.  Dec.  389 
(in  this  case  the  plaintiff  had  ac- 
cepted the  note  which  was  transfer- 
able by  delivery  without  the  defend- 
ant's indorsement  and  the  indorse- 
ment subsequently  obtained  was 
without  consideration  and  the  par- 


ties being  immediate  parties  the  de- 
fense was  held  good. 

Maryland. — Hamburger  v.  Miller, 
48  Md.  317,  325,  326  (where  Alvey, 
J.,  said;  "That  in  an  action  by  the 
holder  of  negotiable  paper  against 
the  immediate  indorser,  the  title  of 
no  innocent  third  party  intervening, 
it  is  always  competent  for  the  de- 
fendant to  show,  by  parol  evidence, 
either  the  want  of  consideration  as 
between  himself  and  the  plaintiff, 
or  that  the  indorsement  was  pro- 
cured by  fraud,  or  that  it  was  made 
upon  some  special  trust,  or  for  a 
special  purpose,  as  to  an  agent  to 
enable  him  to  use  the  paper  or  the 
money  in  some  particular  way,  or  to 
make  collection,  or  have  the  paper 
discounted,  for  the  benefit  of  the 
principal;  or  that  the  note  was  in- 
dorsed and  delivered  to  the  plain- 
tiff to  be  used  only  upon  some  ex- 
press condition  that  has  not  been 
complied  with"). 

Massachusetts. — Arpin  v.  Owens, 
140  Mass.  144,  145,  3  N.  E.  25,  quot- 
ing Byle  on  Bills  (6th  Am.  ed.)  206. 

Federal. — Martin  v.  Kercheval,  4 
McLean  (U.  S.)  117,  Fed.  Cas.  No. 
9,163;  National  Bank  of  Rising  Sun 
V.  Brush,  6  Fed.  132,  where  the  in- 
dorsement was  for  convenience  and 
without  consideration. 


§  201] 


WAXT   OK    FAILURE    OF    COXSIDERATIOX. 


234 


ply  in  an  action  where  the  note  had  been  assigned  by  an  indorsement 
in  blank.^'' 

§  201.  Partial  want  of  consideration. — The  principle  that  in  an 
action  between  the  original  or  immediate  parties  to  a  bill  or  note  the 
consideration  may  be  inquired  into,  applies  where  the  consideration  is 
less  than  the  amount  of  the  bill  or  note,  and  in  such  case  no  recovery 
can  be  had  beyond  the  sum  actually  paid;^''  and  judgment  rendered 
for  the  sum  actually  due,  that  is,  an  objection  to  a  note  that  there  is 
only  a  partial  want  of  consideration  may  be  sustained,  but  it  affects  the 
note  with  nullity  only  pro  tanto.''^  A  partial  want  of  consideration 
may  therefore  be  relied  on  as  a  defense  between  the  original  parties.-- 
Again,  "whenever  the  defendant  is  entitled  to  go  into  the  question 
of  consideration  he  may  set  up  the  partial  as  well  as  the  total  want  of 
consideration."^^  And  want  of  consideration  may  be  pleaded  to  a 
part  as  well  as  the  whole  of  a  cause  of  action  when  limited  to  that 
part.-*  If  an  unjust  claim  is  added  to  a  note  given  in  settlement  of 
a  balance  found  due  on  adjustment  of  mutual  accounts  such  note  is 
without  consideration  and  void  as  to  the  amount  added.  ^^  So  a  note 
may  be  without  consideration  as  to  a  part  of  the  matters  wrongfully 


^^  Parker  v.  Morton,  29  Ind.  89. 

-"  Lawrence  v.  Stonington  Bank,  6 
Conn.  521,  525-527;  Wilson  v.  Ells- 
worth, 25  Neb.  246,  41  N.  W.  177, 
holding  that  consideration  may  be 
Inquired  into  and  judgment  ren- 
dered for  the  sum  actually  due. 

=^  Sawyer  v.  McLouth,  46  Barb. 
(N.  Y.)  350,  353,  citing  Story  on 
Prom.  Notes,  §  187.  When  there  is 
not  a  partial  want  of  consideration 
within  the  Code,  §  1806.  See  Griffin 
v.   Simons,   61   Tenn.    (2   Baxt.)    19. 

As  to  partial  want  of  considera- 
tion, see  Klein  v.  Keys,  17  Mo. 
326,  a  case  of  a  partnership  note 
given  by  a  partner  and  the  defense 
was  that  the  note  was  not  a  partner- 
ship transaction  and  that  only  part 
of  the  consideration  was  due  on  ac- 
count of  the  firm  and  the  balance  for 
a  debt  not  growing  out  of  the  part- 


nership business  and  that  such  fact 
was  known  to  the  plaintiff. 

"  Beall  v.  Pearce,  12  Md.  550. 

A  partial  want  of  consideration 
can  be  shown  if  properly  pleaded 
as  a  defense  pro  tanto  to  a  negotia- 
ble instrument  in  the  hands  of  the 
original  payee,  or  of  a  party  stand- 
ing in  his  shoes.  Brown  v.  Roberts, 
90  Minn.  314,  96  N.  W.  793,  per 
Start,  C.  J. 

Evidence  of  partial  want  of  con- 
sideration is  not  admissible  unless 
notice  of  such  defense  shall  be 
given.  Hubbard  v.  Freiburger,  133 
Mich.  139,  94  N.  W.  727,  10  Det.  L. 
N.  123;  Comp.  Laws,  §§  769,  828. 

-■'Daniel  on  Neg.  Inst.  (5th  ed.), 
§  201. 

^  Moore  v.  Boyd,  95  Ind.  134,  135. 

==  Briscoe  v.  Kinealy,  8  Mo.  App. 
76. 


235  TOTAL    FAILURE    OF    CONSIDERATION.  [§    203 

or  not  properly  included  therein.""  In  a  Massachusetts  case  the  court 
states  the  following  rule :  If  a  note  is  taken  for  two  distinct  liquidated 
sums  consolidat'ed,  and  the  consideration  had  been  wholly  wanting, 
or  wholly  failed  as  to  one,  the  note,  as  between  the  original  parties, 
and  all  who  stand  in  such  relation  as  to  allow  the  defense  of  want  of 
consideration,  may  be  apportioned  by  the  court  and  found  good  in  part 
and  void  in  part  and  the  holder  be  permitted  to  recover  accordingly, 
and  where  the  parts  of  a  bill  are  divisible,  making  an  aggregate  sum 
and  as  to  one  liquidated  and  definite  part  there  is  a  valuable  considera- 
tion and  as  to  the  other  part  there  is  no  consideration,  the  bill  as  such 
may  be  apportioned  and  the  holder  may  recover  for  such  part  as  was 
founded  on  a  good  consideration.  Want  of  consideration,  therefore, 
either  total  or  partial,  may  always  be  shown  by  way  of  defense.  Wliere 
the  note  is  not  given  upon  any  one  consideration,  which,  whether  good 
or  not,  whether  it  fail  or  not,  goes  to  the  whole  note  at  the  time  it  was 
made,  but  for  two  distinct  and  independent  considerations,  each  go- 
ing to  a  distinct  portion  of  the  note,  and  one  is  a  consideration  which 
the  law  deems  valid  and  sufficient  to  support  a  contract  and  the  other 
not,  there  the  contract  shall  be  apportioned  and  the  holder  shall  re- 
cover to  the  extent  of  the  valid  consideration  and  no  further." 

§  202.  Total  failure  of  consideration — Defense  between  original 
or  immediate  parties.— It  is  a  well-settled  rule  that  as  between  origi- 
nal or  immediate  parties  to  a  bill  or  note,  or  negotiable  paper  gener- 
all}^  that  in  an  action  thereon  an  entire  or  total  failure  of  considera- 
tion constitutes  a  good  defense.-^     But  where  the  consideration  of  a 

"« Bean  v.  Jones,  8  N.  H.  149.    In  sideration  of  the  difference  between 

this    case    a    creditor    charged    his  want  and  failure  of  consideration, 
traveling    and    other    expenses    in-        "^  California. — Russ  Lumber  &  Mill 

curred  on  a  journey  made  for  the  Co  v.  Muscupiabe  L.  &  W.  Co.,  120 

purpose  of  collecting  a  debt  and  in-  CaL  521;   Estudillo  v.  Aguirre   (Cal. 

eluded  them  in  a  new  note  given  by  1884),  5  Pac.  109  (in  this  case  a  note 

the  debtor.  -was  given  in  part  for  a  definite  sum 

"Parish   v.    Stone,   31    Mass.    (14  innocently  represented  to  have  been 

Pick.)    198,    208-210,    25    Am.    Dec.  fixed,    allowed    and    determined    by 

378.   See  also  Washburn  v.  Picot,  14  the   probate    court    for   services    as 

N.  C.  (3  Dev.)  390,  where  it  is  said  guardian   of  defendant  and   the  al- 

that  if  a  part  of  a  contract  arises  on  lowance    had    not    been    made,    and 

a  good  consideration  and  part  on  a  this  was  held  to  constitute  a  failure 

bad  one,  it  is   divisible,  but  other-  of  consideration  to  the  extent  of  the 

wise  as  to  the  security,  that  being  amount  of  the  note), 
entire.     This    statement,    however,        Delaware. — Mills  v.  Gilpin,  2  Harr. 

was  made  in  connection  with  a  con-  (Del.)  32. 


J03] 


WANT    OR   FAILURE   OF    CONSIDERATION. 


236 


note  sued  on  was  the  conveyance  of  land,  secured  by  a  deed  of  trust, 
the  sale  of  the  land  under  the  deed  of  trust  does  not  constitute  a 
failure  of  consideration,  for  the  conveyance  having  been  fully  ren- 
dered at  the  date  of  the  deed  there  could  be  no  failure  otherwise  than 
for  some  defect  or  deficiency  in  the  consideration  at  the  time  of  the 
rendition,  and  a  sale  subsequently  made  as  provided  for  in  the  agree- 
ment of  the  parties  could  not  be  given  such  effect.^®  If,  however, 
personal  property  is  sold  and  the  title  reserved  and  the  seller  retakes 
the  property  and  sells  it  under  warranty  that  he  is  the  owner,  it  is 


Georgia.— Whitt  v.  Blount,  124 
Ga.  671,  53  S.  E.  205. 

Illinois. — Sturges  v.  Miller,  80  111. 
241;  Winkleman  v.  Choteau,  78  111. 
107;  Capps  v.  Smith,  3  Scam.  (111.) 
177;  Winnemann  v.  Oberne,  40  111. 
App.  269. 

Indiana. — Moore  v.  Boyd,  95  Ind. 
134,  135. 

Iowa. — George  v.  Gillespie,  1  G. 
Greene  (Iowa)  421  (so  under  the 
Rev.  Stat.,  p.  453,  §§  5,  6). 

Kansas. — Blood  v.  Northup,  1  Kan. 
28,  35. 

Kentucky. — Coyle  v.  Fowler,  3  J. 
J.  Marsh.  (Ky.)  473  (holding  plea 
of  failure  of  consideration  good 
since  statute  of  1801). 

Louisiana. — Kernion  v.  Jumon- 
ville  de  Villier,  8  La.  547;  Byrd  v. 
Craig,  2  Mart.  N.  S.  (La.)   625. 

Maryland. — Ingersoll  v.  Martin^  58 
Md.  67,  73,  42  Am.  Rep.  322;  Beall 
V.  Pearre,  12  Md.  550,  566. 

Massachusetts. — Arpin  v.  Owens, 
140  Mass.  144,  145,  quoting  1  Byle 
on  Bills  (6th  Am.  ed.)  206. 

Michigan. — Hubbard  v.  Freibur- 
ger,  123  Mich.  139,  94  N.  W.  727,  10 
Det.  L.  W.  123;  Comp.  Laws,  §§  709, 
828;  Kelley  v.  Guy,  116  Mich.  43,  74 
N.  W.  291. 

Minnesota. — Warner  v.  Schultz,  74 
Minn.  252,  77  N.  W.  25. 

Mississippi. — Stigler  v.  Anderson 
(Miss.  1893),  12  So.  831;  Hamer  v. 
Johnson  (5  Miss.),  6  How.  698,  721 
(per  Sharkey,  J.). 


iTfissoMri.— Harwood  v.  Brown,  23 
Mo.  App.  69. 

New  York. — Sawyer  v.  Chambers, 
44  Barb.  (N.  Y.)  42;  Chase  v.  Senn, 
36  N.  Y.  St.  Rep.  36,  13  N.  Y.  Supp. 
266;  Sawyer  v.  McLouth,  46  Barb. 
(N.  Y.)  350,  353;  Britton  v.  Hall, 
1  Hilt.  (N.  Y.)  528;  American 
Boiler  Co.  v.  Foutham,  50  N.  Y. 
Supp.  351. 

North  Carolina. — Washburn  v.  Pi- 
cott,  14  N.  C.  (3  Dev.)  390. 

Ohio. — Loffland  v.  Russell,  Wright 
(Ohio)  438. 

Oregon. — Sayre  v.  Mohney,  30 
Oreg.  238,  47  Pac.  197. 

Pennsylvania. — Barnett  v.  Offer- 
man,  7  Watts  (Pa.)   130. 

Tennessee. — Turley  v.  Bartlett,  57 
Tenn.   (10  Heisk.)   221,  225. 

Texas. — Branch  v.  Howard,  4  Tex. 
Civ.  App.  271,  23  S.  W.  476. 

Vermo7it. — Stone  v.  Peake,  16  Vt. 
213,  219. 

Federal. — Scudder  v.  Andrews,  2 
McLean  (U.  S.)  464,  Fed.  Cas.  No. 
12,564;  Hoopes  v.  Northern  Nat.  Bk., 
102  Fed.  448;   Neg.  Inst.  Law,  §  54. 

See  Jones  v.  Swan,  6  Wend.  (N. 
Y.)  589,  593. 

In  the  case  of  a  note  under  seal 
it  is  held  that  failure  of  considera- 
tion may  be  pleaded,  whether  or  not 
want  may  be.  Slaton  v.  Fowler, 
124  Ga.  955,  53  S.  E.  567. 

-^Thurgood  v.  Spring,  139  Cal. 
596,  73  Pac.  456. 


237 


DEFENSE   BETWEEN    ACCEPTOR   AND   OTHER    PARTIES.       [§    203 


held  that  the  consideration  of  notes  given  by  the  first  purchaser  fails. ^^ 
A  plea  of  total  failure  of  consideration  filed  to  an  action  on  a  note, 
given  by  one  person  to  another  to  pay  a  certain  amount  at  a  fixed 
time,  is  not  good  when  the  time  for  the  performance  of  the  service 
has  not  expired,  although  the  note  has  matured.^^  And  failure  of  the 
performance  of  the  services  to  be  performed  by  the  payee  is  no  de- 
fense to  an  action  on  the  note  brought  by  the  purchaser  thereof  for 
value  and  before  its  maturity,  though  he  knew  of  the  consideration, 
but  not  of  its  failure  when  he  purchased.^ ^  But  a  defense  of  failure 
of  consideration  is  available  where  the  note  was  given  in  consideration 
of  an  agreement  to  perform  certain  work  under  a  contract  which  was 
performed  but  the  work  done  was  not  in  accordance  with  the  agree- 
ment and  did  not  fulfill  the  conditions  represented,  there  being  an 
alleged  misrepresentation  of  material  f  acts.^^ 

§  203.  Upon  acceptance — Between  acceptor  and  other  parties — 
Failure  of  consideration. — Failure  of  consideration  as  between  the 
drawer  and  drawee  is  no  defense  to  an  action  by  the  payee  or  holder 
against  an  acceptor,  if  the  payee  or  holder  took  the  bill  before  ma- 
turity in  good  faith  and  for  value  f*  provided  also  that  the  considera- 


=»Earle  v.  Robinson,  91  Hun  (N. 
Y.)  363,  70  N.  Y.  St.  R.  831,  36  N.  Y. 
Supp.  178. 

=' Morrison  v.  Hart,  Ga.  1905,  50 
S.  E.  471. 

"Wilensky  v.  Morrison,  Ga.  1905, 
50  S.  E.  472. 

^^Conroy  v.  Logue,  87  Minn.  289, 
91  N.  W.  1105. 

^^  Morrison  v.  Farmers'  and  Mer- 
chants' Banlt,  9  Okla.  697,  60  Pac. 
275  (a  foreign  bill  of  exchange.  "It 
is  a  well-settled  rule  of  law  that  an 
acceptor  of  a  bill  of  exchange  will 
not  be  permitted  to  vary  his  liabil- 
ity from  that  which  is  apparent 
on  the  face  of  the  bill  by  setting  up 
against  bona  fide  holders  for  value, 
who  took  the  bill  before  maturity, 
statements  made  by  the  drawers  to 
the  drawees  whereby  they  were  in- 
duced to  accept  the  bill"). 

See  Colorado. — Wyman  v.  Bank,  5 
Colo.  30,  33,  40  Am.  Rep.  133. 


Georgia. — Flournory  v.  First  Nat. 
Bk.,  79  Ga.  814,  78  Ga.  222,  2  S.  E. 
547. 

New  Hampshire.  —  Clement  v. 
Leverett,  12  N.  H.  317,  320. 

New  York. — American  Boiler  Co. 
v.  Foutham,  50  N.  Y.  Supp.  351. 

England. — ^Arden  v.  Watkins,  3 
East.  317. 

In  Gilman  v.  Pillsbury,  16  La. 
Ann.  51,  it  is  held  that  the  acceptor, 
when  sued  by  the  payee,  may  call 
the  drawer  of  the  bill  in  warranty 
in  the  case  where  the  drawee  is  re- 
quested to  pay,  not  unconditionally 
but  in  accordance  with  a  contract, 
and  he  has  been  notified  by  the 
drawer,  because  the  consideration 
of  the  draft  has  failed,  and  when 
cited  in  warranty  by  the  drawee  the 
drawer  may  plead  a  failure  of  con- 
sideration as  a  defense  to  the  suit. 


§    203]  WANT    OR   FAILURE   OF    CONSIDERATION.  238 

tion  for  the  acceptance  fails  without  any  fault  on  the  part  of  the 
payee.^^  So  an  acceptor  cannot,  b}^  paying  a  bill  before  he  is  bound  to 
do  so,  and  before  maturity  or  out  of  due  course,  exchange  the  rela- 
tions of  the  original  parties  and  cut  off  the  drawer  from  the  defense 
of  failure  of  consideration.  An  acceptor  paying  before  maturity  is 
not  a  holder  for  value  of  the  paper  as  against  the  drawer,  and  even 
though  an  acceptor  may  have  been  a  surety  for  the  drawer  for  per- 
sonal property  purchased  by  him  from  the  payee,  yet  such  acceptor 
by  paying  before  maturity  is  subject  to  any  defense  which  the  maker 
would  have  had  in  a  suit  by  the  payee. ^"^  Again,  the  rule  which  pre- 
cludes the  acceptor  from  inquiring  into  the  want  of  consideration  be- 
tween the  drawer  and  payee  or  between  the  latter  and  a  subsequent  in- 
dorsee applies  to  exclude  inquiry  into  the  failure  of  consideration  be- 
tween such  parties.^''  But  it  is  no  defense  in  favor  of  an  acceptor  when 
sued  on  his  acceptance  that  there  are  subsequent  dealings  between  the 
parties  when  his  liability  has  not  been  changed  thereby  and  such  deal- 
ings are  not  to  his  prejudice  or  against  his  rights.^^  In  an  action  by 
the  indorsee  against  the  maker  of  promissory  notes,  the  consideration 
of  which  was  the  purchase  price  of  certain  bills  of  exchange,  it  is  not 
available  by  way  of  defense  to  show  a  total  failure  of  consideration  on 
the  ground  that  the  drawee  refused  to  accept,  where  recovery  can  be 
had  against  the  indorser,  especially  where  it  does  not  appear  that  the 
plaintiffs  are  bona  fide  holders.  The  court  said :  "What  was  the  con- 
sideration for  the  notes  on  which  this  action  is  brought?  The  two 
bills  of  exchange !  Were  they  of  any  value  at  the  time  they  were  given 
as  the  consideration  for  the  notes?  That  they  were  of  no  value  will 
hardly  be  affirmed  without  deciding  the  question  whether  the  defend- 
ants could  have  resorted  to"  the  payee  when  the  bills  were  not  ac- 

'''  Corbin  v.   Southgate,   3   Hen.   &  were  not  bound  because  of  the  fraud 

M.  (Va.)  319.    In  Walker  v.  Squires,  of  the  payee,  and  that  the  acceptors 

Hill  &  Den.    (N.  Y.)    23,  the  payee  could  not  be  regarded  as  in  funds, 

of   a   bill   knowingly   sold    standing  and  even  if  there  were  no  fraud  the 

timber,  not  his  own,  to  the  drawer,  act  of  the  owner  of  the  timber  was 

who    was    to    manufacture    it    into  equivalent  to   an  eviction,  and  the 

boards  and  deliver  them  to  the  ac-  failure    of   consideration   was    com- 

ceptors    upon    whom    the    bill    was  plete. 

drawn    and    accepted.     The    drawer  '"  Stark  v.  Alford,  49  Tex.  260. 
was  forbidden  by  the  owner  to  cut  "See  §  199,  ante,  as  to  acceptor 
the   timber,    and    it   was    held    that  and  other  parties  and  want  of  con- 
even    though    he    proceeded    to    get  sideration. 

the  timber  and  manufacture  and  de-  ='*'  Canadian    Bk.    v.    Coumbe,    47 

liver  it  to  the  acceptors,  the  latter  Mich.  358,  11  N.  W.  196. 


239  PARTIAL    FAILURE    OF    CONSIDERATION.         [§§'   204-207 

cepted  "they  had  a  perfect  right  to  enforce  the  payment  of  them  against 
the  indorser.  *  *  *  l^  the  case  under  consideration  the  bills  were 
not  void ;  the  responsibility  of  the  indorser,  if  there  was  none  in  the 
drawer,  constituted  a  good  consideration."^" 

§  204.  Indorser  and  indorsee  as  immediate  parties — Failure  of 
consideration. — In  an  action  by  the  holder  of  negotiable  paper  against 
his  immediate  indorser,  the  title  of  no  innocent  third  party  interven- 
ing, the  entire  failure  of  consideration  between  such  immediate  parties 
may  be  shown.*" 

§  205.     Consideration    acknowledged — Failure    of    consideration. 

Wliere  a  certificate  of  deposit  acknowledges  the  receijit  of  money  upon 
its  face  the  maker  is  not  estopped  from  showing  as  against  assignees 
occupying  the  status  of  payees  that  there  was  a  failure  of  considera- 
tion.*^ So  the  statement  in  a  promissory  note  that  it  is  given  in  con- 
sideration of  "money  loaned"  does  not  preclude  the  defense  that  the 
consideration  was  different  from  that  expressed  in  the  note  and  that 
it  had  failed.*^ 

§  206.  Non-negotiable  paper  made  at  request  of  another — ^Failure 
of  consideration. — In  a  suit  upon  a  non-negotiable  promissory  note 
made  payable  to  plaintiff  at  the  request  of  a  party  from  whom  the 
consideration  moved,  and  therefore  presumed  to  be  held  in  trust  for 
the  benefit  of  such  party,  the  failure  of  consideration,  total  or  partial, 
may,  it  is  decided,  be  set  up  in  defense  whether  the  payee  at  the  time 
of  receiving  the  note  did,  or  did  not,  know  what  the  character  of  the 
consideration  was;  especially  so  where  it  does  not  appear  that  the 
plaintiff  paid  anything  for  the  note  or  that  he  was  in  any  manner  a 
holder  for  a  valuable  consideration,  and  the  note  being  regarded  as 
the  property  of  the  party  from  whom  the  actual  consideration  moved 
the  defense  was  still  available  in  the  same  manner  as  if  the  action  had 
been  in  the  name  of  the  last  mentioned  party.*^ 

§  207.  Partial  failure  of  consideration — Defense — Between,  origi- 
nal parties. — Although  there  has  been  much  discussion  upon  the  ques- 

'°  Jones  V.  Swan,  6  Wend.  (N.  Y.)  Quaere   in   this   case   whether   such 

589,  594.  certificate  was  a  promissory  note. 

*°  Hamburger    v.    Miller,    48    Md.         *"  Pollen  v.  James,  45  Miss.  129. 
317,  325,  326.  ^^  Herbert  v.  Ford,  33  Me.  90. 

"Blood    V.    Northup,    1    Kan.    35. 


§    208]  WANT    OR   FAILURE   OF    CONSIDERATION".  240 

tion  whether  or  not  a  partial  failure  of  consideration  may  be  availed 
of  as  a  defense  to  an  action  on  a  bill  of  exchange,  promissory  note,  or 
negotiable  paper  generally,  and  although  in  certain  jurisdictions  such 
partial  failure  is  no  defense,  and  in  others,  where  land  is  the  subject 
of  contract  or  purchase  and  there  is  a  defect  of  title,  such  partial 
failure  is  precluded  as  a  defense,  especially  where  the  contract  remains 
unrescinded  and  there  has  been  no  fraud,  this  rule  being  extended 
also  to  cases  where  the  quality  or  quantity  is  deficient,  still  the  great 
weight  of  modern  authority,  either  by  force  of  some  statute  or  to 
avoid  circuity  of  action,  permits  such  defense,  between  the  original 
parties  to  the  paper,  either  wholly  or  pro  tanto  as  a  rule,  at  least  so 
when  properly  pleaded.  But  the  manner  in  which  such  defense  may 
be  availed  of  as  well  as  the  nature  thereof  varies  in  different  jurisdic- 
tions, it  being  held  in  some  courts  that  such  partial  failure  of  consider- 
ation can  only  be  taken  advantage  of  by  way  of  abatement  or  in  reduc- 
tion or  mitigation  of  damages,  or  as  a  set-off,  recoupment,  counter- 
claim, or  discount,  and  in  certain  cases  it  is  allowed  as  a  bar.  In  some 
states,  however,  the  defense  or  allowance  in  reduction  of  damages,  etc., 
is  limited  to  those  cases  where  the  consideration  or  amount  of  the  paper 
is  divisible,  or  ascertainable  and  capable  of  liquidation,  and  in  still 
other  jurisdictions  the  right  to  make  the  defense  of  partial  failure  as 
such  is  absolute  or  it  may  be  given  in  evidence.  Such  technical  dis- 
tinctions as  to  its  not  being  a  defense  but  being  merely  available  un- 
der a  proper  plea  to  reduce  the  amount  of  recovery  will  fully  appear 
in  the  following  review  of  the  decisions. 

§  208.  Same  subject — Review  of  decisions. — The  following  review 
of  decisions  is  subject  to  such  qualifications  and  exceptions  as  may  ex- 
ist by  reason  of  any  statute  more  recent  than  the  decision  given.**  In 
Alabama  evidence  is  admissil)le  which  tends  to  prove  a  partial  failure 
of  consideration.*^  And  wherever  a  defendant  can  maintain  a  cross- 
action  for  damages  on  account  of  a  defect  in  personal  property  pur- 
chased by  him,  or  for  a  non-compliance  by  the  plaintiff  with  his  part  of 
the  contract,  the  former  may,  in  defense  to  an  action  upon  his  note 
made  in  consequeace  of  such  purchase  or  contract,  claim  a  deduction 
corresponding  with  the  injury  he  has  sustained,  as  it  is  the  policy  in 
that  state  to  avoid  circuity  of  action.  The  rule,  however,  is  different 
where  real  estate  is  the  subject  of  the  contract  of  purchase  and  a  par- 

"  See  Appendix  herein.  "  Agnew  v.   Walden,   84  Ala.   502, 

4  So.  672. 


241 


PARTIAL    FAILURE   OF    CONSIDERATION. 


[§   208 


tial  defect  in  title,  while  the  contract  remains  unrescinded,  cannot  be 
alleged  as  a  defense  to  an  action  for  the  recovery  of  the  purchase 
money.*®  A  distinction  has,  however,  been  made  in  regard  to  fraud.'*'^ 
In  Arkansas,  in  all  that  class  of  cases  commonly  called  partial  failure 
of  consideration,  whether  involving  bad  faith  or  not,  or  where  fraud 
has  intervened,  whether  in  the  obtaining  or  the  performance  of  con- 
tracts, or  there  has  been  a  breach  of  warranty,  fraudulent  or  not,  or 
of  any  other  stipulation  of  the  contract  sued  upon  entitling  the  de- 
fendant to  a  cross-action  against  the  plaintiff  to  recover  damages  for 
such  failure,  fraud  or  breach,  he  may,  if  he  elect  to  do  so,  instead  of 
resorting  to  such  cross-action,  recoup  the  damages  sustained  by  him 
in  diminution  of  what  the  plaintiff  would  otherwise  be  authorized  to 
recover.*®  In  California  a  failure  of  consideration  either  total  or 
partial  may  be  pleaded  as  a  defense  to  an  action  upon  a  promissory 
note,  either  wholly  or  pi'o  tanio.^^    But  in  a  case  in  that  state  where 


*^  Peden  v.  Moore,  1  Stew.  &  P. 
(Ala.)   71,  21  Am.  Dec.  649. 

In  Lee  v.  White,  4  Stew.  &  P. 
(Ala.)  178,  the  court  charged  the 
jury  that  in  the  sale  of  real  estate, 
to  render  a  failure  of  title  a  defense 
against  a  promissory  note,  the  fail- 
ure of  title  should  be  total  and  the 
judgment  for  plaintiff  was  affirmed. 
In  Evans  v.  Murphy,  1  Stew.  &  P. 
(Ala.)  226,  however,  a  note  was 
given  for  the  rent  of  eighty  acres 
of  land  including  a  ferry,  and  it  was 
held  that  the  failure  of  considera- 
tion from  being  deprived  of  the 
ferry  could  be  shown  in  mitigation 
of  the  demand;  "that  by  this  course 
much  delay  and  vexation,  and  the 
circuity  of  action  will  be  avoided 
which  should  be  regarded  as  a  de- 
sideratum in  the  administration  of 
justice." 

"Wilson  V.  Jordan,  3  Stew.  &  P. 
(Ala.)  92.  In  this  case  it  was  held 
no  defense  that  the  consideration 
of  the  note  was  the  sale  of  land, 
the  title  to  -which  was  alleged  to  be 
defective  and  incumbered,  but  a 
distinction  was  made  as  to  fraud. 
The  court  said:  "Nor  do  we  feel 
Joyce  Defenses — 16. i 


the  least  dissatisfaction  with  our 
former  decisions  so  far  as  they  tend 
to  place  partial  and  total  failure  of 
consideration  on  the  same  footing 
instead  of  driving  parties  to  cir- 
cuity of  action."  It  was  also  said, 
however,  that  "The  principles  of 
relief  should  in  this  respect  be  the 
same  in  reference  to  the  same  of 
either  kind  of  property  'real  or  per- 
sonal' provided  the  circumstances 
constituting  the  failure  of  consid- 
eration be  equally  conclusive  and 
susceptible  of  proof  at  law." 

''  Desha  v.  Robinson,  17  Ark.  228, 
246-248.  Petillo  v.  Hopson,  23  Ark. 
196,  holding  that  on  a  plea  of  fail- 
ure of  consideration  defendant  is 
entitled  to  abatement  for  only  so 
much  as  the  consideration  has 
failed;  "most  assuredly  defendant 
had  no  right  to  keep  back  the  full 
amount  of  the  note  when  there  was 
but  a  partial  failure  of  considera- 
tion." 

"  Russ  Lumber  &  Mill  Co.  v.  Mus- 
cupiabe  L.  «6;  W.  Co.,  120  Cal.  521, 
529,  52  Pac.  995,  65  Am.  St.  R.  186, 
per  Haynes,  C.  See  McGue  v.  Rom- 
mell   (Cal.  1906),  83  Pac.  1000. 


§    208]  WANT   OR   FAILURE   OF    COXSIDERATION.  242 

the  note  was  given  for  the  purchase  price  of  land  it  was  held  that  the 
failure  of  consideration  must  be  total.  It  was  declared,  however, 
that  "In  cases  of  fraud  or  warranty,  where  the  consideration  is  divisi- 
ble or  capable  of  apportionment,  a  partial  failure  may  sometimes  be 
given  in  evidence  in  reduction  of  damages,  but  the  practice  in  this 
respect  proceeds  upon  the  principle  of  a  cross-action,  and  an  aJBirmative 
right  of  action  must  exist  in  favor  of  a  party  seeking  relief  in  this 
form."™  The  court  also  said  in  this  case:  "A  partial  failure  of  con- 
sideration is  not  a  defense  to  an  action  on  a  promissory  note  or  bill 
of  exchange ;  but  when  properly  pleaded  it  may  be  shown  in  reduction 
or  recoupment  of  damages.""  In  another  case  in  the  same  state, 
where  a  note  was  given  for  defendant's  interest  in  a  ranch  and  mone}^ 
expended  in  bringing  cattle  across  the  plair^,  but  it  was  not  alleged 
that  it  was  given  in  payment  for  a  division  of  cattle,  it  was  held  no 
defense  or  counter-claim  that  the  maker  of  the  note  had  been  deceived 
as  to  the  division  of  the  stock,  as  such  division  had  nothing  to  do  with 
the  consideration  of  the  note.^^  In  Connecticut,  if  the  partial  failure 
of  the  consideration  of  a  note  is  of  a  sum  liquidated  or  capable  of 
liquidation  it  may  be  availed  of.  "The  general  principle  that  a  partial 
failure  of  consideration,  whether  the  action  be  for  the  price  of  prop- 
erty sold  or  upon  a  bill  or  note  given  for  such  price,  may  go  to  reduce 
the  plaintiff's  damages  in  such  action  has  been  fully  recognized  and  is 
now  well  established  in  this  court. ^^  But  we  do  not  suppose  this  prin- 
ciple should  be  applied  to  cases  such  as  this,  wherein  the  damage  or 
amount  to  be  deducted  from  the  plaintiff's  demand  is  merely  conjec- 
tural, unliquidated  and  incapable  of  liquidation  by  known  rules,  at  least 
we  have  seen  no  case  which  has  extended  the  application  of  the  rule 
so  far."^*  And  the  rule  of  an  English  case^^  is  approved  which  holds 
that  the  quantum  to  be  deducted  on  account  of  partial  failure  of  the 
consideration  must  be  of  definite  computation  and  not  of  unliquidated 
damages.^^    In  Delaivare  a  pro  tanto  recovery  may  be  had  under  the 

^'' Reese    v.    Gordan,    19    Cal.    147,  Stark.  Ev.  281;  Bailey  on  Bills  344; 

149.  Roscoe  on  Bv.  168;    Byles  on  Bills 

"Quoting    Edwards    on    Bills    &  65;   Day  v.  Nix,  9  J.  B.  Moore  159; 

Notes,  333,  334.  1    Saund.    PI.   &  Ev.   304;    Green  v. 

^' Case  v.  Maxey,  6  Cal.  276.  Pratt,    11    Conn.    205;     McAlpin    v. 

='McAlpin  v.   Lee,   12   Conn.   129;  Lee,  12  Conn.  129. 

Cook  v.  Mix,  11  Conn.  432;   Nichols  ''^  Day  v.  Nix,  9  J.  B.  Moore  159. 

V.  Alsop,  6  Conn.  477.  '''=  Pulsifer  v.  Hotchkiss,  12  Conn. 

"Citing    Chitty    on    Bills    71;     2  234. 


243  PARTIAL    FAILURE    OF    COXSIDERATIOX.  [§    208 

statute.^''  In  Florida  a  partial  failure  of  consideration  is  not  a  good 
plea  to  a  note  for  the  purchase  price  of  lands  when  the  quantity  is 
deficient. '^^  In  Georgia,  in  an  action  on  a  note  given  for  the  price  of 
land  sold,  it  is  held  that  partial  failure  cannot  be  availed  of  as  a  de- 
fense, and  the  court  said:  "A  partial  failure  of  consideration  cannot 
be  gone  into  unless  that  part  which  has  failed  could  be  as  clearly  and 
distinctly  ascertained  in  liquidated  damages  as  the  whole  amount.  But 
here  the  partial  failure  is  as  to  the  quality,  not  as  to  the  quantity."^'' 
In  another  case  in  the  same  state  where  the  consideration  was  a  special 
interest  in  real  estate,  it  was  held  that  a  partial  failure  of  consideration 
could  not  be  shown.  But  defendant  was  in  quiet  possession  of  the 
land  and  it  was  declared  that  he  could  not  be  protected  from  payment 
of  the  note  from  a  mere  apprehension  of  being  disturbed  at  some  fu- 
ture time.*'*'  In  Illinois,  where  the  averment  was  that  the  considera- 
tion of  the  note  sued  on  had  wholly  failed,  it  was  held  that  to  sus- 
tain such  a  plea  a  total  failure  must  be  shown  and  that  it  was  insuffi- 
cient to  show  a  partial  failure.**^  But  where  the  note  in  such  case  was 
for  the  price  of  real  estate  in  fee  and  the  land  was  incumljered  by  a  life 
estate,  it  was  decided  that  the  consideration  had  failed  as  to  the  value 
of  the  estate  of  which  defendant  was  deprived  and  that  he  might 
recoup  damages  sustained  by  the  breach.*'^  And  the  defense  of  partial 
failure  of  consideration  where  land  purchased  was  incumbered  was 
also  allowed  under  the  statute  in  another  case.®^  Again,  where  a 
note  was  sued  on  in  violation  of  an  agreement  not  to  sue  for  a  certain 
time,  upon  the  faith  of  which  agreement  a  part  of  the  amount  was 
incorporated  into  the  note  and  promised  to  be  paid,  it  was  decided  that 

"Journal  Printing  Co.  v.  Maxwell,  also,  Mills  v.  Gilpin,  2  Harr.   (Del.) 

1  Pennew.    (Del.)    511,  43  Atl.   615;  32,  34,  holding  that  partial  failure  of 

under  Chap.  588,  Vol.  20,  Laws  of  consideration  cannot  be  set  up  as  a 

Del.     But  an  exception  is  made  as  defense,  but  that  there  must  be  a 

to  "bona  fide  holders.  cross  action  except  in  cases  of  fraud. 

As   to    rule   under    earlier    cases,  °'  Reddick  v.  Mickler,  23  Fla.  335, 

see  Carpenter  v.   Phillips,   2   Houst.  2  So.  698. 

(Del.)  524,  a  case  of  a  due  bill,  but  ^^  Hinton  v.  Scott,  Dud.  (Ga.)  245. 

the   rule    was   applied    that   partial  "^  Jordon    v.    Jordon,    Dud.    (Ga.) 

failure  of  consideration  was  no  de-  181. 

fense  to  a  promissory  note,  a  bill  "  Stocks  v.  Scott,  188  111.  266,  58 

of  exchange;   but  a  recovery  could  N.  E.  990. 

be  had  upon  the  note  for  the  full  "=  Chrity  v.  Ogle,  33  111.  295. 

amoimt,    leaving   defendant  to   this  "^  Schuckmann  v.  Knoebel,  27  111. 

action    for    damages    for    the    par-  175,   under   Scates   Comp.    Stat.   Ch. 

tial   failure   of    consideration.     See,  73,  p.  292. 


§    208]  WAXT   OR   FAILURE   OF    CONSIDERATION.  244 

the  consideration  had  necessarily  failed  in  part  and  so  constituted  a 
defense.^'*  In  Indiaim  an  answer  that  the  property  sold  was  not  worth 
half  its  price  was  held  not  a  good  defense.''^  Although  it  is  deter- 
mined in  an  earlier  case  that  defendant  may  reduce  the  damages  by 
showing  a  partial  failure  of  consideration.^^  In  Iowa  a  partial  failure 
of  consideration,  arising  from  breach  of  warranty  or  otherwise,  may 
be  shown  both  on  the  ground  of  avoiding  circuity  of  action,  also  be- 
cause the  statute  allows  the  same  as  a  defense."  In  Kentucly  a  plea 
impeaching  the  consideration  of  a  note  upon  the  ground  that  it  was 
given  upon  a  parol  contract  for  land,  and  the  inability  of  the  obligee 
to  convey  a  title  to  the  property,  must  show  a  total  failure  of  consider- 
ation, for  a  partial  failure  is  no  bar."'  So  where  a  note  was  given  for 
the  part  of  the  price  of  a  lot  and  possession  of  the  lot  was  retained, 
it  was  decided  that  a  partial  failure  of  consideration  furnished  no  de- 
fense at  law,  that  the  relief  of  defendants,  if  any,  should  be  sought  in 
equity  and  that  they  ought  not  to  be  permitted  to  avoid  the  contract 
while  they  still  retained  possession.®''  And  under  a  statute  permitting 
the  consideration  of  writings  to  be  impeached  a  partial  failure  of  con- 
sideration is  not  a  legal  ground  for  defense.'^^  So  a  plea  which  is 
only  of  a  partial  failure  is  no  bar.  If  a  contract  is  to  be  regarded  as 
executory  the  agreement  and  not  the  performance  of  the  agreement  is 
to  be  taken  as  the  true  consideration  of  the  agreement  on  the  other  side 
to  pay  the  price,  and  unless,  by  the  terms  of  the  contract,  the  payment 
of  the  price  is  made  to  depend  upon  the  performance  of  the  agree- 
ment to  let  or  hire,  a  failure  to  perform  the  latter  cannot  be  pleaded 
in  bar  to  an  action  for  the  non-payment  of  the  price.'^^  In  Maiiu  it  is 
well  settled  that,  as  between  the  original  parties  or  between  others 
standing  in  no  better  position,  for  the  purpose  of  avoiding  a  circuity 
of  action,  a  partial  failure  of  consideration  can  be  shown  in  reduction 
of  damages  where  a  promissory  note  is  given  for  two  or  more  inde- 
pendent considerations  and  there  is  failure  of  consideration  as  to  one.'- 

»^  Hill  v.  Enders,  19  111.  163.  ™  Williams    v.    Bristofe,    1    A.    K. 

"Case  v.  Grim,  77  Ind.  565.  Marsh.   (Ky.)  168. 

""Catlett  v.   McDowell,   4   Blackf.  "Owsley  v.  Beasley,  4  Bibl?  (Ky.) 

(Ind.)  556.  277. 

"  Griffey     v.     Payne,      1     Morris  "  Tuttle  v.    George  A.   Tuttle   Co. 

(Iowa)  68.     See  Beatty  v.  Carr,  109  (Me.  1906),  64  Atl.  496;  Hathorn  v. 

Iowa  183,  80  N.  W.  326.  Wheelwright,    99    Me.    351,    59    Atl. 

^Wise  v.   Kelly,   2  A.  K.   Marsh.  517.     See  Rev.  Stat,  c.  84,  §  40,  as 

(Ky.)  545.  to    note   given   for   real    estate    and 

^»Bull  v.  Jackson,  1  A.  K.  Marsh,  partial    failure  of   consideration   as 

(Ky.)  176.  to  patent  right. 


245  PARTIAL  FAILURE  OF  COXSIDERATION".         [§'  208 

Under  an  earlier  decision  it  is  determined  that  in  an  action  upon  a 
note  between  the  original  parties  a  partial  failure  of  consideration, 
though  the  amount  be  unliquidated,  may  be  proved  by  defendant  in 
mitigation  of  damages  and  the  jury  may,  upon  the  evidence,  deter- 
mine the  amount  of  the  failure;  it  being  declared  by  the  court  that 
the  tendency  of  modern  decisions  in  this  country  has  been  to  allow  a 
broader  latitude  of  defense  than  was  permitted  by  the  rules  of  the 
common  law  to  bills  of  exchange  and  promissory  notes  where  the 
justice  of  the  case  required  it  and  a  circuity  of  action  could  be 
avoided.'^  So  in  another  case  in  that  state  such  partial  failure  of  a 
note  for  goods  sold  is  held  to  be  a  good  defense  pro  tanto  between 
parties,^*  although  it  is  also  determined  that  there  must  be  a  failure 
of  an  entire  or  a  certain  and  distinct  part  of  the  consideration.'^^ 
Again  it  is  declared  that  if  upon  inquiry  it  results  that  there  was  no 
consideration  or  that  it  had  failed  totally  or  partially,  the  plaintiff 
fails  to  recover,  or  recovers  a  part  only  of  the  note ;  but  in  this  case 
the  note  was  for  sale  of  timber  and  the  defense  was  that  the  defendant 
by  agreement  was  to  be  held  to  pay  only  so  much  as  he  might  actu- 
ally realize  from  the  property."'^  It  is  also  held  that  the  holder  of  a 
non-negotiable  promissory  note,  made  payable  to  him  at  the  request  of 
the  party  from  whom  the  consideration  moved,  is  presumed  to  hold  it 
in  trust  for  the  benefit  of  the  party  from  whom  the  consideration 
moved,  and  in  a  suit  upon  such  a  note  the  defense  is  available  of  either 
a  total  or  partial  failure  of  consideration,  whether  the  payee  at  the 
time  of  recovering  the  note  did  or  did  not  know  what  the  character  of 
the  consideration  was."  But  a  partial  failure  alone  of  title  to  land 
constitutes  no  defense  in  that  state  to  a  note  given  in  payment  for  it.'^ 
After  the  death,  however,  of  the  payee  and  the  insolvency  of  his  estate, 
the  maker  may,  in  a  suit  against  him  by  the  administrator,  set  off  the 

"Herbert  v.  Ford,  16  Shep.  (Me.)  (holding  that  partial  want  of  title 

546.  is   no   defense   to  a  note   given   for 

"Wadsworth   v.   Smith,   10    Shep.  land;   to  constitute  a  valid  defense 

(Me.)  500.  between  the  parties,  or  wherein  the 

"Clark  v.  Peabody,  9  Shep.  (Me.)  same  defense  may  be  made,  the  de- 

500.  feat  of  title  must  be  entire  so  that 

"Folsom    V.     Mussey,    8    Greenl.  nothing  valuable  passes  by  the  con- 

(Me.)  400,  23  Am.  Dec.  522.  veyance;   Wentworth  v.  Goodwin,  8 

"  Herbert  V.  Ford,  33  Me.  90.  Shep.    (Me.)    150;    Howard    v.    Wit- 

"Hogdon  v.   Golder,   75   Me.   293;  ham,    2    Greenl.    (Me.)    390;     Lloyd 

Thompson  v.  Mansfeild,  43  Me.  490;  v.   Jewell,   1   Greenl.    (Me.)    352,   10 

Morrison  v.  Jewell,  34  Me.  146;  Jen-  Am.  Dec.  73. 
ness  v.  Parker,  11  Shep.   (Me.)   289 


§    208]  WAXT    OR   FAILURE   OF    COXSIDERATIOX.  246 

breach  of  oovenant  against  the  note."^  In  Maryland  partial  failure  of 
consideration  may  be  relied  on  as  a  defense  and  it  avoids  the  note 
only  pro  tanto.^^  In  Massachusetts  the  defendant  is  entitled  to  have 
so  much  deducted  from  the  amount  of  the  note  as  the  chattel  by  reason 
of  its  defects  was  worth  less  than  it  should  have  been  had  it  been  as 
warranted,  or  if  the  defects  had  not  existed ;  but  he  is  not  entitled  to 
a  deduction  of  the  difEerence  between  the  amount  of  the  note  and  the 
sum  which  the  jury  may  deem  the  true  value  of  the  chattel.  Shaw, 
C.  J.,  said :  "This  mode  of  defenses  is  of  modern  origin,  founded  on 
a  liberal  application  of  the  rules  of  law  whioh  allow  such  deduction 
as  a  substitute  for  a  cross-action  on  the  warranty  to  avoid  circuity  of 
action.  The  same  rule  of  damages,  therefore,  must  be  adopted  as 
would  be  adopted  in  assessing  damages  in  such  cross-action.  In  that 
case  it  is  very  clear  that  the  rule  of  damages  would  be  the  loss  ensu- 
ing from  those  defects  in  respect  to  which  the  warranty  is  broken."*^ 
In  Michigan  evidence  of  failure  of  consideration,  in  whole  or  in  part, 
may  be  given  in  any  action  or  set-off  upon,  or  arising  out  of  any  con- 
tract except  negotiable  instruments,  negotiated  before  due,  to  persons 
not  having  notice.^ ^*  In  Minnesota  a  partial  failure  of  consideration 
can  be  shown,  if  properly  pleaded,  as  a  defense  pro  tanto  to  a  negotia- 
ble instrument  in  the  hands  of  the  original  payee,  or  of  a  party  stand- 
ing in  his  shoes. ^^  It  is  also  decided  in  that  state  that  the  allegation 
of  a  breach  of  warranty  in  the  sale  of  chattels  may  be  set  up  as  a  par- 
tial defense  by  way  of  recoupment,  and  it  is  well  settled  in  that  state 
that  a  partial  failure  of  consideration  is  a  good  defense  or  partial  de- 
fense, and  may  be  availed  of  to  defeat  a  recovery  pro  tanto.^^  In  an- 
other case  the  defense  is  held  available  by  way  of  reduction  of  damages 
recoverable  upon  a  non-negotiable  contract  or  instrument.^*   In  earlier 

'» Morrison  v.  Jewell,  34  Me.  146.  as  appears  from  the  preceding  cases 

^'Beall  v.  Pearce,  12  Md.  550.  the  opposite  doctrine  prevails. 

"  Goodwill     V.     Morse,     9     Mete.  "*  Hubbard     v.     Freiburger,     133 

(Mass.)   278.  Mich.  139,  94  N.  W.  727,  10  Det.  L. 

Examine  Parish  v.  Stone,  14  Pick.  N.  123;    Comp.  Laws,  §§  769,  828. 

(Mass.)    198,   208-210,    25   Am.   Dec.  «=  Brown  v.  Roberts,  90  Minn.  314, 

378   (although  the  language  used  in  96  N.  W.  793. 

this  case  refers  more  particularly  to  *'  Nichols  and  Shepard  Co.  v. 
partial  want  of  consideration)  ;  No-  Soderquist,  77  Minn.  509,  80  N.  W. 
ble  V.  Smith,  Quincy  (Mass.)  254,  630;  Durment  v.  Tuttle,  50  Minn, 
states  the  doctrine  that  a  partial  426,  52  N.  W.  909;  Torinus  v.  Buck- 
consideration  of  a  note  cannot  be  ham,  29  Minn.  128,  12  N.  W.  348. 
shown  in  reduction  of  damages,  but  ^*  Stevens    v.    Johnson,    28    Minn. 

172,  9  N.  W.  677. 


J 


24:7  PARTIAL    FAILURE   OF    COXSIDERATIOX.  [§    208 

cases,  however,  it  is  also  determined  that  where  the  consideration  is 
apportionable  a  partial  failure  thereof  is  a  defense;  but  where  it  is 
not  shown  to  what  extent  the  consideration  has  failed  in  proportion  to 
the  whole  consideration  the  whole  amount  of  the  note  may  be  recov- 
ered.*^ In  Mississippi,  in  an  action  upon  instruments  for  a  sum  cer- 
tain, if  introduced  under  a  special  plea,  the  defense  of  partial  failure 
of  consideration  can  be  made.®*'  In  Missouri  it  is  declared  that,  "It 
may  now  be  considered  as  settled  in  this  state,  that  part  failure  of  con- 
sideration may  be  pleaded  to  an  action  at  law  on  a  note."®^  And  may 
be  shown  in  evidence.^®  And  where  there  was  an  agreement  with  an 
out-going  partner  for  a  pro  tanto  rebate  if  accounts  proved  worthless, 
such  partial  failure  may  be  availed  of  as  a  defense  in  an  action  at  law 
upon  notes  for  the  purchase  price  of  notes  and  accounts  of  the  firm 
at  their  face  value.*^  In  a  Nehraska  case  it  is  decided  that  in  an  ac- 
tion between  the  parties  on  a  negotiable  check  and  persons  not  ho)ia 
fide  purchasers,  a  partial  failure  of  consideration  may  be  shown,  and 
where  defendant  admits  an  amount  due  and  alleges  such  partial  failure 
in  an  action  against  the  drawer  the  plaintiff  may  recover  the  amount 
due.''°  In  New  Hampshire,  under  the  statute,  such  part  failure  may  be 
proved  in  reduction  of  damages,  after  filing  a  brief  statement  thereof,®^ 
in  all  cases  where  total  failure  would  have  been  a  good  defense. °"  It 
was  also  at  common  law  a  good  defense  pro  tanto  where  the  sum  to  be 
deducted  could  be  ascertained  by  mere  computation,  but  otherwise 
where  the  amount  to  be  deducted  was  unliquidated."^  In  New  Jersey 
it  is  held  that  in  a  suit  between  the  original  parties  a  partial  failure 

''Bisbee  v.  Tornius,  26  Minn.  165,  ""  Lanning  v.  Burns,  36  Neb.   236, 

2  N.  W.  168;   Leighton  v.  Grant,  20  54  N.  W.  427. 

Minn.  345,  Gil.  298,  306.  °^  Pike   v.    Taylor,    49    N.    H.    124, 

^°  Rasberry  v.  Moye,  23  Miss.  320.  127,  under  stat.  1861,  c.  2497. 

See     Etheridge     v.     Gallgher,     55  ^-  Nichols  v.  Hunton,  45  N.  H.  470. 

Miss.  458,  considering  code,  §  2281;  "Nichols  v.  Hunton,  45  N.  H.  470 

Merchants' Bank  V.  Millsaps  (Miss.),  (Stat.  1861,  c.  2497,  §  1);  Riddle  v. 

15  So.  659,  considering  code,  §  3503;  Gage,  37  N.  H.  519,  75  Am.  Dec.  151; 

Stokes    V.    Winslow,    31    Miss.    518,  Drew   v.    Towle,    27    N.    H.    412,    59 

considering  code,  640,  §  9.  Am.     Dec.     380.       See     Fletcher    v. 

"  Barr  v.  Baker,  9  Mo.  850,  854.  Chase,  16  N.  H.  38,  holding  that  past 

*'  Gamacke  v.  Grimm,  23  Mo.  38.  failure   was   not,   in    general,   a   de- 

''Battrel  v.  Franklin,  57  Mo.  566.  fense,  for  the  defendant  was  left  to 

See  p.  320,  §     3;  Briscoe  v.  Kinealy,  resort    to    action    on    covenants    for 

8  Mo.  App.   76;    Smith  v.   Giegrick,  indemnity.      A    tract    of    land    was 

36  Mo.  369,  under  rev.  code  1865.  sold,  but  no  distinction   was  made 

between  land  and  personal  property. 


§    208]  WANT    OR   FAILURE   OF    CONSIDERATION.  348 

of  the  consideration  may  be  set  up  as  a  defense  to  the  same  extent  as 
though  the  action  were  founded  upon  such  consideration  itself.''*  But 
it  is  also  decided  that  partial  failure  is  no  defense  where  the  amount 
to  be  deducted  on  account  of  such  failure  is  unliquidated.**^  In  New 
York  partial  failure  of  consideration  is,  under  the  negotiable  instru- 
ments law,  a  defense  pro  tanto,  whether  the  failure  is  an  ascertained 
and  liquidated  amount  or  otherwise.""  In  an  early  decision  in  that 
state  it  is  determined  that  if  a  note  be  given  on  account  of  part  per- 
formance of  an  entire  contract,  the  non-performance  of  the  entire  con- 
tract is  no  defense  to  the  note,  and  that  a  claim  for  damages  for  not 
completing  the  contract  cannot  be  recouped  against  the  note.""  In 
another  case  in  that  state  the  court  declares  that  partial  want  of  con- 
sideration affects  the  note  with  nullity  pro  tanto,  and  that  the  same 
rule  applies  where  there  has  been  a  part  failure  of  the  consideration,'^ 
not  indeed  in  all  cases,  but  in  many  cases,  at  least  where  it  is  a  matter 
capable  of  definite  computation  and  not  mere  unliquidated  damages."^ 
Under  earlier  decisions  such  partial  failure  may  be  shown  in  defense,"* 
or  be  given  in  evidence  to  reduce  the  damages  or  recovery,  under  no- 
tice of  defense.^""  Defendant  may  also  show  that  the  note  was  given 
for  more  than  plaintiff  was  entitled  to  and  the  excess  should  be  de- 
ducted.^**^  But  it  is  also  determined  in  that  state  that  where  there 
has  been  only  a  partial  failure  of  consideration  the  defendant  cannot 
say  that  the  note  is  wholly  void ;  in  such  case  each  party  may  have  an 
action  and  this  is  the  only  way  in  which  complete  justice  can  be 
done.^°^  In  North  Carolina  such  partial  failure  is  inadmissible  to  de- 
feat recovery  or  lessen  the  sum  due,  but  resort  must  be  had  to  a  coun- 
terclaim or  cross-action  for  damages  ;^°^  or  as  it  has  been  decided  in 
another  case,  such  part  failure  furnishes  a  distinct  and  independent 
cause  of  action,  and  a  distinction  is  made  between  the  contract  and  the 

»*WyckofE  V.  Runyon,  33  N.  J.  L.  Y.)     605;     Judd    v.    Dennison,     10 

107.  Wend.    (N.    Y.)    512    (available    in 

"^ Allen  V.  Bank  of  U.  S.,  20  N.  J.  mitigation    or    in    bar);    Burton    v. 

L.  620.  Stewart,   3   Wend.    (N.   Y.)    236,    20 

""Neg.   Inst.   Law,   §  54.     See  Ap-  Am.  Dec.  692;    Spalding  v.  Vander- 

pendix  herein.  cook,    2  Wend.    (N.   Y.)    431;    Jones 

"^Walker  v.  Millard,  29  N.  Y.  375.  v.  Swan,  6  Wend.  (N.  Y.)  589,  593. 

"'  Sawyer    v.    McLouth,    46    Barb.  '°^  Phoenix    Ins.    Co.    v.    Fiquet,    7 

(N.  Y.)    350,  353,  quoting  Story  on  Johns.  (N.  Y.)  384. 

Prom.  Notes,  §  187.  ^"^  Payne  v.  Ladue,  1  Hill    (N.  Y.) 

°"  Sawyer   v.    Chambers,    44    Barb.  116. 

(N.  Y.)  42,  43  Barb.  (N.  Y.)  622.  "'Evans  v.  Williamson,  79   N.  C. 

i°"  Payne  v.  Cutler,  13  Wend.    (N.  86. 


I 


249  PARTIAL    FAILURE    OF    COXSIDERATION".  [§    20S 

security.  If  a  part  of  the  contract  arises  on  a  good  consideration  and 
part  on  a  bad  one  it  is  divisible.  But  it  is  otherwise  as  to  the  secur- 
ity, that  being  entire.^"*  In  Oliio  recovery  is  barred  to  the  extent  of 
failure  of  consideration/''^  and  a  party  is  entitled  to  abatement  in 
price,  in  case  of  a  partial  failure  of  consideration,  against  all  persons 
seeking  to  enforce  a  vendor's  lien,  as  they  are  not  hona  fide  holders. ^''^ 
But  a  purchaser  of  land  who  has  received  a  deed  containing  a  cove- 
nant of  warranty  cannot  plead  in  bar,  to  an  action  on  a  note  given 
for  the  purchase  money,  a  defect  of  title,  unless  he  has  been  evicted 
by  title  paramount.^"'^  In  OJclahoma  partial  failure  of  consideration 
in  recoupment  of  damages  may  be  shown.^"^  In  Oregon  such  part 
failure  may  be  set  up,  and  defendant  may  recoup  his  damages,  though 
they  be  unliquidated.^*'''  In  a  Pennsylvania  case  a  note  was  given  in 
payment  pro  tanto  of  work,  but  it  was  not  to  be  extinguished  or  paid 
if  the  work  was  never  completed.  It  was  left  to  the  jury  to  determine 
whether  the  work  was  substantially  performed  or  not,  under  an  in- 
struction to  allow  an  offset  if  so  done,  but  compensating  plaintiff  in 
damages  for  such  part  as  was  not  fully  completed. ^^°  In  South  Caro- 
lina it  is  held  that  where  it  appears  that  a  purchaser  would  have  the 
right  to  recover  back  the  purchase  money  he  has  a  good  defense  by 
way  of  set-off  in  a  case  where  he  has  not  paid  the  purchase  money ;  that 
is,  he  who  has  a  cross-action  has  a  right  of  discount  against  an  action 
brought ;  and  a  set-off  which  equals  a  total  failure  as  to  part  of  a  divisi- 
ble consideration  may  be  shown  under  the  terms  of  a  contract  allowing 
a  return  of  part  of  the  goods  for  the  purchase  price  of  which  the  note 
was  given,  although  it  was  declared  to  be  in  strict  analogy  to  a  case 
of  total  failure  of  consideration. ^^^  In  Tennessee  a  maker  of  a  note 
is  held  to  be  entitled  to  credit  to  the  amount  and  extent  that  the  con- 
sideration has  failed,  caused  by  the  land  being  held  for  debts  of  the 
grantor  when  the  note  is  not  in  the  hands  of  a  hona  fide  holder.^^^   In 

'"Washburn  v.  Pi  cot,  14  N.  C.   (3  '"' Hagan  v.  Bigler,  5  Okla.  575,  49 

Dev.)  390.  Pac.  1011. 

"'^  Lowenstine    v.    Males,    3    Ohio  ^"^  Davis  v.  Wait,  12  Oreg.  425,  428, 

Dec.  (reprint)  330.  8  Pac.  356. 

'""Sutton    v.    Kautzman,    6    Ohio  "°  Truesdale  v.  Watts,  12   Pa.   St. 

Dec.  (reprint),  bottom  page  910.  73. 

""Picket  v.  Picket,  6  Ohio  St.  525,  "'Barnes  v.  Shelton,  Harp.  (S.  C.) 

distinguished  in  Kyle  v.  Thompson,  21,  18  Am.  Dec.  642. 

11  Ohio  St.  616,  623,  where  an  order  "' Edwards  v.  Porter,  42  Tenn.   (2 

was  made  enjoining  collection  of  so  Cold.)  42. 
much  of  a  note  as  was  necessary  to 
cover  a  mortgage  encumbered. 


§    208]  WANT    OR   FAILURE   OF    CONSIDERATION.  250 

a  Texas  case  it  is  decided  that  a  defense  of  partial  failure  of  consider- 
ation may  be  shown  between  original  parties.^^^  In  Vermont,  prior 
to  the  statute  of  1867,  partial  failure  of  consideration  could  not  be  set 
up  as  a  defense  even  in  a  suit  between  the  original  parties,  unless  there 
was  fraud  and  an  offer  to  rescind,  and  the  amount  to  be  deducted  could 
be  ascertained  by  computation ;  and  under  the  statute  such  a  defense 
became  available  only  between  the  original  parties  as  expressed  by  the 
instrument  itself,  as  between  the  maker  and  payee."*  And  where  a 
note  was  given  in  part  payment  of  land,  the  rest  being  in  cash,  it  was 
held  that  the  consideration  of  the  note  was  the  whole  property  pur- 
chased and  not  any  particular  part  of  it  and  that  the  case  was  not 
therefore  within  the  statute,  the  alleged  partial  failure  being  greater 
than  the  amount  of  the  note."'^  It  is  also  held  in  that  state  that  it  is 
no  defense  that  the  land  is  incumbered,  and  that  fraud  which  probably 
affects  the  consideration  is  inadmissible  to  reduce  damages."®  In  a 
Federal  case  it  is  said :  "It  is  urged  that  a  partial  failure  of  considera- 
tion is  not  a  good  defense  at  law,  the  amount  being  unliquidated.  This 
is  the  English  rule  formerly  followed  in  the  United  States."^  But 
the  rule  is  now  otherwise  and  the  cases  referred  to  in  Connecticut  and 
jSTew  Jersey  have  been  in  express  terms  overruled  by  the  courts  of  those 
states."^^^  So  where  a  promissory  note  was  given  for  the  purchase 
price  of  land  it  was  decided  that  failure  of  consideration  through  de- 
fect in  title  must  be  total  to  constitute  a  good  defense,  as  any  defect 
in  the  title  or  deed  was  inadmissible  in  a  court  of  law  in  an  action  on 
a  note,  but  relief  must  be  sought  in  chancery."^   In  a  Canada  case  it 

"^Branch  v.  Howard,  4  Tex.  Civ.  21  Me.  150;    Morrison  v.  Jewell,  34 

App.  271,  23  S.  W.  478.  Me.  146;    Hogden  v.  Colder,  75  Me. 

"^Craigne  v.  Hall  &  Farr,  72  Vt.  293;  Drew  v.  Towle,  27  N.  H.  412,  59 

104,  50  Atl.  806,  87  Am.  St.  Rep.  690,  Am.  Dec.  380;  Riddle  v.  Cage,  37  N. 

55  L.  R.  A.  876;  Russell  v.  Rood,  72  H.  519,  75  Am.  Dec.   151;    Richard- 

Vt.    238,    47    Atl.    789;    Burgess    v.  son  v.  Sanborn,  33  Vt.  75;   Pulsifer 

Nash,  66  Vt.  44,  28  Atl.  419;    Hoyt  v.  Hotchkiss,  12  Conn.  234;  Allen  v. 

V.    McNally    (Rev.    Laws,    §    911);  Bank,  20  N.  J.  L.  620. 

Thrall  v.  Horton,  44  Vt.  386;  Cragin  "^American  Nat.  Bk.  v.  Watkins, 

V.  Fowler,  34  Vt.  326,  80  Am.  Dec.  119  Fed.  545,  555,  556.   Citing  Avery 

680;     Richardson     v.     Sanborn,     33  v.  Brown,  31  Conn.  398;    Bonker  v. 

Vt.  75;  Walker  V.  Smith,  2  Vt.  339.  Randies,   31  N.  J.  L.   335;    Wyckoff 

"=  Craigne  v.  Hall  &  Farr,  73  Vt.  v.  Runyon,  33  N.  J.  L.  107. 

104,    50   Atl.    806,    87   Am.    St.    Rep.  "°  Greenleaf  v.  Cook,  2  Wheat  (U. 

690.  55  L.  R.  A.  876.  S.)  13,  4  L.  Ed.  172.   See  also,  Pack- 

"'Hassam  v.  Dompier,  28  Vt.  32.  wood  v.  Clark,  2  Sawy.   (U.  S.)  546, 

"^Citing  Wentworth  v.   Goodwin,  Fed.  Cas.  No.  10656   (U.  S.  C.  C.  D. 


251 


PARTIAL    FAILURE    OF    COXSIDEKATIOX. 


[§   208 


is  decided  that  a  partial  failure  of  consideration  is  no  objection  in  an 
action  on  a  bill  of  exchange  if  that  failure  applies  to  a  defined  por- 
tion of  the  sum  claimed,  otherwise  it  is  no  defense.^-*'  But  it  is  also 
held  that  a  plea  is  bad  in  law  which  shows  only  partial  failure  of  con- 
sideration, as  defendant's  remedy  is  by  cross-action  or  by  suit  in 
equity.'-'  In  an  Ontario  case  it  is  decided  that  a  partial  failure  of 
consideration  for  an  ascertained  and  liquidated  amount,  such  sum 
having  been  agreed  to  be  allowed,  may  constitute  a  defense  by  way  of 


Oregon)  (holding  that  a  failure 
of  consideration  to  be  defense  must 
be  total,  and  where  some  portion  of 
the  consideration  still  remains  the 
defense  can  only  come  in  by  way  of 
recoupment  of  damages  for  the  par- 
tial failure,  and  under  the  code  the 
damages,  if  any,  can  only  be  allowed 
as  a  counterclaim,  which  must  be 
pleaded  and  proved  in  the  same 
manner  as  if  a  separate  action.) 
Elminger  v.  Drew,  4  McLean  (U.  S.) 
368,  Fed.  Cas.  No.  4416  (holding 
that  total  failure  is  a  good  defense, 
but  partial  is  no  defense  where 
goods  are  sold  and  delivered  with 
warranty  and  the  contract  is  abso- 
lute and  there  is  a  breach;  unless 
the  contract  be  rescinded  by  con- 
sent it  remains  open;  fraud  avoids, 
but  there  must  be  an  offer  to  rescind 
except  where  impracticable  to  re- 
turn property,  as  in  the  case  of 
death  of  a  horse,  and  that  the 
weight  of  authority  is  against  the 
right  to  set  up  part  failure,  although 
the  court  says:  "A  very  recent  case, 
not  yet  reported  in  the  supreme 
court,  has  overruled  the  cases  in 
that  court.")  Scudder  v.  Andrews, 
2  McLean  (U.  S.)  464,  Fed.  Cas.  No. 
12564  (holding  that  partial  fail- 
ure cannot  be  shown  unless  there 
has  been  a  fraud.  The  case  was  one 
of  a  purchase-money  note,  and  the 
court  considers  Chitty  on  Bills  (Ed. 
1839),  p.  86,  to  the  point  that  a  sub- 


sequent failure  of  the  consideration 
for  which  a  bill  or  note  has  been 
given,  either  in  whole  or  in  part, 
when  of  a  definite  amount,  such  as 
the  non-performance  of  a  condition 
precedent,  frequently,  between  the 
original  parties  or  their  representa- 
tives affords  a  defense  entirely  or 
partially.  But  the  court  denies  that 
this  is  the  law,  except  in  cases  of 
fraud.)  Varnum  v.  Mauro,  2 
Cranch  (U.  S.  C.  C.)  425,  Fed.  Cas. 
No.  16889  (holding  that  partial 
failure  is  no  defense.)  Boone  v. 
Queen,  2  Cranch  (U.  S.  C.  C.)  37, 
Fed.  Cas.  No.  1643  (holding  par- 
tial failure  no  defense,  unless  there 
is  fraud.)  Martin  v.  Barton  Iron 
Works,  Fed.  Cas.  No.  9157  (hold- 
ing that  in  Georgia  a  total  as  well 
as  partial  failure  of  consideration 
may  be  set  up  as  a  defense  to  what 
is  commonly  known  as  a  sealed  note 
or  single  bill.  The  writing  was  not 
strictly  speaking,  commercial  paper 
governed  by  the  law  merchant). 

''"Georgian  Bay  Lumber  Co.  v 
Thompson,  35  Up.  Can.  Q.  B.  64,  70 
72. 

'='  Kilroy  v.  Simkins,  26  Up.  Can 
C.  P.  281,  285. 

So  a  plea  to  an  action  on  a  prom 
issory  note  showing  not  a  total  but 
only  a  partial  failure  of  considera 
tion,  is  bad.  Hill  v.  Ryau,  8  Up 
Can.  Q.  B.  443. 


§    209]  WANT    OR   FAILURE    OF    CONSIDERATION.  252' 

reduction  of  the  amount  agreed  upon.^--  In  another  case  it  is  held 
that  partial  failure  of  consideration,  being  a  sum  capable  of  a  definite 
computation,  can  be  set  up  as  an  answer  pro  tanto.^^^  And  in  a  New 
Brunswick  case  it  is  held  that  defense  can  only  be  made  where  the 
failure  of  consideration  is  entire,  and  parties  must  resort  to  a  cross- 
action  for  damages  sustained  by  claimed  part  failure.^-*  If  a  person 
who  is  under  indictment  engages  the  services  of  a  lawyer  and  exe- 
cutes and  gives  to  the  latter  his  note  for  the  amount  of  his  fee,  and 
commits  suicide  before  his  trial,  the  fact  of  non-performance  by  the 
lawyer  of  the  services  for  which  the  note  was  given,  and  that  he  did 
not  defend  the  criminal  on  his  trial  constitutes  no  ground  in  law  or 
equity  for  impeachment  of  the  consideration  of  the  note.  The  promise 
to  perform  the  service  was  the  consideration  of  the  note.  The  per- 
formance was  not  a  condition  on  which  the  obligation  of  the  note  de- 
pended, but  if  by  any  act  or  omission  on  the  lawyer's  part,  without  de- 
fault of  the  obligor,  the  stipulated  service  had  not  been  rendered  there 
would  have  been  a  partial  failure  of  consideration.  There  exists  in 
such  a  case  as  this  no  failure  of  consideration,  because  the  non-per- 
formance resulted  from  the  obligor's  acts,  without  the  concurrence  or 
delinquency  of  the  obligee  who  was  ready  and  willing  to  perform  his 
undertaking  and  would  have  done  so  had  not  the  obligor's  act  pre- 
vented.^^^ 

§  209.  Where  number  of  notes  are  given — Partial  failure  of  con- 
sideration.— Where  several  notes  are  given  for  a  consideration  which 
with  the  assent  of  defendant  has  partially  failed,  it  cannot  be  set  up 
in  defense  against  all  the  notes.  The  amount  of  the  note  first  sued 
on  may  be  recovered  for  past  performance ;  that  is,  the  money  actually 
owed  thereon  may  be  recovered.^^e  There  may,  however,  owing  to  a 
mistake  between  the  parties  be  a  pro  tanto  failure  of  consideration  for 
notes  and  a  mortgage  for  which  equity  will  grant  relief  where  there 

'^^^M'Gregor  v.  Bishop,  14  Ont.  7,  '=' Clarke  v.  Ash,  5  N.  Brunsw.  (3 

quoting     Chalmers     on     Bills     (1st  Kerr)   211.    See  further,  Daniels  on 

ed.),  p.  78,  art.   93,  that  a  "partial  Neg.  Inst.  (5th  Ed.),  §  201. 

failure  of  consideration  is  a  defense  '="  Mitcherson    v.    Dozier,    7    J.    J. 

pro    tanto    against    the    immediate  Marsh.  (Ky.)  53,  22  Am.  Dec.  116. 

party  when  the  failure  is  an  ascer-  "« Hansford  v.  Mills,  9  Port  (Ala.), 

tained   and   liquidated  amount,   but  509;  notes  were  for  sale  of  personal 

not  otherwise."  property. 

^=^Star  Kidney  Pad  Co.  v.  Green- 
wood, 5  Ont.  28,  33. 


I 


^53     RESCINDING  CONTRACT  AND  RESTORING  CONSIDERATION.       [§    210 

is  no  longer  any  consideration  some  of  the  notes  having  been  paid  and 
it  being  obvious  that  the  parties  did  not  intend  to  bind  themselves  to 
the  full  extent  of  said  obligation  represented  by  all  the  notes  and  the 
surrender  and  cancellation  will  be  ordered  of  the  unpaid  notes.^-^  If 
there  is  one  consideration,  not  susceptible  of  apportionment,  for  sev- 
eral promissory  notes,  a  partial  failure  of  that  consideration  cannot,  in 
the  absence  of  fraud  or  mistake,  impeach  any  one  of  the  notes  in  an 
action  on  it.^^^ 

§  210.  Rescinding  contract  and  restoring  consideration — General 
rule. — It  is  as  a  general  rule  a  prerequisite  to  the  defense  that  the  con- 
sideration of  a  bill  or  note  has  failed  or  that  it  is  without  considera- 
tion, that  such  consideration,  if  of  any  value,  should  be  restored,  or 
there  should  be  an  offer  to  restore  it.  The  underlying  principle  is 
that  a  party  must  affirm  or  avoid  a  contract  in  toto  and  not  in  part, 
and  cannot  at  the  same  time  repudiate  and  retain  the  benefit  of  a  con- 
tract. The  party  seeking  to  rescind  must  put  the  other  party  in  statu 
quo}~^    So  where  the  purchaser  of  property  gives  a  note  for  the  price 


"^Thompson  v.  Hudgins,  116  Ala. 
93,  116,  117,  22  So.  632. 

^^«  Leighton  v.  Grant,  20  Minn.  345 
(Gil.  298,  306). 

^Alabama. — Gillespie  v.  Battle, 
15  Ala.  276  (holding  that  the  maker 
of  a  promissory  note  given  in  part 
payment  for  the  purchase  price  of 
land  cannot  retain  the  land,  no 
fraud  being  shown,  and  insist  that 
the  contract  is  a  nullity  and  that  the 
note  given  is  without  consideration. 
It  was  also  held  that  there  was  a 
failure  of  consideration). 

Arkansas. — Desna  v.  Robinson,  17 
Ark.  228. 

California. — Fitz  v.  Bynum,  55 
Cal.  459  (in  this  case  it  appears 
that  the  court  instructed  the  jury 
that  if  the  stock  for  which  the  notes 
in  suit  were  given  had  any  value, 
the  defendant  must  have  offered  to 
return  it  or  the  plaintiff  would  be 
entitled  to  a  verdict,  and  such  in- 
struction was  held  correct;  but  the 
verdict  was  for  defendant  upon  con- 


flicting evidence,  and  the  judgment 
was  affirmed). 

Indiana. — Heaton  v.  Knowlton,  53 
Ind.  357  (holding  that  a  party  can- 
not repudiate  a  contract  on  the 
ground  of  fraud  and  at  the  same 
time  retain  the  benefits  derived 
from  it,  but  must,  when  he  dis- 
covers the  fraud,  restore,  or  offer 
to  restore  to  the  other  party  what  he 
has  received,  and  failing  to  do  this 
he  affirms  the  contract.  When  the 
consideration  received  is  of  any 
value  to  either  party  it  must  be  re- 
turned or  must  be  tendered  before 
the  party  can  sustain  an  action  for 
rescission  of  the  contract  or  suc- 
ces"Sfully  defend  an  action  based 
upon  such  contract.  A  party  cannot 
treat  a  contract  as  good  in  part  and 
void  in  part,  but  must  affirm  it  or 
avoid  it  as  a  whole.  In  this  case 
the  notes  were  claimed  to  have  been 
procured  by  false  and  fraudulent 
representations,  having  been  given 
for  the  right  to  use,  and  in  a  cer- 


§■  210] 


WANT   OR   FAILURE    OF    COXSIDERATION. 


•254 


and  subsequently  ascertains  that  he  has  been  defrauded  in  the  sale,  if 
the  property  is  of  any  value,  and  he  ascertains  the  fraud  in  season  to 
enable  him  to  do  so,  he  must  rescind  the  contract  by  returning  the 


tain  locality,  a  patented  machine). 

loxca. — Moore  v.  Moore,  39  Iowa 
461  (it  was  said  in  this  case:  "It  is 
urged  that  defendant  has  not  re- 
scinded nor  offered  to  rescind  the 
contract  under  which  the  note  was 
given,  and  he  cannot  therefore  re- 
fuse payment  now.  No  further  an- 
swer need  be  given  to  this  position 
than  this.  If  what  defendant  re- 
ceived under  the  contract  was 
worthless,  the  consideration  of  the 
note  failed,  and  recovery  cannot 
therefore  be  had  by  a  holder  with 
notice."  Plaintiff  was  the  indorsee, 
and  note  was  given  in  consideration 
of  the  appointment  of  defendant  as 
agent  for  the  sale  of  roofing  cement 
under  contract  between  defendant 
and  the  payee,  who  indorsed  the 
note  in  blank  without  recourse.  The 
consideration  of  the  contract  proved 
worthless,  and  it  was  held  that  a 
holder  with  notice  could  not  re- 
cover. "If  the  note  was  taken  out  of 
the  'due  course  of  business'  under 
circumstances  calculated  to  impart 
notice  of  its  infirmities,  plaintiff  re- 
ceived It  at  his  peril,  though  taken 
before  due  and  without  notice  of 
fraud"). 

Kentucky. — Bull  v.  Jackson,  1  A. 
K.  Marsh.  (Ky.)  176  (holding  that 
contract  ought  not  to  be  avoided 
while  possession  remained). 

Louisiana. — Brown  v.  Lambeth*,  2 
La.  Ann.  822  (in  this  case  the  de- 
fendant, holder  of  a  note  indorsed  by 
plaintiff,  gave  it  up  to  him  on  the 
latter's  executing  his  own  note  for 
the  amount  payable  at  a  future 
period.  Judgment  was  obtained 
upon  the  last  note  without  defense. 
Plaintiff  claimed  that  he  had  been 


discharged  as  indorser  of  the  origi- 
nal note  by  the  laches  of  the  holders 
in  not  giving  notice  of  protest,  of 
which  discharge  he  was  ignorant. 
Upon  these  allegations  an  injunction 
was  obtained,  which  defendants 
moved  to  dissolve,  and  it  was  held 
that  it  must  be  dissolved,  the  plain- 
tiff having  no  right  to  require  the 
second  note  to  be  cancelled  without 
restoring  the  original  note  received 
from  defendants  "now  constat  that 
the  plaintiff  may  not  have  collected 
the  note  from  the  maker  or  other- 
wise disposed  of  it"). 

Missouri. — Fenwick  v.  Bowling,  50 
Mo.  App.  516. 

New  York. — Burton  v.  Stewart,  3 
Wend.  (N.  Y.)  236,  20  Am.  Dec.  692. 

Ohio. — Mellen  v.  Harvey,  6  Super. 
&  Com.  P.  Dec.  (Ohio)  15  (in  this 
case  the  defense  was  that  the  paper 
was  signed  to  accommodate  the 
payee,  who,  as  executor  of  an 
estate  desired  to  purchase  the  in- 
terest of  another  therein,  that  the 
foreclosure  was  made  in  the  defend- 
ant's name,  but  in  fact  by  and  for 
the  payee.  The  court  said:  "From 
all  that  appears  from  the  second  de- 
fense the  purchase  was  actually 
made,  and  defendant  neither  handed 
it  over  to  the  executor  nor  offered 
to  rescind,  and  may  be  now  enjoying 
it;  hence  this  defense  is  not  suf- 
ficient"). 

Vermont. — Harrington  v.  Lee,  33 
Vt.  249  (holding  that  an  offer  to  re- 
scind was  necessary,  and  if  the 
maker  of  a  note  insists  upon  hold- 
ing the  property  in  consummation 
of  which  the  note  was  given,  this 
operates  as  an  affirmance  of  the 
contract  in  all  its  particulars  and 


k 


255      RESCINDING  CONTRACT  AND  RESTORING   CONSIDERATION.       [§    210 

property,  and  he  cannot  retain  the  property  and  at  the  same  time  re- 
fuse to  pay  the  note/^°  In  an  Indiana  case  the  appellant  held  a  num- 
ber of  notes  and  accounts  against  the  appellee.  Upon  a  settlement 
had,  a  certain  aggregate  sum  was  fixed  as  due  upon  them.  In  judg- 
ment of  this  sum  appellee  gave  a  certain  amount  in  cash  and  conveyed 
the  land  for  a  certain  price  which  equaled  the  balance  of  the  in- 
debtedness. Upon  this  being  done  the  accounts  and  notes  were  sur- 
rendered to  him,  and  appellant  asked  that  the  conveyance  of  land  be 
rescinded  and  that  the  accounts  and  notes  be  returned,  he  retaining 
the  sum  paid  to  him.  There  was  a  claimed  offer  to  rescind  the  con- 
tract and  sale  of  the  land  and  to  return  notes  and  accounts  surren- 
dered on  settlement  and  conveyance  of  the  land,  but  not  in  toto,  and 
the  court  held  that  the  rule  was  well  settled  that  if  a  contract  is  re- 
scinded at  all  it  must  be  rescinded  in  toto ;  that  a  party  cannot  rescind 
a  contract  and  retain  the  whole  or  a  part  of  the  benefits  of  it,  and  that 
a  contract  cannot  be  rescinded  unless  the  parties  can  be  placed  in 
statu  quo}^'^  So  where  notes  were  given  in  consideration  of  a  lease, 
of  which  the  appellants  had  received  the  benefit,  and  fraud  was  al- 
leged in  the  procurement  of  the  notes  in  the  form  in  which  they  were 
given,  but  the  particular  acts  of  fraud  were  not  stated,  and  it  was  also 
asked  that  the  notes  not  due  be  surrendered  and  cancelled,  but  no 
offer  was  made  to  give  new  notes  or  to  compensate  the  appellee  for  the 
rent  of  the  land  for  which  they  were  given,  it  was  declared  that  a  de- 
cree of  that  kind  could  not  be  had  without  an  offer  to  execute  other 
notes,  or  in  some  way  placing  the  appellee  in  statu  quo.  The  court 
said:  "The  appellants  having  received  the  benefit  of  appellee's  lease 
could  not  be  heard  to  say  that  the  notes  given  in  consideration  thereof 
should  be  destroyed  without  giving  equivalent  value  for  the  lease."^^^ 
And  the  fact  that  the  note  was  given  for  a  particular  purpose  does  not 

disentitles    defendant    to    question  plaintiff  fraudulently  left  the  state 

either  the  validity  or  amount  of  the  to  prevent  it,  and  demurrer  was  sus- 

note).  tained.     It    was    also    held    that    if 

In  Ansern  v.  Byrd,  6  Ind.  475,  a  viewed  as  a  plea  of  tender  it  was 

plea  of  fraud  and  misrepresentation  defective    for    not    making    profert 

as  to  the  contents  and  nature  of  the  of  the  money  in  court, 

note  was  not  sustained.    The  action  ""  Smith  v.  Smith,  30  Vt.  139,  144, 

was  for  the  recovery  of  the  entire  per  Poland,  J.    But  examine  Bell  v. 

amount  due  on  account  of  non-pay-  Sheridan,  21  D.  C.  370. 

ment  of  interest.    There  was  a  spe-  "^Worley  v.  Moore,  97  Ind.  15. 

cial  plea  alleging  readiness  to  pay  "-  Norris  v.  Scott,  6  Ind.  App.  18, 

the  interest,  but  averring  that  the  32  N.  E.  103. 


§    210]  WANT    OK   TAILURE  OF    COXSIDERATION.  2o'6 

change  the  above  rule.^^^  Thus,  in  a  suit  by  an  indorsee,  in  behalf  of 
one  of  the  original  payees,  it  appeared  that  the  note  was  made  to  be 
offered  at  a  bank  for  discount  on  certain  terms  which  were  refused, 
and  it  was  held  that  it  ought  to  have  been  returned  to  the  maker,  the 
object  of  it  having  failed,  and  that  it  would  have  been  fraudulent  in 
the  payees  to  have  negotiated  the  note  without  notice  of  the  agree- 
ment under  which  it  was  drawn  and  received,  and  as  the  terms  upon 
which  the  note  was  to  be  offered  to  the  bank  were  not  accepted  the 
maker  was  discharged  from  it.^^*  Again,  where  a  promissory  note  is 
based  upon  a  conditional  agreement  to  return,  upon  inability  to  per- 
form a  certain  condition,  it  is  not  enough  to  show  a  failure  to  perform 
such  condition  in  order  to  avoid  the  note,  but  it  must  also  be  shown 
that  the  property  received  by  the  maker  has  not  been  used  and  that  he 
has  returned  or  tendered  it.^^^  And  where  there  is  an  absence  of  a 
total  failure  of  consideration,  and  no  offer  has  been  made  on  the  part 
of  the  defendant  to  rescind  the  contract,  he  cannot  set  up  as  a  de- 
fense fraud  in  the  contract  on  which  the  note  was  given,  especially 
Avhen  the  damages  are  unliquidated.  If  a  defendant  relies  upon  prov- 
ing fraud  as  a  defense  to  an  action  on  a  note,  when  there  has  been 
only  a  partial  failure  of  consideration,  he  should  in  the  first  place 
offer  to  rescind  the  contract  so  as  to  place  the  parties  in  statu  quo  if  he 
has  it  in  his  power  to  do  so.^'^''  The  general  rule  has  also  been  applied, 
although  the  property  is  only  of  nominal  value.^^^  But  where  a  note 
is  given  for  the  right  to  use  patented  machinery  in  a  certain  locality 
and  the  patent  has  proved  a  useful  one  in  other  places,  it  is  based 
upon  a  valuable  consideration,  even  though  it  has  failed  of  success  in 
the  locality  for  which  the  note  was  given.  In  such  case,  if  the  re- 
scinding of  the  contract  depends  entirely  upon  an  agreement,  its  terms 
should  be  strictly  complied  with,  and  where  such  agreement  also  pre- 
scribes the  terms  upon  which  the  note  is  to  be  given  up,  and  no  suffi- 
cient excuse  for  non-compliance  is  shown,  the  maker  cannot  avoid  the 
note  as  a  rescinded  contract. ^^^*  If,  however,  the  answer  sets  forth 
that  a  suit  has  been  commenced  to  rescind  a  conveyance  tendered,  the 
defense  is  good.^^^ 

'"'  So  held  in  Denniston  v.  Bacon,  '='  Stone  v.  Peake,  16  Vt.  213. 

10  Johns.  (N.  Y.)  198.  "' Boggs    v.    Wann    (C.    C.    N.    D. 

"'Denniston  v.  Bacon,  10  Johns.  Ohio),  58  Fed.  681. 

(N.  Y.)  198.  "•*  Pottle  v.  Thomas,  12  Conn.  565. 

"=  Wood  v.  Ridgeville  College,  114  ^^^  Knappen  v.  Freeman,  47  Minn. 

Ind.  320,  16  N.  E.  619.  491,  50  N.  W.  533. 


I 


257     RESCINDING  CONTRACT  AND  RESTORING  COXSIDERATION.       [§    211 

§  211.     Same   subject — Exceptions  to   and  qualifications  of  rule. 

If  the  thing  purchased  is  of  no  value  to  either  party  it  need  not  be 
restored.^^''  And  if  at  the  time  the  defendant  discovers  that  he  has 
been  defrauded  into  giving  a  note  for  the  purchase  price  of  property 
the  then  state  of  affairs  is  such  that  it  is  impossible  to  rescind  the  con- 
tract and  restore  either  of  the  parties  to  their  former  condition  and 
■  rights,  it  is  unnecessary  either  to  rescind  or  restore.  Thus,  where  the 
consideration  of  a  note  is  a  falsely  and  fraudulently  represented  inter- 
est in  property,  if  no  such  interest  exists  in  fact,  it  cannot,  therefore, 
be  restored  to  the  vendor  by  a  disaffirmance  of  the  contract,  and  the 
maker  of  the  note  may  defend  an  action  thereon  upon  the  ground  of 
want  of  consideration,  even  though  he  makes  no  effort  to  rescind  the 
purchase.^*"  An  actual  tender  will  also  be  excused  where  it  is  ren- 
dered impossible  by  sickness  or  death  or  the  destruction  of  the  chat- 
tel."^ Again,  if  one  is  induced  by  fraud  and  circumvention  to  exe- 
cute a  note,  believing  that  he  is  executing  another  paper  and  he  is  not 
guilty  of  negligence,  it  is  immaterial  whether  such  maker  offers  to 
return  everything  he  has  received  under  the  contract  he  supposed  he 
was  making. ^*^  The  maker  of  a  note,  the  consideration  of  which  was 
a  draft  which  proves  to  have  been  forged,  may  also  set  up  such  de- 
fense without  restoring  or  offering  to  restore  the  draft.^*^  Nor  is  it 
necessary  in  setting  up  usury  in  order  to  defeat  the  collection  of  in- 
terest or  to  have  interest  payments  applied  that  the  party  pleading  it 
should  offer  to  restore  benefits  received.^**  Other  exceptions  and 
qualifications  are  illustrated  by  the  following  decisions.     Where  the 

""Desha  V.  Robinson,  17  Ark.  228;  signee.     It  was  also  held  that  the 

Burton  v.  Stewart,  3  Wend.  (N.  Y.)  note   was   void    in    the    hands   of   a 

236,  20  Am.  Dec.  692   (holding  that  bona   fide    holder    whether    or    not 

article  purchased  must  be  returned  such   holder   had  notice   of  the   de- 

or  shown  to  be  of  no  value).  fense. 

"°  Smith  V.  Smith,  30  Vt.  139.     In  »^  Blood    v.    Northup,    1    Kan.    28. 

this  case  a  note  was  given  by  one  In  this  case  the  point  was  made  that 

partner  to  another  for  his  interest  the    defendant   was  not   seeking   to 

in  an  insolvent  firm,  which  interest  rescind    the    contract,    but    that    he 

was    falsely    and    fraudulently    rep-  had  performed   the  same  while  his 

resented  to  be  valuable  when  it  was  adversary    had    performed    nothing, 

totally  worthless.     Examine  Bell  v.  The   plaintiffs   were    assignees   and 

Sheridan,  21  D.  C.  370.  occupied  the  same  status  as  would 

"'  So  held  in  Desha  v.  Robinson,  the  payee  had  he  sued. 

17  Ark.  228.  "'  First    Nat.    Bank    v.    Ledbettor 

"=  Hubbard  v.  Rankin,  71  111.  129.  (Tex.,  1896),  34  S.  W.  1042. 
In  this  case  appellant  sued   as  as- 
JoYCE  Defenses — 17. 


§    211]  WANT    OR   FAILURE    OF    CONSIDERATION".  258 

payee  named  in  a  note  and  mortgage,  procured  by  him  by  threats  of 
prosecution  and  intimidation  and  without  consideration,  and  which 
are  therefore  absolutely  void,  voluntarily  leaves  on  the  table  another 
note  and  chattel  mortgage  after  said  execution,  and  the  party  executing 
the  first  note  and  mortgage  never  examined  the  papers  so  left  as  a 
pretended  consideration  and  never  agreed  to  receive  them  as  a  con- 
sideration and  never  received  any  Ijenefit  from  them,  they  form  no 
part  of  the  consideration  and  there  exists  no  obligation  in  such  case  to 
return  said  papers  or  to  account  for  their  absence  in  order  to  defend 
an  action  on  the  first  note  and  mortgage.^'*^  In  another  case  it  was 
held  that  in  an  action  on  a  note  given  as  the  consideration  of  an  as- 
signment of  a  bond  of  a  third  person  for  the  conveyance  of  a  tract 
of  land  on  payment  of  a  certain  sum,  within  a  certain  time,  the  de- 
fendant could  give  in  evidence  that  the  contract  was  fraudulent  with- 
out returning  the  bond,  if  the  time  had  expired  before  he  had  knowl- 
edge of  the  fraud;  and  that  the  defendant  was  not  bound  to  restore 
the  bond  assigned  before  its  expiration  unless  he  had  ascertained  that 
the  statements  were  false  and  fraudulent  before  said  expiration  of  the 
Ijond ;  but  if  the  facts  had  been  ascertained  before  such  expiration  of 
the  term  limited  by  the  bond  it  should  have  been  returned.^*®  Again, 
where  the  vendor  of  property  received  from  the  vendee  a  promissory 
note  indorsed  by  the  latter,  for  an  amount  larger  than  the  purchase 
money  and  gave  his  own  note  payable  at  a  day  certain  for  the  excess ; 
to  entitle  the  vendor  to  insist  upon  a  want  of  consideration  when  sued 
on  his  note,  it  is  not  necessary  that  he  should  release  the  vendee  from 
his  indorsement  to  a  corresponding  extent;  if  the  defense  is  success- 
ful the  plaintiff  may  claim  a  reduction  from  his  liability  as  indorser. 
Xor  vrill  tlie  pendency  of  a  suit  by  the  vendor,  as  indorsee,  against  his 
indorser  in  any  manner  prejudice  the  defense ;  such  an  action  may  be 
maintained  to  recover  the  price  of  the  property  sold.^*'^  It  has  also 
been  decided  that  where  a  note  was  fraudulently  obtained  from  plain- 
tiff's husband  and  defendant  knew  that  he  had  no  title  thereto,  it  was 
unnecessary  for  plaintiff  to  refund  the  amounts  given  for  said  note  at 
the  time  it  was  received;  since  the  note  belonged  to  plaintiff,  defend- 
ants could  not  acquire  the  right  to  retain  it  by  purchasing  it  from  one 

"=Lee  V.  Ryder,  1  Kan.  App.  293,  fendant    (Allen)    to    insist   upon   a 

41  Pac.  221.  failure  of  consideration   it  was  not 

"""Winslow     v.     Bailey,     4     Shep.  necessary  that  Allen  should  have  re- 

(Me.)  319.  leased  the  plaintiff  from  his  indorse- 

'"  Litchfield,  v.  Allen,  7  Ala.   779,  ment,  to  the  extent  of  the  sum  the 

783.    It  was  said,  to  entitle  the  de-  latter  is  now  seeking  to  recover. 


I 


259 


AS    TO   GUARANTORS. 


[§   212 


Avho  had  no  right  to  dispose  of  it.^'*^  In  another  case  it  is  declared 
that  the  defense  of  want  or  failure  of  consideration  may  be  pleaded 
without  a  rescission  of  a  contract  for  fraud.^*^  Again  where  a  party 
makes  a  defense  of  only  a  partial  failure  of  consideration  it  is  held 
that  an  offer  to  return  the  article  purchased  is  unnecessary.^^*'  And 
in  a  marine  case  it  is  held  that  it  is  not  necessary  in  order  to  make 
the  defense  of  partial  failure  of  consideration  that  the  party  who  sets 
it  up  should  restore  what  he  has  received  under  the  contract.^^^  But 
in  Vermont,  prior  to  the  statute  of  1867,  partial  failure  of  considera- 
tion was  no  defense  unless  there  was  fraud  and  an  offer  to  rescind.^^^ 
So  a  defense  of  total  failure  of  consideration  is  available  by  the 
maker  without  any  offer  to  return  worthless  corporate  stock  con- 
stituting the  consideration.^^^ 

§  212.     As  to  guarantors. — It  may  be  stated  generally  that  there 
must  be  some  consideration  to  support  a  guaranty. ^^^    But,  although 


"*  More  V.  Finger,  128  Cal.  313,  60 
Pac.  933,  38  Pac.  322. 

"» Russ  Lumber  &  Mill  Co.  v.  Mus- 
cupiabe  L.  &  W.  Co.,  120  Cal.  521, 
527,  52  Pac.  995,  65  Am.  St.  Rep. 
186  ("Where  the  failure  of  consid- 
eration is  total,  as  where  nothing 
of  value  has  been  received  by  the 
defendant  under  it  and  the  plaintiff 
cannot  perform  it,  but  the  defend- 
ant may  plead  want  or  failure  of 
consideration."     Per  Haynes,  C.) 

'^^^  Rasberry  v.  Moye,  23  Miss.  320. 

"•Herbert  v.  Ford,  16  Shep.  (Me.) 
546. 

"=Hoyt  V.  McNally,  66  Vt.  38,  28 
Atl.  417.  See,  also.  Walker  v.  Smith, 
2  Vt.  539,  where  fraudulent  repre- 
sentations were  held  inadmissible, 
in  an  action  on  a  note  for  purchase, 
to  reduce  wages,  the  defendants  not 
having  rescinded  the  purchase. 

'=^'Taft  V.  Myerscough,  197  111.  600, 
64  N.  E.  711,  rev'g  92  111.  App.  560. 

^"A  guaranty  is  a  contract  in  and 
of  itself  but  it  has  relation  to  some 
other  contract  or  some  obligation 
with  reference  to  which  it  is  collat- 


eral and  it  always  requires  a  con- 
sideration. If  the  guaranty  is  exe- 
cuted at  or  about  the  time  the  main 
contract  is  executed  and  both  con- 
tracts form  parts  of  the  same  trans- 
action one  transaction  may  support 
both  contracts.  But  where  the  con- 
tract is  sold  and  assigned  and  the 
guaranty  is  executed  in  contempla- 
tion or  in  pursuance  of  such  sale 
and  assignment  one  consideration 
may  support  both  the  sale  and  the 
guaranty.  In  all  cases,  however, 
where  the  guaranty  is  executed 
after  the  execution  of  the  original 
contract,  or  after  a  sale  thereof, 
and  not  in  pursuance  of  any  under- 
standing had  at  the  time  of  the  exe- 
cution of  the  original  contract  or 
at  the  time  of  the  sale,  neither  the 
consideration  for  the  original  con- 
tract nor  the  consideration  for  the 
sale  can  support  the  guaranty.  But 
the  guaranty  in  all  such  cases  must 
have  a  separate  and  independent 
consideration,  and  unless  it  has  it  is 
void.  Briggs  v.  Latham,  36  Kan.  205, 
209-210,  13  Pac.  129,  per  Valentine,  J., 


§  212] 


"WANT    OR   FAILURE   OF    COXSIDERATION". 


260 


a  guaranty  may  be  a  contract  separate  from  the  execution  of  the  note 
or  undertaking  of  the  principal  debtor  it  does  not  follow  that  the 
guarantor  cannot  make  defense  when  sued  upon  his  guaranty,  and 
although  a  counterclaim  or  set-off  may  not  be  pleaded  it  does  not  fol- 
low that  the  plea  of  no  consideration  is  not  available,  and  if  there  be 
any  consideration  for  the  execution  of  a  note  it  is  sufficient  to  support 
a  guaranty,  yet  if  there  be  no  consideration  the  guarantors  may  plead 
and  prove  that  fact  and  thus  defeat  the  creditor's  action,  unless  the 
guarantors  have  received  a  consideration  direct  to  them  from  the  credi- 
tors.^^^     So  the  want  of  consideration  for  a  guaranty  may  be  set  up 


citing  Daniel  on  Neg.  Inst.,  §  1759; 
Randolph  on  Commercial  Paper, 
§  856;  2  Parsons  on  Notes  &  Bills, 
p.  125.  See,  also,  Stearns  on  Sure- 
tyship (ed.  1903),  §§  16,  57,  144; 
1  Brandt  on  Suretyship  &  Guar- 
anty (3d  ed.),  §§  22,  et  seq.;  Col- 
ston V.  Pemberton,  47  N.  Y.  Supp. 
1110,  1111,  21  Misc.  619,  per  Mc- 
Adam,  J.  (case  affirms  45  N.  Y. 
Supp.  1034,  20  Atl.  410),  who  says: 
"In  Hall  V.  Rodgers,  26  Tenn. 
(7  Humph.)  540  the  Supreme  Court 
of  Tennessee  *  *  *  followed  the 
rule  laid  down  by  Kent,  C.  J.,  in 
Leonard  v.  Vredenburgh,  8  Johns. 
29,  30,  and  adopted  the  classifica- 
tion of  cases  made  by  that  eminent 
jurist,  first  in  which  are  'cases  in 
which  the  guaranty  or  promise  is 
collateral  to  the  principal  contract, 
but  is  made  at  the  same  time  and 
becomes  an  essential  ground  of  the 
credit  given  to  the  principal  or  di- 
rect  debtor.  Here  *  *  *  is  not,  nor 
need  be  any  other  consideration 
than  that  moving  between  the  cred- 
itor and  original  debtor.'  This  clas- 
sification of  the  cases  has  been  a 
landmark  of  the  law  of  our  state 
for  more  than  half  a  century.  Bay- 
lies Sur.  P.  66.  Following  it,  the 
court  of  Appeals,  in  Bank  v.  Coit, 
104  N.  Y.,  at  p.  537,  11  N.  E.,  at  p. 
54,  said:  'Where  a  contract  of  guar- 
anty   is    entered    into    concurrently 


with  the  principal  obligation,  a  con- 
sideration which  supports  the  prin- 
cipal contract  supports  the  subsid- 
iary one  also.  We  understand  this 
to  be  the  settled  doctrine,'  citing 
McNaught  v.  McClaughtry,  42  N.  Y. 
22;  Simons  v.  Steele,  36  N.  H.  73; 
Brandt  Sur.,  §§  6,  7." 

155  ^ood  Mowing  &  Reap.  Mach. 
Co.  v.  Land,  98  Ky.  516,  32  S.  W. 
607,  where  the  court,  per  Guffy,  J., 
quotes  from  2  Parsons  on  Contracts, 
p.  7,  as  follows,  as  to  guarantees: 
"  'It  is  itself  a  distinct  contract  and 
must  rest  upon  its  own  considera- 
tion, but  this  consideration  may  be 
the  same  with  that  on  which  the 
original  debt  is  founded  for  which 
the  guarantor  is  liable.  The  rule  of 
law  is  this:  If  the  original  debt 
or  obligation  is  already  incurred  or 
undertaken  previous  to  the  colla- 
teral undertaking,  then  there  must 
be  a  new  and  distinct  consideration 
to  sustain  the  guaranty.  But  if 
the  original  debt  or  obligation  be 
founded  upon  a  good  consideration 
and  at  the  time  when  it  is  incurred 
or  undertaken  or  before  that  time 
the  guaranty  is  given  and  received, 
and  enters  into  the  inducement  for 
giving  credit  or  supplying  goods, 
then  the  consideration  for  which  the 
original  debt  is  incurred  is  regarded 
as  a  consideration  also  for  the 
guaranty.' "    Citing  also,  Winans  v. 


I 


261  AS    TO   GUAKAXTORS.  [§    212 

even  against  a  subsequent  bona  fide  purchaser,  where  the  guarantor 
never  executed  the  paper,  was  never  liable  thereon  and  never  owned 
the  same,  and  there  was  no  consideration  whatever  for  the  writing  on 
the  notes  of  the  claimed  words  of  guaranty."*^  Where  the  matters 
which  operate  as  a  defense  to  guaranteed  notes  grow  out  of  the  con- 
tract under  which  the  notes  were  given,  there  is  no  objection,  where 
the  state  procedure  so  permits,  to  giving  relief  to  a  guarantor,  where 
the  person  primarily  liable  for  the  debt  guaranteed  is  shown  to  have 
a  defense  growing  out  of  the  same  transaction  and  going  to  the  con- 
sideration of  the  notes  which  entitles  him  to  a  judgment;  and  it  is 
generally  true  that  a  surety  may  set  up  any  defense  by  offset  or  coun- 
terclaim which  would  be  available  to  his  principal.  So  where  a  de- 
fective warranty  arising  at  the  sale  of  personal  chattels  may  be  availed 
of  as  a  defense,  or  the  maker  becomes  entitled  by  reason  thereof  to  re- 
cover a  sum  equal  to  the  balance  due  on  the  notes  as  for  damages, 
the  notes  are  paid  and  the  guaranty  satisfied,  and  if  the  original 
promisor  can  thus  be  discharged  the  guarantor  can.^^^  This  rule  does 
not,  however,  prevent  the  statement  of  a  case  which  would  render 
guarantors  liable  on  their  guarantee,  notwithstanding  the  defenses 
set  up  by  the  makers,  if  the  notes  were  good  as  to  themselves.^^* 
Again,  where  the  guarantors  or  the  parties  assuming  the  payment  of 
notes  have  not  put  their  names  to  the  notes  sued  on  and  are  not  bound 
by  the  law  merchant,  but  solely  on  their  assumpsit  of  the  notes,  they 
may  plead  all  the  equities  against  the  notes  which  the  maker  could, 
and  may  avail  themselves  of  failure  of  consideration  as  to  both  a  per- 
sonal and  real  obligation,  and  a  partial  failure  may  be  shown. ^^®  So 
in  an  action  by  the  transferee  of  the  guarantor,  but  not  a  bona  fide 
holder,  defendant  may  show  that  the  note  was  invalid  in  the  original 
transaction  between  the  guarantor  and  defendant  and  therefore  was 
without  consideration.^®*'    And  if  there  is     valid  consideration  for  a 

Gibbs  &  Starrett  Mfg.  Co.,  48  Kan.  67  Tex.  54,  2  S.  W.  861,  citing  Bay- 

777,  30  Pac.  163;   Standley  v.  Miles  lies  on  Sureties  &  Guarantors  408; 

&  Adams,  36  Miss.  434.  Brandt  on    Suretyship   &   Guaranty 

""Briggs  v.  Latham,  36  Kan.  205,  203;    De  Golyer  on  Guarantees  431. 

13  Pac.  120,  the  words  of  the  guar-  But   compare   1    Brandt   on    Surety- 

anty  written   upon   a   mortgage    se-  ship  (3d  ed.),  §259,  p.  512. 

curing     certain      negotiable      notes  '^"Aultman   &  Taylor  Co.  v.   Hef- 

were  "I  hereby  guarantee  the  pay-  ner,  67  Tex.  54,  2  S.  W.  861. 

ment   of   the    within    mortgage — L.  ^'^^  Brou  v.  Bechel,  20  La.  Ann.  254. 

D.  L."  ^"o  Gross  v.  Kellard,  26  N.  Y.  Supp. 

'"  Aultman  Taylor  Co.  v.  Hefner,  69,  6  Misc.  27,  56  N.  Y.  St.  R.  617. 


§    213]  WAXT    OR   FAILURE    OF    COXSIDERATION.  262 

guaranty,  a  motion  to  dismiss  a  complaint,  seeking  recovery  upon  the 
note,  is  properly  denied.^"^  If  a  "transfer  and  guaranty  of  collection" 
operates  only  as  an  assignment  thereof,  any  defense  available  between 
the  original  parties,  including  that  of  want  of  consideration,  can  be 
made  in  a  suit  brought  by  the  assignee,  even  though  the  latter  took  the 
note  before  due  and  without  knowledge  of  any  infirmities.^"^  And, 
although  a  holder  of  a  note  who  purchases  before  maturity  and  for 
value  has  knowledge  of  the  consideration  of  a  note  and  of  the  guar- 
anty, but  has  no  notice  at  the  time  of  his  purchase  that  the  guarantor 
had  failed  to  perform  his  guaranty,  this  will  not  preclude  a  recovery, 
although  if  he  had  had  knowledge  or  notice  of  the  failure  to  perform 
or  inability  to  perform  the  guaranty  it  might  have  been  a  sufficient 
defense. ^®^ 

§  213.  As  to  sureties. — Xo  exact  line  of  demarcation  between  a 
guarantor  and  surety  can  be  satisfactorily  made  and  it  has  been  well 
said  in  a  Connecticut  case  that:  "With  respect  to  the  technical  dis- 
tinction in  legal  character  and  effect  between  a  surety,  guarantor,  in- 
dorser,  and  maker  of  promissory  notes,  there  is  so  much  nicety  of  re- 
finement'as  often  to  lead  to  great  uncertainty  as  to  the  real  nature  of 
the  distinctions,  and  especially  as  to  the  principle  on  which  some  of 
the  assumed  distinctions  rest.  In  many  cases  the  shades  of  legal  dif- 
ference between  a  guarantor  and  surety  are  so  subtle  and  readily 
blended  as  to  be  almost  impossible  of  separate  and  satisfactory  dis- 
crimination, and  sometimes  also  between  an  indorser,  guarantor  and 
surety,  and  in  some  instances  the  question  whether  a  party  was  maker, 
guarantor,  or  surety  has  been  found  not  free  from  difficulty  upon  any 
clearly  defined  and  well  settled  principles."^^*  This  difficulty  in  de- 
termining whether  or  not  a  party  is  a  surety  becomes  important  in 
determining  not  only  his  liability  but  also  in  formulating  any  rule 
in  the  matter  of  defenses  as  to  sureties.  It  was  the  established  law 
of  England  before  the  judicature  act  that  in  equity  the  true  relations 
of  the  parties  to  a  negotiable  instrument  could  be  inquired  into  and 
that  it  could  be  shown  in  equity  that  the  maker  of  a  note  was  in  fact 
a  surety  and  an  indorser  the  principal,  and  further,  that  in  such  case 

"'  Colston  V.  Pemberton,  47  N.  Y.  ^"^  Hudson  v.  Best,  104  Ga.  131,  30 

Supp.    1110,    21    Misc.    639,   aff'g   45  S.  E.  688. 

N.  Y.  Supp.  1034,  20  Misc.  410.  '"  Monson   v.    Drakeley,    40   Conn. 

^«^  Omaha  Nat.  Bank  v.  Walker,  5  552,  561,  16  Am.  Rep.  74,  per  Phelps, 

Fed.  399.  J.    See  15  Central  L.  J.  82. 


263  AS   TO   SURETIES,  [§   213 

if  the  indorser,  who  was  in  fact  the  principal,  was  dealt  with  so  as  to 
discharge  a  surety,  the  maker  was  discharged. ^"^  So  generally  a  surety 
may  show,  by  way  of  defense,  the  facts  going  to  the  consideration  of  the 
execution  of  the  note,  as  that  he  was  a  mere  accommodation  maker 
and  the  purpose  for  which  the  maker  stated  he  wanted  the  surety's 
signature  as  an  initial  step  affecting  its  consideration  in  the  hands  of 
the  holder  and  notice  thereof  to  the  latter.^*'^  But  a  party  cannot  be 
bound  as  surety  for  a  debt  which  is  not  due  because  of  failure  of  con- 
sideration against  the  principal.^®^  Although  the  mere  liability  of 
one  as  surety  for  another  on  a  note  not  yet  due  will  not  of  itself  give 
a  cause  of  action  against  the  principal  in  favor  of  the  surety,  still  it 
may,  however,  furnisli  a  good  consideration  for  a  promissory  note, 
upon  a  promise  either  express  of  implied  by  law,  on  the  part  of  the 
surety,  that  he  will  pay  and  discharge  the  debt  of  his  principal ;  and 
such  a  note  may  be  the  foundation  of  an  action  and  a  valid  attach- 
ment, at  least  to  the  extent  of  the  actual  payment  made  by  the  surety 
before  taking  judgment  in  his  action;  but  where  the  attachment  is 
made  upon  real  estate  before  the  note  is  signed  and  upon  personal 
estate  thereafter  it  constitutes  a  defense,  since  no  claim  was  due  and 
payable  when  the  action  was  commenced. ^*'^  But  the  agreement  be- 
tween the  payee  of  a  promissory  note  and  a  third  party  that  the  latter 
would  become  surety  on  the  note  and  sign  it  in  consideration  that 
the  payee  would  forbear  to  sue  on  the  note  is  a  valid  enforceable 
agreement,  no  question  being  raised  as  to  the  statute  of  frauds.  Such 
agreement  may  be  either  express  or  inferred  from  the  facts  and  cir- 
cumstances of  the  case.^*^^  If  the  principal  and  sureties  unite  in  a 
common  defense  of  partial  failure  of  consideration,  and  no  plea 
peculiar  to  the  contract  of  suretyship  is  entered  by  the  sureties,  they 
must  stand  or  fall,  according  to  the  validity  of  the  defense  in  favor 

"=  Jennings     v.     Moore,      (Mass.,  Rob.  (La.)  157,  Civ.  Code  Art.  2208, 

1905),  75  N.  E.  214,  215,  per  Lor-  as  to   defenses   as   to   indorsers   as 

ing,  J.  sureties. 

What    acts    do    and    do    not    dis-  ^"^  Swift  v.  Crocker,  38  Mass.    (21 

charge  surety  see  generally,  Daniels  Pick.)   241.     See  Flagg  v.  Locke,  74 

on  Neg.  Inst.   (5th  ed.),  §§  1308e,  et  Vt.  320,  52  Atl.  424,  as  to  right,  un- 

seq.     See,   also,    chapter   herein   on  der  statute,  of  a  surety  in  an  action 

Satisfaction  and  Discharge.  to  set-up  any  defense  that  the  prin- 

^''"  St.  Louis  Nat.  Bank  v.  Flanna-  cipal  might  have  availed  himself  of 

gan,  129  Mo.  178,  201,  31  S.  W.  773.  in  an  action  brought  against  him. 

"'"Adams   v.   Curry,   15    La.   Ann.  '•'^  Hockenbury  v.  Myers,  34  N.  J. 

485.     See    Johnson    v.    Marshall,    4  L.  346. 


214] 


WANT    OR   FAILURE    OF    CONSIDERATION. 


264. 


of  the  principal.^""  If  paper  is  signed  for  a  special  purpose  in  which 
the  sureties  are  interested,  the  fact  that  it  is  made  payable  to  a  par- 
ticular person  may  be  sufficient  to  put  another  who  takes  it  upon  in- 
quiry, and  if  to  take  it  would  operate  as  an  injury  to  or  fraud  upon 
the  sureties,  the  latter  may  defend  against  it  for  want  of  considera- 
tion.^''^ A  promissory  note  given  by  a  surety  in  discharge  of  the  obli- 
gation in  its  original  form,  but  which  the  principal  debtor  had  dis- 
charged, although  the  surety  was  ignorant  of  said  fact,  is  based  upon 
no  consideration  whether  inquiry  had  or  had  not  been  made  of  the 
principal  debtor  as  to  the  payment  or  existence  of  the  original 
debt."2 

§  214.  As  to  donor  and  donee. — It  constitutes  a  defense  in  an  ac- 
tion by  the  donee  against  the  donor  of  a  promissory  note  that  the 
note  was  a  gift  and  that  there  was  no  valuable  consideration,  but  only 
one  based  on  love  and  affection  ;^'^  for  as  a  want  of  consideratin  is  a 


^'"American  Car  Co.  v.  Atlantic 
Street  Ry.  Co.,  100  Ga.  254,  256,  28 
S.  E.  40. 

"1  Meeker  v.  Shanks,  112  Ind.  207, 
212,  13  N.  E.  712,  per  Mitchell,  J. 
See  Voreis  v.  Nussbaum,  131  Ind. 
267,  31  N.  E.  70,  16  L.  R.  A.  45,  as 
to  Stat.  1881,  §  5119,  precluding 
married  women  becoming  sureties, 
etc.,  available  as  defense  against 
bona  fide  holder. 

'"  Pettyjohn  v.  Liebscher,  92  Ga. 
149,  17  S.  E.  1007. 

"'  Loudermilk  v.  Loudermilk,  93 
Ga.  443,  21  S.  E.  77.  A  non-negotia- 
ble note. 

A  note  based  on  love  and  affec- 
tion cannot  be  enforced.  Kline's 
Est.,  In  re,  9  Pa.  Dist.  R.  386;  Shu- 
gart  v.  Shugart,  111  Tenn.  179,  76 
S.  W.  821.  Examine  Head  v.  Bald- 
win, 83  Ala.  132,  3  So.  393;  West 
V.  Cavins,  74  Ind.  265;  Fink  v.  Cox, 
18  Johns.  (N.  Y.)  145.  9  Am.  Dec. 
191;  Kern's  Estate,  In  re,  171  Pa. 
St.  55,  33  Atl.  129. 

A  donor's  own  promissory  note 
is   held  to   be   unenforceable;    Shu- 


gart v.    Shugart    (Tenn.,   1903),    76 
S.  W.  84. 

But  as  to  gifts  of  bills  and  notes 
generally: 

See  California. — Pullen  v.  Placer 
County  Bank,  138  Cal.  169,  71  Pac. 
83. 

Illinois. — Hagermann  v.  Hager- 
mann,  188  111.  363,  53  N.  E.  950,  90 
111.  App.  251;  Morey  v.  Wiley,  100  111. 
App.  75;  Martin  v.  Martin,  89  111. 
App.  147. 

Kansas. — Gallagher  v.  Donahy,  65 
Kan.  341,  69  Pac.  330. 

Maine. — Bickford  v.  Mattocks,  95 
Me.  547,  50  Atl.  894. 

Michigan. — Conrad  v.  Manning, 
125  Mich.  77,  83  N,  W.  1038,  7  Dec.  L. 
W.  440. 

New  Hampshire. — Blazo  v.  Coch- 
ran, 71  N.  H.  585,  53  Atl.  1026. 

Neiu  York. — Timerson,  In  re,  80  N. 
Y.  Supp.  639,  39  Misc.  675. 

North  Carolina. — Flanner  v.  But- 
ler, 131  N.  C.  150,  42  S.  E.  557. 

Texas. — Deussen    v.    Moegelin,    24' 
Tex.  Civ.  App.  339,  59  S.  W.  51. 

Canada. — Ekemberg  v.   Mousseau,. 


265  AS  TO  DO>roR  and  doxee.  [§  214 

good  defense,  a  promise  to  give  money  cannot,  as  between  original 
parties,  be  enforced  even  in  the  form  of  a  promissory  note.^''*  So 
there  is  no  consideration  for  a  new  note  intended  as  a  gift  and  given 
for  a  larger  sum  in  lieu  of  a  prior  note  made  and  executed  as  a 
gift.^^^  It  is  established  as  a  rule  of  law  that  in  a  suit  upon  a  promis- 
sory note  against  the  promisor  by  the  promisee,  or  by  an  indorsee 
without  value  given,  or  taking  the  note  under  such  circumstances 
as  to  enable  him  to  stand  only  upon  the  rights  of  the  promisee,  it  is 
competent  for  the  promisor  to  show  by  way  of  defense  that  it  was 
gratuitous  and  made  without  any  legal  consideration,  that  a  donor's 
promissory  note,  payable  to  the  donee,  cannot  be  the  subject  of  a 
donatio  causa  mortis. ^'"^  And  the  indorsement  of  a  promissory  note 
by  the  donee  cannot  be  the  subject  of  a  gift  causa  mortis  so  as  to  ren- 
der his  estate  liable  on  his  indorsement.  ^'^^  But  upon  a  plea  of  want 
of  consideration  it  is  not  a  defense,  which  will  defeat  recovery  upon 
a  note,  that  the  consideration  of  the  note  sued  on  was  a  loan  to  the 
donor  of  the  money  proceeds  of  a  share  of  stock  which  was  a  volun- 
tary gift  from  the  donor  to  the  plaintiff.^'^®  It  is  lawful  for  one  to 
transfer  notes  to  his  wife  by  gift  i^'^^  and  a  check  drawn  by  a  testator, 
payable  to  his  wife  or  order,  given  to  her  before  his  death,  and  in- 
dorsed and  paid  by  her  into  a  foreign  bank  against  the  amount  of 

Rap.  Jud.  Queb.  19  C.  S.  289;  Foster  Iowa  596,  33  N.  W.  74.    See  last  pre- 

v.  Walker,  32  N.  S.  156.  ceding  note. 

A  relinquishment  of  a  note  by  '"  Copp  v.  Sawyer,  6  N.  H.  386. 
way  of  gift  with  tjie  intent  that  it  ^'"Parish  v.  Stone,  31  Mass.  (14 
should  operate  as  a  release  or  ex-  Pick.)  198,  201,  per  Shaw,  C.  J. 
tinguishment  of  all  obligation  to  When  checks  deposited,  to  be  de- 
make  further  payment  of  the  previ-  livered  after  death,  are  not  good  as 
ously  existing  indebtedness  is  valid,  gifts  for  want  of  delivery,  see  Clay 
Percival-Porter  Co.  v.  Oaks  (Iowa  v.  Layton,  134  Mich.  317,  96  N.  W. 
1906),  106  N.  W.  626.  458. 

A  delivery  of  the  promisor's  note  "'Weston  v.  Hight,  17  Me.  287,  35 

to  a  party  payable  out  of  the  for-  Am.  Dec.  250.    Compare  Whitehouse 

mer's  estate  without  any  actual  de-  v.  Whitehouse,  90  Me.  468,  38  Atl. 

livery  of  the  property  or  amount  is  374. 

without  consideration,  being  a  mere  "**  Rice  v.  Rice,  106  Ala.  636,  17  So. 

promise  to  make   a  gift  or  deliver  628. 

the  property  in  the  future,  and  such  ^""Lee  v.  Newell,  107  Pa.  St.  283, 

note   cannot  be   enforced.    Tyler   v.  see  this  case  also  as  to  legal  and 

Still  (Wis.),  106  N.  W.  114.  equitable  defenses. 

"'Simpson   College   v.    Tuttle,   71 


§§    215,    216]  WANT   OR   FAILURE   OF    CONSIDERATION.  266 

which  she  drew,  is  enforceable  in  the  hands  of  such  bona  -fide  holder, 
even  though  not  presented  until  after  such  donor's  death.^^*^ 

§  215.     As  to  donor  and  donee — Negotiable  check  on  bank. — In 

case  of  a  negotiable  check  on  a  bank  made  and  delivered  to  the  payee 
in  the  lifetime  of  the  drawer  and  not  presented  for  payment  until 
after  the  latter's  death,  but  actually  paid  on  presentation,  there  is 
such  immediate  possession  and  control  of  the  thing  intended  to  be 
given  as  to  constitute  an  executed  and  perfected  gift,  and  it  is  of  no 
importance  that  the  drawer  after  delivery  of  the  check  expressed  a 
wish  that  it  would  not  be  delivered  until  after  his  death,  and  the 
bank  would  have  no  defense  for  refusal  to  pay  it.^^^ 

§  216.  Joint  and  joint  and  several  notes. — Where  a  note  is  upon 
its  face  a  joint  one,  presumably  both  makers  executed  it  at  the  same 
time,  and  upon  ample  consideration  as  to  each  and  both,  but  such 
presumption  is  not  conclusive  and  under  proper  pleas  it  may  be 
shown  as  a  defense  that  there  was  no  consideration  at  all,  and  it  is 
decided  that  it  may  also  be  shown  that  there  was  a  consideration  as 
to  one  of  the  makers  and  none  at  all  as  to  the  other,  and  one  of  the 
joint  makers  cannot  be  precluded  from  setting  up  the  defense  of  want 
of  consideration  as  to  him  because  it  is  common  to  all.^"  But  it  is 
also  decided  that  in  a  suit  on  a  joint  note  it  is  not  sufficient  for  one 
of  the  joint  defendants  to  show  that  he  received  no  consideration; 
it  is  necessary  for  him  to  show  want  of  consideration  between  the 
plaintiff  and  the  other  makers.  Proof  that  one  of  the  joint  makers 
of  a  note  signed  it  without  consideration,  as  between  him  and  the 
payee,  and  at  the  request  of  another  joint  maker,  is  insufficient  to  de- 
stroy the  presumption  of  consideration  contained  in  the  note  itself; 
it  must  be  shown  that  there  was  no  consideration  moving  between  the 
payee  and  the  other  joint  maker.^^^  If  all  the  joint  payees  of  a 
note  indorse  the  same  to  the  holder,  he  is  not  a  lona  fide  indorsee  and 
holder  for  value  so  as  to  preclude  the  defense  of  want  of  considera- 

''"  Rolls  V.  Pearce,  5  Ch.  Div.  730.  "=  Kinsman  v.  Birdsall,  2  E.  D. 
But  quaere  if  the  check  had  been  Smith  (N.  Y.)  395.  Examine  gen- 
payable  to  bearer.  erally   Yoho  v.    McGovern,    42   Ohio 

^"^  Pullen    v.    Placer    County    Bk.  St.  11,  as  to  Rev.  Stat.,  §  5366,  when 

(Cal.),  66  Pac.  740.  not  applicable  to  charge  joint  maker 

^'-  Meyer  v.   Brand,   102   Ind.    301,  of  note. 
26  N.  E.  125;  so  also  under  Rev.  St. 
1881,  §§  366,  568. 


267  NOTES    UNDER   SEAL.  [§    217 

tion  in  an  action  by  him  upon  the  note,  nor  is  he  entitled  to  notice 
of  want  or  failure  of  consideration  to  constitute  it  a  defense.^^* 
Failure  of  consideration  without  fraud  may  be  pleaded  to  a  note 
which  is  a  joint  and  several  promise  to  pay  by  two,  purporting  to  be 
signed  and  sealed  by  the  makers,  but  sealed  only  as  to  one  and  signed 
only  by  the  other  as  security.^  ^^  In  Minnesota  a  partial  failure  of 
consideration  may  be  interposed  by  one  of  the  makers  of  a  joint  and 
several  note  to  defeat  a  recovery  pro  tanto.  The  defense  cannot  be 
taken  away  because  it  is  also  available  to  another  maker  should  he  be 
sued  on  the  note/**' 

§  217.  Notes  under  seal. — The  availability  of  the  defenses  of 
want  or  failure  of  consideration  as  against  sealed  notes  and  like 
obligations  must  rest  largely,  if  not  entirely,  upon  their  character 
as  non-negotiable,  or  as  negotiable  by  statute,  or  as  subject  to  assign- 
ment and  equities  under  the  statute.  Thus  a  note  may  not  be  com- 
mercial paper  governed  by  the  law  merchant,  and  yet  under  the 
statute  total  as  well  as  partial  failure  of  consideration  may  afford  a 
good  defense  to  writings  which  are  commonly  known  as  sealed  notes 
or  single  bills.^"  So  a  distinction  has  also  been  made  between  bonds 
or  sealed  obligations  and  notes,  in  that  inquiry  may  not  be  made  into 
the  consideration  of  the  former,  but  may  as  to  the  latter,  between 
immediate  parties.^**  So  upon  the  principle  that  a  seal  imports  a 
consideration  and  creates  a  legal  obligation,  it  is  decided  that,  in  an 
action  on  a  bond  or  note  under  seal,  want  of  consideration  is  no  de- 
fense.^*^   But  it  is  also  determined  that  want  of  consideration  may  be 

'^Saxton  v.  Dodge,  57  Barb.    (N.  Quaere:   Not  definitely  decided  in 

Y.)  84.  Iowa  whether  or  not  want  of  con- 

^^Albertson   v.   Halloway,   16    Ga.  sideration    may    be    pleaded    in    de- 

377.  fense  of  note  under  seal.     Slaton  v. 

^'*'' Nichols   &    Shepard    Co.    v.    So-  Fowler  (Ga.  1906),  53  S.  E.  567. 

derquist,  77  Minn.  509,  80  N.  W.  630.  ^^'  Sprigg  v.  Bank  of  Mt.  Pleasant, 

'"Martin  v.   Bartow   Iron  Works,  10  Pet.   (U.  S.)    257,  266,  9  Sup.  Ct. 

Fed.  Gas.  No.  9,  157,  so  under  Ga.  416,  a  case  of  principal  and  surety 

Stat.      Action    was    between    maker  on  a  bond  and  of  estoppel, 

and  payee.    When  distinction  exists  When      mortgage      coupon     bond 

between  simple  contracts  and  those  with  interest  coupons  attached  and 

under  seal,  see  Williams  v.  Haines,  conditions  therein  is  sealed   instru- 

27  Iowa  251,  1  Am.  Rep.  268.  ment,    see    Gibson   v.    Allen    (S.    D. 

Failure    of   consideration    can   be  1905),  104  N.  W.  275. 

pleaded  to  a  note  under  seal.   Slaton  ''°  Cosgrove  v.  Cummings,  195  Pa. 

V.  Fowler  (Ga.  1906),  53  S.  E.  567.  St.  497,  498,  46  Atl.  69. 


§§    218,   219]  TVAXT    OR   FAILURE   OF   CONSIDERATION.  268 

available  by  way  of  ^n  equitable  defense  to  a  note  under  seal.^^* 
Again,  notes  under  seal  for  the  payment  of  money,  negotiated  before 
due,  in  good  faith,  are  to  be  regarded  as  commercial  paper,  and  all 
the  incidents  of  such  paper  should  attach  to  them,  so  that  the  makers 
cannot  avail  themselves  of  any  breach  of  confidence  by  one  of  the 
parties  in  filling  them  up  and  putting  them  into  circulation.^*^  But 
it  is  decided  that  the  want  of  consideration  cannot  be  availed  of  in 
defense  on  a  sealed  note  against  a  bona  fide  holder.^"-  But  whatever 
infirmities  or  equities  exist  in  favor  of  the  maker  against  the  payee 
are  available  against  an  assignee  of  a  sealed  note,  and  this  applies  to 
an  accommodation  note  executed  solely  to  enable  money  to  be  raised 
to  pay  a  debt  to  a  third  person.^^^  Where  notes  purport  on  their  face 
to  have  been  given  by  decedent,  not  as  evidence  of  any  debt  due  to  the 
payee,  but  to  enable  the  latter  to  collect  the  amount  thereof  after  the 
maker's  death  for  the  benefit  of  other  persons  named  therein,  they 
are  unenforceable,  even  though  under  seal,  where  there  exists  a  total 
want  of  consideration  for  such  notes.^®* 

§  218.  Notes  under  seal — Gratuitous  promise  to  pay. — It  is  de- 
cided not  to  be  a  good  defense  that  a  promise  in  writing  under  seal 
to  pay  money  was  voluntary. ^^^ 

§  219.  Renewal  notes  generally. — In  an  action  by  the  payee 
against  the  maker  of  a  note  payable  to  a  bank,  which,  under  a  statute,, 
is  goverened  by  the  law  merchant  as  applicable  to  inland  bills  of  ex- 

""  Londerman  v.  Judy,  48  Ohio  St.  course.  The  answer  was  set  aside 
562,  2  Ohio  Cir.  Ct.  R.  351,  29  N.  E.  as  insuflacient  and  judgment  ren- 
181,  within  code  provision  allowing  dered  for  plaintiff  which  was  re- 
legal  and  equitable  defenses.  versed. 

"'  Bank  of  St.  Clairsville  v.  Smith,  "'  Stevenson   v.    Bethea,    68    S.    C. 

5  Ham.  (Ohio)  222.  246,  47  S.  E.  71. 

'"=  Bradford    v.    Williams,    91    N.  "*  Anthony   v.   Harrison,   14   Hun 

C.  7.  (N.  Y.)  198;   2  Rev.  Stat.  406,  §  77, 

Examine  Gehhart  v.  Sorrels,  9  makes  a  seal  only  presumptive  evi- 
Ohio  St.  461.  This  case  was  one  dence  of  a  sufficient  consideration, 
of  an  action  on  a  bill  of  exchange  ^'^Aller  v.  Aller,  40  N.  J.  L.  446. 
brought  by  an  indorser,  but  the  in-  But  statute  Rev.  St.,  p.  387,  §  52,  as 
strument  was  not  in  the  ordinary  to  showing  want  of  consideration 
form  of  a  bill  of  exchange  intended  as  defense  to  sealed  instrument  con- 
to  be  negotiated  in  the  market,  and  sidered.  See  Abel  v.  Burgett,  3 
was  under  seal  and  was  indorsed  Blackf.  (Ind.)  502. 
by  a  bank  to  plaintiff  without  re- 


I 


269  RENEWAL    NOTES — SURETIES    DEFENSE.  [§    220 

change,  it  is  no  defense  that  the  note  sued  on  was  in  lieu  of  another 
paper  for  the  same  amount  executed  without  consideration  to  a  third 
person,  who  had  indorsed  the  same  to  the  plaintiff  before  maturity 
for  an  amount  much  less  than  the  face  value.^^*'  And  the  maker  of 
the  old  note,  who  has  failed  to  sign  a  renewal  note,  is  not  released  by 
the  acceptance  of  such  renewal  note,  where  the  agreement  not  to  re- 
lease or  extinguish  the  old  note  is  the  consideration  for  the  renewal 
being  accepted.^'*'^  Under  a  Massachusetts  decision  it  is  held  that 
where  a  note  was  given  in  pursuance  of  a  promise  to  name  a  child 
after  the  maker  of  the  note,  such  child  can  recover  on  a  renewal  note 
given  in  place  of  said  note.  The  court  said  in  this  case :  "The  de- 
fendants concede  that  the  privilege  *  *  *  was  a  valid  consideration. 
*  *  *  But  they  contend  that  the  plaintiff  was  a  stranger  to  the  con- 
sideration and  that  he  could  not  recover  upon  that  note,  and  that  he 
cannot  recover  upon  the  note  in  suit,  which  the  testator  afterwards  gave 
to  the  plaintiff  in  renewal  of  the  original  note.  We  have  no  doubt 
that  the  privilege  of  naming  a  child  is  a  valid  consideration  for  the 
promise.  *  *  *  j^-^  ^]-,jg  ^^^gg  j^^  ^g  ^^^^  j.^  g^y  thsit^  in  the  transac- 
tion in  which  the  original  note  was  given,  the  parents  were  acting  for 
the  child,  and  were  understood  *  *  *  to  be  so  acting,"  and  that  the 
child  had  ratified  the  contract  after  becoming  of  age. 

§  220.  Renewal  notes — Waiver  by  principal  precluding  defense  of 
failure  of  consideration — Sureties  defense.— The  principal  cannot  de- 
feat a  recovery  upon  a  renewal  note  by  setting  up  a  failure  of  con- 
sideration, where  a  waiver  of  the  right  to  take  advantage  of  defects, 
based  upon  facts,  existing  at  or  about  the  time  of  the  maturity  of  the 
original  note  and  before  the  renewal,  which  facts  were  then  fully 
known  to  the  principal ;  especially  so  when,  in  addition  to  giving  the 
new  note,  he  had  repeatedly,  in  writing,  acknowledged  his  liability 
both  before  and  after  giving  the  new  note.  And  if  the  sureties  have 
not  pleaded  any  facts  which  would  discharge  them  from  liability  on 
the  contract  of  suretyship,  and  have  no  other  defense  than  that  relied 
on  by  their  principal,  they  are  bound  thereby,  although  if  they  had 
a  complete  defense  to  the  first  note,  and  the  holder  knew  it,  and  if 
in  ignorance  of  the  facts  upon  which  their  defense  could  have  been 
predicated  they  signed  the  second  note  and  renewed  their  contract  of 
suretyship,  they  could  by  proper  pleadings  and  proof  have  presented 

>M Murphy  v.  Lucas,  58  Ind.  360.  "^Bowman     v.      Rector      (Tenn., 

1900),  59  S.  W.  389. 


§§    221,    222]         WAXT   OR   FAILURE   OF   CONSIDERATION.  270 

the  question  whether  or  not  they  could  be  discharged  from  liability 
thereon.^®^ 

§  221.  Renewal  notes — Implied  or  expressed  consideration. — Even 
though  matters  are  not  expressed  as  part  of  an  agreement  which 
constitutes  the  consideration  of  a  renewal  note,  yet  the  failure  to 
perform  such  matters  when  not  demanded  cannot  be  availed  of  as  a 
defense  to  an  action  on  paper  so  renewed. ^''^  If  a  note  is  based  upon 
a  valid  consideration,  and  a  renewal  note  which  expresses  the  receipt 
of  value  is  given  therefor,  the  maker  in  an  action  by  the  payee  cannot 
defend  on  the  ground  of  want  of  consideration.^"" 

§  222.    Renewal  note — Consideration  for  original  paper. — If  the 

original  note  is  given  for  an  adequate  consideration  it  follows  that 
no  new  or  additional  consideration  is  necessary  to  give  validity  to  a 
renewal  note.^"^  But  a  contract  to  extend  the  time  of  a  payment  of 
a  promissory  note,  made  after  maturity  of  the  note,  is  not  one  which 
necessarily  imports  a  consideration.^"^  And  a  note  given  in  renewal  of 
a  note  voidable  for  want  of  consideration  is  without  consideration.-"^ 
If  a  note  is  given  in  renewal  only,  and  not  in  payment  of  a  prior  note, 
the  real  consideration  is  the  same  as  that  of  the  prior  note,  and  failure 
of  the  consideration  of  the  original  note  may  be  availed  of  in  a  suit 
on  the  renewal  note.^"*   So  if  the  maker  takes  up  a  note  by  executing 

"'  American    Car    Co.    v.    Atlanta  '"^  Lockner   v.    Holland,   81   N.   Y. 

Street  Ry.  Co.,  100  Ga.  254,  28  S.  E.  Supp.  730. 

40.     In  this  case  the  principal  and  ^°-  See  National  Citizens'  Bank  v. 

sureties  all  united  in  the  common  Toplitz,  178  N.  Y.  464,  468,  71  N.  E.  1. 

defense  of  partial  failure  of  consid-  "°^  Hill  v.   Buckminster,   22   Mass. 

eration  and  the  sureties  entered  no  (5  Pick.)  391.    Action  here  was  be- 

plea   peculiar   to   their   contract   of  tween  original  parties, 

suretyship     and     the     court     said:  Where    original    note    is    without 

"Whether   these    sureties  would   be  consideration  renewal  note  is  also, 

bound  by  the  waiver  of  the  princi-  Cockran  v.  Perkins   (Ala.,  1906),  40 

pal   if  the  facts   were  unknown  to  So.    351;    Gilbert    v.    Brown     (Ky., 

them  at  the  time  they   signed  the  1906),  97  S.  W.  40. 

last  note,  or  whether  for  that  reason  •'^  Wheelock   v.   Berkeley,   138   111. 

they  could  avail  themselves  of  any  153,  157,  27  N.  E.  942,  citing  House 

other  defense  is  not  now  for  deci-  v.  Davis,  60  111.  367;   1  Parsons  on 

sion."  Bills  and  Notes,  pp.  176,  177;  -Tiede- 

"'West  V.  Banigan,  51  N.  Y.  App.  man  on  Com.  Paper,  §  180. 

Div.   328,   64  N.  Y.  Supp.   684,  aff'd  A   note   given   in  renewal   of   one 

172  N.  Y.  622.  which  in  fact  had  been  paid  is  with- 

^'^Ross  V.  Western  Loan  &  Trust  out  consideration.    Smith  v.  Taylor, 

Co.,  Rap.  Jud.  Queb.,  11  R.  R.  292.  39  Me.  242. 


271     RENEWAL   NOTE — CONSIDERATION    FOR   ORIGINAL   PAPER.      [§    222 

to  the  same  payee  new  notes  for  the  same  amount,  the  consideration 
of  the  new  notes  is  the  same  as  that  for  the  old,  and  the  maker  may 
set  up  failure  of  consideration  in  a  suit  by  an  assignee  upon  the  new 
notes.205  go  i^  jg  gaid  j^  ^  Maryland  case :  "The  taking  from  the  same 
party  of  a  security  of  no  higher  grade  or  dignity,  for  another,  never 
works  an  extinguishment  or  amounts  to  a  payment,  but  leaves  the 
original  obligation  in  full  force."^"*'  And  where  notes  were  given  in 
settlement  of  a  note  on  which  it  was  represented  one  was  surety,  but 
he  was  not,  it  was  held  that  the  consideration  had  failed.-<>"  But  it  is 
insufficient  evidence  of  want  of  consideration  to  prove  that  a  note 
previously  given  by  another  for  the  same  amount  to  the  same  payee 
was  satisfied  by  the  payee  about  the  same  time  the  note  sued  on  was 
given.^"^  If  a  renewal  note  is  based  upon  an  independent  valid  con- 
sideration an  inquiry  cannot  be  made,  as  against  a  bona  fide  holder, 
into  the  consideration  of  the  original  note.  So  where  renewal  notes 
or  a  bill  of  exchange  are  given  for  extension  of  the  original  notes 
the  parties  thereto  cannot  inquire  into  the  consideration  of  the  origi- 
nal notes,  payable  at  a  bank,  as  against  said  bank  after  it  becomes  a 
bona  fide  purchaser  thereof.-"^  So  the  extension  of  time  of  payment 
of  a  note  is  a  valuable  consideration  for  other  notes  taken  in  lieu  of  it, 
and  if  a  new  note  taken  in  lieu  of  another  is  founded  on  a  valuable  con- 
sideration, independent  of  that  on  which  the  original  note  was 
founded,  the  failure  of  the  consideration  of  the  former  note  is  not  a 
defense  by  the  drawer  in  a  suit  against  him  on  the  last  note.-^'^ 
Where  no  promise  is  made  to  pay  a  note  in  order  to  obtain  an  ex- 
tension, and  the  maker  does  not  authorize  the  payee  to  secure  such 
extension  from  the  indorsees,  the  maker  is  not,  in  an  action  against 
him  by  the  indorsee,  compelled  to  pay  the  last  note  where  there  has 
been  a  failure  of  consideration  thereof.^"  There  has  also  been  a  total 
failure  of  consideration  where  there  exists  a  failure  or  refusal  to  turn 
over  the  old  notes  as  agreed  to  be  done  in  consideration  of  new  notes, 

^^'Bray  v.  Pearsoll,  12  Ind.  334.  Wkly.  Notes  Cas.   (Pa.)   433,  giving 

=°«  Hopkins  v.   Boyd,   11   Md.   107,  of  time  and  release  of  indorser  con- 

118  per  Le  Grand,  C.  J.  stitute    new    consideration    and    de- 

=""  Wright  V.  Vetter,   54  Mo.   App.  fense  not  good  on  original  notes  is 

384.  no     defense     on     substitute     notes 

-'^  Rowland  v.  Harris,  55  Ga.  141.  which  have  been  negotiated. 

^'^Estep  V.  Burke,  19  Ind.  87.  ="  Merchants'  &  Planters'  Bank  v. 

""Muirhead  v.  Kirkpatrick,  21  Pa.  Millsaps  (Miss.),  15  So.  659. 
St.  237.     See  Gatzmer  v.   Pierce,  6 


§§'  223,  224]       WANT  OR  failure  of  consideration.  272 

and  in  such  case  the  payee  cannot  recover  against  the  makers.^^^ 
But  in  an  action  by  a  holder  for  value  against  the  maker  and  in- 
dorsee upon  renewal  notes  given  upon  an  agreement  that  the  old  notes 
should  be  turned  over  to  plaintiff,  and  one  of  them  is  not  delivered 
until  presented  in  court  for  such  purpose,  and  such  non-delivery  is 
waived,  there  is  not  such  a  failure  of  consideration  as  to  prevent 
plaintiff  from  recovering  on  the  renewal  notes  against  the  indorsee.^^^ 
So  the  fact  that  old  notes  have  never  been  surrendered  as  agreed  con- 
stitutes no  defense  in  law  against  the  obligation  of  new  notes  in  the 
hands  of  a  bona  fide  purchaser  before  maturity  and  without  notice, 
and  where  such  purchaser  obtains  a  judgment  at  law  he  is  entitled  to 
retain  the  same.^^* 

§  223.  Renewal  notes — Discount  before  maturity. — One  who  takes 
good  title,  when  he  discounts  an  original  note  by  receiving  it  before 
maturity,  for  value  and  without  any  notice  of  want  of  consideration, 
may  recover  on  renewals  thereof,  unless  the  taking  of  the  last  notes 
is  an  extinguishment  of  the  original  note.^^^  And  where  the  note 
sued  on  is  not  a  new  transaction,  but  is  a  renewal  note  given  by  the 
maker  to  the  payee  for  a  balance  due,  and  said  renewal  note  has  been 
purchased  for  value  in  due  course  of  business  without  notice,  said 
holder  is  not  precluded  from  recovering  by  notice  that  the  original 
note  was  without  consideration.^^® 

§224.     Notes  or  checks  given  for  other  notes  or  bills  purchased. 

Where  a  note  is  given  for  the  purchase  price  of  another  note  which  at 
the  time  had  a  certain  cash  value,  the  fact  that  the  latter  note  was 
subsequently,  in  an  action  thereon,  found,  even  though  mistakenly, 
to  be  without  consideration,  does  not  constitute  a  defense  to  the  for- 
mer note.^^'^  And  where  the  payee  of  a  note  has  sold  it  to  a  third 
person,  and  the  maker  being  present  at  the  request  of  the  vendee,  and 
for  his  accommodation  takes  it  up  and  executes  a  new  note,  payable 
to  the  purchaser  in  a  suit  upon  a  new  note  the  maker  cannot  prove 

"=  Perry    v.    Connell     (Tex.    Civ.  "=  Hopkins  v.  Boyd,  11  Md.  107. 

App.),  31  S.  W.  685.  2^=  Beattyville  Bank  v.  Roberts,  117 

«^West    V.    Bannigan,    51    N.    Y.  Ky.  689,  25  Ky.  L.  Rep.  1796,  78  S. 

App.  Div.   328,  64  N.  Y.  Supp.  884,  W.  901,  902. 

aff'd  172  N.  Y.  622,  65  N.  E.  1123.  ="  Bean  v.  Proseus  (Cal.),  31  Pac. 

»^*  Martina  v.  Muhlke,  186  111.  327,  49. 
S7  N.  E.  954. 


273  DRAFT  TO  EXTIXGUISn  OTHER  DRAFTS.    [§§  225,  226 

•vrant  of  eonsideration  for  the  note  which  has  been  canceled.^^^  Again, 
it  is  no  defense  to  an  action  upon  a  note  that  the  consideration  of  it 
-vras  another  note,  against  one  B.,  transferred  to  the  defendant  by  the 
plaintiff,  with  a  guaranty  of  payment  before  the  note  in  suit  should 
fall  due,  which  note  against  B.  has  not  been  paid.^^^  If  a  person  pur- 
chases bills  of  exchange  from  an  insolvent's  syndics  and  gives  cash 
and  other  notes  therefor,  and  they  are  protested  for  non-payment 
and  returned  to  the  purchaser,  he  may,  for  want  of  failure  of  con- 
sideration, refuse  to  pay  his  notes  in  the  hands  of  the  syndics  of  the 
vendor,  who  has  failed.  Said  notes  being  still  in  the  payee's  hands, 
or,  which  is  the  same,  in  those  of  his  syndics,  the  consideration  may  be 
inquired  into.^^"  But  the  fact  that  a  check  is  given  for  the  purchase 
price  of  a  note,  and  that  the  makers  of  the  note  had  stopped  payment 
before  the  sale,  does  not  constitute  such  a  failure  of  consideration  as 
to  constitute  a  defense  to  an  action  on  the  check,  where  it  was  given 
for  a  note  placed  in  a  broker's  hands  to  raise  money. ^^^  And  if  post- 
dated checks  are  given  in  pursuance  of  an  arrangement  for  the  ex- 
change of  checks  and  notes  for  the  accommodation  of  defendant,  and 
they  are  deposited  in  a  bank  which  takes  them  before  maturity,  for 
full  value  without  notice  of  any  equities  or  defenses,  such  bank  has  a 
perfect  title  against  all  defenses  in  a  suit  by  ij;  against  the  drawers.^-^ 
Again  where  a  note  is  transferred  for  a  consideration  of  another  note 
and  a  chattel  mortgage,  which  latter  note  has  indorsers  against  whom  it 
may  be  enforced,  there  is  not  a  total  failure  of  consideration,  even 
though  the  maker  of  the  latter  note  and  mortgage  becomes  insolvent.--^ 

§  225.  Draft  accepted  to  extinguish  other  drafts. — One  who  ac- 
cepts a  draft  drawn  to  extinguish  other  outstanding  drafts  cannot 
set  up  a  failure  of  consideration  for  which  the  first  drafts  were 
given  as  a  defense  to  his  acceptance.--^ 

§  226.  Where  only  part  of  the  consideration  is  good — Action  by 
payee. — If  part  of  the  consideration  of  a  note  is  good  and  there  is  no 

^'Williams  v.  Rank,  1  Ind.  230,  1  therefore  that  there  was  a  consid- 

Smith  (Ind.)  176.  eration. 

""State  v.  Hobbs,  40  N.  H.  229.  ="  Symonds  v.  Riley  (Mass.,  1905), 

^Grieve's    Syndics    v.    Sagory,    3  74  N.  E.  926. 

Mart.  0.  S.  (La.)  599.  223  ce^^rai  SaV.  Bank  v.  O'Connor, 

""  Elwell  v.  Chamberlain,  17  N.  Y.  132  Mich.  578,  94  N.  W.  11,  10  Det. 

Super.   Ct.    (4   Bosw.)    320,  aff'd   31  L.  N.  14. 

N.  Y.  611.     There  was  also  a  claim  -^  Kaufman   v.    Barringer,   20    La. 

here  that  the  transaction  was  usuri-  Ann.  419. 
ous,   and  that   it   was   not   so,   and 
Joyce  Defenses — 18. 


§§    277-230]  WANT    OR    FAILURE   OF    COXSIDERATION".  274 

consideration  for  the  balance,  and  the  valid  obligation  is  paid,  an  ac- 
tion upon  the  note  by  the  original  payee  will  fail.--^ 

§  227.     Defense  to  one  note  in  action  on  another. — If  notes  are 

exchanged  each  note  is  a  valid  consideration  for  the  other,  and  is 
fully  available  in  the  hands  of  its  holder,  and  such  transaction  being 
fully  consummated  and  in  no  sense  executory,  a  defense  of  failure  of 
consideration,  in  an  action  upon  one  of  them,  will  not  be  sustained 
by  the  fact  that  the  other  is  not  paid  at  maturity,  where  there  is 
nothing  amounting  to  a  plea  of  an  equitable  set-off.  If,  however,  an. 
equitable  counter-claim  is  set  up  under  proper  averments,  defendant, 
might  then  show  that  no  equities  or  rights  of  others  had  intervened, 
and  that  the  transaction  was  such  as  to  justify  offsetting  one  note 
against  the  other.^^® 

§  228.  Note  given  for  political  assessments. — There  is  no  want  of 
consideration  for  a  note  given  to  the  chairman  of  a  campaign  com- 
mittee, by  the  nominee  for  a  state  office,  to  meet  his  proportion  of 
campaign  assessments  and  also  of  assessments  to  meet  counsel  fees 
and  costs  of  a  contest  of  election  against  all  the  candidates  of  the 
party,  said  note  having  been  given  after  the  contest  was  instituted.--^ 

§  229.  Where  paper  sued  on  is  impossible  to  perform  in  reasonable 
time. — There  is  both  a  want  and  failure  of  consideration  where  the 
paper  sued  on  is  impossible  to  perform  within  a  reasonable  time,  at 
least,  within  the  time  contemplated  by  the  contract  on  which  the  paper 
is  based.^^^ 

§  230.  As  to  agents.-^** — If  defendant  gives  his  negotiable  note 
to  the  order  of  agents,  and  such  payees  indorse  the  same  to  a  bona  fide 
indorsee  for  value  before  maturity,  it  is  valid  in  his  hands  and  not 
subject  as  against  him  to  defenses  affecting  the  consideration.--" 
And  where  an  agent,  at  the  request  of  his  principal,  drew  his  check 

===  Littlefleld     v.      Perkins      (Me.,  -' German-American  Security  Go's 

1905),    60    Atl.    707.     See    Tuttle   v.  Assignee    v.    McGulloch    (Ky.    App., 

George  A.  Tuttle  Co.. (Me.,  1906),  64  1905),  89  S.  W.  5. 

Atl.  496.  "**  See  Neg.  Inst.  Law,  §  119,  ap- 

^^''Rice  V.  Grange,  131  N.  Y.  149,  pendix  herein. 

42  N.  Y.  St.  R.  707,  30  N.  B.  46.  =="  McCormack  v.  Warren,  74  Conn. 

^  Day   V.    Long,    26    Ky.    L.    Rep.  234,  50  Atl.  740.     See  Byers  v.  Har- 

123,  80  S.  W.  774.  ris,  56  Tenn.  (9  Heisk.)  652. 


275  AS   TO    AGENTS.  [§    230 

to  another  to  discharge  a  lona  fide  debt  due  from  his  principal  to  the 
payee,  having  in  his  possession  funds  enough  of  his  principal  to  meet 
the  check,  it  was  decided  that  the  payee  could  recover  against  the 
drawer  and  that  the  money  or  funds^  for  which  the  check  was  given, 
being  in  the  drawer's  hands  at  the  time  of  giving  plaintiff  the  check, 
there  was  no  want  of  consideration.^ ^°  But  if  a  person  draws  as  agent 
upon  his  principal  for  a  debt  not  personal  to  himself,  but  due  by  the 
principal  to  the  payee,  and  an  action  is  brought  against  the  agent  as 
drawer,  he  may  avail  himself  of  the  defense  of  want  of  consideration.^^^ 
If,  however,  an  agent  makes  sales  of  the  property  of  his  principal, 
and  in  payment  to  the  owner  therefor  has  indorsed  a  note,  which  was 
not  taken  for  the  property  sold,  or  any  part  thereof,  such  agent  cannot 
set  up  want  of  consideration  in  defense  of  an  action  against  him  as 
indorser.^^^  But  it  is  also  decided  that  the  consideration  of  a  note  is 
open  to  inquiry  except  where  the  rights  of  a  hona  fide  purchaser  have 
intervened,  and  that  a  principal  is  chargeable  with  such  facts  as  are 
known  to  his  agent,  which  rule  was  applied  to  a  purchase  of  a  note  by 
an  attorney  at  law  for  his  client  ;^^^  although  as  against  a  defense  of 
failure  of  consideration  a  commercial  firm  holding  a  note  in  favor  of 
one  of  its  members,  without  indorsement,  given  for  money  loaned  by 
the  firm,  cannot  set  up  that  they  are  innocent  holders  for  value.^^* 
And,  if  a  general  agent,  who  appoints  sub-agents  to  work  for  an  insur- 
ance company  under  his  supervision,  takes  from  an  applicant  for  in- 
surance a  promissory  note,  to  be  negotiated  and  cash  raised  thereon,  to 
be  sent  with  an  application  in  payment  of  a  premium  upon  a  policy,  to 
be  issued  and  delivered,  and  such  general  agent  discounts  the  note  in 
bank  and  forwards  the  money,  with  the  application,  he  cannot,  where 
he  brings  suit  thereon,  set  up  that  he  is  a  bona  fide  holder  for  value 
and  so  preclude  the  defense  of  failure  of  consideration,  in  that  the  note 

'^'^  Fish  v.  Jacobsohn,  1  Keyes  539,  =^=  Crocker    v.    Getchell,    10    Shep. 

2  Abb.  Dec.  132,  aff'g  18  N.  Y.  Super.  (Me.)   392,  398. 

514.  =^^  Macomb  v.  Wilkinson,  83  Mich. 

=^1  Wolfe    V.    Jewett,    10    La.    383;  486,  47  N.  W.  336. 

Coupry    V.    Dufau,    1    Mart.    N.    S.  ^'^^  Norton  v.  Pickens,  21  La.  Ann. 

(La.)  9.    The  evidence  showed  that  575.      Such    was    on    a    promissory 

the  bill  on  which  suit  was  brought  note  made  by  defendant  to  the  or- 

was    drawn    by    defendant    as    the  der  of  one  of  tHe  plaintiff's  firm,  but 

mere  agent  of  Coupry  and  that  he  the  note  was  never  indorsed  to  the 

received    no    consideration     for     it  firm    and    they   did    not   appear    as 

whatever  and  oral  evidence  was  re-  hona  fide  holders, 
ceived   to    show   that  no   considera- 
tion was  received  by  the  drawer. 


§    231]  WANT    OR   FAILURE   OF    CONSIDERATION.  276 

was  obtained  before  the  policy  was  delivered,  and  the  policy  as  deliv- 
ered was  not  that  contracted  for  and  for  which  the  application  was 
made.^^^  If  an  agent  has  authority  to  make  a  contract  on  which  a  note 
is  based,  and  there  is  a  breach  thereof,  there  is  a  failure  of  consider- 
ation.-^® And  where  the  purchaser  of  a  note  from  a  bona  fide  holder 
transfers  it  to  the  payee's  agent  it  becomes  subject  in  his  hands  to 
equitable  defenses.^^'' 

§  231.  As  to  trustees  or  committees. — Generally,  if  notes  are  issued 
or  held  by  trustees  or  committees,  in  determining  whether  there  is  a 
defense  to  such  notes  the  objects  and  purposes  contemplated,  and  upon 
the  consideration  of  which  the  notes  are  issued,  are  the  determining 
factors,  as  a  rule,  upon  the  question  of  availability  of  defense,  which 
must  therefore  depend  upon  the  particular  circumstances  of  the 
case.^^^  If  a  note  is  given  to  a  trustee  or  committee  for  money  raised 
for  a  specific  purpose,  said  trustee  or  committee  not  being  owners  of 
the  fund,  it  is  based  upon  a  special  consideration,  and  want  of  con- 
sideration can  not  be  set  up  as  a  defense.^^^  Again,  no  recovery  can 
be  had  upon  a  note  executed  by  a  father,  given,  upon  compromise  of 
certain  suits,  to  a  trustee,  to  secure  a  settlement  on  his  minor  children 
for  their  support,  during  the  existence  of  a  marriage.^*"  A  note  is  also 
without  consideration  where  it  is  given  to  a  trustee,  at  his  request, 
merely  to  enable  him  to  show  to  the  party  for  whom  he  was  trustee 
to  account  for  the  disposition  of  money  which  said  party  had  directed 
to  be  paid  to  defendant  as  a  gift  to  the  brother  of  said  trustee,  who 
was  the  plaintiff  and  son  of  the  party  for  whom  he  acted  as  trustee.-" 

='=  Shedden  v.  Heard,  110  Ga.  461,  shown   and   that   the   consideration 

35  S.  E.  707.  had  failed. 

=^"  Webb   v.    Mosely,    30    Tex.    Civ.  ^'^  Town  of  Bayou  Sara  v.  Harper, 

App.  311,  70  S.  W.  349.  15   La.   Ann.   233.    See   Des   Moines 

^'  Battersbee  v.  Calkins,  128  Mich.  Valley  R.  Co.  v.  Graff,  27  Iowa,  99, 

569,  87  N.  W.  769,  8  Detroit  Leg.  N.  1  Am.  Rep.  256. 

778.  ='"  Gates  v.  Renfroe,  7  La.  Ann. 
^  As  to  trustees  or  committees  is-  569.  Court  declared  that  it  was 
suing  or  holding  notes,  and  defenses  doubtful  if  such  contract  could  be 
thereto,  see  Light  v.  Scott,  88  111.  enforceable  in  a  common  law  state 
239.  Trustees  of  the  Town  of  Ewing  as  it  implied  a  delegation  of  pater- 
V.  Clarksville,  61  Ind.  129;  Russell  nal  power  which  could  not  be  recog- 
v.  Hall,  8  Mart.  N.  S.  (La.)  558.  nized.  As  to  compromise  as  a  con- 
That  payees  were  trustees  fcrr  sideration  see  §§  195-197  herein, 
another  for  whose  use  and  bene-  ="  Norwack  v.  Lehmann,  (Mich, 
fit  they  received  the  notes  may  be  1905),  102  N.  W.  992,  11  Det.  L.  N. 

908. 


II 


277  HOLDERS    OF   MUXICIPAL   WAERANTS.  [§    232 

The  principle  involved  in  this  ease  is,  as  is  stated  by  the  court  therein, 
sustained  by  other  decisions  in  the  same  state :  thus  where  the  amount 
of  a  promised  legacy  was  advanced  upon  an  understanding  that  in- 
terest should  be  paid  during  the  testator's  lifetime,  and  the  legatee's 
husband,  in  recognition  of  the  obligation  to  pay  interest,  voluntarily, 
without  request,  gave  the  testator  his  note  for  the  amount,  and  paid 
interest  thereon  until  the  testator's  death,  it  was  held,  in  an  ac- 
tion by  the  administrator,  that  there  was  no  consideration  for  the 
note.^*^  So  in  another  case  it  is  held  that  want  of  consideration  for  a 
note  executed  by  defendant  to  decedent  in  her  lifetime  is  established 
where  it  is  shown  that  the  note  was  executed  merely  as  a  memoran- 
dum of  a  previous  transaction,  whereby  decedent  paid  to  defendant 
the  amount  of  the  note  in  consideration  of  his  agreeing  to  use  the  same 
in  the  construction  of  a  house,  where  she  might  make  her  home  and 
receive  maintenance  and  support,  which  agreement  was  carried  out 
to  the  satisfaction  of  decedent.-*^ 

§  232.  As  to  holders  of  municipal  warrants  and  coupons  attached 
to  bonds. — The  assignee  of  a  municipal  warrant  is  subject  to  the  de- 
fense of  failure  of  the  consideration  in  the  original  contract  occurring 
prior  to  notice,  to  the  maker  or  drawer  of  the  assignment.-**  But 
where  the  evidence  showed  that  defendant  purchased  a  city  warrant 
in  good  faith,  and  the  warrant  contained  nothing  giving  any  notice 
or  intimation  to  put  him  on  his  guard  as  to  another's  ownership,  the 
defendant  was  held  not  liable  to  the  owner.  The  court  in  considering 
this  case  declared  that  a  county  or  city  warrant  possesses  all  the  quali- 
ties of  negotiable  paper  but  one,  and  that  is,  that  it  is  open  to  any 
defense  that  might  have  been  made  to  the  claim  on  which  it  is 
founded;  that  for  all  purposes  involving  title  it  must  be  treated  as 
negotiable.^*^    So  city  warrants  regularly  and  legally  issued  and  in 

="  Graham  v.  Alexander,  123  Mich.  v.  Palmer,  22  Wash,  t/S,     61   Pac. 

168,  81  N.  W.  1064.  158  citing  numerous  cases. 

="  Kelly  v.  Guy,  116  Mich,  43,  74  See   generally  as  to   negotiability 

N.  W.  291.  of   and    defenses   to    municipal   and 

^"  Board  of  Supervisors  of  Jeffer-  county  warrants,  even  in   hands  of 

son  County  v.  Arrghi,  51  Miss.  667.  bona  fide  holders: 

As  to  defenses  on  all  promissory  Alabama. — Allen  v.  McCreary,  101 

notes    and    other    writings    for    the  Ala.  514,  14  So.  320. 

payment  of  money  and  other  things,  California. — Santa     Cruz     County 

see  Annot.  Code  Miss.,  §  3503.  Bank  v.  Bartlett,  78  Cal.  301,  20  Pac. 

■*' Washington. — Fidelity  Trust  Co.  682;    Shakespear   v.    Smith,    77   Cal. 


232] 


WANT    OE   FAILURE   OF    CONSIDERATIOX. 


97R 


the  hands  of  innocent  purchasers  are  not  affected  by  the  subsequent 
loss  of  bank  deposits,  applicable  to  their  payment,  through  the  bank's 
insolvency.^*^  Transferees,  by  delivery  and  written  assignment  from 
bona  fide  holders  of  coupons  attached  to  county  bonds,  become  the 
legal  owners  of  such  coupons  and  succeed  to  all  the  rights  of  such 
holders,  and  may  recover  upon  such  coupons,  whether  they  have  given 


638,  11  Am.  St.  Rep.  327,  20  Pac.  294 
(Municipal). 

Colorado. — People  v.  Hall,  8  Colo. 
485,  9  Pac.  34;  Raymond  v.  People, 
2  Colo.  App.  529,  30  Pac.  504  (Mu- 
nicipal). 

Illinois. — People  v.  Johnson,  100 
111.  537,  39  Am.  Rep.  63;  Delfosse  v. 
Metropolitan  Nat.  Bank,  98  111.  App. 
123  (Municipal). 

Indiana. — Connersville  v.  Conners- 
ville  Hydraulic  Co.,  86  Ind.  184  (Mu- 
( Municipal). 

Iowa. — Boardman  v.  Hayne,  29 
Iowa  339  (Municipal);  Shepherd  v. 
Richland  Dist.  Tp.,  22  Iowa  595  (Mu- 
nicipal). 

Kansas. — Garfield  Tp.  v.  Crocker, 
63  Kan.  272,  65  Pac.  273;  Atchison 
T.  &  S.  F.  R.  Co.  v.  Kearney,  58 
Kan.  19,  48  Pac.  583. 

Michigan. — Van  Aiken  v.  Dunn, 
117  Mich.  421,  75  N.  W.  938;  Miner 
V.  Vedder,  66  Mich.  101,  33  N.  W.  47 
(Municipal). 

Missouri. — State  v.  Huff,  63  Mo. 
283  (Municipal);  State,  Livesay  v. 
Harrison,  99  Mo.  App.  57,  72  S.  W. 
469. 

JN'ebrosfca. — State,  York  First  Nat. 
Bank  v.  Cook,  43  Neb.  318,  61  N.  W. 
693   (Municipal). 

New  Hampshire. — Eaton  v.  Berlin, 
49  N.  H.  219   (Municipal). 

New  York. — Bank  of  Staten  Island 
V.  City  of  New  York,  68  N.  Y.  App. 
Div.  231,  74  N.  Y.  Supp.  284;  Read 
V.  Buffalo,  67  Barb.  (N.  Y.)  526  (Mu- 
nicipal). 

North      Carolina. — McPeeters      v. 


Blankenship,  123  N.  C.  651,  31  S.  E. 
876. 

North  Dakota. — Gilman  v.  Town- 
ship of  Gilby,  8  N.  D.  627,  80  N.  W. 
889  (Municipal);  Erskine  v.  Steele 
County,  4  N.  D.  339,  60  N.  W.  1050, 
28  L.  R.  A.  645. 

Ohio. — State  v.  Liberty  Tp.,  22 
Ohio  St.  144   (Municipal). 

Oklahoma. — Crawford  v.  Board  of 
Commissioners  of  Noble  Co.,  8  Okla. 
450,  58  Pac.  616. 

Oregon. — Klamouth  County  v. 
Leavitt,  32  Oreg.  437,  52  Pac.  20; 
Franki  v.  Bailey,  31  Oreg.  285,  50 
Pac.  186. 

South  Dakota. — Livingston  v. 
Brown  County,  15  S.  D.  606,  91  N. 
W.  309;  Hubbell  v.  Town  of  Coster 
City,  15  S.  D.  55,  87  N.  W.  520  (Mu- 
nicipal). 

Tennessee. — Fine  v.  Stewart 
(Tenn.),  48  S.  W.  371;  Donaldson  v. 
Walker,  101  Tenn.  236,  41  S.  W.  417. 

Washington. — Potter  v.  New 
Wheaton,  20  Wash.  589,  56  Pac.  394 
(Municipal). 

West  Virginia. — Shinn  v.  Board  of 
Education,  39  W.  Va.  497,  20  S.  E. 
604  (Municipal). 

Federal. — Ouachita  County  v.  Wol- 
cott,  103  U.  S.  559,  26  L.  Ed.  505  (Mu- 
nicipal);  Wall  v.  Monroe  County, 
103  U.  S.  74,  26  L.  Ed.  430;  Watson 
V.  City  of  Huron,  38  C.  C.  A.  664, 
97  Fed.  449   (Municipal). 

-*^  New  York  Security  &  Trust  Co. 
V.  City  of  Tacoma,  21  Wash.  303,  57 
Pac.  810. 


^79 


THIRD    TERSOXS    AS    HOLDERS    OF    NOTES.       [§§    233,    234 


any  consideration  for  them  or  not,  especially  where  no  defense  is 
pleaded  which  makes  it  material  whether  value  was  or  was  not  paid 
for  them. 2*^ 

§  233.  Third  persons  as  holders  of  notes. — It  is  decided  that  if  a 
third  person  becomes  the  holder  of  a  bill  or  note,  negotiable  by  the 
law  merchant,  which  had  been  obtained  from  the  maker  without 
consideration,  and  it  can  be  proved  that  he  had  notice  of  the  transac- 
tion between  the  original  parties,  and  gave  no  value  for  the  note  or 
bill,  he  will  be  affected  by  everything  which  would  affect  the  first 
liolder."^  But  a  party  defendant  cannot  defeat  an  action  upon  a  note 
by  showing  that  the  plaintiff  obtained  it  from  the  payee  without  con- 
sideration. Thus  if  a  party  to  a  suit  in  pursuance  of  an  award  exe- 
cutes his  promissory  note,  payable  to  a  third  person,  he  cannot  defeat 
a  recovery  thereon  by  showing  that  no  consideration  passed  between 
the  plaintiff  and  the  payee. 


249 


§  234.  Note  of  third  person. — "\\liile  the  giving  of  a  note  of  a 
third  person  by  a  debtor  to  a  creditor,  when  it  is  agreed  between  the 
parties  that  such  note  shall  be  taken  in  payment  of  the  indebtedness, 
operates  to  discharge  the  debt,  yet  where  a  third  party,  subsequent  to 
the  time  of  incurring  the  debt,  and  a  stranger  thereto,  promises  to 
pay  such  debt,  such  promise  is  unenforceable,  such  third  party  not 
having  requested  the  loan  and  not  having  received  any  benefit  there- 
from, nor  the  payee  having  been  injured,  and  there  being  no  agree- 
ment between  the  debtor  and  the  payee  that  such  third  person  should 
give  any  note,  nor  between  such  third  person  and  the  debtor,  the 
debtor  being  in  no  way  a  party  to  the  transaction,  and  no  forbearance 
on  the  creditor's  part  being  shown.  Such  a  case  differs  from  one  where 
the  debtor  is  a  party  to  the  transaction  and  the  payment  made  is  en- 
forceable against  the  debtor  by  such  third  person  upon  the  express  or 
implied  promise  of  the  debtor,  or  was  a  payment  by  the  third  person 
of  his  own  debt  to  the  creditor.  This  rule,  with  its  qualifications, 
controlled  the  court  in  a  recent  case  in  New  York.  In  this  case  the 
plaintiff  was  the  owner  of  a  copyright  of  a  play,  which  he  sold  to  a 

="  Dudley  v.  Lake  Co.,  26  C.  C.  A.  ="  Munson     v.     Cheesborough,     6 

82,  80  Fed.  672.  Blackf.    (Ind.)    17,  citing  Collins  v. 

As  to  negotiability  of  bonds  and  Martin,  1  Bos.  &  Pull.  651. 

interest  coupons  see  Article  "Bonds,"  ="  Yeatman    v.    Mattison,    59    Ala. 

5  Cyc,  pp.  777-784.  382.    See  §  244  herein. 


§    235]  WANT   OR   FAILURE    OF    COXSIDERATION.  280 

sister  of  defendant,  she  agreeing  to  pay  therefor  a  certain  sum  of 
money  as  soon  as  she  could  sell  some  property  owned  by  her.  De- 
fendant, to  some  extent,  participated  in  the  prior  negotiations,  but 
it  was  not  claimed  that  the  play  was  sold  to  him  or  that  he  ever 
agreed  to  pay  any  portion  of  the  purchase  price,  except  as  hereinafter 
stated.  Subsequently  the  plaintiff  applied  to  defendant  for  a  loan, 
and  two  notes  were  made  and  signed  by  defendant  and  another  and 
delivered  to  the  plaintiff  to  enable  him  to  get  them  discounted. 
Thereafter  plaintiff  returned  these  notes  to  defendant,  who  thereupon 
gave  the  plaintiff,  for  his  accommodation,  two  other  notes,  signed  by 
defendant  alone,  and  when  they  were  delivered  defendant  asked  for 
and  obtained  a  receipt  stating  that  the  amount  of  the  notes  was  in  part 
payment  of  the  play.  These  notes  were  kept  until  maturity,  and  not 
being  paid,  suit  was  brought  thereon  and  the  defense  of  want  of  con- 
sideration was  set  up.  It  was  not  claimed  that  the  sister  ever  re- 
quested defendant  to  give  the  notes,  and  she  had  no  knowledge  about 
their  being  given.  It  was  decided  that  the  notes  could  not  be  en- 
forced.^^° 

§  235.  Note  given  to  promote  peace  between  husband  and  wife — 
Note  of  stranger. — A  written  promise  by  a  stranger,  in  the  form  of  a 
note,  not  given  in  satisfaction  of  any  legal  obligation,  but  given  to  a 
husband  in  order  that  he  might  deliver  the  same  to  his  wdfe  to  secure 
domestic  peace  between  them,  is  not  in  law  a  good  promise  in  con- 
sideration of  marriage,  and  such  note  is  without  consideration  in  the 
hands  of  the  wife  against  the  maker  and  cannot  be  collected,  even 
though  there  was  an  ante-nuptial  agreement,  but  not  in  writing, 
whereby  the  intended  husband  was  to  give  the  wife  a  certain  sum  of 
money,  and  the  note  was  given  about  two  and  one-half  years  after 
their  marriage.^^^ 

^^  Tyler  v.  Jaeger,  93  N.  Y.  Supp.  Har.  &  J.   (Md.)  409,  considered  un- 

558.   The  case  of  Kramer  v.  Kramer,  der  §  193  herein. 

90  App.  Div.  176,  86  N.  Y.  Supp.  129,  ■''  Kramer   v.   Kramer,   181   N.   Y. 

considered  by  the  court  in  the  prin-  477,  74  N.  E.  474,  revg.  90  App.  Div. 

cipal  case  was  subsequently  reversed  176,   86   N.   Y.   Supp.    129,   Gray,   J., 

in   181  N.  Y.   477.    See   §§   235,   244  dissenting.   See  §§  234,  244  herein, 
herein.  Examine  Wyman  v.  Gray,  7 


CHAPTER  XI. 


WANT    OR   FAILURE    OF   CONSIDERATION    CONTINUED. 


Sec.  Sec. 

236.  Assignees — Consideration  of  as-     249. 

signment. 

237.  Assignees — Want  or  failure  of     250. 

consideration. 

238.  Bona  fide  indorsees  or  holders     251. 

—Rule. 

239.  Transfer  after  maturity.  252- 

240.  Rule  as  to  payment  of  value; 

its  basis  and  qualifications — 
Bona  fide  indorsees  or  hold-     253. 
ers. 

241.  Rule   as   to    value    continued —     254. 

Payment  of  pre-existing  debt     255. 
— Bona  fl,de  indorsees  or  hold- 
ers. 256. 

242.  Same  subject — Decisions  contra    257. 

or  qualifications. 

243.  Bank  s — Distinctions  between     258. 

crediting  amount  of  note  on     259. 
undrawn    deposit   and   credit     260. 
on   pre-existing   indebtedness 
— Bona  fide  holder.  261. 

244.  Parting  with  value — Surrender    262. 

by  creditor  of   debtor's   own 
not  e — Receiving    negotiable     263. 
note  of  third  person. 

245.  Joint  note  of  husband  and  wife     264. 

— Outlawed  debt  of  husband 
— Indorsee  for  past  indebted-     265. 
ness — Indorsement   by   presi- 
dent payee  to  bank.  266. 

246.  Rule  as  to  value — Collateral  se- 

curity for  pre-existing  debt — 
Bona  fide  indorsees  or  hold-     267. 
ers. 

247.  Same  subject — Particular  deci- 

sions. 

248.  Same    Subject — Specific    excep- 

tions. 

281 


Security  for  pre-existing  debt — 
Additional  consideration. 

Intermediary  party — H  older 
from  bona  fide  holder. 

Paper  issued  by  corporation — 
Bona  fide  holder. 

Want  or  failure  of  considera- 
tion subsequent  to  transfer — 
Bona  fide  holder. 

Suit  in  name  of  original  party 
— bona  fide  holder. 

Lex  Fori. 

Indorsement  for  transfer  mere- 
ly or  to  pass  title. 

Same  subject — Instances. 

Purchase-price  notes — Original 
parties. 

Same  subject — Acceptor. 

Same  subject — Guarantors. 

Same  subject — Bona  fide  holder 
or  assignee. 

Effect  of  judgment — Assignees. 

Purchase-price  notes — Property 
useless  or  of  no  value. 

Vendor  or  seller  without  title — 
Loss  of  title. 

Purchase-price  notes — Land — 
Warranty. 

Purchase-price  notes — Personal 
property — Warranty. 

Where  property  for  which  note 
given  is  of  some  value — No 
failure  of  consideration. 

Rights  of  holder  where  prior 
indorsee  held  note  as  collat- 
eral security  and  for  continu- 
ing credit — Lien. 


236] 


■WANT   OR   FAILURE    OF    CONSIDERATION". 


282 


Sec. 

268.  Purchase-price  notes — In- 

stances in  general  of  want  or 
failure  of  consideration. 

269.  Accommodation  paper — Consid- 

eration  as   between   original 
or  immediate  parties. 

270.  Bojia  fide  holders — Assignees — 

Notice  or  knowledge. 

271.  Same  subject — Particular  deci- 

sions. 

272.  Accommodation  acceptor — Gen- 

eral rules  and  illustrations. 

273.  Same  subject — Continued. 

274.  Same     subject    continued — Ex- 

ceptions and  qualifications. 

275.  Bill  payable  to  order. 

276.  Taking  before  acceptance. 

277.  Accommodation    p  a  p  e  r — Con- 

flict of  laws — Acceptance. 

278.  Accommodation   check — B  a  n  k 

check. 


Sec. 

279.  Accommodation        indorsers  — 

Availability  of  defense  s — 
General  rule. 

280.  Same    subject — Application    of 

rule. 

281.  Same  subject — Qualifications  of 

and  exceptions  to  rule. 

282.  B07ia  fide  holder — Accommoda- 

tion paper  taken  after  matur- 
ity— Want  of  consideration. 

283.  Accommodation    of    other    par- 

ties in  general. 

284.  Payment  of  pre-existing  debt — 

Bona  fide  holder  against  ac- 
commodation maker. 

285.  Same    subject — Particular    rul- 

ings and  opinions. 

286.  Same     subject — Bona    fide    in- 

dorsee against  indorser. 

287.  Same  subject — Drafts  and  bills 

— Payee — Accommodation  ac- 
ceptor. 


■  §  236.  Assignees — Consideration  of  assignment.^ — The  assignment 
of  a  note  is  itself  a  contract  which  imports  a  consideration,  and  that 
consideration,  prima  facie,  is  the  amount  of  the  note.^  The  consider- 
ation of  an  assignment  cannot  be  questioned  by  the  maker  of  a  note 
when  sued  by  an  assignee.^    And  if  a  failure  of  consideration  is  so 


^  As  to  assignments  generally  see 
Daniels  on  Neg.  Inst.  (5th  ed.), 
§§  729-748a. 

2  Lee  V.  Pile,  37  Ind.  107,  109. 

^Arkansas. — Geisreiter  v.  Sevier, 
33  Ark.  522,  531  ("whether  the  note 
was  sold  by  the  assignee  for  little  or 
much  did  not  concern  Geisreiter,  the 
maker  of  the  note.  *  *  *  The 
maker  of  the  note,  when  sued  upon 
it  by  an  assignee,  cannot  question 
the  consideration  given  by  the  as- 
signee to  the  assignor  for  the  trans- 
fer of  the  note"). 

Indiana. — Shane  v.  Lowry,  48  Ind. 
205,  206,  207.  ("The  answer  alleges 
that  there  was  no  consideration  for 


the  assignment  of  the  note.  This  is 
no  reason  why  the  defendants  should 
not  pay  the  note.  If  the  payees  as- 
signed it,  it  is  not  for  them  to  ques- 
tion the  consideration  paid  for  the 
assignment.  If  the  payees  gave  it  to 
the  plaintiff,  it  is  no  concern  of 
theirs.  If  the  action  were  on  the  as- 
signment the  rule  would  be  differ- 
ent"); Musselman  v.  Hays,  28  Ind. 
App.  360,  62  N.  E.  1022  (holding  that 
answer  is  demurrable  which  avers  in 
action  by  indorsee,  that  nothing  was 
paid  for  assignment). 

New  York. — Oishei  v.  Craven,  11 
Misc.  (N.  Y.)  139,  31  N.  Y.  Supp. 
1021,  24  Civ.  Proc.  R.  301,  65  N.  Y. 


283 


ASSIGNEES — CONSIDERATIOX    OF    ASSIGXMEXT. 


[§   236 


insufficiently  pleaded  that  a  demurrer  will  be  sustained  it  is  not  a  good 
defense  in  an  action  by  an  assignee.*  But  if  the  assignee  knows  the 
facts,  so  that  the  note  cannot  be  said  to  have  been  assigned  bona  fide, 
the  maker  may  set  up  such  facts  in  defense.^  And  if  a  note  is  given 
without  any  consideration,  and  is  indorsed  by  the  payee  without  con- 
sideration, the  maker  will  not,  it  is  held,  be  precluded  from  showing 
these  facts  by  way  of  defense  to  a  suit  brought  by  the  assignee.^ 


St.  R.  114  (consideration  is  not  nec- 
essary to  an  assignment  as  against 
the  maker.  "It  is  not  necessary 
to  allege  consideration  for  the  as- 
signment for,  if  it  be  the  fact  that 
it  is  assigned,  it  is  of  no  conse- 
quence whether  it  he  for  value  or 
not.  Certainly  the  maker  cannot 
complain."  Per  Hatch,  J.);  Snyder 
V.  Gruniger,  77  N.  Y.  Supp.  234  ("it 
is  no  defense  to  a  party  sued  upon 
commercial  paper  to  show  that  the 
transfer  under  which  plaintiff  holds 
it  is  without  consideration  or  sub- 
ject to  equities  between  him  and  his 
assignor  or  colorable  and  merely 
for  the  purpose  of  collection,  or  to 
secure  a  debt  contracted  by  an  agent 
without  sufficient  authority.  It  is 
sufficient  to  make  the  plaintiff  the 
real  party  in  interest,  if  he  has  the 
legal  title,  either  by  written  trans- 
fer, as  in  the  case  at  bar,  or  by  de- 
livery whatever  may  be  the  equities 
between  the  plaintiff  and  his  as- 
signor"). 

Assignment:  See  as  to  defenses 
generally : 

Colorado. — Cannon  v.  Serrel,  15 
Colo.  App.  99,  61  Pac.  187  (Gen.  Stat., 
§  107,  provides  that  every  assignor 
of  a  note  becomes  liable  to  the  as- 
signee, if  the  latter,  by  the  use  of 
due  diligence  in  the  institution  and 
prosecution  of  the  proper  suit  has 
failed  to  collect  the  money  due,  pro- 
vided that,  if  the  suit  would  be  un- 
availing, it  need  not  be  brought  and 
the  assignor  may  be  sued  in  the  first 


instance.  This  statute  was  held  to 
afford  no  protection  and  it  was  also 
held  that  the  assignor  was  liable  to 
the  holder  before  suit  brought  and 
that  the  holder,  in  order  to  fall  back 
upon  the  indorsers,  was  obliged  to 
seek  a  recovery  outside  of  the  terms 
of  the  note  since  the  indorser  war- 
rants the  genuineness  of  the  instru- 
ment in  every  respect  and  engages 
that  it  may  be  recovered  upon  and 
collected  according  to  its  terms,  cit- 
ing 1  Daniel  Neg.  Inst,  §§  669,  672). 
Illinois:  Wilson  v.  Van  Winkle,  2 
Gil.  (111.)  684  (a  case  of  an  assign- 
ment by  A.  of  a  note  to  C.  made  by 

B.  a  recovery  thereon  against  B.,  an 
injunction  obtained  by  B.,  and  a  re- 
scission of  the  contract,  A.  died  and 

C.  obtained  a  judgment  against  A.'s 
estate  for  the  money  originally  paid 
A.  for  the  note). 

North  Carolina. — Finch  v.  Gregg, 
126  N.  C.  176,  35  S.  E.  251  (a  case 
of  assignment  of  bills  of  lading  with 
drafts  attached  and  liability  for  de- 
fective condition  of  consignment). 

As  to  rights  of  purchaser  before 
and  after  notice  of  assignment  un- 
der Burn's  Rev.  Stat.  1894,  §  277,  see 
Rosenthal  v.  Rambo,  28  Ind.  App. 
285,  62  N.  E.  637. 

^  Couch  V.  McKee,  1  Eng.  (Ark.) 
484,  496. 

=  Hammond  v.  Kingsley,  12  111. 
343. 

"  Martin  v.  Kercheval,  4  McLean 
(U.  S.)  117,  Fed.  Cas.  No.  9163. 


§  237] 


WANT    OR    FAILURE    OF    CONSIDERATIOISr. 


284 


§  237.  Assignees — ^Want  or  failure  of  consideration. — If  there  is 
a  subsisting  consideration  at  the  time  of  the  assignment,  and  there  is 
no  defense,  a  subsequent  failure  of  consideration  cannot  affect  the 
rights  of  an  assignee  of  a  note.  Statutory  provisions  may,  however, 
affect  the  question  of  availability  of  defenses  against  an  assignee.'^ 
And,  if  a  statute  so  provides,  the  maker  of  a  promissory  note  after  as- 
signment will  be  entitled  to  the  benefit  of  all  want  of  lawful  consider- 
ation and  of  failure  of  consideration.^  So  where  assignees  occupy  the 
same  position  as  the  payee  would,  had  he  sued,  the  rule  permitting  a 
defense  of  failure  of  consideration,  as  between  original  parties,  would 
apply.^  And  it  would  seem  that  this  defense  ought  to  be  available  un- 
der laws  which  make  an  assignee  take  subject  to  all  defenses  or 
equities.^"   It  was  said  in  a  recent  case  that:    "A  negotiable  instru- 


^  Woodruff  V.  Webb,  32  Ark.  612, 
615,  616.  "According  to  the  statute, 
oh.  15,  §  3,  Gould's  Dig.,  in  force 
when  the  assignment  was  made,  and 
until  the  Act  of  April  24,  1873,  the 
assignee  of  a  note,  unless  it  was  ex- 
pressed therein  to  be  payable  'with- 
out defalcation'  (and  the  note  sued 
on  was  not  such),  took  it  at  his 
peril,  and  at  the  risk  of  any  defense 
that  the  maker  could  set  up  against 
the  payee.  But  *  *  *  whilst  there 
was  a  subsisting  consideration 
*  *  *  the  defendant  had  no  de- 
fense to  it,  the  subsequent  failure  of 
consideration,  could  not,  therefore, 
affect  the  plaintiff's  right." 

^Mississippi. — Hamer  v.  Johnston, 
5  Miss.  (6  How.)  698,  721,  per 
Sharkey,  C.  J. 

As  to  defenses  generally  against 
assignee  under  statutes  see  the  ear- 
lier decisions  of 

Colorado. — Dunn  v.  Ghost,  5  Colo. 
134;  Nowak  v.  Excelsior  Stone  Co., 
78  111.  309. 

Illinois. — Peoria  v.  Neill,  6  Peck 
(111.)  269. 

Indiana. — Sayres  v.  Linkhart,  25 
Ind.  145;    Bubler  v.  Pullen,  12  Ind. 


567;  Bowles  v.  Newby,  2  Blackf. 
(Ind.)  364. 

Kentucky. — Spencer  v.  Biggs,  2 
Mete.  (Ky.)  123;  Kelly  v.  Smith,  1 
Mete.  (Ky:)  313. 

Louisiana. — Watt  v.  Rice,  1  La. 
Ann.  280. 

Iowa. — Examine  also  Jack  v.  Hos- 
mer,  97  Iowa  17,  65  N.  W.  1009. 

Mississippi. — Brown  v.  Union 
Bank,  62  Miss.  754. 

See  second  following  note  herein. 
See  Bowles  v.  Newby,  2  Blackf. 
(Ind.)  364,  under  Rev.  Code  1824, 
p.  295,  (1)  making  notes  negotiable 
and  giving  same  defenses  against  the 
assignee  as  against  the  original 
payee,  failure  of  consideration  is  a 
defense  to  an  action  on  the  note  by 
an  assignee  against  the  maker. 

^  Blood  v.  Northrup,  1  Kan.  28. 
See  generally  as  to  assignments,  etc., 
Daniels  on  Neg.  Inst.  (5th  ed.), 
§§  729-748a. 

i"That  assignee  of  non-negotiable 
paper  takes  subject  to  all  equities. 

See  Pennsylvania. — Howie  v.  Lew- 
is, 14  Pa.  Super.  Ct.  23;  Zeis  v. 
Potter,  44  C.  C.  A.  665,  105  Fed.  671. 

That  transferee  or  assignee  with- 


285 


BONA    FIDE    IXDORSEES    OR    HOLDERS. 


[§   238 


ment,  payable  to  orclcr,  must  be  indorsed  by  the  payee  in  order  to  pre- 
serve its  negotiability  in  the  hands  of  a  subsQquent  holder.  A  trans- 
fer without  indorsement  destroys  its  negotiable  character,  and  the  as- 
signee takes  it  subject  to  all  such  defenses  as  might  have  been  availa- 
ble against  it  in  the  hands  of  the  payee.""  If  a  note  is  expressed  to 
be  non-negotiable  the  assignee  takes  it  subject  to  the  maker's  existing 
rights  and  other  rights  accruing  prior  to  notice  of  the  transfer.^- 

§  238.  Bona  fide  indorsees  or  holders — Rule. — The  original  want 
of  consideration,  or  the  original  failure  of  consideration  for  negotia- 
ble paper  between  the  parties  to  it  constitutes  no  defense  against  it  in 
the  hands  of  a  bona  fide  indorsee  or  holder  without  notice  or  knowl- 
edge of  any  facts  tending  to  invalidate  the  note.^^ 


out  indorsement,  takes  subject  to  all 
defenses,  see  Gray  Tie  Lumber  Co. 
Y.  Farmers'  Bank,  22  Ky.  Law  Rep. 
1333,  60  S.  W.  537. 

Ohio. — Henniger  v.  Wager,  4  Ohio 
Dec.  242,  1  Clev.  Law  Rep.  150. 

When  bona  fide  holder  for  value 
of  note  payable  to  order  may  be 
subject  to  all  equities  where  note  is 
taken  without  indorsement,  see: 

Idaho. — Warren  v.  Stoddart,  6 
Idaho  692,  59  Pac.  540. 

Utah. — Lebcher  v.  Lambert,  23 
Utah  1,  63  Pac.  628. 

Wisconsin. — Galusha  v.  Sherman, 
105  Wis.  263,  81  N.  W.  495. 

That  purchaser  for  value  takes 
subject  to  all  defenses  against  orig- 
inal holder,  see  Wade  v.  Foster,  24 
Ky.  Law  Rep.  1292,  71  S.  W.  443. 

But  as  to  assignability  of  nego- 
tiable instrument  and  latent  de- 
fenses being  cut  off  under  statute, 
see  Mann  v.  Merchants'  Loan  & 
Trust  Co.,  100  111.  App.  224. 

See  also,  Ohio. — Loudermann  v. 
Judy,  48  Ohio  Cir.  Ct.  R.  351,  29  N. 
E.  181  (as  to  "equitable  defense"  un- 
der Code,  §  93). 

Texas. — Wilson  v.  Denton,  82  Tex. 
531,  18  S.  W.  620  (under  Rev.  Stat., 


Art.  265,  protecting  bona  fide  hold- 
ers against  equities). 

Kentucky. — Power  v.  Hambrick,  25 
Ky.  Law  Rep.  30,  74  S.  W.  660.  (As- 
signee of  note  is  subject  to  de- 
fenses.) 

Illinois. — Harphane  v.  Haynes,  30 
111.  405,  410  (assignee  of  note  with- 
out consideration  held  to  take  it  sub- 
ject to  all  infirmities,  the  same  as  if 
he  had  had  actual  notice  of  them,  or 
as  if  the  note  had  been  assigned 
after  due.  Note  was  alleged  to  have 
been  duly  indorsed  without  consider- 
ation). 

When  assignee  of  mortgage  notes 
takes  subject  to  defenses,  see  Ray  v. 
Baker  (Ind.),  74  N.  E.  619. 

See  second  preceding  note  herein. 

"Cornish  v.  Wolverton  (Mont., 
1905) ,  81  Pac.  4,  9,  per  Brantley,  C.  J. 

'-  Barker  v.  Barth,  88  111.  App.  23. 
See  also  second  last  preceding  note 
herein. 

^  Arkansas. — Cagle  v.  Lane,  49 
Ark.  465,  5  S.  W.  790  (failure  with- 
out fraud  no  defense). 

California. — Splivallo  v.  Patten,  38 
Cal.  138,  99  Am.  Dec.  358.  (Simple 
failure  in  whole  or  in  part  no  de- 
fense in  suit  by  bona  fide  assignee 


239] 


WANT   OR   FAILURE    OF   CONSIDERATION. 


286 


§  239.     Transfer  after  maturity. — As  a  general  rule,  in  all  cases 
where  a  note  overdue  is  indorsed,  the  indorsee  takes  it  subject  to  all 


before  maturity  against  maker,  even 
though  assignee  had  full  knowledge 
of  original  consideration  on  which 
note  given  prior  to  purchase  and 
receiving  transfer.  Citing  Story  on 
Prom.  Notes,  §  191.) 

Colorado. — Parsons  v.  Parsons,  17 
Colo.  App.  154,  67  Pac.  345  (fail- 
ure) ;  Hand  v.  Pantagraph  Co.,  1 
Colo.  App.  270,  28  Pac.  661  (failure 
of  consideration  without  notice  no 
defense). 

Cojinecticut. — Middletown  Bank  v. 
Jerome;  18  Conn.  443  (want). 

Delaware. — McCready  v.  Cann,  5 
Harr.  (Del.)  175  (want  or  failure); 
Waterman  v.  Barratt,  4  Harr. 
(Del.)  311  (want);  Bush  v.  Peck- 
ard,    3    Harr.     (Del.)     385     (want). 

Florida. — White  v.  Camp,  1  Fla. 
109  (want;  compare  McKay  v.  Bel- 
lows, 8  Fla.  31,  as  to  failure,  partial 
failure  and  want). 

Georgia. — Parr  v.  Erickson,  115 
Ga.  873,  42  S.  E.  240  (bona  fide 
holder  for  value  before  maturity  pro- 
tected against  defense  of  want  of 
consideration);  Keith  v.  Pork  (Ga., 
1898),  31  S.  E.  169  (failure  without 
notice  or  reasonable  ground  to  sus- 
pect defects) ;  Smith  v.  Rawson,  61 
Ga.  208  (failure) ;  Faulkner  v.  Ware, 
34  Ga.  498  (failure);  Scott  v.  Coop- 
er, Ga.  Dec,  pt.  2.163   (failure).     . 

Illinois. — Matson  v.  Alley,  141  111. 
284,  31  N.  E.  419  (failure);  Good- 
rich V.  Reynolds,  31  111.  490,  83  Am. 
Dec.  240  (want);  Kepley  v.  Schmidt, 
21  111.  App.  402  (want);  Cassell  v. 
Morrison,  8  Bradw.  (111.)  175 
(want);  Taylor  v.  Thompson,  3 
Bradw.  (111.)  109  (failure  in  whole 
or  part). 

Indiana. — First  Nat.  Bank  v.  Ruhl, 


122  Ind.  279,  23  N.  E.  766  (want); 
Proctor  V.  Baldwin,  82  Ind.  370 
(want);  Bremmerman  v.  Jennings, 
61  Ind.  334  (failure);  Kline  v. 
Spahr,  56  Ind.  296  (failure;  note 
payable  in  bank) ;  Hankins  v. 
Shoup,  2  Ind.  (2  Cort.)  342  (holding 
that  pleas  of  want  or  failure  of 
consideration  are  insufficient  under 
the  law  merchant  unless  they  al- 
lege that  the  indorsement  was  made 
without  consideration  or  after  the 
maturity  of  the  note  or  bill,  and 
that  the  statute  did  not  intend  to 
alter  the  law  as  to  these  pleas.  Rev. 
Stat.  (843,  pp.  577,  578);  Midland 
Steel  Co.  v.  Citizens'  Nat.  Bank,  — 
Ind.  App.  1904,  72  N.  E.  290.  (In 
an  action  by  a  hona  fide  purchaser 
the  defense  of  want  or  failure  of 
consideration  is  not  available  un- 
less want  of  notice  of  such  defense 
is  negatived;  there  should  be  a  de- 
nial of  want  of  notice  or  some  equiv- 
alent averment.)  Voris  v.  Harsh- 
barger,  11  Ind.  App.  555,  39  N.  E. 
521  (want);  Potter  v.  Sheets,  5  Ind. 
App.    506.    32    N.    E.    811     (want). 

Iowa. — Council  Bluffs  Iron  Works 
V.  Cupper,  41  Iowa  104  (want,  note 
without  defalcation) ;  Mornyer  v. 
Cooper,  35  Iowa  257  (failure,  case  of 
second  indorsee). 

Kentucky. — Spencers  v.  Biggs,  2 
Mete.  (Ky.)  123  (total  or  partial 
failure,  without  notice.  Rule  not  al- 
tered by  Civ.  Code,  §  31,  or  Rev. 
Stat,  Ch.  22,  §  6);  Kelly  v.  Smith, 
1  Mete.  (Ky.)  313  (same  as  last 
case) ;  Luckett  v.  Triplett,  2  B.  Mon. 
(Ky.)  39  (failure);  Bement  v.  Mc- 
Clarlen,  1  B.  Mon.  (Ky.)  296 
(want);  Grey  v.  Kentucky  Bank,  2 
Litt.     (Ky.)     378     (want,    note     to 


287 


TRANSFER   AFTER   MATURITY. 


[§  239 


the  equities  of  the  maker,  and  it  is  always  competent  for  the  defend- 
ant in  such  cases,  whether  as  against  the  payee  or  holder,  to  prove 


bank) ;  Tuggle  v.  Adams,  3  A.  K. 
Marsh.  (Ky.)  429  (want). 

Louisiana. — Morris  v.  White,  28 
La.  Ann.  855  (failure);  Battalora  v. 
Earth,  25  La.  Ann.  318  (want). 

Maine. — Burrill  v.  Parsons,  71  Me. 
282  (want);  Hascall  v.  Whitmore, 
19  Me.  102,  36  Am.  Dec.  738  (want, 
purchaser  from  indorsee) ;  Lewis  v. 
Hodgdon,  5  Shep.  (Me.)  267. 

Michigan. — Polhemus  v.  Ann  Ar- 
bor Sav.  Bank,  27  Mich.  44  (cannot 
inquire  into  or  contest  considera- 
tion ) . 

Minnesota. — Wilderman  v.  Don- 
nelly, 86  Minn.  184,  90  N.  W.  366, 
367,  per  Collins,  J.  (of  course  such 
a  defense  cannot  be  asserted  against 
a  remote  holder  of  a  negotiable 
promissory  note  who  is  a  bona  fide 
holder  for  value) ;  Daniels  v.  Wil- 
son, 21  Minn.  530  (want). 

Mississippi. — Davis  v.  Blanton,  71 
Miss.  821,  15  So.  132  (failure); 
Harrison  v.  Pike,  48  Miss.  46  (as  to 
a  Louisiana  note). 

Missouri. — First  Nat.  Bank  v. 
Skeen,  101  Mo.  683,  14  S.  W.  732 
(failure);  Merrick  v.  Phillips,  58 
Mo.  436;  Clark  v.  Potter,  90  Mo. 
App.  143  (failure);  First  Nat.  Bank 
V.  Skeen,  29  Mo.  App.  115. 

Nebraska. — Blue  Valley  Lumber 
Co.  V.  Smith,  48  Neb.  293,  67  N.  W. 
159  (want). 

New  Hampshire. — Trask  v.  Win- 
gate,  63  N.  H.  474,  3  Atl.  926  (want). 

New  York. — Farwell  v.  Hibner,  15 
Hun  (N.  Y.)  280  (failure);  Val- 
lett  V.  Parker,  6  Wend.  (N.  Y.) 
615  (want,  except  where  note  void 
by  statute);  Brooks  v.  Christopher, 
5  Duer  (N.  Y.)  216;  Baker  v.  Ar- 
nold,   2    Cai.    Cas.     (N.    Y.)     279. 


Pennsylvania. — Bullock  v.  Wilcox, 
7  Watts  (Pa.)  328  (failure). 

Tennessee. — Stone  v.  Bond,  2 
Heisk.  (Tenn.)  425  (want  of  consid- 
eration for  guaranty). 

Texas. — Stone  v.  Wright,  83  Tex. 
345,  18  S.  W.  615  (want);  Herndon 
V.  Bremond,  17  Tex.  432. 

Virginia. — Payne  v.  Zell,  98  Va. 
297,  36  S.  E.  379  (failure);  Robert- 
soii  V.  Williams,  5  Munf.  (Va.)  381 
(valuable  consideration  passed). 

Vermont. — Powers  v.  Ball,  1  Wil- 
liams (Vt.)  662. 

Wisconsin. — Stillwell  v.  Kellogg, 
14  Wis.  461  (failure). 

Federal. — Pease  v.  McClelland,  2 
Bond  (U.  S.)  42,  Fed.  Cas.  No.  10,882 
(failure);  Union  Bank  v.  Crine,  33 
Fed.  809  (accommodation  note  and 
agreement  for  non-ability  not  avail- 
able against  bona  fide  indorsee)  ; 
Mobile  Sav.  Bank  v.  Board  of  Sup'rs, 
22  Fed.  580;  Fogg  v.  Stickney,  Fed. 
Cas.  No.  4898  (want). 

See  Mississippi. — Robertson  v. 
Britton,  74  Miss.  873,  21  So.  523  (as 
to  want  or  failure  of  consideration 
and  false  representations  or  fraud 
under  code  1892,  §  3503);  Etheridge 
V.  Gallagher,  55  Miss.  458  (Code 
1871,  §  2228,  changes  law  merchant 
so  as  to  enable  defense  by  promisor 
before  notice  of  assignment  against 
remote  holder  by  indorsement  be- 
fore maturity,  same  as  could  have 
been  made  against  payee.) 

Vermont. — Ellis  v.  Watkins,  73  Vt. 
371,  50  Atl.  1105  (lack  of  considera- 
tion based  upon  immoral  or  illegal 
consideration  may  be  shown  against 
indorsee) ;  Baker-Boyer  Bank  v. 
Hughson,  5  Wash.  St.  100,  31  Pac. 
423    (where   want   o-f   consideration 


§  239] 


WANT    OR   FxULUKE    OF    CONSIDERATION. 


288 


either  a  "want  or  failure  of  consideration.^*   If  a  note  is  taken  after 
maturity  by  an  assignee  of  the  payee  such  note  is  subject  to  all  de- 


was  averred  and  answer  held  in- 
sufficient defense  against  payee,  and 
therefore  that  plaintiff  need  not 
prove  that  he  was  innocent  pur- 
chaser). 

Federal. — McCullough  v.  Houston, 
1  Ball.  (U.  S.)  441,  11  L.  ed.  214,  de- 
cided 1789,  holding  that  indorsee 
of  promissory  note  takes  it  subject 
to  all  equitable  consideration  to 
which  subject  in  original  indorser 
or  payee's  hands). 

Washington. — Allen  v.  Chambers, 
13  Wash.  327,  43  Pac.  57  (want). 

"  Maryland. — Renwick  v.  Williams, 
liams,  2  Md.  336,  363,  per  Mason,  J. 

California. — Risley  v.  Gray,  98 
Cal.  40,  32  Pac.  884  (note  was  pur- 
chased after  maturity,  at  sheriff's 
sale) ;  Folsom  v.  Bartlett,  2  Cal.  163. 

Delaware. — McCready  v.  Cann,  5 
Harr.  (Del.)  175  (want  or  failure 
of  consideration  or  other  equities 
may  be  set  up  against  indorsee 
after  maturity). 

Georgia. — Carter  v.  Christie,  30 
Ga.  813;  Scott  v.  Cooper,  Ga.  Dec. 
pt.  2,  163  (holding  that  failure  of 
consideration,  in  a  negotiable  note, 
is  no  defense  to  an  action,  in  favor 
of  a  "bona  fide  holder  without  notice, 
unless  he  took  the  note  after  it  be- 
came due). 

/Ziinots.— Stafford  v.  Fargo,  35  111. 
481  (assignee  after  maturity,  held 
subject  to  defense  of  want  of  con- 
sideration) ;  Root  V.  Irwin,  18  111. 
147  (statute  allowing  defenses 
against  indorsee  after  maturity) ; 
Sargeant  v.  Kellogg,  5  Gilm.  (111.) 
273  (where  note  is  assigned  after 
due  maker  is  permitted  to  inter- 
pose same  defense  against  assignee 
as  he  might  make  in  action  brought 
in     name     of     payee) ;     Griffin     v. 


Ketchum,  8  Peck  (111.)  392  (fail- 
ure of  warranty  is  good  defense 
against  mala  fide  assignee) ;  Hayes 
V.  Gorham,  2  Scam.  (111.)  429 
(want  of  consideration). 

Iowa. — Freittenberg  v.  Rubel,  123 
Iowa  154,  98  N.  W.  624  (failure 
of  considerations  is  available) ;  Bar- 
low V.  Scott,  12  Iowa  63  (con- 
sideration may  be  inquired  into  as 
a  defense  where  plaintiff  takes  it, 
even    for   value,    after    it   is    due). 

Louisiana. — Clement  v.  Sigur,  29 
La.  Ann.  798  (consideration  may  be 
inquired  into  the  hands  of  payee  or 
of  any  third  person  who  has  taken 
it  after  maturity). 

Maryland. — Wyman  v.  Gray,  7 
Harr.  &  J.  (Md.)  409. 

Massachusetts. — Fish  v.  French 
(Mass.),  15  Gray  520  (indorsee  of 
note  secured  by  mortgage,  without 
notice  of  want  of  consideration, 
who  takes  it  from  payee  when 
overdue  is  subject  to  all  defenses) ; 
Thompson  v.  Hale,  23  Mass.  259 
(6  Pick.)  (note  was  held  taken 
subject  to  all  equities  existing 
against   it    in   the   payee's    hands). 

Islew  York. — Chester  v.  Door,  41  N. 
Y.  279,  rev'g  26  N.  Y.  Super.  Ct. 
(3  Rob.)  275  (defenses  of  want  of 
consideration  available  against  any 
person  into  whose  hands  note  comes 
after  maturity) ;  Wiltsie  v.  North- 
am,  3  Bosw.  (N.  Y.)  162  (rule  ap- 
plied where  facts  show  either  want 
or  failure  of  consideration  in  action 
by  one  receiving  note  after  matur- 
ity). 

Pennsylvania. — Barnet  v.  Offer- 
man,  7  Watts  (Pa.)  130  (want  or 
failure  of  consideration  may  be 
shown). 

South  Carolina. — Bell  v.  Wood,  1 


289 


TRANSFER   AFTER   IIATURITY. 


LS 


239 


fenses  against  the  assignor.^'^'  Knowledge  by  an  assignee  of  notes 
that  they  were  past  due  when  he  took-  the  assignment,  even  though 
the  notes  are  negotiable  instruments,  precludes  a  recovery  by  him, 
as  he  is  not  an  innocent  purchaser  without  notice,  and  the  same  de- 
fenses are  available  against  him  as  though  the  action  had  been  prose- 
cuted in  the  name  of  the  original  payee,  especially  so  when  the  as- 
signee also  knew  at  the  time  that  the  consideration  for  the  note  had 
wholly  failed;  and  knowledge  may  be  imputed  to  such  holder  where 
another  instrument,  a  mortgage  securing  the  note,  was  also  purchased, 
and  said  mortgage  by  its  very  terms  showed  that  the  paper  was  past 
due  and  dishonored.^"  But  where  one  has  acquired  a  negotiable  note 
after  its  maturity  he  is  entitled  to  protection  if  the  immediate  party 
who  transferred  the  note  to  him  took  it  by  indorsement  bona  fide  be- 
fore it  was  due.^*** 


Bay  (S.  C.)  249  (indorsement  after 
note  due  permits  parties  to  go  into 
consideration);  McNeill  v.  McDon- 
ald, 1  Hill  L.  (S.  C.)  1  (note  trans- 
ferred after  due  is  subject  to  all 
equities  between  original  parties, 
and  true  consideration  may  be  in- 
quired into,  though  expressed  to  be 
for  value  received). 

Texas. — Kalamazoo  Nat.  Bk.  v. 
Sides  (Tex.  Civ.  App.,  1894),  28  S. 
W.  918  (indorsee  against  maker; 
after  maturity;  conditions  unper- 
formed; failure  of  consideration  a 
defense  \^here  evidence  exists  to 
impeach  due  and  regular  indorse- 
ment of  note). 

Federal. — Lipsmier  v.  Vehslage,  29 
Fed.  175  (want  of  consideration  not 
enforced  by  indorsee  after  matur- 
ity). 

See  Georgia. — Camp  v.  Matheson, 
30  Ga.  170,  172. 

/ndiana.^Thomas  v.  Ruddell,  G6 
Ind.  326  (case  of  negligence  in 
maker  and  plea  von  est  factum  and 
transfer  after  maturity  on  note  re- 
covered ) . 

Massachusetts. — Perkins     v.     Gil- 
man,  25  Mass.    (8  Pick.)    229    (hold- 
ing that  a  covenant  by  the  payee  of 
Joyce  Dkfexse.s — 19. 


a  promissory  note  not  to  sue  the 
maker  within  a  limited  time  cannot 
be  pleaded  in  bar  to  an  action 
brought  within  the  time  by  a  per- 
son to  whom  the  note  was  indorsed 
after  due.  But  see  chap.  —  herein 
as  to  conditions). 

Texas. — Branch  v.  Traylor  (Tex. 
Civ.  App.,  1896),  36  S.  W.  592  (ques- 
tion of  fraud  was  also  involved). 
Preston  v.  Breedlove,  36  Tex.  96 
(notes  were  assigned  after  maturity 
with  notice  of  dishonor,  and  defense 
was  held  good  pro  tanto) ;  Rhode 
V.  Lodge,  15  Tex.  446  (held  note  sub- 
ject to  plea  of  failure  of  consider- 
ation). 

'"  May  V.  First  Nat.  Bank  of  Men- 
dota  (Neb.,  1905),  104  N.  W.  184. 

^^  Stoy  V.  Bledsoe,  31  Ind.  App. 
643,  68  N.  W.  907. 

i«*  Howell  V.  Crane,  12  La.  Ann. 
126,  68  Am.  Dec.  765.  See  Chapter 
herein  as  to  bona  fide  holders.  See 
Jones  V.  Caswell,  3  Johns.  Cas.  (N. 
Y.)  29,  2  Am.  Dec.  134  (second  in- 
dorsee took  note  after  maturity  and 
with  knowledge;  consideration  was 
permitted  to  be  inquired  into,  but 
it  was  against  public  policy,  and 
note  was  held  void). 


g  240] 


WANT   OR   FAILURE    OF    COXSIDERATIOX. 


290 


§  240.  Rule  as  to  payment  of  value,  its  basis  and  qualifications — 
Bona  fide  indorsees  or  holders. — By  his  contract  the  indorser  of  a 
note  warrants  the  instrument's  genuineness  in  every  respect  and 
engages  that  it  may  be  recovered  upon  and  collected  in  accordance 
with  its  terms. ^'  And  it  is  a  legal  presumption  that  all  indorsements 
are  for  value  and  for  a  proper  purpose/*  and  that  one  who  is  a  pur- 
chaser for  value  of  a  note  holds  it  bona  fick.^^  It  is  also  another  gen- 
eral rule  that  mere  possession  of  a  negotiable  paper  is  prima  facie 
sufficient  evidence  of  ownership  of  title. ^'^     In  other  words,  the  mere 


^'  Cannon  v.  Serrel,  15  Colo.  App. 
99,  61  Pac.  187.  See  Neg.  Inst.  Law, 
§§  114-117,  appendix  herein. 

"Geisreiter  v.  Sevier,  33  Ark.  522 
(where  the  maker  was  not  allowed 
to  question  the  consideration  paid  in 
purchasing  the  note  from  the  as- 
signee of  the  bankrupt  payee,  al- 
though it  was  thought  that  he  could 
have  shown  the  bankruptcy  assign- 
ment to  have  been  fraudulent) ; 
Luning  v.  Wise,  64  Cal.  410,  1  Pac. 
485,  874  (raises  a  presunlption  of 
value.)  Lafayette  Sav.  Bank  v.  St. 
Louis  Stoneware  Co.,  4  Mo.  App.  276, 
283  (holding  also  that  this  rule 
applies  to  paper  indorsed  by  a  cor- 
poration in  the  prosecution  of  its 
business  and  the  regular  course  of 
its  affairs);  Cotton  v.  Graham,  84 
Ky.  672,  2  S.  W.  647  ("value  re- 
ceived" and  in  "consideration  of  love 
and  affection"  imports  a  considera- 
tion). See  Frederick' V.  Winans,  51 
Wis.  472,  8  N.  W.  301;  McClintick  v. 
Johnston,  1  McLean  (U.  S.)  414, 
Fed.  Cas.  No.  8,700.  (For  "if  the 
indorsement  of  a  bill  should  be  held 
not  to  import  a  consideration  it 
must  shake  the  credit  of  commer- 
cial paper  and  produce  injurious 
consequences  in  commercial  trans- 
actions. And  we  think  the  principle 
has  been  too  long  and  too  benefi- 
cially settled  to  be  now  ques- 
tioned.") 

••■'Duncan  v.   Gilbert,   29   N.   J.   L. 


521  (holder  is  not  bound  to  prove 
value  where  no  other  defense  is 
raised  than  that  of  its  being  origi- 
nally accommodation  paper).  See 
Hunter  v.  Parsons,  22  Mich.  96.  But 
examine  Prentice  v.  Zane,  Fed.  Cas. 
No.  11,383  (decided  1846),  goes  to 
support  Citizens'  Bank  v.  Strauss,  26 
La.  Ann.  736  (holding  that  while 
one  is  in  the  attitude  of  a  bona  fide 
holder  before  the  court  he  can  le- 
gally object  to  any  inquiry  into  the 
consideration  of  a  note). 

^^  Colorado. — Gumaer  v.  Sowers,  31 
Colo.  164,  71  Pac.  1103. 

Connecticut. — New  Haven  Mfg.  Co. 
V.  New  Haven  Pulp  &  Bond  Co.,  76 
Conn.  126,  131,  55  Atl.  604,  Gen.  Stat., 
§  4221. 

Illinois. — Perry  State  Bank  v.  El- 
ledge,  109  111.  App.  179,  184;  Ryan  v. 
Illinois  Trust  &  Sav.  Bk.,  100  111. 
App.  251,  case  aff'd,  64  N.  E-  1085; 
Mann  v.  Merchants'  L.  &  T.  Co.,  100 
111.  App.  224;  Metcalf  v.  Draper,  98 
111.  App.  399. 

Kansas. — Parker  v.  Gilmore,  10 
Kan.  App.  527,  63  Pac.  20. 

Massachusetts.  —  Massachusetts 
Nat.  Bk.  V.  Snow,  187  Mass.  159,  72 
N.  E.  959. 

Minnesota. — Huntley  v.  Hutchin- 
son, 91  Minn.  244,  97  N.  W.  97,  Gen. 
Stat.  1894,  §  5751. 

Missouri. — Lowry  v.  Danforth,  95 
Mo.  App.  441,  69  S.  W.  39. 

Nebraska. — Gandy  v.  Bissells'  Est. 


291 


BONA    FIDE    INDORSEES    OR   HOLDERS. 


[§   240 


possession  of  a  negotiable  note  imports,  prima  facie,  that  the  holder 
acquired  it  bona  fide,  for  value,  in  the  usual  course  of  business,  with- 
out notice  of  any  circumstances  impeaching  its  validity,  and  that  he 
is  the  owner  thereof,  entitled  to  receive  the  contents  of  the  same  from 
all  prior  parties  thereto. -^    Therefore,  it  constitutes  no  defense  in  be- 


(Neb.,  1904),  100  N.  W.  803,  rev'g  97 
N.  W.  632;  Michigan  Mut.  L.  Ins.  Co. 
V.  Klatt  (Neb.,  1902),  92  N.  W.  325. 

New  York. — Poess  v.  Twelfth 
Ward  Bank,  43  Misc.  45,  86  N.  Y. 
Supp.  857,  Neg.  Inst.  Law  1897, 
p.  719,  c.  612. 

North  Dakota. — Brynjolfson  v. 
Osthus,  12  N.  D.  42,  96  N.  W.  261. 

Oklahoma. — Price  v.  Winnebago 
Banlt,  14  Oltla.  268,  79  Pac.  105. 

South  Carolina. — Watford  v.  Wind- 
ham, 64  S.  C.  509,  42  S.  E.  597. 

See  'Illinois. — Gilmore  v.  German 
Sav.  Bk.,  89  111.  App.  442. 

Compare  Kansas. — James  v.  Black- 
man,  68  Kan,  723,  75  Pac.  1017. 

Kentucky. — Turner  v.  Mitchell,  22 
Ky.  L.  Rep.  1784,  61  S.  W.  468. 

Neiv  York. — Manawaring  v.  Keen- 
an,  86  N.  Y.  Supp.  262. 

='  Federal. — Bank  of  British  North 
America  v.  Ellis,  6  Sawy.  (U.  S.)  96, 
Fed.  Cas.  No.  859,  8  Amer.  L.  Rec. 
460,  citing  1  Daniel  on  Neg.  Inst., 
§  812,  1  Parsons'  Notes  &  Bills  184; 
Collins  V.  Gilbert,  94  U.  S.  754. 

Illinois. — Perry  State  Bank  v. 
Ellidge,  109  111.  App.  179,  184; 
Mann  v.  Merchants'  L.  &  T.  Co.,  100 
111.  App.  224. 

Indiana. — Thomas  v.  Ruddell,  66 
Ind.  326  (a  note  that  has  been  trans- 
ferred by  indorsement  imports  a 
consideration). 

Kansas. — Parker  v.  Gilmore,  10 
Kan.  App.  527,  63  Pac.  20. 

Kentucky. — Beattyville  Bank  v. 
Roberts  (Ky.  Ct.  App.  1904),  25  Ky. 
L.  Rep.  1796,  78  S.  W.  901,  902  ("the 
law  presumes  a  consideration  for  the 
execution  of  bills  of  exchange  and 


negotiable  notes  placed  upon  the 
footing  of  bills  of  exchange  by  the 
statute,  for  the  benefit  of  the  holder, 
in  an  action  against  the  maker  or  in- 
dorser  of  such  paper,"  per  Burnham, 
C.  J.). 

New  York. — Heuertematte  v.  Mor- 
ris, 101  N.  Y.  63,  4  N.  E.  1  (acceptor 
cannot  show  acceptance  without  con- 
sideration by  indorsee). 

Oklahoma. — Price  v.  Winnebago 
Bank,  14  Okla.  268,  79  Pac.  105. 

Pennsylvania. — Gray  v.  Bank  of 
Kentucky,  29  Pa.  St.  356  (indorsee 
of  negotiable  paper  is  presumed  to 
have  received  it  bona  fide  and  for 
a  valuable  consideration). 

Wisconsin. — Frederick  v.  Winans, 
51  Wis.  472,  8  N.  Y.  W.  301  (where 
there  is  an  indorsement  of  a  note 
before  delivery  no  consideration  for 
the  indorsement  need  be  averred  by 
payee  against  the  maker  and  in- 
dorser). 

The  transfer  of  a  promissory  note 
.by  indorsement  furnishes  a  suffi- 
cient consideration  for  a  promise  by 
the  indorsee  to  pay  the  indorser  an 
equivalent  sum.  Litchfield  v.  Allen, 
7  Ala.  779,  782. 

Negotiable  notes  in  the  hands  of 
a  third  person  are  presumed  until 
the  contrary  appears  to  have  been 
acquired  in  good  faith  and  for  value 
before  maturity.  Hillard  v.  Taylor 
(La.  1905),  38  So.  594. 

Every  person  whose  signature  ap- 
pears thereon  is  deemed  prima  facie 
to  have  become  a  party  thereto  for 
value.  Neg.  Inst.  Law,  §  50.  see  also 
id.,    §   96,   Eng.   Bills  of  Exch.   Act, 


240] 


WAXT    OR   FAILURE    OF    CONSIDERATIOX. 


293 


half  of  the  maker  and  he  has  no  concern  with  the  fact  whether  or 
not  the  holder  of  commercial  paper  paid  value,  or  that  it  was  indorsed 
without  consideration,  unless  he  has  thereby  been  deprived  of  his 
rights  or  has  been  defrauded  or  has  lost  some  defense  of  which  he 
might  have  had  against  the  original  holder  or  payee  had  he  retained 
it.--  The  preceding  rule  has  been  applied,  even  though  the  purchaser 
of  the  note  has  paid  less  than  its  face  value,-^  or  one-half  thereof,^* 
for  if  value  has  been  given  it  is  immaterial  as  a  defense  what  amount 
was  actually  paid  except  as  far  as  notice  is  concerned.^^    So  it  is  held 


§  30.  See  also  id.,  §  27.  See  Ap- 
pendix herein. 

--  Georgia. — Ray  v.  Anderson,  119 
Ga.  926,  47  S.  E.  205;  Civ.  Code, 
§  3698.  (The  defendant  in  a  suit  on 
a  note  cannot  inquire  into  the  title 
of  the  holder,  unless  it  is  necessary 
for  his  protection,  or  to  let  in  the 
defense  which   he   seeks  to   make.) 

Illinois. — Burnap  v.  Cook,  32  111. 
168  (or  that  there  was  a  failure  of 
consideration). 

Michigan. — Vinton  v.  Peck,  14 
Mich.  287  (a  purchaser  of  a  note  at 
less  than  its  face  is  not  the  less  a 
bona  fide  holder  and  is  entitled  to 
recover  the  full  amount). 

Missouri. — Powers  v.  Nelson,  19 
Mo.  190  (or  that  it  was  indorsed 
without  consideration  and  after  due 
to  plaintiff) ;  Bannister  v.  Kenton, 
46  Mo.  App.  462. 

Neiv  York. — Forestville  Society  v. 
Farnham,  15  Hun  (N.  Y.)  381;  As- 
pinwall  V.  Meyer,  2  Sandf.  (N.  Y.) 
180  (unless  maker  has  been  de- 
frauded or  has  lost  some  defense 
against  payee  which  he  might  have 
had,  had  he  retained  it). 

Oregon. — Brown  v.  Feldwert  (Ore. 
1905),  80  Pac.  414  (failure  of  con- 
sideration cannot  be  availed  of  as 
against  an  innocent  purchaser). 

Soiith  Carolina. — Stoney  v.  Jo- 
seph, 1  Rich.  Eq.   (S.  C.)   352. 

See  Middlebury  v.  Case,  6  Vt.  165. 

Wisconsin. — Holden    v.    Kirby,    21 


Wis.  149  (as  against  indorsee  no  de- 
fense by  maker  that  indorsee  paid 
no  consideration). 

Federal. — In  re  Great  Western  Tel. 
Co.,  5  Biss.  363,  Fed.  Cas.  No.  5740. 

Examine  further  Illinois. — Jones 
V.  Nellis,  41  111.  482,  89  Am.  Dec. 
389  (as  to  statute  not  changing 
common-law  rule  as  to  bona  fide 
holders);  Lord  v.  Favorite,  *29  111. 
149  (as  to  statute  allowing  defenses 
against  indorsee). 

Georgia. — Grooms  v.  Oliff,  93  Ga. 
789,  20  S.  E.  655  (code  as  to  §  2785. 
protecting  bona  fide  purchaser  ex- 
cept as   to   fraud   in   procurement), 

Virginia. — Lynchburg  Nat.  Bank  v. 
Scott,  91  Va.  652,  22  S.  E.  487,  29 
L.  R.  A.  827  (Code  1887,  §  2818,  as 
to  defenses,  bona  fide  holder). 

"^  Lay  V.  Wissman,  36   Iowa  305 
Sully    V.    Goldsmith,    32    Iowa   397 
Daniels    v.    Wilson,    21    Minn.    530 
United  States  Nat.  Bank  v.  McNair, 
116  N.  C.  550,  21  S.  E.  389    (except 
where  note  is  void  in  whole  or  part 
from  its  inception  and  except  as  to 
limited  recovery  when  original  con- 
sideration is  illegal  or  fraudulent  or 
it  is  taken  as  collateral  security). 
Examine  §§  188-196  herein. 

='  McNamara  v.  Jose,  28  Wash.  461, 
68  Pac.  903  (Sess.  Laws  1899,  p.  350. 
§  57). 

"Gould  V.  Sigel,  5  Duer  (N.  Y.) 
260. 


293  BONA   FIDE    INDORSEES    OR   HOLDERS.  [§    240 

that  evidence  is  inadmissible  to  show  that  the  amount  paid  by  the 
indorsee  was  a  certain  amount  of  about  one-twentieth  of  the  face 
value  of  the  note.-*'  But  it  is  decided  that  a  maker  of  a  note  not 
governed  by  law  merchant,  by  selling  his  note  for  less  than  its  face 
cannot,  except  in  case  of  estoppel,  preclude  himself  from  setting  up 
want  of  consideration  to  the  amount  of  the  discount.-^  And  it  is  also 
determined  that  where  a  bona  fide  holder  purchases  a  note  for  a  sum 
less  than  its  face  he  is  only  entitled  to  recover  to  the  extent  of  the  con- 
sideration paid  by  him  or  some  prior  holder  from  whom  he  obtained 
title.^^  Generally,  however,  some  value  in  money  or  property  must 
have  been  given,  or  some  responsibility  or  liability  have  been  in- 
curred, or  some  right  parted  with,  to  preclude  equitable  defenses  on 
the  ground  of  being  a  bona  fide  holder. ^'^  So  in  a  Xew  York  case  the 
court,  per  Andrews,  J.,  says :  "It  has  been  the  established  law  of  this 
state  that  to  constitute  an  indorsee  of  negotiable  paper  a  holder  for 
value,  so  as  to  exclude  the  equities  of  antecedent  parties,  it  is  not 
sufficient  that  the  transfer  should  be  valid  as  between  the  indorser 
and  indorsee,  but  in  addition  the  latter  must  have  relinquished  some 
right,  incurred  some  responsibility,  or  parted  with  value  upon  the 
credit  of  the  paper  at  the  time  of  the  transfer."^"  Again  it  has  also 
been  decided  that  all  defenses  against  the  original  holders  may  also 

Defense  of  failure  of  consideration  fide    holder    to    the    extent    of    the 

is  admissible  against  a  holder  where  amount  paid). 

there  is  evidence  which  tends  even  ^^'''McQiiade    v.    Irwin,    39     N.    Y. 

slightly  to  impeach  the  due  and  reg-  Super.  Ct.  (7  J.  &  S.)  396;  Phoenix 

ular  indorsement  of  the  note.    Kala-  v.  Church,  56  How.  Pr.   (N.  Y.)   29, 

mazoo  Nat.  Bank  v.  Sides  (Tex.  Civ.  493  id.,   81  N.  Y.   218,   59  How.   Pr. 

App.  1894),  28  S.  W.  918.  (N.   Y.)    293.    Compare   §§    188-19G, 

If  an  indorsee  take  a  bill  with  no-  241,  242,  246  herein, 

tice  of  failure  of  consideration  his  The    rule    is    well    settled    that    a 

right  to  recover  cannot  be  superior  valid   consideration   is  necessary  to 

to   that   of   his    indorser.     Davis    v.  support     the     liability     of     an     in- 

Wait,  12  Ore.  425,  428,  8  Pac.  356.  dorser    of   a    negotiable    note.     Pea- 

="  Ellis  V.  Watkins'  Estate,  73  Vt.  body  "v.    Munson,    211    111.    324,    326, 

371,  50  Atl.  1105.    Compare  §§  188-  71  N.  E.  1006,  per  Boggs,  J.    "It  is  a 

196  herein.  general  rule  that  an  indorsement  is 

-•  Musselman     v.     McElhenny,     23  a  contract  and  that,  like  every  other 

Ind.  4,  85  Am.  Dec.  445.  contract,    it    requires    a    considera- 

"Holcomb  v.  Wycoff,  35  N.  J.  L.  tion."     Farmers'    Savings    Bank    v. 

35,  10  Am.  Rep.  219;  Noble  v,  Carey,  Hausmann,   114   Iowa  49,   51,  86  N. 

64  Hun  (N.  Y.)   635    (Mem.),  19  N.  W.  31,  per  Sherwin,  J. 

Y.  Supp.  58  (the  purchaser  is  a  &OH.a  ™  Phoenix    Ins.   Co.    v.    Church,    81 

N.  Y.  218,  222,  37  Am.  Rep.  284. 


§    241]  WAXT    OR   FAILURE   OF    CONSIDERATION.  294 

be  available  against  one  who  is  not  a  purchaser  of  the  notes  for 
value.^^  The  consideration  must,  however,  have  been  paid  before  no- 
tice of  any  defenses.^-  And  as  against  an  innocent  holder  who,  upon 
inquiry  of  the  maker,  had  been  informed  that  the  note  was  good  and 
that  it  would  be  paid  at  maturity,  the  maker  cannot  set  up  failure  of 
consideration,  even  though  the  latter  was  ignorant  of  such  failure  of 
consideration  at  the  time  he  gave  such  assurance  of  payment,  since 
the  fact  of  making  such  inquiries  of  the  drawer  was  sufficient  to  put 
him  on  his  guard.^^  Again,  knowledge  of  an  agreement  constituting 
the  consideration  of  a  note,  without  knowledge  of  the  breach  thereof, 
does  not  make  such  breach  available  as  a  defense  against  an  indorsee 
for  value  in  due  course.^*  And  it  is  held  that  defenses  and  equities 
based  upon  a  want  or  failure  of  consideration  are  available  against  a 
holder  without  indorsement.^^ 

§  241.  Rule  as  to  value  continued — Payment  of  pre-existing 
debt — Bona  fide  indorsees  or  holders. — It  is  a  well  settled  rule  that 
where  the  essentials  constituting  one  a  hona  fide  holder  exist,  want  or 
failure  of  consideration  between  the  original  parties  cannot  be  suc- 
cessfully set  up  against  him  to  defeat  a  recovery  on  negotiable  paper 
taken  in  payment  of  a  pre-existing  debt.  This  rule  also  extends  to 
and  includes,  as  against  such  holder,  all  defenses  and  equities  gener- 
ally existing  as  between  original  parties.^*'    And  one  who  has  given 

'^  Sturges   V.    Miller,    80    111.    241;  bwm /ide  purchaser  without  notice) ; 

Harpham    v.    Haynes,    30    111.    404;  Baily  v.  Smith,  14  Ohio  St.  396,  402, 

Martindale  v.   Hudson,   25    Mo.   422  403,  84  Am.  Dec.  385  (it  is  not  neces- 

( paper  was  fraudulently  assigned  by  sary  to  protect  hona  fide  holder  that 

indorsement   not   for   value    but   to  he  should  have  paid  face  of  paper, 

prevent   set-off   of   demand    against  but  he  must  have  paid  fair  and  rea- 

payee).    See  Clark  v.  Gallagher,  20  sonable  value). 

How.   Pr.    (N.   Y.)    308    (check  was  =^  Hamer  v.  Johnston,  5  Miss.    (6 

transferred     for    debt    due    to     in-  How.)  698. 

dorser).   See  §§  188-196  herein.  ^*  Black    v.    First    Nat.    Bank,    96 

-  Haescig  v.  Brown,  34  Mich.  503  Md.  399,  54  Atl.  88. 
(a  case  of  purchaser  of  securities  ^Ingram  v.  Morgan,  23  Tenn.  (4 
not  delivered  to  him  and  nominal  Humph.)  66,  40  Am.  Dec.  626. 
payment  only  was  made  before  de-  ^^  Alabama. — Gates  v.  Morton 
livery);  Colby  v.  Parker,  34  Neb.  Hardware  Co.  (Ala.,  1906),  40  So. 
510,  52  N.  W.  693;  De  Mott  v.  509;  Marks  v.  First  National  Bank, 
Starkey,  3  Barb.  (N.  Y.)  403  (some  79  Ala.  550,  58  Am.  Rep.  620;  Mo- 
part  of  purchase  money  must  have  bile  R.  Co.  v.  Heirath,  67  Ala.  189; 
been  paid  or  something  of  value  Mayberry  v  Morris.  62  Ala.  113; 
been  parted  with  before  notice  of  Mobile  Bank  v.  Hall,  6  Ala.  639,  41 
prior  right  or  equity  to  make  one  a  Am.  Dec.  72. 


295 


PAYMENT   OF    PRE-EXISTIXG   DEBT. 


[§   241 


liis  note  for  a  legal  and  valuable  consideration  cannot  avoid  payment 
because  the  payee  has  transferred  it  in  payment  of  a  debt  whicli  the 


Arkansas. — Evans  v.  Speer  Hard- 
\vare  Co.,  65  Ark.  204,  67  Am.  St. 
Rep.  919,  45  S.  W.  370;  Tabor  v. 
Merchants'  Nat.  Bank,  48  Ark.  454,  3 
S.  W.  805;  Bertrand  v.  Bankman,  13 
Ark.  150. 

California. — Sackett  v.  Johnson,  54 
Cal.  107  (not  an  open  question  in 
this  state.  Civ.  Code,  §  14,  Subd.  28 
as  originally  adopted  did  not  change 
former  rule). 

Connecticut. — Rockville  National 
Bank  v.  Citizens'  Gas  Light  Co.,  72 
Conn.  576,  45  Atl.  36  (negotiable 
bonds) ;  McCasky  v.  Sherman,  24 
Conn.  605. 

Delaware. — Bush  v.  Peckard,  3 
Harr.  (Del.)  385. 

District  of  Columhia. — Leach  v. 
Lewis,  1  McArthur  (D.  C.)  112 
(there  was  also  additional  consider- 
ation). 

Georgia. — Atlanta  Bottling  Co.  v. 
Hutchinson,  109  Ga.  550,  35  S.  E. 
124;  Bond  v.  Central  Bank,  2  Kelly 
(Ga.)  92. 

Illinois. — Mix  v.  Bloomingdale 
Bank,  91  111.  20,  33  Am.  Rep.  44; 
Worcester  Nat.  Bank  v.  Cheeney,  87 
111.  602;  Manning  v.  McClure,  36  111. 
490;  Foy  c.  Blackstone,  31  111.  538, 
83  Am.  Dec.  246;  Bemis  v.  Horner, 
62  111.  App.  38. 

Indiana. — Fulton  v.  Loughlin,  118 
Ind.  286,  20  N.  E.  796;  Proctor  v. 
Baldwin,  82  Ind.  370.  The  authori- 
ties are  not  quite  agreed  as  to 
whether  the  purchase  of  a  note  for 
a  previously  existing  debt  is  such  a 
consideration  as  protects  the  in- 
dorsee or  holder  of  commercial  pa- 
per, purchased  against  existing  equi- 
ties. "It  is  now  quite  well  settled," 
says  Parsons,  "that  where  negotia- 
ble paper  is  received  in  payment  and 


extinguishment  of  a  pre-existing 
debt,  the  holder  is  entitled  to  pro- 
tection." 

Iowa. — Robinson  v.  Lair,  31  Iowa 
9  (received  in  part  payment). 

Kansas. — Draper  v.  Cowles,  27 
Kan.  484. 

Kentucky. — Frank  &  Sons  v. 
Quast,  86  Ky.  649,  6  S.  W.  909,  9  Ky. 
L.  Rep.  781;  May  v.  Quimby,  3  Bush 
(Ky.)  96. 

Louisiana. — Citizens'  Bank  v.  Gil- 
man,  18  La.  Ann.  222,  89  Am.  Dec. 
650  (but  recovery  limited  to  debt 
and  not  face  value  of  note). 

Maine. — Breckenridge  v.  Lewis,  84 
Me.  349,  30  Am.  St.  Rep.  353,  24  Atl. 
864;  South  Boston  Co.  v.  Brown,  63 
Me.  139;  Norton  v.  Waite,  20  Me. 
175;  Hascall  v.  Whitmore.  19  Me. 
102,  36  Am.  Dec.  738;  Lewis  v.  Hodg- 
son, 17  Me.  267  (difference  between 
decisions  in  New  York  and  Maine 
explained  in  Homes  v.  Smyth,  16  Me. 
177.  If  a  negotiable  note  be  trans- 
ferred to  an  indorsee  before  it  be- 
comes payable,  without  notice  of  a 
defense,  in  payment  of  a  pre-existing 
debt,  want  of  consideration  on  the 
failure  of  it  cannot  be  given  in  evi- 
dence in  defense) ;  Dudley  v.  liittle- 
field,  8  Shep.  (Me.)  418;  Homes  v. 
Smyth.  4  Shep.  (Me.)  177,  33  Am. 
Dec.  650. 

Maryland. — Buchanan  v.  Mechan- 
ics' Loan  &  Savings  Institution,  84 
Md.  430,  35  Atl.  1099;  Cecil  Bank  v. 
Held,  25  Md.  562  (in  part  payment). 

Massachusetts. — Woodruff  v.  Hill, 
116  Mass.  310;  Ives  v.  Farmers' 
Bank,  84  Mass.  236,  241  (by  the  set- 
tled law  of  Massachusetts,  a  party 
who  takes  a  negotiable  instrument 
in  payment  of  a  pre-existing  debt  is 
regarded  as  entitled  to  the  same  pro- 


§  241] 


WAXT    OR   FAILURE    OF    CONSIDERATION. 


29G 


tection  as  any  other  taker  for  a  valu- 
able consideration);  Blanchard  v. 
Stevens,  57  Mass.  (3  Cush.)  162,  50 
Am.  Dec.  723. 

•  Michigan. — Outhwite  v.  Porter,  13 
Mich.  533;  Bostwick  v.  Dodge,  1 
Doug.  (Mich.)  413,  41  Am.  Dec.  584. 

Minnesota. — Stevenson  v.  Hyland, 
11  Minn.  198  (Gil.  128). 

Mississippi. — Carridine  v.  Wilson, 
61  Miss.  573;  Emanuel  v.  White,  34 
Miss.  56,  69  Am.  Dec.  385. 

Missouri. — Fitzgerald  v.  Barker, 
96  Mo.  661,  9  Am.  St.  Rep.  375,  10 
S.  W.  45  (there  was  also  an  addi- 
tional consideration) ;  Clark  v.  Lo- 
ker,  11  Mo.  97. 

Montana. — Yellowstone  National 
Bank  v.  Gagnon,  19  Mont.  402,  61 
Am.  St.  Rep.  520,  48  Pac.  762,  44 
L.  R.  A.  243  (to  extent  of  claim). 

Nebraska. — Lashmett  v.  Prall 
(Neb.  1902),  96  N.  W.  152.  (An 
indorsee  of  paper  taken  as  collat- 
eral security  for  another  existing  or 
antecedent  debt  is,  by  the  weight 
of  authority  In  this  country  and 
England,  a  hona  fide  holder  for 
value  within  the  intent  of  the  law 
merchant  where  he  has  so  accepted 
it  without  notice  of  defenses.  ("In 
Martin  v.  Johnson,  34  Neb.  797,  52 
N.  W.  819,  it  was  held  that  one  who 
accepted  a  negotiable  note,  without 
notice  of  defenses,  in  payment  of  an 
antecedent  debt,  was  a  bona  fide 
holder  for  value  and  precisely  the 
same  principles  must  apply  to  one 
who  receives  such  an  instrument  as 
collateral  security.  Such  is  also,  we 
think,  the  weight  of  authority  in 
this  country  and  in  England.  Cole- 
brook  on  Collat.  Securities,  §  18,  et 
seq.  and  notes,"  per  Ames,  C); 
Barker  v.  Lichtenberger,  41  Neb. 
751,  60  N.  W.  79. 

New  Hampshire. — Williams  v.  Lit- 
tle. 11  N.  H.  66.     . 

Neio  Jersey. — Mechanics'  Bank  &c.. 


V.  Chardavoyne,  69  N.  J.  L.  256; 
Armour  v.  McMichael,  36  N.  J.  L. 
92;  Allaire  v.  Hartshorne,  21  N.  J.  L. 
665,  47  Am.  Dec.  175. 

Neiv  York. — Ward  v.  City  Trust 
Co.,  102  N.  Y.  Supp.  50;  Milms  v. 
Kauffman,  93  N.  Y.  Supp.  669;  Brown 
V.  Leavitt,  31  N.  Y.  113  (received  in 
payment  of  note  overdue) ;  Magee  v. 
Badger,  30  Barb.  (N.  Y.)  246,  aff'd  34 
N.  Y.  247,  90  Am.  Dec.  691  (case  of 
second  note  given  in  settlement  of 
action  brought  to  recover  amount 
due  on  original  note) ;  Yungs  v. 
Lee,  18  Barb.  (N.  Y.)  187,  aff'd 
in  12  N.  Y.  551;  Purchase  v.  Matti- 
son,  13  N.  Y.  Super.  Ct.  (6  Duer) 
310;  Brookman  v.  Metcalf,  18  N.  Y. 
Super.  Ct.  (5  Bosw.)  429;  New  York," 
etc..  Works  v.  Smith,  11  N.  Y.  Super. 
Ct.  (4  Duer)  362;  White  v.  Spring- 
field Bank,  5  N.  Y.  Super.  Ct.  (3 
Sandf.)  222;  Scott  v.  Betts,  1  Hill  & 
Den.  Supp.  (Lalor,  N.  Y.)  363  (if  the 
transfer  of  a  check  works  a  pay- 
ment of  a  pre-existing  debt,  or 
causes  some  new  responsibility  to  be 
incurred,  or  some  valuable  benefit  to 
be  relinquished  by  the  person  to 
whom  it  is  made,  the  check  is  to  be 
deemed  as  purchased  for  value) ; 
St.  Albans  Bank  v.  Gulliland,  23 
Wend.  (N.  Y.)  311,  35  Am.  Dec.  566 
(receiving  a  note  for  a  precedent 
debt  is  receiving  it  for  value  within 
the  law  merchant,  if  it  be  taken  in 
satisfaction  of  such  precedent  debt 
and  the  indebtedness  be  cancelled) : 

North  Carolina. — Singer  Mfg.  Co. 
V.  Summ.ers  (N.  C,  1906),  55  S.  E.' 
522;  United  States  National  Bank 
of  N.  Y.  V.  McNair,  116  N.  C.  550, 
21  S.  E.  389  (rule  applies  with  cer- 
tain exceptions) ;  Reddick  v.  Jones, 
6  Ired.   (N.  C.)  107,  44  Am.  Dec.  68. 

North  Dakota. — Dunham  v.  Peter- 
son. 5  N.  D.  414.  67  N.  W.  293,  57  Am. 
St.  Rep.  556.  36  L.  R.  A.  232. 

Ohio. — Carlisle  v.  Wishart,  11  Ohio 


297 


PAYMENT    OF    TKE-EXISTIXG   CEBT. 


[§  241 


172;  White  v.  Francis,  5  Ohio  Dec. 
323. 

Pennsylvania. — Bardsley  v.  Delp, 
88  Pa.  St.  420,  6  Wkly.  Notes  Gas. 
(Pa.)  479,  rev'g  6  Wkly.  Notes  Gas. 
(Pa.)  366. 

South  Dakota. — Iowa  Nat.  Bank  of 
Ottumwa  V.  Sherman  &  Bratager  (S. 
D.  1903),  97  N.  W.  12. 

Tennessee. — Sugg  v.  Powell,  38 
Tenn.  (1  Head)  221. 

Texas. — Raatz  v.  Gordon  (Tex. 
App.  1899),  51  S.  W.  651;  Herman  v. 
Gunter,  83  Tex.  66,  18  S.  W.  428,  29 
Am.  St.  Rep.  632.  See  Howe  v.  Gohl- 
man  (Tex.  Civ,  App.,  1907),  98  S. 
W.  1077. 

Vermont. — Russell  v.  Splater,  47 
Vt.  273;  Dixon  v.  Dixon,  31  Vt.  450, 
76  Am.  Dec.  129. 

Virginia. — Payne  v.  Zell,  98  Va. 
294,  36  S.  E.  379. 

West  Virginia. — Mercantile  Bank 
V.  Boggs,  48  W.  Va.  289,  37  S.  E.  587. 
( Pre-existing  debt  is  a  valuable  con- 
sideration prima  facie  in  hands  of 
bona  fide  holder.) 

Wisconsin. — Knox  v.  Clifford,  38 
Wis.  651,  20  Am.  Rep.  28;  Stevens 
v.  Campbell,  13  Wis.  375. 

Federal. — Brooklyn  City  R.  Co.  v. 
Republic  Bank,  102  U.  S.  14,  26  L. 
ed.  61;  Swift  v.  Tyson,  16  Pet.  (U. 
S.)  1,  10  L.  ed.  865;  Drexler  v. 
Smith,  30  Fed.  754  (transferred  by 
one  of  payee  firm  in  payment  of  in- 
dividual debt)  ;  Riggs  v.  Hatch,  16 
Fed.  838. 

English. — M'Lean  v.  Clydesdale 
Banking  Co.,  9  App.  Gas.  95,  50  L.  T. 
Rep.,  N.  S.  457. 

See  Connecticu  t. — ^Waters  v. 
White,  75  Conn.  98,  52  Atl.  401. 

Federal.— Safe  Deposit  &  Trust  Co. 
v.  Wright,  105  Fed.  155,  44  C.  C.  A. 
421. 

New  York. — Bookheim  v.  Alexan- 
der, 64  Hun  (N.  Y.)  458,  19  N.  Y. 
Suppl.  776. 


A  moral  obligation  to  pay  a  pre- 
existing legal  debt  is  a  good  con- 
sideration for  the  execution  of  a 
note  in  its  payment:  Fourth  Na- 
tional Bank  of  Cadiz  v.  Craig  (Neb. 
1901),  96  N.  W.  185. 

"The  current  and  weight  of  au- 
thority sustain  the  doctrine  that  a 
do7ia  fide  holder,  taking  a  negotiable 
note  in  payment  of  or  as  security 
for  a  pre-existing  debt,  is  a  holder 
fiOr  a  valuable  consideration,  en- 
titled to  protection  against  all  the 
equities  between  antecedent  par- 
ties." Jewett  v.  Home,  1  Woods  (U. 
S.  G.  C.)  530,  534,  Fed.  Gas.  No. 
7311,  per  Woods,  Cir.  J. 

If  the  transfer  is  made  without 
delivery  or  indorsement,  and  with- 
out notice  to  the  maker,  an  antece- 
dent debt  or  existing  liability  is 
sufficient  to  support  the  assignment. 
Planters'  Ins.  Co.  v.  Tunstall,  72 
Ala.  142. 

Antecedent  debt  or  liability  as  a 
valid  consideration.  Neg.  Inst.  Law, 
§  51,  Eng.  Bills  of  Exch.  Act,  §  27. 

Pre-existing  debt  of  maktr  is  suffi- 
cient consideration  for  note.  Gates 
V.  Morton  Hardware  Co.  (Ala.  1906), 
40  So.  509. 

Holder  of  note  taken  before  ma- 
turity in  payment  of  indebtedness, 
largely  in  excess,  is  not  holder  for 
value  in  due  course  of  trade  so  as 
to  cut  off  the  maker's  equities  and 
defenses,  where  the  transactions  in- 
volved occurred  prior  to  the  passage 
of  the  Negotiable  Inst.  Law,  which 
provides  that  "an  antecedent  or  pre- 
existing debt  constitutes  value,  and 
is  deemed  such  whether  the  instru- 
ment is  payable  on  demand  or  at  a 
future  time."  Bank  v.  Johnston,  105 
Tenn.  521,  59  S.  W.  131;  Negotiable 
Inst.  Law,  Art.  II,  §  25;  Shannon's 
Supp.  Code  Tenn.,  p.  579. 

Transferee  taking  in  part  pay- 
ment  of   pre-existing   debt   is   bona 


§    242]  WANT    OR   FAILURE    OF    CONSIDEKATIOX.  298 

law  would  not  have  compelled  him  to  pay.^'^  It  is  also  decided  that 
the  indorsee  of  a  negotiable  promissory  note,  to  whom  the  same  is 
transferred  by  the  maker  in  payment  of  a  pre-existing  debt,  is  en- 
titled to  enforce  payment  of  the  same  against  the  indorser,  irrespec- 
tive of  the  equities  existing  between  the  original  parties.^^  Again,  the 
fact  that  an  assignee  receives  a  bond  in  payment  of  a  pre-existing 
debt  due  him  by  a  corporation  can  make  no  difference  in  his  rights  to 
a  recovery  upon  it,  where  he  is  the  assignee  for  a  valuable  considera- 
tion and  so  entitled  to  all  rights  as  such.^^  But  whether  the  giving  of 
notes  for  an  existing  indebtedness  shall  be  regarded  as  an  absolute 
payment  or  treated  as  evidence  of  the  original  debt,  which  shall  con- 
tinue in  force,  is  within  the  control  of  the  parties,  and  the  effect  of 
the  transaction  is  to  be  determined  by  their  intention  and  agreement. 
The  common  law  rule  is  that  a  promissory  note  made  by  the  debtor 
does  not  discharge  a  pre-existing  debt  for  which  it  was  given  unless 
it  be  the  express  agreement  of  the  parties.*" 

§  242.  Same  subject — Decisions  contra  or  qualificative. — Notwith- 
standing the  weight  of  authority  sustaining  the  preceding  rule,  the 
contrary  rule  has  been  asserted  in  numerous  cases.  Many  of  these  de- 
terminations, however,  cannot  be  relied  on  as  establishing  a  controlling 
arbitrary  rule,  since  they  rest  rather  upon  the  circumstances  than  upon 
principle,  even  though  upon  their  face  they  assert  the  doctrine  of 
availability  of  defenses,  and  in  addition  they  do  not  all  of  them  posi- 
tively or  in  terms  negative  the  general  rule  first  stated,  but  may  be 
deemed  to  be  exceptions  or  qualifications  thereof.*^    So  where  the 

fide    holder.     Smith    v.    Thompson  New    York. — Phoenix    Ins.    Co.    v. 

(Neb.  1903),  93  N.  W.  678.  Church,  81  N.  Y.   218,  37  Am.  Rep. 

=' Gould  v.  Leavitt,  92  Me.  416.  284    (Andrews,  J.,  says:     "It  is  the 

'-  Blanchard  v.   Stevens,   57   Mass.'  settled  law  of  this  state,  that  prior 

(3  Cush.)  162,  50  Am.  Dec.  723.  equities  of  antecedent  parties  to  ne- 

^^  Fox  V.  Blackstone,  31  111.  538.  gotiable  paper  transferred  in  fraud 

*°Topeka  Capital  Co.  v.  Merriam,  of  their  rights  will  prevail  against 

60  Kan.  397,  56  Pac.  757.  an    indorsee    who    has    received    it 

*^ Alabama. — Jordon      &      Son      v.  merely    in    nominal    payment    of    a 

Thompson,  117  Ala.  468,  23  So.  157.  -precedent  debt,  there  being  no  ev:- 

Illinois. — Forbes   v.    Williams,    13  dence  of  an  intention  to  receive  the 

Bradw.  (111.)  280.  paper    in    absolute    discharge    and 

Michigan.  —  Ingerson      v.      Stark-  satisfaction    beyond    what    may    be 

weather.  Walk.  Ch.   (Mich.)  346.  inferred    from    the    ordinary    trans- 

Mississippi. — Woodsen     v.     Owens  action    of    accepting    or    receipting 

(Miss.,  1892),  12  So.  207;  Holmes  v.  it    in    payment,    or    crediting    it   on 

Carman,  1  Freem.  Ch.  (Miss.)  408.  account.    The  law  regards  the  pay- 


299 


PAYMENT    OF    PRE-EXISTING   DEBT. 


[§   243 


holder,  who  had  a  claim  against  the  drawer  for  the  conversion  of 
certain  bonds,  took  a  bill  in  satisfaction  thereof,  it  was  decided  that 
there  was  a  precedent  liability  and  as,  at  the  time  it  was  delivered, 
nor  at  any  time  afterwards,  the  holder  had  surrendered  nothing  held 
by  him  for  the  bill,  he  was  not  such  a  bona  fide  holder  as  to  preclude 
a  defense  of  want  or  failure  of  consideration.*-  And  if  no  valuable 
security  or  lien  is  relinquished  by  the  holder  of  negotiable  paper. 


ment  under  such  circumstances  as 
conditional  only,  and  the  right  of 
the  creditor  to  proceed  upon  the 
original  indebtedness  after  the  ma- 
turity of  the  paper  is  unimpaired") ; 
Lawrence  v.  Clark,  36  N.  Y.  128; 
Scott  v.  Ocean  Bank,  23  N.  Y.  289; 
Tredwell  v.  Lincoln,  52  Hun  (N.  Y.) 
614,  5  N.  Y.  Suppl.  341,  aff'd,  127  N. 
Y.  674,  28  N.  E.  255;  Rochester  Co. 
V.  Loomis,  45  Hun  (N.  Y.)  93;  Bur- 
ham  V.  Baylis,  14  Hun  (N.  Y.)  608; 
Bright  V.  Judson,  47  Barb.  (N.  Y.) 
29.  (Accepting  a  bill  or  note  in  pay- 
ment of  a  precedent  debt  is  not 
parting  with  value,  so  as  to  make 
the  holder  a  bona  fide  holder  for 
value) ;  White  v.  Springfield  Bank,  1 
Barb.  (N.  Y.)  225;  Philbrick  v.  Dal- 
lett,  34  N.  Y.  Super.  Ct.  370,  43  How. 
Pr.  (N.  Y.)  419,  12  Abb.  Pr.  N.  S. 
(N.  Y.)  419  ("our  courts  held  at 
quite  an  early  day  that  the  receipt 
of  commercial  paper,  fraudulently 
put  in  circulation  or  diverted  from 
the  purpose  for  which  it  was  origi- 
nally issued,  merely  as  payment  or 
security  for  a  precedent  debt,  no 
new  credit  or  other  thing  of  legal 
value  being  given  on  the  faith 
thereof,  and  no  security  being  relin- 
quished or  discharged,  nor  any  new 
responsibility  incurred  on  the  credit 
thereof,  is  not  parting  with  value, 
such  as  to  enable  the  holder  to  en- 
force such  commercial  paper  against 
an  accommodation  party,  or  to  hold 
it  against  the  true  owner,  or  to  hold 


it  free  of  equities  existing  upon  it 
against  the  transferer  at  the  time 
of  the  transfer.  This  rule  has  been 
firmly  maintained,  both  at  law  and 
in  equity,  by  a  long  and  uninter- 
rupted series  of  adjudications,  and 
is  beyond  question  the  settled  law  of 
this  state,"  id.  387,  per  Freeman, 
J.)  ;  Bell  V.  McNiece,  17  N.  Y.  Suppl. 
846.  (Note  was  received  subject  to 
defenses  where  it  does  not  appear 
that  anything  of  value  was  parted 
with  or  relinquished) ;  Stalker  v. 
McDonald,  6  Hill  (N.  Y.)  93,  40  Am. 
Dec.  389;  Ontario  Bank  v.  Worthing- 
ton,  12  Wend.  (N.  Y.)   593. 

Tennessee. — Bank  v.  Johnston,  105 
Tenn.  521,  59  S.  W.  131;  Vatterlieve 
V.  Howell,  37  Tenn.  (5  Sneed)  441; 
Rhea  v.  Allison,  40  Tenn.  (3  Head) 
176;  King  v.  Doolittle,  38  Tenn.  (1 
Head)  77;  Ingram  v.  Morgan,  23 
Tenn.  (4  Humph.)  66,  40  Am.  Dec. 
626;  Ferress  v.  Tavel,  87  Tenn.  (3 
Pick.)  386,  11  S.  W.  93,  3  L.  R.  A. 
414. 

That  one  who  takes  a  draft  in 
payment  of  pre-existing  debt  is  not 
a  bona  fide  holder  for  value,  no  re- 
lease having  been  given  and  nothing 
of  value  having  been  relinquished. 
See:  Webster  v.  Howe  Machine  Co., 
54  Conn.  394,  8  Atl.  482.  See  Credit 
Co.,  Ltd.,  V.  Howe  Machine  Co.,  54 
Conn.  357,  8  Atl.  472,  1  Am.  St.  Rep. 
123. 

*- Linden  v.  Beach,  6  Hun  (N.  Y.) 
200. 


243] 


WANT    OR   FAILURE    OF    COXSIDERATION. 


300 


who  has  taken  it  for  an  antecedent  indebtedness,  the  fact  that  he  takes 
the  note  in  good  faith  is  held  not  to  protect  him  either  in  law  or 
equity  against  the  true  owner. ^^  So,  where  a  note  is  taken  for  a 
subsisting  indebtedness,  it  is  decided  that  the  holder  cannot  recover 
thereon  where  he  is  not  a  holder  for  a  valuable  consideration.**  And 
payments  made  to  an  assignor  of  a  note  for  a  pre-existing  debt  may 
operate  to  reduce  the  amount  of  recovery.*^  So  the  defense  of  want 
or  failure  of  consideration  is  held  to  be  available  against  a  creditor 
who  takes  a  note  originally  signed  in  blank,  although  filled  up  before 
delivery  to  such  holder,  especially  where  he  has  not  incurred  loss  by 
gi^^ng  credit  to  the  paper  or  by  paying  a  fair  equivalent  for  it  and 
the  notes  were  not  received  in  the  usual  course  of  trade  for  a  valuable 
consideration.*^ 

§  243.  Banks — Distinction  between  crediting  amount  of  note  on 
undrawn  deposit  and  credit  on  pre-existing  indebtedness — Bona  fide 
holder. — An  indorsee  bank  is  a  bo7ia  fide  holder  of  a  note  given  for  past 
indebtedness.*^  And  if  a  note  is  given  to  a  bank  for  a  pre-existing 
debt  the  bank  is  a  bona  fide  holder  to  the  extent  of  the  debt  due  and 
not  to  the  amount  of  the  note.**  Again  after  a  note  has  been  negotiated 
in  a  bank  the  consideration  thereof,  whilst  the  note  is  the  property 
of  the  bank,  cannot  be  questioned  by  the  payor.*^  And  where  a  bank 
receives  and  discounts  negotiable  pa2:»er,  places  the  proceeds  to  the 
credit  of  the  holder,  and  charges  over  against  him  and  cancels  other 
notes  upon  which  are  responsible  parties,  but  which  are  overdue  and 
lie  under  jDrotest,  such  cancellation  is  equivalent  to  paying  value  at 
the  time,  and  precludes  all  defenses  existing  as  between  the  original 
parties.^"  A  distinction  exists,  however,  between  a  case  where  a  bank 
gives  a  depositor  credit  on  a  pre-existing  indebtedness,  such  as  for 


"Clark  v.  Ely,  2  Sandf.  Ch.  (N. 
Y.)  166. 

"Petrie  v.  Clark,  11  Serg.  &  R. 
(Pa.)   377,  14  Am.  Dec.  636. 

*^Bond  v.  Fitzpatrick,  72  Mass.  (6 
Gray)   536. 

"Riley  v.  Johnson,  8  Ham.  (Ohio) 
526  (decided  1838). 

■*"  Mechanics'  Bank  v.  Charda- 
voyne,  69  N.  J.  L.  256,  55  Atl.  1080. 
But  the  note  was  indorsed  in  blank 
and  given  to  another  to  get  dis- 
counted who  indorsed  it  to  the  bank 


in  payment  of  his  debt  then  due  to 
the  bank.  The  question,  however, 
was  determined  under  the  law  of 
New  York  as  the  lex  loci  contractus. 

*^  Citizens'  Bank  v.  Payne,  18  La. 
Ann.  222,  89  Am.  Dec.  650. 

"  Tuggle  v.  Adams,  3  A.  K.  Marsh. 
(Ky.)  429. 

^'"Salina  Bank  v.  Babcock.  21 
Wend.  (N.  Y.)  499  (the  contention 
was  that  no  value  had  been  given 
and  diversion). 


301  BAXKS — BOK^A   FIDE    HOLDERS.  [§    213 

money  loaned,  or  for  an  overdraft  of  his  account,  or  the  like,  and  a 
case  where  a  bank  discounts  paper  for  a  depositor,  and  gives  him  credit 
upon  its  books  for  the  proceeds  thereof,  since  in  the  latter  case  the 
bank  is  not  a  bona  fide  holder  for  value  so  as  to  be  protected  against 
infirmities  of  the  paper,  unless  in  addition  to  the  mere  fact  of  credit- 
ing the  depositor  with  the  proceeds  of  the  paper,  some  other  and 
valuable  consideration  passes.  Such  a  transaction  simply  creates  the 
relation  of  debtor  and  creditor  between  the  bank  and  the  depositor, 
and  so  long  as  that  relation  continues  and  the  deposit  is  not  drawn 
out,  the  bank  stands  in  the  same  position  as  the  original  party  to 
whom  the  papw  was  made  payable,  even  though  the  bank  took  the 
paper  before  maturity  and  without  notice.  By  giving  credit  to  the 
indorser  of  the  note  on  his  deposit  account,  the  bank  in  effect  agrees 
to  pay  him  that  amount  of  money  on  demand  by  check  or  order,  and 
parts  with  nothing  of  value.  When  it  receives  notice  of  defenses  to 
the  note,  it  is  still  in  a  situation,  provided  the  amount  thus  credited  has 
remained  undrawn  by  the  depositor,  to  return  the  note  to  him  and 
cancel  the  credit.^^  So  it  is  decided  in  New  York  that  the  mere  cred- 
iting to  a  depositor's  account,  on  the  books  of  a  bank,  of  the  amount 
of  a  check  drawn  upon  another  bank,  wliere  the  depositor's  account 
continues  to  be  sufficient  to  pay  the  check  in  case  it  is  dishonored,  does 
not  constitute  the  bank  a  holder  in  due  course  within  the  law  mer- 
chant, as  that  term  is  now  defined  in  the  negotiable  instruments  law 
so  as  to  render  its  title  superior  to  the  defenses  which  the  drawer  of 
the  check  may  have  against  the  payee.^-  So  in  another  case  in  that 
state  it  is  held  tliat  a  bank  is  not  a  holder  of  a  note  in  due  course, 
when  the  proceeds  of  the  note  are  simply  credited  to  the  person  from 
whom  it  was  purchased,  and  not  paid  out  until  the  bank  has  notice 
of  an  infirmity  in  tlie  instrument  or  defect  in  the  title  of  the  person 
from  whom  the  note  was  purchased.  The  negotiable  instruments  law 
seems  declaratory  of  the  law  as  uniformly  stated  in  the  decisions  of 
Xcw  York  and  other  states,  and  notice  to  the  bank  of  an  infirmity  in 

"  City  Deposit  Bank  of  Columbus  case  the  court,  per  Werner,  J.,  cites 
V.  Green  (Iowa  1905),  103  N.  W.  96,  Albany  County  Bank  v.  People's  Co- 
per McClain,  J.,  also  charge  of  trial  Operative  Ice  Co.,  92  App.  Div.  N.  Y. 
court  affirmed.  47;  Dykman  v.  Northbridge,  80  Hun 

'=  Citizens'  State  Bank  v.  Cowles,  (N.  Y.)    258;    Central  Nat.  Bank  v. 

180  N.  Y.  346,  348,  349,  73  N.  E.  33;  Valentine,    18    Hun     (N.    Y.)     417; 

Neg.  Inst.  Law,  1897,  ch.  612,  §  91;  Thompson  v.  Sioux  Falls  Nat.  Bk., 

case  reversed  89  N.  Y.  App.  Div.  281,  150  U.  S.  231,  244. 
86  N.  Y.  Supp.  38.    In  the  principal 


§  244] 


WANT    OK   FAILURE   OF    COXSIDERATION. 


302 


r 


the  instrument  in  suit  or  of  defect  in  the  title,  before  it  has  paid  out 
the  full  amount  agreed  to  be  paid  therefor,  entitles  the  maker  to 
avail  himself  of  the  defense  of  failure  of  consideration,^^  Where  a 
bank  has  notes  of  an  individual  on  which  he  was  indebted  and  it  be- 
comes expedient  for  a  corporation  to  purchase  his  personal  property 
and  the  bank. desiring  that  adequate  provision  should  be  made  for  the 
payment  of  its  debts  an  agreement  was  reached  between  the  parties 
whereby,  with  the  bank's  consent,  the  individual's  notes  were  retired 
with  new  notes  of  the  corporation,  such  notes  were  based  upon  a  suffi- 
cient consideration.^*  Again,  the  partial  or  total  failure  of  considera- 
tion or  fraud,  in  the  execution  and  negotiation  of  a  note  made  payable 
at  an  incorporated  bank,  which  had  been  discounted  before  maturity 
by  a  bank  of  the  commonwealth  of  Kentucky  or  organized  under  the 
laws  of  the  United  States,  is  not  available  as  a  defense  to  it,  if  pur- 
chased in  good  faith  by  the  bank  without  notice  of  such  infirmity; 
especially  so  where  there  is  nothing  in  a  written  contract  executed 
simultaneously  with  the  execution  of  the  note  which  suggests  any  lack 
of  consideration  for  the  execution  of  the  note.^^ 

g  244.     Parting  with  value — Surrender  by  creditor  of  debtor's  own 
note — Receiving  negotiable  note  of  third  person. — When  a  creditor 


'^^  Albany  County  Bank  v.  People's 
Co-Operative  Ice  Co.,  86  N.  Y.  Supp. 
773,  777,  92' N.  Y.  App.  Div.  47  (Ches- 
ter, J.,  dissented),  per  Chase,  J., 
quoting  from  New  York  County 
Bank  v.  Massey  (U.  S.),  24  Sup.  Ct. 
199,  48  L.  Ed.  138,  N.  Y.  Law  Jour., 
Jan'.  14,  1904;  ^tna  National  Bank 
v.  Fourth  National  Bank,  46  N.  Y. 
82,  7  Am.  Rep.  314;  Thompson  v. 
Sioux  Falls  National  Bank,  150  U.  S. 
231,  14  Sup.  Ct.  94,  37  L.  Ed.  1063; 
Central  National  Bank  v.  Valentine, 
18  Hun  (N.  Y.)  417;  Dykman  v. 
Northbridge,  80  Hun  (N.  Y.)  258,  30 
N.  Y.  Supp.  164;  Sixth  National 
Bank  v.  Lorillard  Brickworks  Co., 
18  N.  Y.  Supp.  861;  Clark  National 
Bank  v.  Bank  of  Albion,  52  Barb. 
(N.  Y.)  592;  Negot.  Inst.  Law  1897, 
p.  732,  c.  612,  §§  93,  96;  Daniel  on 
Neg.  Inst.  (5th  ed.),  §§  779b,  782; 
Eaton  &  Gilbert  on  Commercial  Pap., 


p.  306;  7  "Cye,"  p.  929;  4  Amer.  & 
Eng.  Ency.  of  L.  298.  The  court,  in 
the  principal  case,  said,  however: 
"Whether  notice  of  dishonor  of  a 
note  is  alone  sufficient  in  all  cases 
to  constitute  notice  of  an  infirmity 
or  defect  in  the  title  of  the  person 
negotiating  the  same  is  not  neces- 
sary now  to  determine,"  per 
Chase,  J. 

"Flour  City  National  Bank  v. 
Shire.  84  N.  Y.  Supp.  810,  88  App. 
Div.  401. 

^Beattyville  Bank  v.  Roberts 
(Ky.  Ct.  App.  1904),  25  Ky.  L.  Rep. 
1796,  78  S.  W.  901,  902,  citing  Ky. 
Stat.  1903,  §  483;  Clark  v.  Tanner, 
100  Ky.  275,  38  S.  W.  11;  Moreland 
V.  Citizens'  Savings  Bank,  97  Ky. 
211,  30  S.  W.  637;  Harigs  v.  Louis- 
ville Trust  Co.  (Ky.),  30  S.  W.  637; 
Kelly  V.  Smith,  58  Ky.  313. 


303  JOINT    NOTE    OF    HUSBAND   AND   WIFE.  [§   245' 

takes  from  his  debtor  the  note  of  a  third  person  before  maturity,  in 
good  faith,  in  payment  of,  or  as  collateral  security  for  the  debt,  and 
in  consideration  thereof  gives  up  collateral  securities  held  therefor, 
he  becomes,  to  the  extent  of  the  collaterals  surrendered,  a  holder  for 
value  of  the  paper,  and  takes  it  free  from  the  defenses  of  antecedent 
parties,  and  it  is  regarded  as  the  settled  doctrine  of  the  state  of  New 
York,  that  the  surrender  by  a  creditor  of  the  past  due  notes  of  a 
debtor,  upon  receiving  from  him,  in  good  faith  before  maturity,  the 
note  of  a  third  person  in  place  of  the  note  surrendered,  constitutes  the 
creditor  a  holder  for  value  of  the  note  thus  taken,  and  protects  him 
against  the  defenses  and  equities  of  the  antecedent  parties,  and  it  is 
immaterial  whether  the  note  surrendered  was  given  to  the  creditor  for 
goods  sold,  or  money  loaned,  or  under  circumstances  which  would 
leave  the  original  debt  represented  by  the  note  in  existence,  enforceable 
against  the  debtor,  or  whether  by  surrendering  the  note,  the  creditor 
parted  with  his  entire  right  of  action.  The  surrender  of  a  prior  note 
to  the  maker  may  be  under  certain  circumstances  an  unequivocal  evi- 
dence of  an  intention,  on  the  part  of  the  parties  to  the  transaction,  to 
extinguish  the  note  surrendered,  and  so  be  equivalent  to  an  express 
agreement  to  that  effect.  The  actual  extinguishment  and  discharge 
of  a  prior  debt,  upon  the  transfer  of  a  note  of  a  third  person  by  the 
debtor  to  the  creditor,  is  a  parting  with  value  by  the  former.  But 
there  is  little  ground  for  holding  that  the  surrender  by  a  creditor  of 
a  past  due  note  of  a  debtor,  especially  when  his  remedy  upon  the 
original  debt  remains,  is  a  parting  with  value.^** 

§  245.  Joint  note  of  husband  and  wife — Outlawed  debt  of  husband 
— Indorsee  for  past  indebtedness — Indorsement  by  president  payee 
to  bank. — A  wife  joined  with  her  huslDand  in  the  execution  of  a 
negotiable  note  secured  by  mortgage  and  the  only  consideration 
therefor  was  a  past  indebtedness  of  the  husband  which,  had  an  action 
been  brought  therefor,  would  have  been  barred  by  the  statute  of  limi- 
tations. The  note  was  regularly  indorsed  and  delivered  long  before 
its  maturity  by  the  payee  to  a  banking  company  to  which  the  payee 
was  indebted  in  an  amount  much  larger  than  the  amount  of  the  note 
and  it,  with  the  mortgage,  was  received  by  said  indorsee  as  part  pay- 
ment of  the  indebtedness  and  the  full  amount  of  the  note  was  credited. 
The  court  below  found  that  the  indorsee  purchased  the  note  and  mort- 

'"  Phoenix  Ins.  Co.  v.  Church,  81  drews,  J.  See  Taylor's  Appeal,  45 
N.  Y.  218,  37  Am.  Rep.  294,  per  An-     Pa.  St.  71.   See  §§  233-235  herein. 


? 


§     2-i6] 


WANT    OR   FAILURE   OF    CONSIDERATION. 


304 


gage,  in  good  faith,  in  the  ordinary  course  of  hnsiness  and  for  value 
before  its  maturity,  and  in  ignorance  of  the  fact  that  it  was  given 
without  consideration  or  for  a  debt  barred  by  the  statute  of  limita- 
tions. The  payee  Avas  the  president  of  the  bank  and  knew  of  the  con- 
sideration of  the  note.  The  note  and  mortgage  were  accepted  at  a 
meeting  of  the  board  of  directors  of  the  bank  at  which  the  president 
was  not  present,  and  none  of  those  present  knew  that  the  considera- 
tion of  the  note  was  an  outlawed  indebtedness.  It  was  held  that  the 
finding  should  not  be  disturbed ;  that  when  the  president  procured  the 
bank  to  take  the  note  as  part  payment  of  his  indebtedness,  he  was 
acting  individually  and  his  knowledge  was  not  the  knowledge  of  the 
bank ;  that  the  further  fact  that  some  of  the  directors  knew,  or  should 
have  known,  that  shortly  before  the  making  of  the  note  and  mortgage 
the  property  covered  by  the  mortgage  had  been  conveyed  by  the  hus- 
band to  the  wife,  it  formerly  having  been  community  property,  and 
that  the  conveyance  had  been  recorded,  was  of  no  significance.  The 
action  was  brought  by  the  wife  to  cancel  her  note  and  mortgage  for 
want  of  consideration,  and  it  was  held  that  it  could  not  be  main- 
tained.^'^ 

§  246.  Rule  as  to  value — Collateral  security  for  pre-existing  debt 
— Bona  fide  indorsees  or  holders. — The  right  to  show  a  want  or  fail- 
ure of  consideration,  or  the  availability  of  defenses  and  equities  gen- 
erally, existing  between  the  original  parties,  as  against  a  transferee  or 
indorsee  who  takes  commercial  paper  as  collateral  security  for  a  pre- 
existing debt,  has  been  a  subject  of  constant  controversy.  In  many  of 
the  states  such  transferee'  or  indorsee  is  held  to  be  a  bona  fide  holder 
for  value  where  the  other  essentials  constituting  one  a  bona  fide  holder 
exist.^^     So  in  a  West  Virginia  case^^  it  is  held  that  where  a  negotia- 


"  McDonald  v.  McDonald,  139  Cal. 
246,  72  Pac.  997,  Beatty,  C.  J.,  dis- 
sented. 

As  to  constructive  notice  to  bank, 
see  also,  Iowa  Nat.  Bank  of  Ot- 
tumwa  V.  Sherman  &  Bratager  (S. 
D.  1903),  97  N.  W.  12. 

^^  Calif ornia. — Robinson  v.  Smith, 
14  Cal.  94  (note  taken  as  collateral 
security  is  not  subject  to  defenses 
existing  between   original   parties). 

Colorado. — Merchants'  Bank  v. 
Cleveland,  9  Colo.  608,  13  Pac.  723. 


One  who  takes  in  payment  or  secur- 
ity of  pre-existing  debt  is  purchaser 
for  value);  Murphy  v.  Gumaer,  12 
Colo.  App.  472,  55  Pac.  951  ("the  law 
has  been  followed  in  this  state,  and 
it  is  the  law  of  Colorado,  as  in  most 
other  state  jurisdictions,  that  the 
taker  of  notes  as  collateral  security 
as  amply  and  abundantly  protects 
the  rights  of  the  holder  as  though 

""  Hotchkiss  V.   Fitzgerald  Co.,  41 
W.  Va.  357,  23  S.  E.  576. 


305 


COLLATERAL    SECURITY    FOR   PRE-EXISTING   DEBT. 


[§  24G 


ble  instrument  is  transferred  as  collateral  to  secure  a  valid  pre-exist- 
ing debt,  by  being  properly  indorsed  and  delivered,  or  by  delivery  only 


he  had  bought  and  discounted  the 
paper  in  the  usual  and  ordinary 
course  of  business,"  per  Bissell,  J.). 

Connecticut. — Rockville  Nat.  Bank 
V.  Citizens'  Gas  Light  Co.,  72  Conn. 
576,  581,  45  Atl.  361  (rule  applies 
both  to  payment  and  collateral  se- 
curity. A  case  of  negotiable  bonds) ; 
Bridgeport  Bank  v.  Welch,  29  Conn. 
475. 

Georgia. — Kaiser  &  Brother  v. 
United  States  National  Bank,  99  Ga. 
258,  25  S.  B.  620  (syllabus  cites  Cole- 
brook  on  Collateral  Securities,  §  18, 
I  Morse  Banks  and  Banking,  §  600) ; 
University  Bank  v.  Tuck,  96  Ga. 
456,  23  S.  E.  467  (to  extent  of  debt 
due) ;  Laster  v.  Stewai't  &  Co.,  89 
Ga.  181,  15  S.  E.  42. 

Illinois. — First  National  Bank  of 
Joliet  v.  Adam,  138  111.  483,  28  N.  E. 
955.  (In  this  case  the  pledger  of 
notes,  who  was  the  maker  and  also 
the  payee,  was  allowed  possession  of 
the  notes  to  sell  them,  but  he  did 
not  do  so  and  pledged  them  as  col- 
lateral to  another  creditor  and  they 
were  received  bona  fide  and  without 
notice) ;  Mix  v.  National  Bank  of 
Bloomington,  91  111.  20,  24,  33  Am. 
Rep.  44. 

Indiana. — Spencer  v.  Sloan,  108 
Ind.  183,  58  Am.  St.  Rep.  35,  9  N.  E. 
100;  Proctor  v.  Baldwin,  82  Ind. 
370. 

Kansas. — Best  v.  Krall,  23  Kan. 
482,  33  Am.  Rep.  185.  (Quoting 
from  Daniel  on  Neg.  Inst.,  §  824, 
as  follows:  "  'When  a  note  or  bill 
of  a  third  party,  payable  to  order,  is 
indorsed  as  collateral  security  for  a 
debt  contracted  at  the  time  of  such 
indorsement,  the  indorsee  is  a  bona 
fide  holder  for  value  in  the  usual 
course  of  business,  and  is  entitled 
Joyce  Defenses — 20. 


to  protection  against  equities,  off- 
sets, and  other  defenses,  available 
between  antecedent  parties,  pro- 
vided, of  course,  that  the  bill  or  note 
transferred  as- collateral  security  is 
itself,  at  the  time,  not  overdue'"). 

Louisiana. — Levy  v.  Ford,  41  La. 
Ann.  873,  6  So.  671;  Saloy  v.  Bank, 
39  La.  Ann.  90,  1  So.  657  (for  over- 
drawn bank  account) ;  Giavanovitch 
V.  Citizens'  Bank  of  Louisiana,  26 
La.  Ann.  15. 

Maryland. — Buchanan  v.  Mechan- 
ics' Loan  &  Savings  Institution,  84 
Md.  430,  35  Atl.  1599  (holding  this 
to  be  the  settled  law  of  the  state 
since  Maitland  v.  Citizens'  National 
Bank,  40  Md.  540,  17  Am.  Rep.  620) ; 
Maitland  v.  Citizens'  Nat.  Bank,  40 
Md.  540,  17  Am.  Rep.  620.  (Indorsee 
of  paper  to  whom  transferred  as 
collateral  security  by  payee  in  ex- 
cess of  his  authority  is  entitled  to 
protection  unless  he  had  knowledge 
that  payee  exceeded  his  authority). 

Massachusetts. — National  Revere 
Bank  v.  Morse,  163  Mass.  383,  40  N. 
E.  180. 

Minnesota. — Haugan  v.  Surwall,  60 
Minn.  367,  62  N.  W.  398  (following 
and  applying  Rosemond  v.  Graham, 
54  Minn.  323,  40  Am.  St.  Rep.  336, 
56  N.  W.  38). 

Nevada. — Fair  v.  Howard,  6  Nev. 
304  (note  and  mortgage  were  exe- 
cuted for  antecedent  debt). 

New  Jersey. — Armour  v.  Mitchell, 
36  N.  J.  L.  92. 

Ne^o  York. — Continental  Nat.  Bk. 
V.  Townsend,  87  N.  Y.  8  (indorsee 
for  collateral  security  for  antecedent 
debt  is  holder  for  value  and  entitled 
to  protection  as  such). 

North  Carolina. — Brooks  v.  Sulli- 
van, 129  N.  C.  190,  39  S.  E.  822   (so 


246] 


WANT    OR    FAILURE    OF    CONSIDERATION, 


30G 


when  indorsed  in  blank  or  made  payable  to  bearer,  so  that  the  trans- 
feree becomes  a  party  to  the  instrument,  and  he  takes  the  same  before 
maturity  in  good  faith,  and  without  notice  of  equities,  he  thereby  be- 


under  "Negotiable  Instruments"  stat- 
ute, Acts  1899,  Chap.  733,  §§  25-27, 
to  extent  of  debt,  but  the  law  was 
previously  otherwise). 

Rhode  Island. — Cobb  v.  Doyle,  7  R. 
I.  550. 

South  Carolina. — Bank  of  Charles- 
ton V.  Chambers,  11  Rich.  (S.  C.) 
657. 

Tennessee. — Gosling  v.  Griffin,  85 
Tenn.  737,  744,  3  S.  W,  642. 

Texas. — Wright  v.  Hardie  &  Co., 
88  Tex.  653,  32  S.  W.  885  (innocent 
holder  is  protected  only  to  extent  of 
his  interest  or  amount  of  debt  for 
which  held  as  collateral);  Bruce  v. 
First  Nat.  Bank  of  Weatherford,  25 
Tex.  Civ.  App.  295,  60  S.  W.  1006 
(citing  Swift  v.  Tyson,  16  Pet.  (U. 
S.)  1,  10  L.  Ed.  865). 

Vermont. — People's  Nat.  Bank  v. 
Clayton,  66  Vt.  541,  546,  29  Atl.  1020. 

Virginia. — Prentice  &  Weissinger 
V.  Zane,  2  Graft.  (Va.)  262  (quali- 
fied to  the  extent,  however,  that  if 
the  party  from  whom  the  holder  re- 
ceived it  took  it  for  value  without 
notice,  the  holder  is  entitled  to  re- 
cover, but  also  holding  that  the 
holder  of  a  negotiable  note  taken  as 
collateral  security  holds  it  subject  to 
all  the  equities  of  the  maker  against 
the  party  from  whom  the  holder  re- 
ceived it). 

Washington. — Peters  v.  Gay,  9 
Wash.  383,  37  Pac.  325. 

Federal. — American  File  Co.  v. 
Garrett,  110  U.  S.  288,  28  L.  Ed.  149, 
4  Sup.,  etc.,  40  (bonds  were  taken 
as  collateral  security  for  pre-exist- 
ing debt). 

English. — Currie  v.  Misa,  L.  R.  10 
Exch.  153  (title  of  bona  fide  holder. 


without  notice,  to  negotiable  secur- 
ity for  pre-existing  debt  is  inde- 
fensible whether  the  security  be  pay- 
able at  a  future  time  or  on  demand). 
Lord  Coleridge,  C.  J.,  dissented). 

Canadian.  —  Canadian  Bank  of 
Commerce  v.  Gurley,  30  U.  C.  C.  P. 
583. 

See  District  of  Columbia. — Leach 
v.  Lewis,  1  MacArthur  (D.  C.)  112 
(a  case  of  payment  and  additional 
security,  although  there  was  a  con- 
tention that  the  paper  passed  as  se- 
curity for  an  antecedent  debt). 

Louisiana. — Pavey  v.  Stauffer,  45 
La.  Ann.  353,  12  South.  512,  19  L.  R. 
A.  716  (assignee;  collateral  security 
for  a  running  account  of  the  maker 
with  the  payee  held  not  liable  to 
equities  between  parties). 

Holder  of  note  as  collateral  se- 
curity for  debt  is  bona  fide  holder 
for  value.  Randall  v.  Rhode  Island 
Lumber  Co.,  20  R.  I.  625,  40  Atl.  763, 
citing  Cobb  v.  Doyle,  7  R.  I.  550; 
Bank  v.  Carrington,  5  R.  I.  515. 

Pre-existing  debt  constitutes  value 
for  the  transfer  of  negotiable  paper, 
whether  the  instrument  is  payable 
on  demand  or  at  a  future  time.  This 
is  so  under  the  Virginia  statute,  al- 
though the  question  may  not  have 
been  previously  settled  in  that  state; 
and  one  who  is  a  holder  in  good 
faith,  before  maturity,  without  no- 
tice of  infirmities,  even  though  the 
transfer  is  made  merely  as  col- 
lateral, is  a  holder  for  value  to  the 
extent  of  the  amount  due  him. 
Payne  v.  Zell,  98  Va.  294,  36  S.  E. 
379;  Acts  1897,  1898,  pp.  896,  918, 
§§  25,  27. 


307 


COLLATERAL    SECURITY    FOR   PRE-EXISTING   DEBT.  [§    346 


comes  without  more,  a  holder  for  value  in  the  usual  course  of  business. 
And  in  a  Kansas  decision  it  is  determined  that  an  indorsee  of  a  nego- 
tiable note  taken  as  collateral  security  for  a  pre-existing  debt,  there 
being  no  extension  of  time  of  payment  or  other  new  consideration, 
except  such  as  may  be  deemed  to  arise  from  acceptance  of  the  paper, 
is  a  holder  for  value  and  in  due  course  of  business,  and  in  the  ab- 
sence of  any  circumstance  charging  him  witli  notice,  is  protected 
against  a  claim  of  payment  made  to  the  original  payee.  The  court, 
per  Mason,  J.,  said:  "The  rule  in  the  federal  courts,  as  well  as  in 
those  in  England  and  Canada,  is  that  the  holder  of  a  negotiable  note 
taken  as  collateral  security  for  a  pre-existing  debt  is  a  holder  for  value 
in  due  course  of  business,  and,  as  such,  is  protected  against  all  latent 
equities  of  third  parties.  The  state  courts  that  have  passed  upon  this 
question  are  in  irreconcilable  conflict."*'"  Although  it  would  seem 
that  the  above  rule  ought  to  be  deemed  the  true  and  better  one,  never- 
theless, as  stated  in  the  al)ove  extract  from  the  opinion  of  Mason,  J., 
there  is  an  "irreconcilable  conflict"  in  the  state  courts  and  a  number 
of  states  have  held  to  the  contrary.''^     But  the  courts  asserting  this 


""Birket  v.  Edward  (Kan.  1904,) 
74  Pac.  1100.  The  case  of  Bank  v. 
Dakin,  54  Kan.  656,  is  stated  to  have 
been  wrongly  placed  among  the 
states  committed  to  the  rule,  and 
that  case  is  explained.  The  state  de- 
cisions, as  well  as  certain  codes,  are 
also  considered  at  length. 

AlaMma. — Thompson  v.  Maddox, 
117  Ala.  468,  23  So.  157.  (One  who 
takes  negotiable  paper  as  collateral 
security  for  the  payment  of  a  pre- 
existing or  antecedent  debt  is  not  a 
purchaser  for  value  in  the  usual 
course  of  trade;  such  paper  is  open 
in  the  hands  of  the  assignee  to  all 
defenses  which  could  have  been 
made  against  it,  while  in  the  hands 
of  the  assignor  or  original  owner. 
But  one  who  honestly  receives  a  ne- 
gotiable bill  or  note  before  matur- 
ity, as  collateral  security  for  a  debt 
contracted  simultaneously,  or  in 
pursuance  of  a  previous  agreement, 
made  at  the  time  the  debt  was  con- 
tracted,   is    entitled    to    protection 


against  secret  equities  or  defects  of 
which  he  had  no  notice,  per  Haeral- 
son,  J.) ;  Vann  v.  Marbury,  100  Ala. 
438,  46  Am.  St.  Rep.  70,  14  So.  273, 
23  L.  R.  A.  325;  Haden  v.  Lehman, 
83  Ala.  243,  3  So.  528. 
Arkansas. — Bertrand  v.  Barkman, 

13  Ark.  150. 

Iowa. — Keokuk  County  Bank  v. 
Eunice  Hall,  106  Iowa  540,  76  N.  W. 
832;  Noteboom  v.  Watkins,  103  Iowa 
580,  72  N.  W.  766. 

Kentucky. — May  v.  Quimby  &  Co., 
3  Bush  (Ky.)  96  (distinction  is 
made  between  receiving  bill  in  ab- 
solute payment  of  antecedent  debt 
and  receiving  it  as  collateral  secur- 
ity only). 

Michigan. — Maynard  v.  Davis,  127 
Mich.  571,  36  N.  W.  1051,  8  Del.  L.  N. 
46. 

Mississippi. — First  National  Bank 
of  Meridian  v.  Strauss,  66  Miss.  479, 

14  Am.  St.  Rep.  579,  C  So.  232  (the 
court  said  that  the  reason  of  the 
rule  that  one  who  accepts  negotia- 


246] 


WANT    OR    FAILURE    OF    CONSIDERATIOX. 


508 


opposing  rule  are  evidently  bound  by  the  rule  stare  decisis  which  pre- 
cludes the  probability  of  a  change  except  such  as  may  be  brought  about 
by  statute.  Thus  it  is  said  by  Libbey,  J.,  in  a  Maine  case:"^  "The 
rule  which  requires  some  new  consideration  to  protect  the  indorsee 
who  takes  the  note  as  collateral  for  a  pre-existing  debt,  against  such 
a  defense  as  is  set  up  here,  is  admitted  as  the  settled  law  of  this  state 
when  the  note  in  suit  was  made.^^  But  it  is  claimed  by  counsel  for 
the  plaintiff  that  it  is  in  conflict  with  the  rule  established  by  the  fed- 
eral courts,  court  of  Massachusetts  and  many  of  the  other  states,  which 


ble  paper  before  maturity  as  secur- 
ity merely  for  a  pre-existing  debt  is 
a  holder  for  value,  is  the  sanctity  of 
negotiable  paper  and  the  policy  of 
leaving  it  unfettered  in  commercial 
transactions.  "But  it  can  find  no  ap- 
plication in  this  state  where  by  ex- 
press legislative  provision  negotia- 
bility (in  the  sense  in  which  the 
word  is  used  in  the  law  merchant) 
is  withdrawn  from  all  bills  of  ex- 
change and  promissory  notes  except 
those  payable  to  bearer"). 

Nebraska. — Smith  v.  Kinney,  32 
Neb.  162,  49  N.  W.  341  (note  was  in- 
dorsed to  mortgagee  as  collateral 
and  had  passed  to  plaintiff  with  the 
mortgage;  may  show  note  without 
consideration). 

NeiD  Hampshire. — Rice  v.  Raitt,  17 
N.  H.  166. 

New  York. — Potts  v.  Mayer,  74  N. 
Y.  594;  Comstock  v.  Hier,  73  N.  Y. 
269,  273,  29  Am.  St.  Rep.  142  (per 
Allen,  J.,  who  says:  "This  is  the 
well-established  rule  in  this  state"). 

North  Dakota. — Porter  v.  Andrus, 
10  N.  D.  558,  88  N.  W.  567  (held  not 
to  be  holders  for  value  or  holders  in 
due  course  under  §§  4884,  5130,  Rev. 
Codes). 

Ohio. — Roxborough  v.  Messick,  6 
Ohio  St.  448,  67  Am.  Dec.  346  (trans- 
feree of  note  as  collateral,  without 
any  new  consideration,  etc.,  is  not 
holder  for  value). 

Pennsylvania.  —  Altoona      Second 


National  Bank  v.  Dunn,  151  Pa.  St. 
228,  232,  25  Atl.  80,  31  Am.  St.  Rep. 
742;  Appeal  of  the  Liggett  Spring 
and  Axle  Co.,  Ltd.,  Ill  Pa.  St.  291, 
2  Atl.  684  (applied  to  pledge  to 
bank  of  negotiable  securities). 

Tennessee. — Vatterlein  v.  Howell, 
37  Tenn.  (5  Sneed)  441  (if  paper  is 
taken  in  payment  of  or  as  collateral 
security  for  a  pre-existing  debt,  it  is 
not  negotiated  in  due  course  of 
trade,  and  the  holder  stands  in  no 
better  position  than  the  payee  and 
would  be  subject  to  all  defenses 
available  against  the  payee). 

Wisconsin.  —  Burnham  v.  Mer- 
chants' Exchange  Bank,  92  Wis.  277, 
281,  66  N.  W.  510. 

See  Ohio.—SecoT  v.  Witter,  39 
Ohio  St.  218,  232,  233  (this  case, 
however,  is  only  a  qualified  author- 
ity, as  the  notes  were  taken  with 
actual  notice  of  that  which  made 
them  a  fraudulent  transfer) ;  Pitts 
V.  Foglesong,  37  Ohio  St.  676,  680,  41 
Am.  Rep.  540  (where  the  court  said 
it  was  not  disposed  to  question  the 
proposition,  but  the  principle  was 
not  applicable  to  the  case  before  it). 

Virginia. — Prentice  &  Weissinger 
V.  Zane,  2  Graft.  (Va.)  262  (rule 
qualified,  however). 

==  Smith  V.  Bibber,  82'  Me.  34,  19 
Atl.  89,  17  Am.  St.  Rep.  464. 

"^Citing  Nutter  v.  Stover,  48  Me. 
169;  Smith  v.  Hiscock,  14  Me.  449. 


309  COLLATERAIy   SECURITY    TOR   I'lIE-EXISTlXU    DEBT.  [§    24G 

is  well  shown  by  the  many  authorities  cited  on  their  brief ;  and  they 
urge  the  court  to  overrule  the  cases  in  tliis  state,  and  establish  here 
the  rule  held  by  them  which  requires  no  new  consideration,  and  thereby 
bring  this  state  in  accord,  upon  the  question  of  commercial  law,  with 
what  is  claimed  to  be  tlie  rule  established  by  the  greater  Aveight  of  au- 
thority. If  the  question  were  an  open  one  here  we  should  be  inclined 
to  adopt  the  federal  rule  as  the  one  best  sustained  by  principle  and 
authority,  but  it  has  been  so  long  settled  the  other  way  and  acted  upon 
in  this  state,  we  do  not  feel  we  should  be  justified  in  reversing  it." 
So  in  a  Missouri  decision**^  the  court  admits  that  the  first  stated  rule 
"seems  to  be  in  accord  with  the  decided  weight  of  authority,"  but  ad- 
heres to  its  own  state  decisions.  In  a  New  York  case  it  is  decided  that 
as  against  a  holder  in  due  course  a  note  which  is  unrestricted  in  its 
terms  is  not  subject  to  the  defense  of  want  or  failure  of  consideration, 
even  though  it  was  taken  as  collateral  security  for  an  antecedent  debt, 
as  such  holder  is  a  holder  for  value  ;"*'  especially  so  when  there  is  also 
an  agreement  to  forbear  action  on  the  existing  indebtedness  founded 
upon  a  consideration  which  was  the  delivery  of  the  security."'^  In  a 
North  Dakota  case  the  court,  per  Morgan,  J.,  says:  "Upon  the  ques- 
tion of  the  rights  of  holders  of  negotiable  paper  taken  in  due  course 
before  maturity  as  collateral  security  for  a  pre-existing  debt,  there  is 
a  radical  conflict  of  authority.  The  courts  sustaining  the  rights  of  the 
holders  to  recover  in  such  cases  as  against  equities  or  defenses  in  favor 
of  the  holders,  do  so,  generally,  upon  the  ground  that  by  becoming 
holders  of  such  negotiable  paper  through  indorsement,  they  become 
parties  to  it,  and  as  such  assume  obligations  in  reference  to  the  en- 
forcement of  the  same.  Those  courts  denying  the  rights  of  such  hold- 
ers to  recover  as  against  defenses  in  favor  of  the  makers  do  so  upon 
the  ground  that  the  holders  parted  with  nothing  in  the  nature  of  a 
new  consideration  when  they  acquired  such  note  or  other  negotiable 
paper ;  that  merely  accepting  the  note  as  collateral  security  for  a  pre- 
existing debt,  without  any  agreement  for  extension  of  time  or  for- 

'^Loeween  v.  Forsee,  137  Mo.   29,  Am.    Rep.   231;    McSpedon  v.    Troy, 

38  S.  W.  712,  59  Am.  St.  Rep.  489.  Bank,  41   N.  Y.  35;    Grandin  v.   Le 

""Milius  V.   Kauffmann,   93   N.   Y.  Roy,  2  Paige  (N.  Y.)   509;   Tinsdale 

Supp.    669,    citing    Neg.    Inst.    Law,  v.  Murray,  9  Daly  (N.  Y.)  446;  Fur- 

1897,  p.  729,  c.  612;   First  National  niss  v.   Gilchrist,  1   Sandf.    (N.  Y.) 

Bank  v.  Wood,  128  N.  Y.  35,  27  N.  E.  53. 

1020;  Continental  National  Bank  v.         «■  Milius  v.  Kauffmann,  104  N.  Y. 

Townsend,    87    N.    Y.     8;     Grocers'  App.  Div.  442,  93  N.  Y.  Supp.  669. 
Bank  v.  Penfield,   69  N.   Y.   502,  25 


§    247]  WANT   OR    FAILURE   OF    CONSIDERATION.  310 

bearanee  of  some  kind,  and  without  making  any  new  promise,  so  far 
as  the  original  debt  is  concerned,  or  any  new  obligation,  is  not  receiv- 
ing the  collateral  for  anything  of  'value'  within  the  meaning  of  that 
term  as  laid  down  in  the  statute  of  the  law  merchant.'"^^ 

§  247.  Same  subject — Particular  decisions. — A  pre-existing  debt  is 
not  such  a  valuable  consideration  as  will  protect  the  holder  of  a  ne- 
gotiable note  wrongfully  pledged  as  collateral  security  by  the  payee.*''^ 
If  notes  are  assigned  by  a  separate  instrument,  but  are  not  indorsed, 
as  security  for  a  pre-existing  indebtedness,  the  assignee  is  not  a  bona 
fide  holder  and  is  subject  to  all  defenses  available  against  the  payee 
had  they  remained  in  his  hands. '^^  And  where  a  note,  payable  to  a 
person  named,  or  bearer,  was  transferred  by  the  payee  to  his  creditor 
as  collateral  security  for  a  debt  due  from  the  payee  to  him,  and  a  suit 
was  brought  by  the  creditor  in  his  own  name  against  the  maker,  it  was 
held  that  it  furnished  no  defense,  if  the  latter  could  show  that  the 
p-iyee  had  paid  his  own  debt  to  the  plaintiff,  and  so  was  entitled  to 
have  the  note  returned  to  him  before  the  commencement  of  the  suit.'^^ 
If  a  note  is  transferred  to  secure  a  pre-existing  debt  in  consideration  of 
an  extension  of  time  of  payment  of  a  debt  there  is  a  valuable  considera- 
tion.'^- So  the  fact  that  the  bona  fide  holder  of  a  note,  with  whom  it 
was  deposited  before  maturity  as  collateral  security  for  a  debt,  knew 
that  it  was  accommodation  paper  and  that  the  indorsement  was  with- 
out consideration,  does  not  preclude  recovery  against  the  indorser,  even 
though  the  debt  secured  was  that  of  the  husband  of  the  maker  of  the 
note.'^^  Again,  where  a  suit  was  brought  in  Mississippi  on  a  note  made 
in  Tennessee  the  lex  loci  contractus  was  held  to  govern  and  it  being 
taken  as  collateral  was  therefore  subject  to  all  defenses  between  the 
maker  and  the  payee. ^* 

"'Porter  v.  Andrus,  10  N.  D.  558,  v.  Hanna,  124  Iowa  374,  100  N.  W. 

562,    563,    88    N.    W.    567,    per    Mor-  57. 
gan,  J.  "'Woodson  v.  Owens  (Miss.,  1892), 

"^  Union  Trust  Co.  v.  McClellan,  40  12  So.  207. 
W.  Va.  405,  21  S.  E.  1025.  As  to  lex  loci  contractus  and  note 

'"Sathre   v.    Rolfe    (Mont.,    1904),  transferred     as    collateral    security 

77  Pac.  431.  for    antecedent    debt,    see    National 

"  Silbley    v.    Robinson,    10    Shep.  Bank  of  Commerce  v.  Kenney  (Tex. 

(Me.)   70.  Sup.  Ct,  1904),  83  S.  W.  368,  rev'g 

'=  First  National  Bank  v.  Johnson,  80  S.  W.  555.    See  also  §§  258,  277, 

97  Ala.  655,  11  So.  690.  284,  and  chapter  on  collateral  herein. 

''^  German-American  Savings  Bank 


311  INTERMEDIARY   PARTIES.  [§§    248-250 

§  248.  Same  subject^Specific  exceptions.— The  following  excep- 
tions have  been  noted:  (1)  A  note  or  bill  negotiated  in  security  for 
a  debt  not  yet  due,  is  not  upon  sufficient  consideration,  ordinarily,  un- 
less the  creditor  wait  in  faith  of  the  collateral  after  his  debt  becomes 
due.  (2)  If  the  holder  is  notoriously  insolvent  before  the  note  or 
bill  is  negotiated  as  collateral  security,  it  is  said  the  creditor  can  only 
stand  upon  the  rights  of  his  debtor.  (3)  If  a  note  or  bill  is  taken 
merely  to  collect  for  the  debtor,  to  apply  when  collected,  the  creditor 
not  becoming  a  party  by  indorsement  so  as  to  be  bound  to  pursue  the 
rules  of  the  law  merchant  in  making  demand  of  payment  and  giving 
notice  back,  the  holder  is  merely  the  agent  of  the  owner.  (4)  So,  too, 
probably,  if  it  were  shown  positively  that  the  holder  gave  no  credit 
to  the  indorsed  bill  and  did,  in  no  sense,  conduct  differently  on  that 
account,  he  could  not  be  regarded  as  a  holder  for  value."  In  an  action 
by  an  indorsee  before  maturity  against  the  payee  it  may  be  shown  that 
the  note  was  given  as  security  merely  and  that  this  was  known  to  the 
indorsee  and  so  let  in  all  the  equities  between  the  maker  and  the 
payee.'^'' 

§  249.     Security  for  pre-existing  debt — Additional  consideration. 

Although  one  who  takes  a  note  as  security  for  an  antecedent  debt  is  a 
holder  for  value,  yet,  in  addition,  an  agreement  to  forbear  action  on 
the  existing  indebtedness  for  a  time,  founded  upon  a  good  considera- 
tion, such  as  the  delivery  of  security,  would  make  tlie  holder  one  in 
good  faith  for  -value,  and  such  note  not  having  been  diverted,  but  be- 
ing unrestricted  as  to  its  use,  would  not  he  sul)ject  in  such  holder's 
hands  to  the  defense  of  want  or  failure  of  consideration.'^' 

§  250.     Intermediary  party — Holder  from  bona  fide  holder.— The 

want  of  consideration,  in  whole  or  in  part,  cannot  be  insisted  on,  if 
the  plaintiff  or  any  intermediary  party  between  him  and  the  defend- 
ant took  the  bill  or  note  bona  fide  and  upon  a  valid  consideration.'^ 

"Atkinson  v.  Brooks,  26  Vt.  569,  35,  27  N.  E.  1020;    Continental  Na- 

584,  62  Am.  Dec.  592.  tional  Bank  v.  Townsend,  87  N.  Y. 

'"Grew    V.    Burditt,    26    Mass.    (9  8;   Grocers'  Bank  v.  Penfield,  69  N. 

Pick.)  265.  Y.  502,  25  Am.  Rep.  231;   McSpedon 

"Milius   V.   KaufEmann,   93   N.   Y.  v.  Troy  Bank,  41  N.  Y.  35;  Grandin 

Supp.  669;    Court,  per  McLaughlin,  v.    Le    Roy,    2    Paige    (N.   Y.)    509; 

J.,    cites,    on    the    first    proposition  Tinsdale  v.  Murray,  9  Daly  (N.  Y.) 

above  stated.  Negotiable  Inst.  Law,  446;    Furniss  v.  Gilchrist,  1   Sandf. 

§  91,  Laws  1897,  p.  729,  C.  612:  First  (N.  Y.)  53. 

National  Bank  v.  Wood,   128  N.  Y.  "Mallard  v.  Aillet,  6  La.  Ann.  92. 


251-253]         WAXT    OK   FAILURE    OF    CONSIDERATIOX. 


112 


If  negotiable  notes  are  traded  before  maturity  to  one  who  has  no  no- 
tice of  any  defect,  such  as  failure  of  consideration,  that  defense  can- 
not be  availed  of  as  against  an  innocent  holder  who  subsequently  takes 
such  notes  without  knowledge.'^  And  a  holder  from  a  bona  fide 
holder  of  title  to  a  note  is  entitled  to  recover  thereon,  even  though  he 
has  notice  or  knowledge  of  defenses  available  as  against  the  payee.*" 

§  251.  Paper  issued  by  corporation — Bona  fide  holder. — The  con- 
sideration of  negotiable  paper  issued  by  a  corporation  with  authority 
to  issue  the  same  cannot  be  inquired  into  in  an  action  by  a  bona  fide 
indorsee  for  value  before  maturity  as  against  the  maker,"  and  the  rule 
has  been  held  to  apply,  even  though  the  note  was  issued  for  an  un- 
authorized purpose.*^ 

§  252.  Want  or  failure  of  consideration  subsequent  to  transfer — 
Bona  fide  holder. — Failure  of  consideration  subsequent  to  the  transfer 
of  a  negotiable  note,  such  transfer  being  made  before  maturity,  is  no 
defense  to  an  action  by  the  indorsee ;  and,  in  the  absence  of  evidence 
to  contrary,  the  presumption  is  that  the  note  was  not  transferred  after 
maturity.*^  If  notes  are  exchanged  by  the  parties,  a  bona  fide  holder, 
for  a  good  consideration,  without  notice,  cannot  be  defeated  by  a  show- 
ing of  want  of  consideration  or  a  failure  of  consideration  subsequent 
to  the  transfer.** 

§  253.  Suit  in  name  of  original  party — Bona  fide  holder. — Want 
or  failure  of  consideration  is  a  defense  against  an  indorsee  or  holder 
of  a  note  or  bill  when  the  action  can  be  treated  as  one  against  the 
original  parties  to  the  note.*^ 

"Burch  v.  Pope  (Ga.,  1902),  40  S.  "Dexter  Sav.  Bank  v.  Friend,  90 

E.  227.  Fed.  703. 

^oHolliman   v.   Karger    (Tex.   Civ.  •*"  Bearden  v.  Moses,  75  Tenn.    (7 

App.,  1902),  71  S.  W.  299.    See  also  Lea)  459. 

Prentiss  v.  Strand,  116  Wis.  647,  93  ''  Trustees  v.  Hill,  12  Iowa  462. 

N.  W.  816.    See  also  Neg.  Inst.  Law  "  Hartwell    v.    McBeth,    1    Harr. 

N.  Y.,  §  97.  (Del.)    363;    Quincy  Union  Bank  v. 

"Cooks  V.   Pearce,  23   S.   C.  239;  Tutt,  8  Mo.  App.  342;  Sutherland  v. 

Blair   v.    Rutherford,    31    Tex.    465;  Whitaker,  50  N.  C.  5    (the  indorse- 

Pas.  Dig.  Art.  222.  Note  285;  Cornell  ment  was   in   blank  by  the   payee, 

V.  Hichens,  11  Wis.  353.   See  Wright  without   any   value,   and   could   not 

V.  Pipe  Iron  Co.,  101  Pa.  St.  204,  47  he    recovered    in    the   name    of   the 

Am.  Rep.  701.  payee  or  his  indorsee  for  the  want 

of  consideration). 


313     LEX    FORI — INDORSEMENT    FOR    TRANSFER    MERELY.    [§$ 


254-255 


§  254.  Lex  fori. — In  determining  the  form  of  pleas  of  want  of 
consideration  and  trial  the  lex  fori  will  control.^''  And  this  rule  has 
been  applied  where  the  distinction  between  simple  contracts  and 
contracts  under  seal  has  been  abolished  by  statute.**^  So  the  form  of 
pleading  and  trial  and  the  quality  and  degree  of  the  evidence,  and  the 
mode  of  redress  will  be  according  to  the  lex  fori.^^ 

§  255.  Indorsement  for  transfer  merely  or  to  pass  title. — That  the 
indorsement  was  wholly  and  entirely  without  consideration  and' was 
merely  for  transfer  of  title  in  accordance  with  a  bank  custom  is  a 
good  defense  in  an  action  by  the  indorsee  against  the  indorser.'*^  The 
court,  in  sustaining  this  rule,  said :  "In  the  case  of  Doolittle  v. 
Ferr}',""  Mr.  Justice  Brewer,  in  speaking  for  the  court  of  the  indorse- 
ment of  negotiable  paper,  said:  'Where  the  law  furnishes  such  apt, 
brief,  and  well-known  expressions  for  the  making  the  indorsement  ac- 
complish exactly  what  the  parties  may  desire,  wise  policy  demands 
that  each  form  of  indorsement  should  conclusively  carry  with  it  the 
liability  which  it  implies/   Again,  'that  these  implications  should  be 


^^  Williams  v.  Haines,  27  Iowa  251, 
1  Am.  Rep.  268.  See  Stevens  v.  Nor- 
ris,  30  N.  H.  466;  Green  v.  Sarmi- 
ento,  3  Wash.  (C.  C.)  17,  Fed.  Cas. 
No.  6760. 

"  Williams  v.  Haines,  27  Iowa  251, 
1  Am.  Rep.  268. 

*'  Harrison  v.  Edwards,  12  Vt.  648, 
36  Am.  Dec.  364. 

Lex  fori — Lex  loci  contractus — 
Equitable  defenses.  "  'The  principle 
is  that  whatever  relates  merely  to 
the  remedy  and  constitutes  a  part 
of  the  procedure  is  determined  by 
the  law  of  the  forum,  for  matters 
of  process  must  be  uniform  in  the 
courts  of  the  same  country;  but 
whatever  goes  to  the  substance  of 
the  obligation  and  affects  the  rights 
of  the  parties,  as  growing  out  of  the 
contract  itself,  or  inhering  in  it  or 
attaching  to  it,  is  governed  by  the 
law  of  the  contract.  *  *  *  So,  if  by 
the  law  of  the  place  of  a  contract 
equitable  defenses  are  allowed  in 
favor    of    the    maker    of    a    negotia- 


ble note,  any  subsequent  indorse- 
ment will  not  change  his  rights  in 
regard  to  the  holder.  The  latter 
must  take  it  cum  onere'  (citing 
Pritchard  v.  Norton,  106  U.  S.  124, 
129,  133,  1  Sup.  Ct.  102,  27  L.  Ed. 
104;  Story  Conflict  of  Laws,  §  332). 
*  *  *  Where  the  statute  where 
the  contract  is  made  and  to  be  per- 
formed operates  to  extinguish  the 
contract  or  debt  itself,  the  case  no 
longer  falls  within  the  law  in  re- 
spect to  the  remedy,  and  when  such 
a  contract  is  sued  upon  in  another 
state,  the  lex  loci  contractus,  and 
not  the  lex  fori,  governs."  Creston 
National  Bank  v.  Salmon  (Mo.  App. 
1906),  93  S.  W.  288,  289,  per  Elli- 
son, J.  Compare  Kaufman  v.  Bar- 
bour (Minn.  1906),  107  N.  W.  1128; 
Barry  v.  Stover  (S.  D.  1906),  107  N. 
W.  672. 

^''Lovejoy  v.  Citizens'  Bank,  23 
Kan.  331. 

"» Doolittle  V.  Ferry,  20  Kan.  230. 


§  255] 


WANT    OR   FAILURE    OF    COXSIDERATIOX, 


314 


as  conclusive  upon  all  the  parties  as  though  the  full  contract  were  re- 
duced to  writing.'  While  the  general  rule  applicable  to  such  cases  has 
been  stated  so  strongly  and  clearly,  yet  certain  limitations  and  ex- 
ceptions are  noted  in  the  opinion, — as  where  the  indorsement  was 
without  consideration,  or  upon  trust  for  some  special  purpose,  or  where 
there  was  an 'equity  arising  from  an  antecedent  transaction,  including 
an  agreement  that  the  note  should  be  taken  in  sole  reliance  upon  the 
responsibility  of  the  maker,  and  that  it  was  indorsed  in  order  to  trans- 
fer the  title  in  pursuance  of  such  agreement,  and  where  the  attempt 
to  enforce  it  would  be  fraud.  We  think  these  limitations  and  deci- 
sions are  justly  and  wisely  recognized  in  the  authorities."^^  So  upon 
a  hona  fide  sale  of  a  note  the  vendor  may  indorse  it  in  order  to  pass 
title  and  he  does  not  in  such  case  become  liable  for  its  payment.^- 
And  it  is  competent  for  the  indorser  of  a  negotiable  note  in  blank  to 
show  that  he  indorsed  such  paper  merely  to  pass  title,  and  that  he  as- 
sumed no  liability  conditional  or  otherwise  and  that  this  was  in  ac- 
cordance with  the  understanding  between  the  parties.^^  Again,  if  the 
plaintiff's  right  to  sue  as  the  bona  fide  holder  of  an  indorsed  note  is 
contested,  and  it  is  shown  that  he  became  possessed  of  it  as  agent  and 
not  in  the  usual  course  of  business,  the  indorsers  may  show  that  they 
indorsed  it  only  as  agents  and  without  ultimate  responsibility.®*  So 
where  one  acting  in  a  fiduciary  capacity  indorses  in  blank  and  the 
circumstances  so  show,  such  indorsement  must  be  regarded  as  noth- 
ing more  than  a  mere  transfer  of  the  right  of  action  on  the  notes.®^ 
But  it  is  also  held  that  words  clearly  expressing  such  intention  must 
be  inserted  in  the  contract  to  relieve  one  who  indorses  paper  from  his 
liability  on  his  indorsement,  and  that  where  the  facts  of  the  case  do 
not  so  warrant  the  position  cannot  be  sustained  that  the  form  of  the 
indorsement  is  one  for  the  mere  purpose  of  transferring  title  and  such 
as  to  preclude  the  idea  of  assuming  liability  as  an  indorser.®°  And  it 
is  further  decided  that  in  an  action  by  an  indorsee  against  his  in- 
dorser, 'prima  facie  the  face  of  the  note  fixes  the  sum  to  be  received, 
and  it  is  no  defense  to  the  action  that  the  note  was  delivered  to  the 
plaintiff  and  then,  at  his  request  and  solely  for  the  purpose  of  parting 
with  any  apparent  title  thereto,  defendant  indorsed  the  note."^     As 


"^  Lovejoy  v.  Citizens'  Bank,  23 
Kan.  331,  333,  per  Horton,  C.  J. 

«=Cowles  V.  McVickar,  3  Wis.  725. 

»=  Patten  v.  Pearson,  57  Me.  428. 

"McDonough  v.  Goule,  8  La.  472. 
See   Byers   v.    Harris,    56   Tenn.    (9 


Heisk.)  652,  as  to  necessity  of  intent 
of  agent  to  bind  himself  personally 
in  making  indorsement. 

"=  Wade  v.  Wade,  36  Tex.  529. 

'"  Fassen  v.  Hubbard,  55  N.  Y.  485. 

"  Lee  V.  Pile,  37  Ind.  107. 


315      INDORSEMENT  FOR  TRANSFER  MERELY  OR  TO  PASS  TITLE.       [§    256 

against  the  maker  an  indorsement  and  transfer  by  the  payee  for  col- 
lection is  sufficient,  even  though  without  consideration.''^ 

§  256,  Same  subject — Instances. — Where  the  payee  indorsed  on  the 
note  the  receipt  of  a  certain  part  of  the  amount  and  also  the  words 
"Pay  the  within  note  to"  the  plaintiff,  it  was  held  that  the  payee  was 
neither  an  indorser  nor  a  guarantor,  but  that  his  indorsement  merely 
passed  the  property  in  the  note  to  the  person  to  whom  it  was  thus 
made  payable.'"'  In  a  Pennsylvania  case  the  affidavit  of  defense  was: 
that  the  defendant  at  the  urgent  request  of  a  member  of  the  firm,  who 
were  the  makers  of  the  note,  and  without  any  consideration  whatever 
wrote  his  name  upon  the  back  of  the  note  for  the  sole  accommodation 
of  the  firm  and  upon  the  agreement  that  they  would  see  that  it  was 
paid,  that  said  indorsement  was  irregular  and  not  a  negotiable  instru- 
ment and  said  note  was  made  by  said  firm  payable  to  their  own  order 
as  payees,  and  it  was  first  indorsed  by  defendant  and  subsequently 
transferred  by  indorsement  by  the  payees.  It  was  held  that  the  reason 
of  the  rule,  that  unless  the  payee  is  the  first  indorser  there  can  be  no 
recourse  against  him,  did  not  apply  because  the  payees  were  also  the 
makers  of  the  note,  and  the  defendant,  though  entitled  to  the  position 
of  second  indorser,  was  deprived  of  no  valuable  rights,  as  he  could 
sue  the  payees  as  makers  of  the  note,  and  that  their  responsibility  to 
him  was  precisely  the  same  as  if  they  had  indorsed  the  note  as  payees 
before  he  placed  his  indorsement  upon  it;  therefore  the  defense  was 
insufficient.^""  Under  another  decision,  the  form  of  the  instruments 
made  them  checks  and  not  bills  of  exchange,  being  orders  drawn  upon 
a  bank,  signed  by  one  as  agent,  indorsed  in  blank,  and  upon  present- 
ment were  paid  by  the  bank.  It  was  determined  that  no  obliga- 
tion could  be  inferred  on  the  part  of  the  indorser  to  repay  the  bank  in 
default  of  repayment  by  the  drawer.^"^  So  where  the  defendant's  in- 
dorsement was  intended  only  to  transfer  to  another,  with  whom  he 
stood  in  known  confidential  relations,  the  legal  right  to  receive  money 
and  not  to  become  responsible  for  the  ultimate  payment  of  a  draft, 
such  indorser  is  not  liable."- 

''  McPherson    v.    Weston,    64    Cal.  Nat.  Bank  of  Lebanon  v.  Bachman,  3 

275,  30  Pac.  842.  Pa.  Dist.  460. 

^  Crawford  v.  Lyttle,  70  N.  C.  385.  ""  Westminster  Bank  v.  Wheaton, 

""Central  Nat.  Bank  v.  Dreydop-  4  R.  I.  30. 

pel,  134  Pa.  St.  499.  19  Atl.  689,  19  "=  Kimmell  v.  Bittner,  62  Pa.  St. 

Am.  St.  Rep.  713.   Followed  in  First  203. 


257] 


WANT   OR   FAILURE   OP    CONSIDERATION. 


316 


§  257.  Purchase  price  notes — Original  parties. — In  an  action  upon 
purchase  price  note,  between  the  original  parties  thereto,  an  inquiry 
may  be  made  into  the  consideration,  and  a  want  or  failure  thereof 
constitutes  a  good  defense.^"^  So  a  due  bill  cannot  be  collected  where 
it  recites  that  the  consideration  is  for  a  certain  share  in  a  store  and  the 
payee  fails  to  deliver  the  goods.^°*  There  are,  however,  decisions  which 
are  opposed  to  the  general  rule,  or  which  are  exceptions  to  or  qualifica- 
tions thereof,  or  which  perhaps  fall  within  the  rule,  but  by  reason  of 
the  circumstances  the  defense  of  want  or  failure  of  consideration  is 
not  available.^"^     If  the  purchaser  of  a  note  had  no  notice  of  the  al- 


"^Ohio  Thresher  and  Engine  Co. 
V.  Hensel,  9  Ind.  App.  326,  36  N.  E. 
716  (total  want  of  consideration  is  a 
defense;  buyer  entitled  to  defense 
of  failure  of  warranty) ;  Snyder  v. 
Hargue,  26  Kan.  416  (want  of  con- 
sideration is  good  defense) ;  Key- 
stone Mfg.  Co.  V.  Forsythe,  126 
Mich.  98,  85  N.  W.  262  (warranty 
had  failed  and  total  failure  of  con- 
sideration was  permitted  to  be 
shown.  Examine  same  case,  123 
Mich.  626,  82  N.  W.  521—115  Mich. 
51—72  N.  W.  1109). 

As  to  warranty,  see  §§  264,  265, 
herein. 

As  to  the  value  of  property  be- 
ing fraudulently  misrepresented 
and  constituting  a  total  failure  of 
consideration  under  the  Negotiable 
Instruments  Act,  §§  9,  10,  see  Taft 
V.  Myerseough,  197  111.  600,  64  N.  E. 
711,  rev'g  92  111.  App.  560. 

Failure  of  consideration  by  mis- 
conduct of  the  payee,  without  the 
fault  of  the  maker,  will  discharge 
the  latter  from  his  obligation.  Ker- 
nion  V.  Jumonville  de  Villier,  8  La. 
547. 

Examine  Swain  v.  Ewing,  1  Mor- 
ris (Iowa)  344,  a  case  of  total  want 
of  consideration.  The  notes  were 
given  to  secure  a  part  of  the  pur- 
chase money  for  a  certain  lot  of 
land  purchased  at  a  public  sale,  and 


by  fraud  or  mistake  of  the  acting 
commissioner  a  receipt  was  given 
for  a  different  lot,  and  the  one  actu- 
ally purchased  was  sold  to  another 
person. 

^"  Burns  v.  Ross,  17  Ky.  L.  Rep. 
181,  30  S.  W.  641;  Shoe  and  Leather 
Bank  v.  Wood,  142  Mass.  563,  8  N.  E. 
753;  under  Ky.  Genr.  Stat.,  C.  22, 
§§6,  21,  notes  in  hands  of  indorsee 
are  subject  to  any  defense  maker 
has  against  payee  before  notice  of 
transfer.  So  that  failure  of  consider- 
ation in  purchase-price  note  by  non- 
delivery of  goods  is  a  defense  to  note 
not  negotiable  by  law  of  state  where 
made. 

i»^  McNeel  v.  Smith,  106  Ga.  215,  32 
S.  E.  119  (plea  thereby  set  up  an 
agreement  and  condition,  not  only 
not  contained  in  the  note,  but  in 
direct  contradiction  of  the  written 
contract) ;  Heard  v.  De  Loach,  105 
Ga.  500,  30  S.  E.  940  (there  was  no 
evidence  that  the  notes  were  in  fact 
given  as  claimed);  McCormick 
Harvesting  Mach.  Co.  v.  Yoeman,  26 
Ind.  App.  415,  59  N.  E.  1069  (no 
evidence  showing  the  claimed  breach 
of  warranty  was  offered) ;  Wright  v. 
Benjamin,  5  La.  Ann.  179  (note  was 
given  for  purchase  of  certain  char- 
ter rights,  but  although  causes  of 
forfeiture  were  claimed  to  exist  at 
date  of  purchase,  yet  there  had  been 


317    PURCHASE-PRICE    NOTES — ACCEPTOR GUARANTORS.      [§§    258,  259 

Icged  failure  of  consideration  before  paying  the  purchase  price  such 
defense  is  not  available  to  preclude  his  recovery.""  Again,  if  per- 
formance of  conditions  or  a  tender  by  defendant  is  a  prerequisite,  com- 
pliance therewith  is  necessary  in  order  that  a  defense  of  want  or  failure 
of  consideration  may  be  of  avail. ^°^ 

§  258.  Purchase  price  notes — Acceptor. — If  an  article  is  uncon- 
ditionally sold  by  the  payee  to  the  drawer  with  a  warranty  super- 
added, want  or  failure  of  consideration  is  not  available  as  a  defense 
in  an  action  for  the  purchase  price.  The  remedy  is  for  a  breach  of 
the  warranty  or  by  way  of  recoupment  or  counterclaim,  so  that  a 
breach  of  warranty  cannot  be  set  up  by  the  acceptor  as  a  defense  to  an 
action  against  him,  upon  his  acceptance  of  the  purchase  price  draft.^*'^ 
But  where  the  purchaser  accepts  a  draft  on  him  by  the  vendor  before 
the  goods  arrive  and  on  arrival  receives  and  retains  the  goods,  he  is 
obligated  to  pay,  even  though  the  goods  are  not  merchantable  or  in 
accord  with  contract.^*"'  In  an  action  by  the  payee,  who  was  the  holder 
of  a  draft  against  the  drawee,  who  was  the  acceptor,  it  constitutes  a 
good  defense  that  the  draft  was  drawn  and  accepted  in  payment  of 
good  sound  merchantable  goods,  which  the  drawer,  through  his  agent, 
sold  and  had  agreed  to  deliver,  but  that  said  goods  were  not  delivered 
and  those  which  were  delivered  were  worthless  and  unmerchantable.^  ^° 

§  259.  Purchase  price  notes — Guarantors. — A  breach  of  warranty 
by  the  principal  in  a  transaction  cannot  be  set  up  by  a  guarantor  when 
sued  on  his  contract  of  guaranty,  and  this  rule  applies  where  the  de- 
fenses interposed  do  not  arise  upon  a  failure  of  the  consideration  of 
the  contract  on  which  the  jilaintiff's  action  is  founded,  but  are  to  be 
regarded  as  the  setting  off  of  distinct  causes  of  action  one  against  the 
other;  and  the  non-performance  of  the  plaintiff's  engagement  to  the 
makers  of  the  note  is  not  to  be  regarded  as  a  failure  of  consideration, 
but  as  an  independent  cause  of  action  which  the  makers  of  the  note 
and  they  only  can  assert.^^^  And  where,  before  the  note  is  delivered 
or  accepted  by  the  payee,  the  payment  of  the  purchase  price  note  is 

no    judicial    decree    of    forfeiture);  Ind.  168;  Acme  Co.  v.  Erne,  83  Kan. 

Dickson  v.   Tingstall,   3   C.   P.   Rep.  858,  66  Pac.  1004;   Hoag  v.  Parr,  13 

(Pa.)  128  (given  for  property  which  Hun  (N.  Y.)   95. 
third  party  was  bound  to  deliver).  "^  Marsh  v.  Low,  55  Ind.  271. 

""'  Burt  V.  Bennett,  116  Ga.  430,  42         ^"^  Walton  v.  Black,  5  Houst.  149. 
S.  E.  740.  ""Frence  v.  Gordon,  10  Kan.  370. 

""  Howard  v.  Higgins,  137  Cal.  227,         "^  Osborne  v.  Brice,  23  Fed.  171. 
69  Pac.  1060;    O'Kane  v.   Kiser,   25 


IGO] 


WANT    OR   FAILURE   OF    COXSIDERATION. 


318 


guaranteed  by  the  guarantor  in  writing,  the  consideration  to  the  mak- 
ers would  support  the  guarant}-.  And  even  if  the  guaranty  was  given 
in  accordance  with  the  contract  between  the  vendor  and  vendee  reserv- 
ing title  in  the  vendor  until  payment  of  the  note,  there  would  exist  a 
sufficient  consideration  to  support  it.^^'  But  the  writing  of  a  guaranty 
for  the  payment  of  the  mortgage  only,  upon  the  mortgage  only  and 
not  upon  the  notes,  is  not  an  indorsement  of  the  notes.  And  if  the 
guaranty  were  written  upon  the  notes  themselves  the  guaranty  would 
not  be  negotiable,  and  there  is  no  consideration  for  such  a  guaranty 
as  that  first  stated,  and  the  guaranty  not  being  a  negotiable  contract 
the  guarantor  could  set  up  against  a  bona  fide  purchaser  a  want  of  con- 
sideration for  the  guaranty."^ 

§  260.     Purchase  price  notes — Bona  fide  holder  or  assignee. — The 

defense  of  want  or  failure  of  consideration  is  not  available  against  one 
who  is,  within  the  rule  as  to  essentials,  a  bona  fide  holder  of  a  purchase 
price  note.^^*     And  where  a  vendor  of  land  took  several  negotiable 


"-  Winans  v.  Manufacturing  Co.,  48 
Kan.  777;  Stanley  v.  Miles  &  Ad- 
ams, 36  Miss.  434. 

"^  Briggs  V.  Latham,  36  Kan.  205. 

"*  California.  —  Siebe  v.  Joshua 
Handy  Mach.  Works,  86  Cal.  390,  25 
Pac.  14  ("it  is  contended  that 
there  was  a  failure  of  consideration 
for  this  note  *  *  *  But  findings 
show  that  the  plaintiff  was  an  inno- 
cent purchaser  of  the  note  for  value 
before  maturity"). 

Iowa. — Whittaker  v.  Kuhn,  52 
Iowa  315,  3  N.  W.  127  (note  here 
was  given  for  amount  of  assessment 
of  capital  stock  subscribed). 

Nebraska. — Stedman  v.  Rochester 
Loan  and  Banking  Co.,  42  Neb.  641, 
60  N.  W.  890  (note  given  for  stock 
in  milling  corporation);  Coakley  v. 
Christie,  20  Neb.  509,  31  N.  W.  73 
(note  for  purchase  price  of  personal 
property,  and  claim  of  non-compli- 
ance with  warranty) ;  Western  Cot- 
tage Organ  Co.  v.  Boyle,  10  Neb.  406, 
6  N.  W.  473  (proof  of  worthless 
character  of  property  as  defense  was 
not  permitted). 


New  Hampshire. — Green  v.  Bick- 
ford,  60  N.  H.  159  (a  note  given  for 
a  worthless  patent  or  for  an  ar- 
ticle not  patented  is  good  in  the 
hands  of  a  bona  fide  indorsee  for 
value,  without  knowledge  or  notice 
of  such  facts  or  of  any  infirmity  in 
the  note). 

North  Carolina. — Blackmer  v.  Phil- 
lips, 67  N.  C.  340  (failure;  purchase 
money  negotiable  notes  in  hands  of 
bona  fide  indorsee  before  maturity 
are  taken  free  from  all  equities  or 
drawbacks  except  indorser's  pay- 
ments). 

South  Carolina. — Bank  v.  Ander- 
son, 32  S.  C.  538,  11  S.  E.  379  (inno- 
cent indorsee  and  holder  of  pur- 
chase-price note  takes  free  from  any 
defense  of  the  maker  against  the 
payee). 

Vermont. — Brockway  v.  Mason,  3 
Williams  (Vt.)   519. 

See  Kansas. — Keith  v.  Thisler 
(Kan.,  1889),  61  Pac.  758  (note  was 
for  horses  warranted  to  be  sound, 
but  it  was  not ) .    But  see : 

Pennsylvania. — Hawley  v.  Hirsch, 


I 


319  puKCHASE-rmcE  xotes — bona  fide  holders.  [§  2G0 

notes  for  the  payment  of  the  purchase  money,  one  of  which  Avas  ne- 
gotiated in  the  usual  course  of  trade  and  the  others  were  not;  it  was 
lield  that,  although  the  holder  of  the  note  so  negotiated  was  not  sub- 
ject to  an  equity  existing  against  the  vendor,  such  equity  could  be  en- 
forced against  the  holders  of  the  other  notes  and  that  the  vendor  could 
not  be  required  to  apportion  the  loss.^^^  The  general  rule  especially 
applies,  where  the  maker  has  teen  fully  indemnified  against  loss  by 
the  payee  ;"'^  or  where  some  consideration,  no  matter  what  the  sum,^^^ 
or  a  valuable  one  at  the  time  of  the  transfer  is  shown  ;^^*  or  where  the 
maker  had  knowledge  at  the  time  of  purchase  of  the  character  and 
condition  of  the  vendor's  title  and  of  the  facts  alleged  in  defense;"® 
or  where  the  vendee  had  knowledge  of  the  transfer  of  the  note  to  the 
holder  and  of  the  facts  relied  on  as  a  failure  of  consideration.^-" 
Again,  if  a  note  is  written  for  value  received,  negotiable  and  payable 
without  defalcation,  it  is  no  defense  against  a  bona  fide  holder,  that  it 
was  without  consideration.^-^  Nor  is  it  a  defense  to  a  purchase  price 
note  for  land,  having  a  lawful  consideration,  that  the  property  was 
estimated  in  a  depreciated  or  unlawful  currency,  or  that  a  previous 
holder  was  willing  to  take  an  unlawful  currency  in  payment. ^^-  An 
assignee,  however,  even  though  a  bona  fide  purchaser  without  notice, 
has  been  held  subject  to  such  a  defense,^ ^^  especially  where  the  law 
governing  mercantile  paper  has  no  application;^-*  or  where  the  cir- 
cumstances are  sucli  that  he  was  obligated  to  use  such  precaution  and 
make  such  inquiry  as  would  be  expected  from  men  of  ordinary  pru- 
dence.^^^-  But  an  assignee  for  value  has,  nevertheless,  been  brought 
within  the  general  rule.^-*'     Under  the  Civil  Code  of  Georgia  the  as- 

2  Woodw.  Dec.    (Pa.)    158    (   a  pur-  "' Rees    v.    Sessions,    41    Ohio    St. 

chase-price  note  for  real  estate,  and  234. 

misrepresentations    of    the    vendor  ""  Green    v.    McDonald,    21    Miss. 

were   allowed    against  the   indorsee  (13  S.  &  M.)   445.    See  also  Myer  v. 

upon  the  ground  that  where  a  case  Hettinger,  94  Fed.  370. 

of   fraud   is  made   out  between   the  ^-"Wiggins  v.  McGimpsey,  21  Miss. 

original  parties,  the  assignee  or  in-  (13  S.  &  M.)  532. 

dorsee  is  put  upon  proof  that  he  is  '-^  Smith  v.   Giegrich,   36   Mo.   369 

an  innocent  purchaser  for  value).  (under  Rev.  Code  1855,  p.  320-3). 

"=  Andrews  v.  McCoy,  8  Ala.  920,  ^"Crosby  v.  Tucker,  21  La.  Ann. 

42  Am.  Dec.  669.  512.     See    Conwell    v.    Pumphrey,    9 

""Myer  v.  Hettinger,  94  Fed.  370  Ind.    135,   68   Am.    Dec.   611    (depre- 

(note    was    given    in    payment    of  ciated  bank  bills), 

stock;    defense    of    failure    of    con-  ^-'' Lucas  v.  Kernoddle,  2  Ala.  199. 

sideration  not  allowed).  '"  Liuville  v.  Savage,  58  Mo.  248. 

"■Howe   V.    Potter,    61    Barb.    (N.  ^-"' Sims  v.  Bice,  67  HI.  88. 

Y.)  356.  ^-"Dye  v.  Grover,  17  Ky.  L.  Rep. 


§    260]  WANT    OR   FAILURE   OF    COXSIDERATIOX.  320 

signee  or  holder  of  a  note  given  for  the  purchase  money  of  land,  may, 
in  appropriate  proceedings,  subject  the  land  to  the  pa'yment  of  his 
debt;  so  that  in  a  suit  brought  on  a  promissory  note  of  such  a  char- 
acter and  payable  to  named  persons  or  bearer,  it  is  not  a  good  defense 
that  title  to  the  notes  (since  the  act  of  1894  codified  as  above)  has 
been  transferred  without  indorsement  to  other  persons ;  and  an  amend- 
ment to  a  plea  seeking  to  set  up  this  defense,  and  claiming  that  the 
alleged  owners  of  the  notes  would  not,  in  a  suit  against  the  defendant, 
be  entitled  to  a  lien  upon  the  land  for  the  purchase  money  of  which 
the  notes  were  given  was  properly  allowed. ^-^  In  a  recent  Connecticut 
case  a  defense  to  an  action  on  a  note  was  that  the  note  was  delivered 
to  the  payee  on  an  express  condition  that  its  payment  should  be  con- 
tingent on  the  acceptance  of  certain  engines,  which  it  had  delivered  to 
defendant,  with  a  warranty  that  they  should  work  satisfactorily — and 
they  had  proved  unsatisfactory.  Certain  machinery  was  furnished 
and  guaranteed  but  was  found  not  to  work  satisfactorily ;  subsequently 
there  was  a  compromise  agreement  whereby  a  certain  amoimt  of  money 
and  a  note  were  to  be  given  and  certain  new  parts  of  the  machinery 
Avere  to  be  furnished,  and  the  note  in  suit  was  given  but  with  a 
reservation  as  to  the  machinery  complying  with  requirements,  but  the 
note  was  a  direct  tender  in  payment  for  certain  of  the  machines  and 
the  reservation  was  not  put  forward  as  a  qualification  of  the  tender 
but  of  the  manner  in  which  the  note  was  to  be  held  or  used,  the  tender 
remained  unqualified  and  unconditional.  It  was  made  to  pay  the 
debt  and  if  accepted  the  debt  would  be  extinguished  and  was  in  ful- 
fillment of  a  contract  dut}^,  so  that  the  defense  would  he  unavailing 
even  if  the  vendor  could  be  considered  as  having,  by  accepting  the 
note,  assented  to  the  proposed  modification  of  the  contract.  The  note 
was  indorsed  by  the  plaintiff  before  maturity  to  a  bank  and  deposited 
with  it  for  collection.  It  was  protested  and  then  returned  to  plaintiff. 
The  bank  received  the  title  for  the  sole  benefit  of  the  plaintiff.  When 
it  returned  the  note  'protested,  the  plaintiff  became  an  indorsee  in  pos- 
session and  invested  with  the  rights  belonging  to  all  holders  of  com- 
mercial paper  and  one  of  these  was  to  cancel  the  indorsement  which  it 
had  made,  whether  it  exercised  this  right  or  not  was  immaterial.  Itr 
mere  possession  of  the  note  was  sufficient  evidence  of  ownership  to 
support  a  suit,  and  in  an  action  by  the  indorsee  against  the  maker  a 

685,  32  S.  W.  294;   People's  Bank  of         ^=^  Ray  v.  Anderson,  119  Ga.  926,  47 
New    Orleans    v.    Tredeau,    38    La.     S.  E.  205. 
Ann.  898. 


321  PROPERTY  USELESS  OR  OF  XO  VALUE.     [§§  261,  2u2 

judgment  was  rendered  for  the  plaintiff.^-^  If  one  purchases  a  note 
and  it  is  assigned  to  him  he  acquires  the  right  to  enforce  the  vendor's 
lien  against  the  land  for  the  balance  of  the  purchase  money  by  a  suit 
in  his  own  name.  But  if  he  purchases  the  note  after  its  maturity  ho 
takes  it  subject  to  every  legal  or  equitable  defense  that  it  was  subject 
to  in  the  hands  of  the  payee. ^-''  Again,  where  the  maker,  when  first 
applied  to,  refused  to  acknowledge  the  validity  of  the  note,  alleging 
that  there  was  some  difficulty  about  the  consideration,  but  subsequently 
declared  that  the  difficulty  was  removed  and  the  note  would  be  paid, 
he  was  held  to  have  waived  his  right  to  set  up  failure  of  consideration 
against  an  assignee  who  had  purchased  the  paper  upon  the  faith  of  such 
assurance.^^'' 

§  261.  Effect  of  judgment — Assignees.^^''* — A  judgment  against  a 
garnishee  in  an  attachment  proceeding  against  the  payee  is  a  good  de- 
fense, to  the  extent  of  such  judgment,  to  an  action  against  the  maker 
by  an  assignee  upon  such  notes  where  the  maker  had  no  notice  of  the 
assignment  at  the  date  of  the  judgment. ^^^  It  is  also  a  good  reply  to 
a  defense  of  a  breach  of  warranty  pleaded  to  a  suit  upon  a  promissory 
note  given  for  personal  proport}^  that  a  judgment  has  ])een  recovered 
by  the  maker  of  a  note  for  the  damages  sustained  by  such  breach  of 
warranty.^^^ 

§  262.  Purchase  price  notes — Property  useless  or  of  no  value.^"-* 
It  has  been  asserted  as  a  rule  that  if  the  consideration  utterly  fails  by 
reason  of  the  thing  for  which  the  note  is  given  being  useless,  or  be- 
cause the  note  is  based  upon  a  void  consideration,  such  failure  of  con- 
sideration may  be  availed  of  as  a  defense  in  an  action  upon  the  note.^^^ 

'-'New    Haven    Mfg.    Co.    v.    New  9,  1891;   Sand  &  H.  Dig.,  §  492,  case 

Haven  Pulp  &  Board  Co.,  76  Conn,  was  reversed  and  remanded  because 

126,    55    Atl.    604    substantially    the  of  error  in  excluding  evidence  which 

opinion  of  Baldwin,  J.  tended  to  show  a  total  want  of  con- 

'^ Williams   v.   Baker    (Mo.   App.,  sideration,  etc.). 

1903),  93  S.  W.  339.  District    of    Columbia.— Hodge    v. 

'^"'Land    v.    Lacoste,    5    Miss.     (6  Mason,  21  D.  C.  181. 

How.)  471  (a  purchase-money  note).  Illinois. — Bailey    v.    Cromwell,    3 

'"'*See   §§   236,   237,  herein  as  to  Scam.    (111.)    71;    Kinzie  v.  Chicago, 

assignees  generally.  2  Scam.   (111.)   187,  33  Am.  Dec.  443 

'■*' Canady  v.  Detrick,  63  Ind.  485.  (in  this  case  a  lease  was  null  and 

"-  Herod  v.  Snyder,  48  Ind.  480.  void  and  a  plea  setting  up  such  facts 

'"=*See   §§  210,  211,  herein.  was  held  good). 

^^"^  Arkansas. — Tilson  v.  Gatling,  60  Indiana. — New     v.     Walker,     108 

Ark.  114,  29  S.  W.  35.    (Act  of  April  Ind.  365,  9  N.  E.  386,  58  Am.  Rep. 
Joyce  Defenses — 21. 


262] 


WANT   OR   FAILURE   OF    CONSIDERATION. 


322 


The  consideration  of  a  contract  is  always  open  to  inquiry  in  a  suit 
for  its  enforcement ;  and  where  the  answer  sets  up  that  the  note  sued  on 
was  for  the  purchase  price  of  certain  saw-mill  timber,  and  that 
part  of  the  land  conveyed  had  no  timber  on  it  at  all,  that  as  to  other 
portions  a  paramount  outstanding  title  existed  in  other  parties,  and 
that  the  defendants  had  never  been  in  possession  thereof,  such  answer 
is  good  as  a  plea  of  failure  of  consideration.^^*  So  the  sale  of  an  ab- 
solutely void  chose  in  action  will  not  form  any  consideration  for  a 
promise.  If  void,  no  legal  obligation  is  created  by  it ;  and  it  is,  in  the 
view  of  the  law,  as  if  it  did  not  exist.  The  principle  is  the  same,  not- 
withstanding the  chose  in  action  is  salable  in  market  for  even  the  full 
value  that  would  attach  to  it  if  valid.  If  the  law  does  not  recognize 
it  as  having  some  binding  force,  and  will  not  enforce  it,  a  note  given 
upon  the  sale  of  it  wull  be  invalid  for  want  of  consideration.^^^  Again, 
if  upon  the  sale  of  property  the  vendor  receives  a  note  with  an  indorse- 
ment for  a  greater  amount  than  the  purchase  money  and  gives  his 
o^vn  note  to  the  vendee  for  the  payment  of  the  excess  at  a  day  certain, 
the  vendor,  when  sued  upon  his  note,  may  show  in  defense  to  the  action 


40  (void  as  to  a  purchaser  with  no- 
tice unless  he  shows  that  his  in- 
dorser  was  a  good  purchaser  in 
good  faith);  Mulliken  v.  Latchen,  7 
Blackf.  (Ind.)  136;  Huggins  v. 
Strong,  4  Blackf.  (Ind.)  182. 

Kansas. — First  Nat.  Bank  v. 
Peek,  8  Kan.  660. 

Massachusetts. — Aldrich  v.  Stock- 
well,  91  Mass.  (9  Allen)  45;  Bierce 
V.  Stocking,  77  Mass.  (11  Gray) 
174;  Dickinson  v.  Hall,  31  Mass. 
(14  Pick.)  217,  25  Am.  Dec.  390. 

Minnesota. — Slater  v.  Foster,  62 
Minn.  150,  64  N.  W.  160. 

Missouri. — Marker  v.  Brown,  81 
Mo.  68  (consideration  had  wholly 
failed)  ;  Fenwick  v.  Bowling,  50  Mo. 
App.  516  (but  chattel  must  be 
worthless  for  all  purposes) ;  Joliffe 
V.  Collins,  21  Mo.  338;  Rowe  v. 
Blanchard,  18  Mo.  441,  86  Am.  Dec. 
783. 

Nebraska. — Schroeder  v.  Nielson, 
39  Neb.  335,  57  N.  W.  993. 

New  Hampshire. — Green  v.  Bick- 


ford,  60  N.  H.  159  (defense  of  want 
of  consideration  or  that  the  article 
purchased  was  worthless — a  patent 
— cannot  be  made  against  a  bona 
fide  indorsee  without  notice  or 
knowledge;  Dunbar  v.  Marden,  13 
N.  H.  (Patent). 

New  York. — Sill  v.  Rood,  15  John. 
(N.  y.)  230  (there  was,  however, 
the  element  of  fraud);  Hand  v. 
Feld,  Anth.  N.  P.  (N.  Y.)  87  (so, 
where  the  fact  of  worthlessness  was 
fraudulently  concealed. 

Vermont. — Smith  v.  Smith,  30  Vt. 
139  (consideration  was  for  a  part- 
nership interest  which  was  worth 
nothing). 

Wiscotisin. — Rowe  v.  Blanchard, 
18  Wis.  441,  86  Am.  Dec.  783. 

"*  Butler  &  Co.  v.  McCall,  119  Ga. 
503,  46  S.  E.  647.  See  also  Wells  v. 
Gress,  118  Ga.  566,  45  S.  E.  418;  Civ. 
Code,  §  3555,  considered  in  §  265 
herein. 

"'^  Sherman  v.  Barnard,  19  Barb. 
N.  Y.)  291. 


323  VENDOR   OR   SELLER   WITHOUT    TITLE.  [§    2G3 

that  the  maker  of  the  indorsed  note  was  insolvent  and  that  a  suit 
against  him  would  have  been  unavailing  and  this,  although  no  action 
was  brought.^^''  But  it  is  also  decided  that  it  is  no  defense  as  between 
the  original  parties  to  a  purchase  price  note  for  goods  that  the  goods 
turned  out  to  be  of  no  value,  by  reason  of  which  the  consideration 
wholly  failed  without  proof  of  an  express  and  fraudulent  warranty  of 
the  goods."'^  And  it  is  held  that  a  bona  fide  indorsee  of  a  note  is  not 
subject  to  defense  of  want  of  consideration,  although  the  note  was 
given  for  a  worthless  article,  such  indorsee  having  no  knowledge  of 
the  facts.^^*  So  a  person  who  has  bargained  with  one  in  possession 
for  a  license  to  dig  and  carry  away  minerals,  cannot,  after  enjoying 
the  privilege,  refuse  to  pay  on  the  ground  that  somebody  else  had  a 
better  right  to  the  possession.  In  these  cases  the  title  to  land  is  not 
involved.^^^  And  the  interest  of  a  retiring  partner  in  the  good  will 
of  a  business  is  a  good  consideration  for  a  note  and  it  constitutes  no 
failure  of  consideration  that  the  business,  which  is  purchased  after- 
ward, proves  not  so  successful  as  before.^'*" 

§263.     Vendor  or  seller  without  title  or  interest — ^Loss  of  title. 

The  general  rule  permitting  a  defense  of  want  or  failure  of  considera- 

1^"  Litchfield  v.  Allen,  7  Ala.  779.  defense  that  the  article   for  which 

"^Delaware. — O'Neal   v.    Bacon,   1  the  note  was  given  was  of  no  value. 

Houst.   (Del.)   215.  But  had  the  property  never  passed, 

Illinois. — Myers  v.   Turner,  17  111.  or  had  fraud  been  practiced  or  an 

179  (even  though  patent  practically  express  warranty  broken,  the  action 

of  no  value  recovery  may  be  had  on  might  be  defeated'), 

note  given  therefor).  North  Carolina. — Fair  v.  Shelton, 

7n(Ziana.— Kerwodle     v.     Hunt,     4  128  N.  C.  105,  38  S.  E.  290   (cannot 

Blackf.    (Ind.)    57    (no  defense  that  set  up  as  total  failure  of  considera- 

patent  right  sold  was  not  useful  and  tion  that  patent  worthless, 

valuable).  Vermo7it.— Bryant  v.   Pembler,   45 

Massachusetts. — Gilmore  v.  Allen,  Vt.  487  (it  is  no  defense  to  an  action 

118    Mass.    94    (where   part   of   con-  upon  a  note  given  for  the  price  of 

sideration  valid   as   to   several   pat-  personal  property  that  it  was  worth- 

ents,  note  valid,  even  though  reissue  less  at  the  time  of  the  sale  if  the 

of  one  of  the  patents  invalid) ;  Nash  sale  was  without  fraud  or  warranty 

V.  Lull,  102  Mass.  60,  3  Am.  Rep.  435  on  the  part  of  the  vendor), 

(valid  patent  without  regard  to  its  "'^  Careen  v.  Bickford,  60  N.  H.  159. 

pecuniary  value  is  good   considera-  "^Rhoades  v.  Patrick,  27   Pa.   St. 

tion).  323. 

New   Hampshire.— Reed    v.    Pren-  ""Smock  v.  Pierson,  68   Ind.  405, 

tiss,  1  N.  H.  174,  8  Am.  Dec.  50   (it  34  Am.  Rep.  269. 
is   as   between   original  parties,   no 


§  263] 


WAN"!    OR   FAILURE   OF    CONSIDERATION. 


324 


tion  has  also  been  applied,  as  between  original  parties,  where  the 
vendor  or  seller  had  no  title  and  could  convey  none.^*^ 


"1  California. — Fisher  v.  Salmon, 
1  Cal.  413,  54  Am.  Dec.  297  (vendor 
had  no  title  or  color  of  title  or  pos- 
session). 

Illinois. — Davis  v.  McVickers,  11 
111.  (1  Peck)  327  (there  is  a  failure 
of  consideration  where  vendor  has 
no  title  and  can  acquire  none) ; 
French  v.  Carr,  7  111.  (2  Gil.)  664 
(sale  was  made  after  bankruptcy 
and  after  title  was  gone  and  the 
promise  was  therefore  wholly  with- 
out consideration  and  precluded  re- 
covery on  note). 

Indiana. — Kernodle  v.  Hunt,  4 
Blackf.  (Ind.)  57  (sale  of  patent 
right  of  which  payee  had  no  owner- 
ship or  authority  to  sell). 

Kansas. — Vickroy  v.  Pratt,  7  Kan. 
238  (note  for  title  to  Indian  lands 
and  vendor  did  not  own  or  possess 
except  by  virtue  of  an  unlawful 
claim). 

Kentucky. — Crawford  v.  Beard,  4 
J.  J.  Marsh.  (Ky.)  187  (a  sale  of 
personal  property). 

Massachusetts.— Roc^  v.  Nichols, 
85  Mass.  (3  Allen)  343  (shares  sold 
were  not  owned  by  payee  when  he 
undertook  to  sell  them). 

Minnesota. — Durment  v.  Tuttle, 
50  Minn.  426,  52  N.  W.  909  (title  to 
part  of  land  failed,  a  case  of  partial 
failure  of  consideration). 

Missouri. — Hacker  v.  Brown,  81 
Mo.  68  (consideration  wholly  failed 
as  represented  and  taken  at  time  of 
exchange) ;  Wellman  v.  Dismukes, 
42  Mo.  101  (where  contract  remains 
executory  purchaser  may  demand 
clear  title  and  vendor  to  recover 
must  show  an  ability  to  comply  with 
stipulations  of  covenants). 

Texas. — Garrison  v.  King,  35  Tex. 
183    (notes  were  for  house  and  lot 


and  vendor  had  no  title  and  ac- 
quired none  and  made  no  deed. 
Held  a  good  defense) ;  Roehl  v. 
Pleasants,  31  Tex.  45,  98  Am.  Dec. 
514  (administrator  sold  land  with- 
out good  title;  plea  of  failure  of 
consideration  sustained);  Richard- 
son V.  McFadden,  13  Tex.  278  (that 
title  to  personal  property  not  in 
seller  a  good  defense). 

But  see  Iowa. — Findley  v.  Rich- 
ardson, 46  Iowa  103  (holding  that  a 
purchaser  having  acquired  all  the 
interest  of  the  owner  in  the  land 
he  cannot  defend  on  the  ground  of 
failure  of  consideration,  the  land 
being  purchased  at  a  guardian's 
sale). 

Minnesota. — Lough  v.  Bragg,  18 
Minn.  121  (Gil.  106).  Holding  that 
the  vendor's  want  of  title  is  not 
a  ground  of  want  of  failure  of  con- 
sideration of  a  purchase  price  note 
given  for  the  agreed  price. 

Texas. — Ward  v.  Williams,  45 
Tex.  617  (a  case  of  purchase  at  ad- 
ministrator's sale  the  rule  caveat 
emptor  applying). 

Examine  further  the  following 
cases: 

Alabama. — Stark  v.  Anderson,  30 
Alf..  438  (note  for  land  purchased 
at  administrator's  sale  held  to  be 
without  consideration). 

Connecticut. — Clark  v.  Sigourney, 
17  Conn.  511. 

Illinois. — Linton  v.  Porter,  31  111. 
107. 

Indiana. — Mullen  v.  Hawkins,  141 
Ind.  363,  40  N.  E.  797  (failure  of 
title  no  defense  where  there  are  no 
covenants  of  warranty). 

Louisiana. — Byrd  v.  Craig,  1  Mart. 
N.  S.  (La.)  625  (failure  of  consider- 
ation   and    failure   to    make    title). 


325  PURCHASE-PRICE   NOTES — LAND — WARRANTY.  [§    264 

§  264.  Purchase  price  notes — Land — Warranty. — A  breach  of  war- 
ranty of  title  may  be  set  up  as  a  defense  to  a  purchase  price  note  for 
land.^*^  So  it  is  decided  in  a  federal  case  that  a  loss  of  title  under 
a  contract  of  bargain  and  sale  may  constitute  a  partial  failure  of  con- 
sideration."^ And  in  North  Dakota  a  total  or  partial  failure  of  con- 
sideration or  want  of  consideration  may  be  shown  as  a  complete  or  par- 
tial defense  in  an  action  on  a  note  given  for  the  purchase  price  of  land 
sold  with  covenants  where  the  title  has  failed  or  partially  failed ;  and 
in  case  of  a  breach  pf  covenant  against  incumbrances  the  purchaser  is 
entitled  to  a  credit  on  a  note  given  for  the  purchase  price  of  real 
estate  of  the  amount  paid  by  him  to  protect  his  title  against  such  in- 
cumbrance by  paying  such  incumbrance.^**  For  a  long  time  a  rule 
prevailed  in  Maine  to  the  effect  that  a  partial  failure  of  title  con- 
stituted no  defense  to  a  suit  given  on  a  note  given  for  real  estate.  This 
doctrine  became  so  firmly  established  and  was  reiterated  in  so  many 
decisions  that  the  state  legislature  in  1897  deemed  it  wise  and  ex- 
pedient to  abrogate  it  by  legislation  which  appears  in  Eev.  Stat.  C.  84, 
§  40,  as  follows :  "In  any  proceeding  in  law  or  in  equity  in  which  the 
amount  due  on  a  promissory  note  given  for  the  price  of  land  conveyed, 
is  the  question,  and  a  total  failure  of  consideration  would  be  a  good 
defense,  a  partial  failure  of  consideration  may  be  shown  in  reduction 
of  damages."  But  this  rule  has  never  prevailed  in  respect  to  a  note 
given  for  another  consideration.  The  rule  then  in  that  state  is  this : 
whenever  a  promissory  note  is  given  for  two  or  more  independent  con- 

Mississippi. — Billingsley     v.     Nib-  the  lessor  makes  title  under  an  In- 

lett,  56   Miss.    537    (trust   deed   and  dian,  plaintiff  cannot  recover), 

note;    no    defense  that   title   worth-  Texas. — Earnest    v.    Moline    Plow 

less).  Co.,  8  Tex.  Civ.  App.  159,  27  S.  W. 

Missouri. — Hudson    v.    Busby,    48  734. 

Mo.  35.  As  to  coverture  affecting  the  con- 

Montana. — First  Nat.  Bk.  v.  How,  sideration  in  action  by  husband  of 

1  Mont.  604  (a  failure  of  considera-  deceased    wife    against    maker,    see 

tion  does  not  exist  where  the  maker  Campbell  v.  Moulton,  30  Vt.  667  (in 

delivered  over  the  property  without  this    case    the    legal    title    was    not 

legal  necessity  to  a  claimant).  passed  at  the  time  but  subsequently. 

New  Hampshire. — Perkins  v.  Bum-  "=  Williams    v.    Baker    (Mo.    App. 

ford,  3  N.  H.  522.  1903),  73  S.  W.  339. 

Ohio. — Chaffee  v.  Garrett,  6  Ham.  '"  American  National  Bank  v.  Wat- 

(Ohio)    421    (where    the    considera-  kins  (U.  S.  C.  C.  A.,  Wis.)  119  Fed. 

tion  of  a  note  is  a  lease  of  lands  545. 

within   an    Indian    reservation,    and  '"  Dahle  v.   Starke    (N.   D.   1903), 

96  N.  W.  353. 


265] 


WANT   OR   FAILURE   OF    CONSIDERATION. 


326 


siderations,  and  there  is  a  failure  of  consideration  as  to  one,  as  -where 
the  title  to  the  articles  sold  is  not  in  the  vendor  at  the  time  of  the  sale, 
or  where  there  is  a  breach  of  warranty  or  a  misrepresentation  as  to 
quality,  for  the  purpose  of  avoiding  circuity  of  action,  the  law  will 
allow  the  defendant,  in  an  action  between  the  original  parties,  or  be- . 
tween  others  standing  in  no  better  position,  to  show  such  partial  failure 
of  consideration  in  reduction  of  damages. '^'^^  Again,  under  a  Missouri 
decision,  a  failure  or  partial  failure  of  consideration  for  the  pur- 
chase price  of  land  on  warranty  may  be  interposed  to  defeat  a  suit 
to  enforce  a  vendor's  lien  for  the  balance  of  the  purchase  price  evi- 
denced by  a  note.^*''  But  an  outstanding  title  in  a  stranger  is  held  to 
be  no  defense  where  the  purchaser  of  land  is  in  possession  under  a 
deed  with  covenants  of  warranty. ^*^  Nor  is  it  any  defense  that  land 
was  not  free  from  but  was  subject  to  incumbrances  contrary  to  cove- 
nant."8 


§  265.     Purchase  price  notes — Personal  property — Warranty. — The 

plea  of  failure  of  consideration  of  the  purchase  price  for  personal 
property  sold  on  a  warranty  is  available  as  a  defense  in  a  suit  to  re- 
cover such  price.^*''  And  a  breach  of  warranty  for  goods  sold  consti- 
tutes a  good  defense  to  an  action  upon  it  by  the  payee  of  a  promissory 
note  for  the  price.  ^^^    So  where  the  plea  of  total  failure  of  considera- 


^*^  Hathorn  v.  Wheelwright,  99  Me. 
351,  59  Atl.  517,  per  Wiswell,  C.  J. 

""Williams  v.  Baker,  (Mo.  App. 
1903),  73  S.  W.  339. 

"'  Winstead  v.  Davis,  40  Miss.  785. 

"^Lattin  v.  Vail,  17  Wend.  (N.  Y.) 
188. 

""Williams  v.  Baker  (Mo.  App. 
1903),  73  S.  W,  339  ("is  the  well- 
settled  law  of  this  state,"  per  Bland, 
P.  J.). 

""Aldrich  v.  Stockwell,  91  Mass. 
(9  Allen)  45;  Sturges  v.  Miller,  80 
111.  241  (failure  of  consideration.  In 
this  case  the  notes  were  given  for 
the  purchase  of  a  propeller  with  the 
title  warranted  and  the  vessel  was 
libeled  and  sold  for  old  debts  which 
were  liens  upon  it  at  the  time  of 
sale,  and  it  was  held  that  the  con- 
sideration had  wholly  failed,  the 
vessel   having   been   wholly   lost  to 


defendant) ;  Hoopes  v.  Northern 
Nat.  Bank,  102  Fed.  448.  (Failure 
of  consideration;  a  note  in  part  pay- 
ment of  machinery  and  failure  of 
guaranty  in  respect  thereto.  The 
action  was  against  the  indorser  on 
his  irregular  indorsement,  so  that 
the  plaintiff  was  not  the  bona  fide 
holder  but  sued  thereon  for  the  ben- 
efit of  the  payee  and  it  was  held 
that  the  case  was  to  be  treated  as  if 
the  suit  was  by  the  payee,  the  nomi- 
nal plaintiff  standing  upon  the 
rights  of  the  payee  and  the  defend- 
ant being  an  original  accommoda- 
tion indorser  and  the  case  was  held, 
therefore,  to  be  subject  to  the  rule 
that  the  consideration  of  every 
promissory  note  is  open  to  inquiry 
between  any  of  the  immediate  par- 
ties to  the  note.) 


337  PURCHASE-PRICE    NOTES — PERSONAL    PROPERTY.  [§    265 

tion  in  that  the  article  is  worthless  is  available  as  a  defense  to  a  pur- 
chase price  note  given  for  the  property,  in  a  suit  for  a  breach  of  war- 
ranty of  personal  property  it  is"  not  error  for  the  court  to  charge  under 
the  code  to  the  effect  that  in  ordinary  sales  there  is  an  implied  war- 
ranty that  the  article  sold  is  merchantable  and  suitable  for  the  use 
intended.^'^^  In  Kentucky,  upon  an  executed  sale,  the  purchaser  of 
personal  property  has  a  right  to  retain  it  and  make  defense  by  way 
of  recoupment,  and  if  a  warranty  be  proven,  credit  should  be  given 
on  the  purchase  price  note  for  the  difference  between  the  agreed  price 
and  the  actual  value  of  the  property  at  the  time  it  was  received.  If  the 
claim  has  been  assigned,  the  assignee,  where  the  statute  so  provides,  is 
subject  to  the  same  defenses  as  might  have  been  used  against  the 
original  payee.^^-  Again,  where  a  defense  was  set  up  that  a  note  was 
given  in  part  payment  of  a  machine  purchased  upon  a  contract  of 
warranty  which  had  wholly  failed  a  judgment  was  rendered  for  de- 
fendant.^ ^^  So  one  of  two  partners,  the  other  having  defaulted,  may 
plead  the  defense  of  breach  of  contract  of  warranty.^^*  And  where 
goods  were  warranted  but  were  deficient  in  quality  and  the  defects 
were  not  discoverable  until  after  delivery  and  use,  it  was  held  that 
plaintiff  acquired  title  after  maturity  with  full  notice,  and  the  defense 
was  held  good.^^^  But  the  maker  of  a  promissory  note  executed  and 
delivered  in  renewal  of  one  previously  given  for  the  purchase  of  per- 
sonal property,  cannot  defeat  a  recovery  thereon  because  of  alleged 
failure  of  consideration  based  on  the  ground  that  the  property  was  de- 
fective, when  it  appears  that  such  maker  had  full  and  complete  knowl- 
edge of  the  defects  in  the  property  at  the  time  of  signing  the  note.^^® 
If,  however,  a  renewal  note  is  given  in  consideration  of  a  promise  by 
a  seller  of  a  warranted  article  to  repair  defects,  and  such  promise  is 
not  performed,  the  breach  of  such  promise  and  the  damage  sustained 
in  consequence  of  said  breach,  may  properly  be  alleged  in  an  action 
against  the  maker  on  the  note.^''^ 

''^^  Wells  v.  Gress,  118  Ga.  566,  45  "'Hays  v.  Kingston  (Pa.  1899),  16 

S.   E.   418;    Civ.   Code,   §   3555.    See  AtL  745,  23  Wkly.  Not.  Cas.  277. 

§  262  herein.  '=«  Atlanta  R.  Co.  v.  American  Car 

'"Harrigan  v.   Advance  Thresher  Co.,  100  Ga.  254,  28  S.  E.  40. 

Co.,  26  Ky.  L.   Rep.   317,   81    S.   W.  '=>•  Atlanta  City  Street  Ry.  Co.   v. 

261,  Ky.  Rev.  Stat.  1903,  §  474.  American  Car  Co.,   103   Ga.   254,  29 

"'Wardner,   Bushnell    &   Glessner  S.    E.    925;    distinguishing   Electric 

Co.  v.  Myers   (Neb.  1903),  96  N.  W.  Co.  v.  Blount,  96  Ga.  272,  23  S.  E. 

992.  306.    See  also  Blount  v.  Edison  Co.. 

'"Braley  v.  Goff,  40  Iowa  76.  106  Ga.  197,  32  S.  E.  113. 


§    266]  WANT   OR   FAILURE   OF    CONSIDERATION.  328 

§  266.  Where  property  for  which  note  is  given  is  of  some  value — 
No  failure  of  consideration. — In  the  absence  of  fraud  a  party  will  not 
be  allowed  to  interpose  as  a  defense,  to  an  action  for  the  purchase 
price,  the  fact  that  the  property  was  not  pecuniarily  worth  what  he 
supposed  it  to  be.  And  when  the  consideration  of  a  promissory  note 
consists  of  the  payee's  agreement  to  transfer  to  the  maker  certain 
stock  in  a  corporation,  the  agreement  is  no  less  valid  because  the  value 
of  the  stock  becomes  depreciated  by  subsequent  events.  Such  a  de- 
preciation no  more  gives  the  defendant  a  right  to  avoid  his  obligation 
to  pay  the  stipulated  price  than  an  enhanced  value  would  avail  the 
plaintiff  as  an  excuse  for  the  non-fulfillment  of  his  agreement.^^^ 
Again,  the  fact  that  the  property  for  which  the  note  was  given  is  not 
as  valuable  as  the  purchaser  hoped  or  believed  and  he  received  what 
he  contracted  for  and  there  is  no  fraud  on  the  vendor's  part  and  the 
representations  are  as  to  the  value  of  property  to  ascertain  which  the 
usual  methods  of  business  men  would  have  been  sufficient  and  the  rep- 
resentations were,  if  relied  on,  at  the  purchaser's  risk,  there  is  no  want 
or  failure  of  consideration.^ °"  So  where  a  note  is  given  as  a  part  of 
the  entire  consideration  for  the  purchase  by  one  partner  of  his  co- 
partner's interest  in  the  partnership,  the  contract  is  entire  and  it 
not  being  disputed  that  the  stock  and  accounts  mentioned  in  the  con- 
tract were  valuable,  there  exists  a  good  and  valuable  consideration  for 
the  note  which  precludes  sustaining  a  defense  of  failure  of  considera- 
tion.^"'* If  a  note  is  admitted  to  have  been  given  for  certain  goods 
and  it  is  not  denied  that  such  goods  are  of  value,  the  fact  that  they  arc 
not  such  goods  as  to  meet  the  demands  of  the  defendant's  trade  as 
represented  by  plaintiff's  agent,  such  representations  being  nothing 
more  than  the  expression  of  such  agent's  opinion,  does  not  constitute 
a  failure  of  consideration.^*'^  It  is  also  decided  that  if  the  article,  for 
the  price  of  which  the  note  was  given,  is  not  wholly  worthless  the 
payee  may  recover  the  full  amount  thereof.^"^  So  where  a  note  is 
given  for  land  it  is  held  that  the  defect  of  title  must  be  entire  so  that 
nothing  valuable  passes  by  the  conveyance.  If  anything  valuable  does 
pass  it  becomes  a  case  for  unliquidated  damages,  the  remedy  for  whicli 
is    by    action    for    covenant    broken. ^''^     Again,    defendants    entered 

"'Furber  v.  Fogler,  97  Me.  585,  55  ""  Shiretzki  v.  Kessler  (Ala.  1904), 

Atl.  514.  37  So.  422. 

^'^^  Harness  v.  Home,  20  Ind.  App.  .  ^"- Clark  v.  Peabody,  9  Shep.  (Me.) 

134,  50  N.  E.  395.  500. 

i»»  Taylor  v.  Ford  131  Cal.  440,  63  ^"^  Jenness    v.     Parker,    11     Shep. 

Pac.  770.  (Me.)  289. 


329  EIGHTS    OF   HOLDER   AXD    PRIOR   INDORSEE.  [§§    267,    2G8 

into  an  agreement  to  pay  a  stated  price  for  each  share  of  stock  in  a 
specified  company  then  being  formed,  and  a  note  was  given  pursuant 
to  the  terms  of  the  agreement ;  that  is,  the  note  was  accessory  to  said 
written  agreement.  The  company  was  never  formed  and  no  shares  of 
stock  in  such  company  were  ever  issued  and  it  was  decided  that  the  note 
never  became  a  binding  obligation  between  the  makers  and  payee,  and 
one  not  an  innocent  purchaser  of  such  notes  was  bound  by  the  facts 
and  could  not  recover.^***  But  where  in  a  suit  by  the  payee  of  a  prom- 
issory note,  against  the  makers,  the  defendants  pleaded  that  the  note 
was  given  in  consideration  for  part  of  the  purchase  money  of  an  in- 
surance-agency business,  sold  by  him  to  them,  and  the  consideration  of 
the  contract  had  failed  to  an  extent  equal  to  the  amount  of  the  note, 
because  the  plaintiff  "represented  to  defendants  that  he  had  made  cer- 
tain profits  out  of  said  business  for  the  three  years  previous  to  said 
purchase,  and  said  purchase  was  based  upon  the  amounts  alleged  to 
have  been  made,  but  said  representations  as  defendants  have  since 
discovered  were  untrue"  a  demurrer  to  the  plea  upon  the  ground  that 
it  "failed  to  set  forth  how  much  profits  plaintiff  represented  he  had 
made  *  *  *  or  how  much  damage  had  resulted  to  defendants," 
by  reason  of  the  alleged  misrepresentations  of  the  plaintiff,  should  be 
sustained.^®  ^ 

§  267.  Rights  of  holder  where  prior  indorsee  held  note  as  collateral 
security  and  for  continuing  credit — ^Lien. — One  who  is  an  indorsee 
and  who  is  holder  of  a  note  and  the  owner  of  the  indebtedness  which 
it  was  indorsed  to  secure,  has  all  the  rights  of  a  prior  indorsee  or  party 
through  whom  he  holds,  whether  the  holder  is  in  due  course  or  not 
and  where  such  prior  indorsee  held  the  note  as  collateral  security  for 
such  indebtedness  to  "it"  as  the  payee  might  incur  upon  a  continuing 
credit  extended  to  him  for  property  sold  and  to  be  sold  it  became  a 
lien  holder  and  as  such  was  both  originally  and  at  the  maturity  of  the 
note  a  holder  for  value  to  the  extent  of  the  lien  and  to  that  extent  a 
holder  ip  due  course. ^*^® 

§  268.     Purchase   price  notes — Instances  in  general  of  want  or 
failure  of  consideration. — A  person  wlio  lias  given  his  promissory  note 

""'^  Howe  V.  Raymond,  74  Conn.  68,  ""'  Mersick  v.  Alderman,  77  Conn. 
49  Atl.  854.  634,  635,  60  Atl.  109,  per  Prentice,  J. 

"'^'McCrary   v.   Pritchard,   119    Ga. 
876,  47  S.  E.  341. 


f 


269] 


WANT    OR   FAILURE   OF    COXSIDERATIOX. 


330 


for  the  purchase  price  of  personal  property  cannot  avoid  payment  be- 
cause of  the  alleged  failure  of  consideration  by  reason  of  the  fact  that 
such  property  has  been  taken  on  a  judgment  in  replevin  where  it  ap- 
pears that  the  purchaser  of  such  property  has  permitted  judgment  to 
be  entered  by  default  and  it  does  not  appear  that  the  seller  had  knowl- 
edge of  the  suit  or  notice  to  defend.^*''  If  one  party  to  an  exchange  of 
lands  refuses  to  deliver  the  deed  unless  notes  are  given  for  a  claimed 
equivalent  in  value  of  an  excess  in  quantity  over  that  understood  to  be 
conveyed,  and  the  grantee,  being  obliged  to  have  the  land  to  fulfill 
a  contract  of  his  own,  executes  the  notes  under  protest  and  takes  the 
deed ;  in  an  action  on  the  note  evidence  of  such  facts  is  admissible  to 
prove  or  as  tending  to  show  want  of  consideration.^®^  A  failure  of 
consideration  also  exists  as  to  a  note  given  for  the  conveyance  of  title 
to  land  where  it  is  to  be  reconveyed  if  the  maker  fails  to  perform  cer- 
tain acts  for  the  payee  and  they  are  not  performed.^ ®^  Again,  where 
the  consideration  of  a  note  was  the  conveyance  of  land  which  was 
fully  tendered  at  the  date  of  the  deed,  and  the  note  was  secured  by  a 
trust  deed,  a  subsequent  sale  of  the  land  under  the  trust  deed  does  not 
constitute  a  failure  of  consideration,  as  there  could  be  no  failure  other- 
wise than  for  some  defect  or  deficiency  in  the  consideration  at  the 
time  of  its  rendition  and  such  effect  is  not  given  by  a  sale  subsequently 
made  in  accordance  with  an  agreement  between  the  parties.^^" 

§  269.  Accommodation  paper — Consideration  as  between  original 
or  immediate  parties. — As  between  the  original  or  immediate  parties 
the  want  of  consideration  of  an  accommodation  note  may  be  shown  ;^'^ 
that  is,  as  between  such  parties  the  maker  may  set  up  as  a  defense  that 
he  signed  the  note  for  accommodation  merely;^'-  or  merely  as  surety 
for  accommodation  and  upon  no  other  consideration;^"^  or  that  tlie 
notes  were  for  accommodation  merely  and  that  there  was  no  considera- 
tion, and  that  the  notes  were  given  for  the  purpose  of  increasing  the 
apparent  assets  of  a  bank  ;^'*  or  that  the  indorsement  was  for  the  ac- 


'"Moul  V.  Pfeiffer,  23  Pa.  Super. 
Ct.  280. 

'•^Holland  v.  Hoyt,  14  Mich.  238. 

^""Holmes  v.  Farris,  97  Mo.  App. 
305.  71  S.  W.  116. 

'™Thurgood  v.  Spring  (Cal.  1903), 
73  Pac.  456. 

"'  Batterman  v.  Butcher,  95  App. 
Div.  213,  88  N.  Y.  Supp.  685. 


''=  Tuggle  v.  Adams,  3  A.  K.  Marsh. 
(Ky.)  429. 

^■=Day  V.  Billingsly,  66  Ky.  (3 
Bush)  157;'  holding  that  there  was 
no  binding  consideration  in  this 
case. 

'■^Chicago  Title  and  Trust  Co.  v. 
Brady  (Mo.,  1901),  65.  S.  W.  303.  De- 
fense held  good  as  against  receiver. 


331 


BONA-FIDE    IIOLDERS^ASSIGXEES — NOTICE. 


[§  270 


commodation  of  a  bank  and  defendant  received  no  benefit  whatever 
from  the  note.^'^^ 

§  270.     Bona  fide  holders — Assignees — Notice  or  knowledge. — A 

benefit  accruing  to  the  person  accommodated  is  a  sufficient  considera- 
tion to  sustain  the  liability  of  an  accommodation  maker  or  indorser."'' 
As  a  rule,  therefore,  it  constitutes  no  defense,  in  an  action  by  a  bona 
fide  holder  who  took  the  note  before  maturity  and  for  value  in  due 
course,  to  show  the  accommodation  character  of  a*note  or  indorsement, 
or  that  the  defendants  were  accommodation  makers,  even  though  said 
note  was  received  by  plaintiff  with  a  knowledge  of  the  character  of 
the  paper."'^     So  where  the  payee  indorses  a  non-negotiable  note  for 


'"  Higgins  V.  Ridgway,  153  N.  Y. 
130,  132,  47  N.  E.  32,  aff'g  90  Hun 
398,  35  N.  Y.  Supp.  944. 

""First  National  Bank  of  St. 
Cloud  V.  Lang  (Minn.  1905),  102 
N.  W.  700. 

"^Alabama. — Rudulph  v.  Brewer, 
96  Ala.  189,  11  South.  314  (one 
signing  a  note  after  delivery  to  en- 
able the  payee  to  negotiate  it  cannot 
set  up  in  a  suit  on  the  note  that 
there  was  no  consideration  for  his 
signature);  Marks  v.  First  National 
Bank,  79  Ala.  550,  58  Am.  Rep.  620 
(an  accommodation  indorser  of  a 
note  is  liable  to  the  holder,  who  has 
taken  the  note  for  value  bona  fide 
before  maturity,  even  though  the 
holder  knew  at  the  time  that  the 
indorsement  was  for  accommodation 
merely) ;  Connerly  v.  Planters  & 
Merchants'  Ins.  Co.,  66  Ala.  432 
(holding  also  that  maker  cannot 
show  that  he  could  have  protected 
himself  from  loss  if  he  had  been 
notified  that  notes  were  unpaid,  the 
payee  being  solvent  at  their  matur- 
ity). 

Colorado. — Pendleton  v.  Smissart, 
1  Colo.  App.  508,  29  Pac.  521  (the 
defendant  testified  that  he  deliv- 
ered the  note  as  accommodation  pa- 
per for  the  purpose   of   saving  the 


credit  of  the  payee  under  a  promise 
that  it  should  not  be  used  in  any 
way  except  to  show  it,  and  this  was 
held  no  defense). 

Delaioare. — Maher  v.  Moore  (Del. 
1898),  42  Atl.  721  (the  fact  that  a 
note  was  made  for  the  payee's  ac- 
commodation and  on  his  represen- 
tation that  defendant  would  never 
be  held  liable  upon  it  does  not  re- 
lieve the  maker  from  liability  there- 
on to  a  bona  fide  indorsee  for  value 
before  maturity). 

District  of  Columbia. — Willard  v. 
Crook,  21  App.  D.  C.  237;  Code  D. 
C,  §  1333.  (The  defense  in  an  ac- 
tion by  an  indorsee  against  the 
maker  that  he  was  an  accommoda- 
tion maker  within  the  knowledge 
of  the  indorsee  and  holder  is  in  di- 
rect opposition  to  the  Negotiable  Se- 
curities Act  of  the  District  of  Co- 
lumbia and  is  therefore  not  avail- 
able. 

Georgia. — Jones  v.  Bank  of  New 
York,  90  Ga.  334,  17  S.  E.  88. 

Illinois. — Hodges  v.  Nash,  43  HI. 
App.  638;  Dawson  v.  Tolman,  37  111. 
App.  134;  Waite  v.  Kalurisky,  22  111. 
App.  382;  Miller  v.  Larned,  103  111. 
562,  570,  571  (it  is  no  defense  as 
against  the  maker  in  an  action  by 
a  holder   into   whose   hands  an   ac- 


ro] 


WANT    OR   FAILURE   OF    COXSIDERATIOX. 


33* 


commodation  note  may  have  come 
in  the  usual  course  of  business  for 
a  valuable  consideration  that  said 
holder  may  have  taken  the  notes 
with  knowledge  that  it  was  accom- 
modation paper,  per  Scott,  J.) ;  Har- 
low V.  Boswell,  5  Peck  (111.)  56; 
Hall  V.  Bank,  13  111.  234,  24  N.  E. 
546. 

Iowa. — Bankers  Iowa  State  Bank 
V.  Mason  Hand  Latfie  Co.  (Iowa 
1902),  90  N.  W.  612;  Winters  v. 
Home  Ins.  Co.,  30  Iowa  172. 

Maryland. — Maitland  v.  Citizens' 
National  Bank  of  Baltimore,  40  Md. 
540,  562,  17  Am.  Rep.  620. 

Massachusetts. — Kenworthy  v.  Saw- 
yer, 125  Mass.  28;  Davis  v.  Randall, 
115  Mass.  547  (no  defense  that  draft 
was  accepted  for  accommodation)  ; 
Monument  Nat.  Bank  v.  Globe 
Works,  101  Mass.  57,  3  Am.  Rep. 
322. 

Michigan. — Van  Etten  v.  Hemann, 
35  Mich.  513  (cannot  defend  against 
new  notes  in  hona  fide  holder's 
hands.  The  factor  of  knowledge 
also  entered  into  the  decision) ; 
Thatcher  v.  West  River  Nat.  Bank, 
19  Mich.  196  (holding  also  that 
agreement  between  maker  and 
payee  no  defense). 

Minnesota. — First  Nat.  Bank  of 
St.  Cloud  V.  Lang  (Minn.  1905),  102 
N.  W.  700  (that  a  note  was  made 
solely  for  the  accommodation  of  a 
third  person,  for  no  valid  considera- 
tion passing  to  the  maker,  is  no  de- 
fense in  an  action  by  the  holder 
thereof  with  notice  of  those  facts  at 
the  time  of  delivery,  who  has  in  the 
regular  course  of  business  and  for 
value  taken  it  before  maturity); 
Tourtelot  v.  Bushnell,  66  Minn.  1, 
68  N.  W.  104. 

Mississippi. — Hawkins  v.  Neal,  60 
Miss.  256  (no  difference  in  this  re- 
spect between  a  promissory  note 
and  bill  of  exchange). 


Missouri. — Edwards  v.  Thomas, 
66  Mo.  468  (a  case  of  paper  in- 
dorsed by  an  unauthorized  agent)  ; 
Chaffe  V.  Memphis,  C.  &  N.  W.  R. 
Co.,  64  Mo.  193;  Macy  v.  Kendall,  33 
Mo.  164. 

New  Jersey. — National  Bank  of 
Republic  v.  Young,  41  N.  J.  Eq.  531, 
7  Atl.  488  (unless  paper  was  taken 
with  actual  knowledge,  mere  notice 
of  facts  to  put  holder  on  inquiry  not 
sufficient) ;  Duncan  v.  Gilbert,  29  N. 
J.  L.  521. 

New  York. — National  Bank  of 
North  America  v.  White,  19  N.  Y. 
App.  Div.  390,  46  N.  Y.  Supp.  555; 
Arnson  v.  Abrahamson,  30  N.  Y.  St. 
R.  657,  16  Daly  72,  9  N.  Y.  Supp. 
514;  Moynihan  v.  McKeon,  74  N.  Y. 
St.  R.  316,  16  Misc.  343,  38  N.  Y. 
Supp.  61;  First  National  Bank  of 
Portland  v.  Schuyler,  39  N.  Y.  Super. 
Ct.  (7  J.  &  S.)  440;  Lincoln  Nat. 
Bank  v.  Butler,  74  N.  Y.  St.  R.  116, 
16  Misc.  566,  38  N.  Y.  Supp.  776.  See 
Grant  &  Gary  v.  Ellicott,  7  Wend. 
(N.  Y.)  227  (there  being  no  fraud) ; 
Brown  v.  Mott,  7  Johns  (N.  Y.)  361 
(there  being  no  fraud)  Mechanics' 
Banking  Assoc,  v.  New  York  &  Sau- 
gerties  White  Lead  Co.,  35  N.  Y. 
505;  Holland  Trust  Co.  v.  Waddell, 
75  Hun  (N.  Y.)  104,  26  N.  Y.  Supp. 
980  (certificate  of  deposit) ;  Pierson 
V.  Boyd,  2  Duer  (N.  Y.)  33.  (Suit 
was  against  maker  and  indorser) ; 
Pettigrew  v.  Chave,  2  Hilt.  (N.  Y.) 
546  (rule  applied  where  note  given 
without  restriction  as  to  its  use) ; 
Bridgeport  City  Bank  v.  Empire 
Stone  Dressing  Co.,  19  How.  Prac. 
(N.  Y.)  51.  (Rule  applied  to  holder 
without  notice  of  defenses). 

Ohio. — Pitts  V.  Foglesong,  37  Ohio 
St.  676  (rule  that  accommodation 
indorser  liable  applied  where  note 
without  restriction,  and  not  induced 
by  fraud). 


i 


333 


BONA-riDE    HOLDERS — ASSIGNEES — NOTICE. 


[§   270 


Oregon. — White  v.  Savage  (Or. 
1906),  87  Pac.  1040. 

Pennsylvania. — Philer  v.  Patter- 
son. 168  Pa.  St.  46,  32  Atl.  26,  36 
Wkly.  Notes  Cas.  47  Am.  St.  Rep. 
896;  Newbold  v.  Boraef,  155  Pa. 
St.  227,  26  Atl.  305.  (Where  no  con- 
sideration has  passed  from  the 
maker  to  an  accommodation  in- 
dorser,  it  will  not  prevent  a  recov- 
ery by  one  who  discounts  the  same 
before  maturity);  Garden  City  Nat. 
Bank  v.  Fitler,  155  Pa.  St.  210,  26 
Atl.  372,  35  Am.  St.  Rep.  874. 
(There  was  no  allegation  that  plain- 
tiff was  not  a  hona  fide  holder); 
Ashton  V.  Spro'ule,  35  Pa.  St.  492. 
Failure  of  consideration  intended 
to  be  given  an  accommodation  in- 
dorser  for  his  becoming  surety  will 
not  release  him  if  the  holder  is  not 
at  fault) ;  Halloway  v.  Quin,  18 
Wkly.  Notes  Cas.  (Pa.)  284;  Laib 
V.  Lanagan,  2  Leg.  Chron.  (Pa.)  386 
(following  Moore  v.  Baird,  30  Pa. 
St.  138). 

North  Carolina. — Norfolk  Nat. 
Bank  v.  Griffin,  107  N.  C.  173,  11  S. 
E.  1049,  22  Am.  St.  Rep.  868. 

Federal. — United  States  v.  Me- 
tropolis Bank,  15  Pet.  (U.  S.)  377, 
10  L.  ed.  774;  Earle  v.  Enos,  130 
Fed.  467.  (Even  though  the  holder 
who  discounts  an  accommodation 
note  knew  its  character  at  the  time 
such  fact  does  not  permit  the  maker 
to  avail  himself  of  the  defense  of 
want  of  consideration);  Perry  v. 
Crammond,  1  Wash.  (C.  C.)  100, 
Fed.  Cas.  No.  11005  (accommo- 
dation bill). 

English. — Collins  v.  Martin,  1 
Bos.  &  P.  651  (bills  were  indorsed 
in  blank.  Held,  that  trover  could 
not  be  maintained  for  the  bills)  ; 
Mallett  V.  Thompson,  5  Esp.  178; 
Smith  V.  Knox,  3  Esp.  46. 

As  to  knowledge  or  notice  see 
also  the  following  additional  cases: 


Illinois. — Diversy  v.  Moor,  22  111. 
331,  74  Am.  St.  Rep.  157. 

Indiana. — Reed  v.  Trentman,  53 
Ind.  438. 

Maryland. — Schwartz  v.  Wilmer, 
90  Md.  136,  44  Atl.  1059;  Yates  v. 
Donaldson,  5  Md.  389,  61  Am.  Dqo. 
283. 

Massachusetts. — Lincoln  v.  Ste- 
vens, 7  Mete.   (Mass.)   529. 

Neio  York. — Brown  v.  Mott,  7 
Johns.  (N.  Y.)  361;  Beall  v.  Gen- 
eral Electric  Co.,  16  Misc.  Rep.  611, 
38  N.  Y.  Supp.  527. 

Ohio. — Second  Nat.  Bank  v.  Mor- 
rison, 3  Ohio  Dec.  534. 

Pennsylvania. — Stephens  v.  Mo- 
nongahela  Nat.  Bank,  7  Wkly. 
Notes  (Pa.)  Cas.  491.  (Liable,  al- 
though holder  have  notice  of  want 
of  consideration) ;  Bonsall  v.  Bauer, 
2  Wkly.  Notes  (Pa.)  Cas.  298. 

Federal. — Perry  v.  Crammond,  1 
Wash.  (C.  C.)  100;  Fed.  Cas.  No. 
11005;  Israel  v.  Gale,  77  Fed.  Rep. 
532;  Armstrong  v.  Scott,  36  Fed.  63. 

But  see:  Delaivare. — Nailor  v. 
Daniel,  5  Houst.    (Del.)    455. 

Missouri. — Wagner  v.  Diedrich,  50 
Mo.  484. 

New  York. — Prall  v.  Hinchman,  6 
Duer  (N.  Y.)  351;  Holbrook  v.  Mix, 
1  E.  D.  Smith  (N.  Y.)  154;  Small  v. 
Smith,  1  Denio  (N.  Y.)  583;  Powell 
v.  Waters,  8  Cow.  (N.  Y.)  669,  aff'g 
17  Johns.  N.  Y.  176. 

Ohio. — Stone  v.  Vance,  6  Ohio 
246;  Moulton  v.  Posten,  52  Wis.  169. 

The  making  of  an  accommodation 
note  is  a  loan  of  the  maker's  credit 
with  no  restriction  as  to  its  use, 
and  in  an  action  thereon  by  an  in- 
dorsee for  value  before  maturity, 
want  of  consideration,  even  though 
known  to  the  indorsee  on  receiving 
the  note,  constitutes  no  defense. 
First  National  Bank  v.  Dick,  22  Pa. 
Super.  Ct.  Rep.  445;  Penn.  Safe  De- 


271] 


WANT    OR   FAILURE    OF    CONSIDERATION. 


334 


the  maker's  accommodation  the  assignor  has  been  held  bound  as  against 
a  bona  fide  holder  for  value. "^  And  as  against  a  bona  fide  holder  of  an 
accommodation  check  the  defense  that  no  consideration  passed  to  the 
drawer -is  not  open  to  the  latter.^'^'^  Misapplication  of  the  note  may, 
however,  affect  the  extent  of  the  recovery.^*" 

§  271.  Same  subject — Particular  decisions. — The  rule  is  thus  stated 
in  an  Illinois  case :  Where  a  bill  or  note  is  given  with  no  restriction 
as  to  the  mode  or  time  of  using  it  by  the  party  accommodated  and  the 
same  has  been  transferred  in  good  faith  in  the  usual  course  of  business, 
the  holder  for  a  valuable  consideration  is  entitled  to  recover  the  full 
amount,  although  he  had  full  knowledge  that  it  was  accommodation 
paper.^*^  And  in  another  case  in  that  state  it  is  decided  that  one  who 
takes  negotiable  paper  before  maturity  and  for  value  is  not  affected  by 
the  fact  that  it  is  accommodation  paper,  even  if  he  knew  such  fact, 
unless  notice  is  brought  to  him  of  restrictions  placed  upon  its  use  by 
the  maker."^  So  in  a  Missouri  case  it  is  held  that  negotiable  notes 
or  indorsements  in  the  hands  of  indorsees,  though  made  simply  for 
the  accommodation  of  original  debtors,  may  be  enforced  against  such 
makers  or  indorsers,  although  procured  by  misrepresentations  made 
by  the  debtor  to  such  makers  or  indorsers,  if  the  indorsees  or  holders 
were  not  privy  to  the  misrepresentation  or  fraud  or  unfulfilled  promise 
of  the  debtor.^^^  And  under  a  Georgia  decision  it  is  determined  that 
a  note  payable  to  a  named  person  or  order  and  indorsed  by  a  payee, 
though  under  seal,  and  therefore  not  negotiable  according  to  the  strict 
commercial  law  prevailing  in  Alabama,  if  made  and  indorsed  for  the 
accommodation  of  a  person  not  a  party  thereto  and  by  him  put  in  cir- 


posit  Co.  v.  Kennedy,  175  Pa.  164, 
34  Atl.  660,  per  the  court. 

'"Macy  V.  Kendall,  33  Mo.  164. 
Examine  Munson  v.  Cheesborough, 
6  Blackf.  (Ind.)  17.  (Plea  of  notice 
held  good.) 

1'°  Metropolitan  Printing  Co.  v. 
Springer,  90  N.  Y.  Supp.  376;  Neg. 
Inst.  Law  1897,  p.  728,  c.  612,  §  55. 

''"Williapis  V.  Smith,  2  Hill  (N. 
Y.)  301.  See  Weill  v.  Trosclari,  42 
La.  Ann.  171,  7  So.  232.  A  bona  fide 
holder  of  accommodation  paper 
without  notice  or  knowledge  of  de- 
fenses or  equities  is  entitled  to  pro- 


tection. Held,  however,  that  the  de- 
fense that  the  note  was  executed  as 
accommodation  for  the  payee  and 
suing  holder  must  be  clearly  proved. 
Examine  Bank  v.  Rider,  58  N.  H. 
512.  Holding  that  an  indorsee  is 
bound  by  knowledge  of  such  facts  as 
should  put  him  on  inquiry. 

^'1  Waite  V.  Kalurisky,  22  111.  App. 
382,  citing  Miller  v.  Larned,  103  111. 
562. 

'«=  Holmes  v.  Bemis,  25  111.  App. 
232,  affd.  124  111.  453,  17  N.  E.  42. 

i**^  Whittemore  v.  Obear,  58  Mo. 
280. 


335  BONA-FIDE    HOLDERS — ASSIGNEES — NOTICE.  [§    270 

dilation  for  value,  is  not  without  consideration  between  the  holder, 
who  paid  value,  and  the  accommodation  maker  or  indorser.  The  con- 
sideration which  the  parties  contemplated  when  the  note  was  executed 
and  indorsed  was  realized  and  the  plea  of  want  of  consideration  will 
not  prevail  in  such  case.^®"*  It  is  also  decided  in  Massachusetts  that 
the  cases  which  hold  that  knowledge  of  a  consideration  by  one  putting 
his  name  on  a  note  for  the  accommodation  of  another  is  necessary  to 
bind  him,  are  where  a  note  had  previously  taken  effect  as  a  contract, 
and  a  new  and  independent  consideration  is  required  for  the  new  con- 
tract.^^^  Where  a  note  indorsed  by  the  cashier  of  defendant  corpora- 
tion was  discounted  by  plaintiff,  who  was  informed  at  the  time  by  the 
cashier  that  the  money  was  not  for  the  defendant,  but  for  another 
corporation,  it  was  held  that  as  there  was  no  evidence  that  the  cashier 
had  anything  to  indorse  for  accommodation,  and  the  defendant  was, 
therefore,  not  liable,  in  the  absence  of  proof  of  authority  or  of  proof 
that  defendant  could  bind  itself  by  such  an  indorsement.^^**  A  note 
of  a  private  corporation  in  the  hands  of  a  bona  fide  holder  who  took 
the  same  before  maturity  without  knowledge  that  the  maker  did  not 
receive  full  consideration,  can  be  enforced  provided  the  corporation 
had  power  to  make  notes.^®^  Again,  if  two  parties  exchange  accommo- 
dation notes  with  the  understanding  that  each  shall  take  care  of  the 
notes  received  and  hold  the  other  harmless  for  notes  discounted  by 
him,  one  of  them  who  has  taken  up  the  notes  received  is  not  a  bona  fide 
creditor  of  the  other.^**  If  a  firm  note  is  given  generally  for  accom- 
modation of  another  a  partner  who  did  not  assent  to  the  loan  is  not 
liable  unless  the  holder  shows  that  he  paid  value. ^**''  In  case  the  holder 
of  a  note  had  notice  at  the  time  of  its  transfer  to  him  that  it  was  an 
accommodation  note  subscribed  by  the  maker  for  the  exclusive  benefit 
of  the  payee,  the  maker  must  be  regarded  as  a  surety  of  the  latter.^'"' 
If  an  action  is  brought  upon  a  note  executed  by  two  persons  as  makers 
it  cannot  be  set  up  in  defense  by  one  of  them  that  the  payee  knew  him 
to  be  an  accommodation  maker,  and  that  such  payee  obligated  himself 

'^  Farrar  v.  New  York  Bank,  90  "^  Monument  Nat.  Bank  v.   Globe 

Ga.  331,  17  S.  E.  87;   Jones  v.  New  Works,  101  Mass.  57,  3  Am.  Rep.  332. 

York  Bank,  90  Ga.  334,  17  S.  E.  87,  ^^  Wolverton  v.-  George  H.  Taylor 

88.  &  Co.,  157  111.  485,  42  N.  E.  49. 

'"^  Robertson  v.  Rowell,  158  Mass.  ^'^  Tobias  v.  Sadler,  5  N.  Y.  Leg. 

94,  32  N.  E.  898,  35  Am.  St.  Rep.  466.  Obs.  100. 

""Fox  v.  Rural  Home  Co.,  90  Hun  ""Adle  v.  Metoyer,  1  La.  Ann.  254. 
365,  35  N.  Y.  Supp.  896,  aff'd  157  N. 
Y.  684. 


§    272]  WANT    OR   FAILURE   OF    CONSIDERATION.  336 

with  the  other  maker  to  give  him  time.^'*^  An  accommodation  maker 
of  non-negotiable  paper  may  set  up  want  of  consideration  as  a  defense 
against  a  bona  fde  holder  who  purchased  it  for  value  before  maturity, 
even  though  the  note  was  given  to  the  payee  to  obtain  money 
thereon.  ^^^  In  Pennsylvania  it  is  held  that  such  maker  can  defend 
only  on  ground  of  actual  pa3'ment.^''^  Where  a  note  made  by  one  who 
was  an  infant  at  the  time  of  its  execution  is  indorsed  to  a  third  party 
for  the  accommodation  of  the  maker  to  enable  him  to  purchase  a  busi- 
ness, formerly  conducted  by  him  and  his  mother  as  co-partners,  which 
she,  without  his  consent,  had  sold  to  the  payee  of  the  note,  the  transfer 
thus  acquired  from  the  mother  of  her  interest  in  such  business  (as  it 
might  ultimately  be  determined  on  an  accounting  between  the  part- 
ners) is  a  sufficient  consideration  to  sustain  the  obligation  of  the  ac- 
commodation indorser  of  the  note.^^*  Again,  a  defense  of  failure  of 
consideration  personal  to  the  maker  of  a  note  cannot  be  availed  of  by 
an  accommodation  indorser.^ ^^  If  an  indorser  signs,  for  the  accommo- 
dation of  the  maker,  before  the  payee  indorses  the  note,  such  indorser 
is  liable  to  the  first  holder  of  the  note  aiter  it  takes  effect  and  to  all 
subsequent  parties,  and  in  such  case  defenses  as  to  the  legality  or  con- 
sideration are  as  open  as  they  would  be  in  a  suit  against  the  maker.^**" 

§  272.  Accommodation  acceptor — General  rules  and  illustrations. 
If  the  drawee  of  a  bill  of  exchange  pays  a  consideration  to  the 
drawer  its  acceptance  by  another  for  the  drawer's  accommodation  is 
supported  thereby.^^^  While  the  drawer  and  acceptor  are  immediate 
parties  to  the  consideration,  yet  the  payee  holds  a  different  relation ; 
he  is  a  stranger  to  the  transaction  between  the  drawer  and  acceptor, 
and  is  therefore  in  a  legal  sense  a  remote  party.  The  payee  or  holder 
gives  value  to  the  drawer,  and  if  he  is  ignorant  of  the  equities  between 
the  drawer  and  acceptor,  he  is  in  the  position  of  a  bona  fide  indorsee.^"^ 
An  accommodation  acceptor  occupies  precisely  the  same  position  as 
one  who  accepts  with  funds,  as  to  all  persons  who  receive  the  bill  for 

"1  Anthony  v.  Fritts,  45  N.  J.  L.  1.  628,  65  N.  E.  1116,  aff'g  60  N.  Y.  App. 

"=  Wetter  v.  Kiley,  95  Pa.  St.  461.  Div.  201,  69  N.  Y.  Supp.  1099. 

"^  Philler  v.  Patterson,  168  Pa.  St.        ^^  Leonard    v.   Draper,   187   Mass. 

468,  32  Atl.  26,  36  Wkly.  Notes  Cas.  536,  73  N.  E.  644;  Rev.  Laws,  c.  73, 

416,  47  Am.  St.  Rep.  896.  §  8L 

1"^  Waterman     v.     Waterman,     42         "^  Meggett  v.  Baum,  57  Miss.  22. 
Misc.  195,  85  N.  Y.  Supp.  377.  '^^  Laflin    &    Rand    Powder   Co.   v. 

"=  Fleitman  v.  Ashley,   172   N.   Y.  Simsheimer,  48  Md.  411,  30  Am.  Rep. 

472. 


337 


ACCOMMODATION   ACCEPTOR. 


[§  2' 


value,  whether  they  knew  that  it  was  an  accommodation  acceptance  or 
not."®  If  the  action  is  against  the  acceptor,  he  cannot  defend  against 
the  payee  on  the  ground  that  the  acceptance  was  for  accommodation 
merely,  without  consideration,  and  that  the  payee  had  knowledge 
thereof,  and  this  rule  also  applies  to  an  indorsee,-*^"  for  the  acceptance 
of  a  drawee  of  a  bill  binds  him,  though  the  payee  knew  the  acceptor 
had  no  funds  of  the  drawer.^'^i  Knowledge  at  the  time  of  indorsement 
that  the  acceptance  was  for  accommodation  will  not  preclude  a  re- 
covery against  an  accommodation  acceptor  by  an  accommodation  in- 
dorser  of  a  bill  who  becomes  a  holder  for  value  by  meeting  the  obliga- 
tion of  the  debt  when  legally  charged  therewith.- °-    Thus,  in  an  action 


"»Cronise  v.  Kellogg,  20  111.  11,  14. 
per  Caton,  C.  J. 

'"^Illinois. — Diversy  v.  Moore,  22 
111.  331,  74  Am.  Dec.  157.  (Holding 
also  tbat  acceptor  for  accommoda- 
tion of  drawer  is  principal  debtor 
and  the  drawer  a  surety  merely) ; 
Diversy  v.  Loeb,  22  111.  393.  (Holds 
that  accommodation  acceptor  cannot 
set  up  fact  that  he  never  received 
any  consideration,  even  though  the 
person  receiving  the  instrument 
knew  that  he  was  accommodation  ac- 
ceptor, provided  such  holder  gave  a 
bona  fide  consideration  for  the 
paper) ;  Cronise  v.  Kellogg,  20  111. 
11. 

Indiana. — Spurgin  v.  Pheeters,  42 
Ind.  527. 

,  Kentucky. — Anderson  v.  Ander- 
son, 4  Dana  (Ky.)  352.  (No  de- 
fense that  acceptance  was  for  ac- 
commodation since  written  accept- 
ance implies  a  consideration.) 

Massachusetts. — Arpin  v.  Owens, 
140  Mass.  144,  3  N.  E.  25. 

Minnesota. — Vanstrum  v.  Liljen- 
gren,  37  Minn.  191,  33  N.  W.  555. 

Mississippi-— Meggett  v.  Baum,  57 
Miss.  22;  Hamilton  v.  Catchings,  58 
Miss.  92. 

New  Jersey. — Meyer  v.  Beardsley, 
30  N.  J.  Law  (1  Vroom.)  236. 

New   York. — First    Nat.    Bank    v. 
Joyce  Defenses — 22. 


Schuyler,  39  N.  Y.  Super.  Ct.  (7 
Jones  &  S.)  440;  Iselin  v.  Chemical 
Nat.  Bank,  16  Misc.  Rep.  437,  40  N. 
Y.  Supp.  388;  Boiler  Co.  v.  Foutham 
(Sup.),  50  N.  Y.  Supp.  351;  Grant 
V.  Ellicot,  7  Wend.  (N.  Y.)  227. 

Pennsylvania. — Stewart  v.  Moore, 
12  Phil.  (Pa.)   225. 

South  Carolina. — Israel  v.  Ayer,  2 
Rich.  (S.  C.)  344. 

Vermont. — Arbold  v.  Sprague,  34 
Vt.  402. 

Federal. — Townsley  v.  Sumrall,  2 
Pet.  (U.  S.)  170;  Levy  &  Co.  v. 
Kauffman,  114  Fed.  170;  Jewett  v. 
Hone,  1  "Woods  (U.  S.)  530,  Fed. 
Cas.  No.  7311. 

See  Illinois. — Wineman  v.  Oberne, 
40  111.  App.  269. 

Colorado. — Law  v.  Brinker,  6  Colo. 
555. 

Georgia. — Flournoy  v.  Bank,  79 
Ga.  810,  2  S.  E.  547. 

Illinois. — Nowak  v.  Excelsior 
Stone  Co.,  78  111.  307. 

=01  Townsley  v.  Sumrall,  2  Pet.  (U. 
S.)  170,  183. 

Defendants  become  simply  sure- 
ties for  payment  of  draft  accepted 
for  the  accommodation  of  the 
drawer.  First  National  Bank  of  N. 
Y.  V.  Morris,  1  Hun   (N.  Y.)    680. 

=»^  Gillespie  v.  Campbell,  39  Fed. 
724,  5  L.  R.  A.  698;  Smith  v.  Knox, 


§    273]  -R-AXT    OR   FAILURE    OF    COXSIDEEATIOX.  338 

by  two  accommodation  indorsers  against  an  acceptor  it  is  no  defense, 
even  though  the  plaintiffs  were  notified  that  the  acceptance  was  an 
accommodation  acceptance,  to  the  claim  of  plaintiffs  for  pa^Tnent  of 
the  bill  that  the  proceeds  of  the  original  draft  when  discounted  were 
applied  in  whole  or  in  part  by  the  drawer  to  the  payment  of  paper 
on  which  the  plaintiffs,  or  one  of  them,  was  an  indorser.^o^  So  an 
accommodation  acceptor  who  pays  or  retires  the  bill  may  look  for  re- 
imbursement or  indemnity-  to  the  drawer  accommodated.^"*  Again, 
if  several  drawees  of  a  bill  accept  it  jointly,  they  are  jointly  bound  as 
between  liiemselves  and  each  is  bound  to  the  holder  for  the  full  amount, 
and  one  cannot  defeat  recovery  on  the  ground  that  he  accepted  it  for 
the  accommodation  of  the  drawer  and  tliat  such  fact  was  well  kno\sni 
to  him,  and  subsequent  to  the  acc-eptance  by  the  others.  ^^"^  So  a  co- 
partner, even  if  his  consent  cannot  be  shown,  will  be  obligated  to  a 
bona  fide  indorsee  for  value  upon  an  accommodation  acceptance  made 
by  another  partner.-"®  And  it  is  no  defense  to  an  action  by  a  holder 
for  value  as  against  an  acceptor  or  other  person  who  received  no  con- 
sideration that  at  the  time  the  plaintiff  took  the  bill  he  knew  that  no 
value  had  been  received;  but  an  exception  exists  in  a  case  where  the 
paper  was  taken  from  a  person  who  held  it  for  a  particular  purpose 
and  was  therefore  gtiilty  of  a  breach  of  duty  in  transferring  it  to  the 
plaintiff  and  the  latter,  at  the  time  of  taking  it,  was  cognizant  of  the 
facts.-" 

§  273.  Same  subject — Continued. — Although  where  a  bill  has  been 
delivered  to  a  lona  fide  holder  for  a  valuable  consideration  and  in 
ignorance  of  the  circumstances  he  may  sue  the  acceptor,  notwithstand- 
ing any  want  of  consideration  received  by  him,  yet  where  the  acceptor 
of  such  accommodation  bill  delivers  it  to  another  for  a  special  purpose 
and  the  latter,  without  performing  his  trust,  commits  an  act  of 
bankruptcv  and  is  pursued  by  a  creditor  who  obtains  the  bill  from 
him  in  ignorance  of  the  bankruptcy  and  of  the  circumstances  of  ac- 
ceptance, such  acceptor  is  not  liable  upon  the  bill  at  the  suit  of  such 

3  Esp.  46    (it  is  no  defense  to  an  =«  Martin  v.  Muncy,   40  La,  Ann. 

action  by  a   iona  fide   holder  of   a  190.  3  So.  640. 

bill  that  the  bill  was  an  accommo-  ''*  McXabb   v.   Tally,   27   La.   Ann. 

dation  one,  and  that  known  to  the  640. 

holder).  -"  Beach  v.  State  Bank,  2  Ind.  48S. 

'^'^  Gillespie   v.    Cambpell,   39   Fed.  -'Stewart    v.    Moore,    12     Phila. 

724,  5  L.  R.  A.  698.  (Pa.)  225. 


1 


;;39  accommodation  acceptou.  [§  273 

creditor.^"^  But  wlicre  a  bill  of  exchange  is  drawn  and  indorsed  for 
the  accommodation  of  the  acceptors,  upon  the  condition  that  it  shall 
be  discounted  at  a  particular  bank,  a  purchaser  of  the  bill  before 
maturity,  without  notice  of  the  secret  agreement,  is  not  affected  by  it, 
and  he  may  recover  upon  the  bill  in  an  action  against  the  drawersj^^*^ 
nor  is  the  drawer  of  a  bill  entitled  to  the  aid  of  equity  to  restrain  a 
bona  fide  holder  from  collecting  the  bill  of  an  accommodation  acceptor 
on  the  ground  of  fraud  in  the  payce.^^"  The  acceptor  of  a  bill  is  the 
principal  debtor  and  the  drawer  the  surety  and  nothing  will  discharge 
the  acceptor  but  payment  or  release,  he  is  bound,  though  he  accept 
without  consideration  and  for  the  sole  accommodation  of  the  drawer  ;-^^ 
that  is,  the  parties  of  a  bill  or  note  are  bound  by  the  character  which 
they  assume  upon  the  face  of  the  bill,  if  by  that  they  are  liable  as 
primary  debtors,  or  as  principal,  then,  as  to  the  holder,  they  are 
bound  as  such  and  his  knowledge  at  the  time  when  he  takes  the  bill, 
that  they  or  either  of  them  are  accommodation  parties,  will  not  vary 
the  case.^^2  And  if  bills  are  received  and  discounted  by  holders  before 
their  maturity,  without  notice  that  they  were  for  accommodation,  such 
holders  have  a  right  to  treat  the  acceptor  as  the  principal  debtor,  and 
the  drawer  is  liable  only  on  his  default.  In  such  cases  there  is  no 
difference  between  accommodation  bills,  and  bills  for  value;  in  either 
case,  a  release  of  the  drawer  from  any  farther  liability  to  the  holder 
will  have  no  effect,  as  a  discharge  of  the  acceptor  from  his  primary 
liability  on  the  bill ;  and  this  right,  so  to  treat  the  parties  on  the  bill, 
remains  unaffected  by  any  notice  subsequently  given,  that  the  bill  was 
for  accommodation.-^^  Where  the  payee  is  obligated  to  take  up  a  bill 
and  accept  a  renewal  tliereof,  such  payment  by  him  constitutes  a  valu- 

'"' Smith  V.  De  Witts,  6  Dowl.  &  ^=  Citing     Montgomery     Bank     v. 

Ry.  120,  16  Eng.  Com.  Law  256.    As  Walker,  9  Serg.  &  R.    (Pa.)    229,  12 

to  misapplication  or  diversion  of  pa-  Serg.  &  R.  (Pa.)  382;  Farmers'  and 

per  accepted  for  accommodation  as  Mechanics'    Bank    v.    Rathbone,    26 

defense  and  liability  of  acceptor,  see  Vt.  33,  58  Am.  Dec.  200. 

Gray  v.  Bank  of  Kentucky,  29  Pa.  ="  Farmers'   and   Mechancs'   Bank 

St.    (insufficient  defense);    Gillespie  v.  Rathbone,  26  Vt.  19,  33,  35,  36,  58 

V.  Campbell,  39  Fed.  724,  5  L.  R.  A.  Am.  Dec.  200,  per  Isham,  J.    As  to 

698.     (When  no  defense.)  liability    of    acceptor    as    principal 

="»  Frank  v.  Quast,  86  Ky.  649,  6  S.  debtor,     see     further,     Bradford     v. 

W.  909.    See  §  199  herein.  Hubbard,     8     Pick.      (Mass.)      155; 

='"Winn  V.  Wilkins,  35  Miss.   186.  Childs  v.  Eureka  Powder  Works,  44 

">  Wilson    v.    labell,    45    Ala.    142,  N.  H.  354;   McKirdy  v.  Hare   (Pa.), 

147,     citing     3     Kent's     Comm.     86  7  Atl.  172;    In  re  Babcock,  3  Story 

(Marg).  (U.  S.)   393,  Fed.  Cas.  No.  696. 


§    274]  WANT   OR   FAILURE   OF    COXSIDERATION.  340 

able  consideration  as  between  himself  and  the  acceptor  so  as  to  con- 
stitute the  latter  who  had  accepted  the  first  bill  for  the  accommodation 
of  the  drawer  the  principal  debtor  and  not  a  mere  surety  on  the  new 
bill'" 

§  274.  Same  subject  continued — Exceptions  and  qualifications.— 
Altliough  there  is  no  doubt  but  that  the  acceptor  of  a  draft  is  liable 
to  an  innocent  bona  fide  holder,  even  though  he  made  the  note  or 
accepted  the  draft  for  the  accommodation  of  the  payee  or  drawer, 
nevertheless  the  general  rule  has  been  qualified  to  the  extent  that  it 
may  be  otherwise  where  the  holder  did  not  receive  it  in  the  ordinary- 
course  of  business,  and  for  a  valuable  consideration,  or  after  notice 
of  facts  available  as  a  defense  as  between  the  drawer  and  ac- 
ceptor.-^^  And  notice  to  a  bank  which  had  discounted  paper  before 
acceptance  that  it  is  accepted  only  for  accommodation  affects  the 
bank  only  in  case  it  makes  arrangements  with  some  of  the  parties 
without  consulting  others,  which  will  affect  the  acceptor's  liability .^^® 
If  the  liability  of  an  accommodation  acceptor  has  not  been  changed 
by  subsequent  dealings  to  his  prejudice  or  against  his  rights  he  may 
be  sued.  An  accommodation  acceptance  stands  upon  its  legal  form 
if  the  drawee  has  not  had  notice  that  it  is  only  for  accommodation, 
but  if  he  has  had  notice  he  cannot  treat  the  maker  as  surety  and  the 
acceptor  as  principal  for  the  purpose  of  choosing  his  form  of  action 
on  the  acceptance.  So  where  paper  drawn  upon  a  bank,  and  accepted  for 
accommodation  and  discounted  by  it  has  been  taken  up  by  the  drawer, 
or  some  one  for  him,  it  cannot  be  sued  as  belonging  to  the  bank,  or 
sued  on  at  all  if  known  to  be  accepted  for  accommodation. ^^^  Again, 
if  a  bill  is  an  accommodation  bill  or  in  the  nature  thereof,  and  is  in- 
dorsed to  the  holder,  and  he  has  notice  of  the  relations  of  the  parties 
when  he  receives  the  bill  and  also  of  the  fact  of  payment  by  the 
drawer,  he  cannot  recover.^^^  So,  where  the  original  consideration  for 
the  acceptance  has  failed,  and  the  indorsee,  having  taken  the  draft 
before  maturity,  in  due  course  and  having  notice,  has  funds  of  the 

="  Israel  v.  Ayer,  2  Rich.    (S.  C.)  ^^^  Canadian  Bank   v.   Coumbe,   47 

344.  Mich.  358,  11  N.  W.  196. 

='=Boggs     V.    Lancaster    Bank,     7  ='' Canadian   Bank  v.   Coumbe,   47 

Watts  &  S.   (Pa.)  331,  332,  per  Hus-  Mich.  358,  11  N.  W.  196.    See  Pease 

ton,   J.    (notice  to   cashier  of  bank  v.    Horst,    10    Barn.    &    Cr.    122,    21 

that  draft  would  not  be  paid).  Eng.  Com.  Law  61;  Field  v.  Carr,  5 

Bing.  13,  15  Eng.  Com.  Law  447. 


1 


341  ACCOMMODATION   ACCEPTOR EXCEPTIONS.  [§    274 

drawer  sufficient  for  payment  of  the  bill,  cannot  recover.-^^  And  no- 
tice is  held  to  be  a  good  defense,  upon  the  ground  that  if  an  indorsee 
takes  a  bill  with  notice  of  the  failure,  or  partial  failure  of  consider- 
ation, his  right  to  recover  cannot  be  superior  to  that  of  his  indorser."'' 
So  in  a  Kentucky  case  it  is  held  that  a  bill  drawn  for  the  accommoda- 
tion of  the  drawee  and  for  the  purpose  of  enabling  him  to  sustain  his 
credit  and  to  aid  him  in  his  banking  operations  cannot  be  enforced 
against  the  drawer  except  at  the  suit  of  a  holder  who  purchased  it  bona 
fide  for  a  valuable  consideration,  and  without  notice  of  the  purpose 
for  which  it  was  drawn.-^i  -q^^^^  jf  the  acceptor  of  a  non-negotiated 
bill  is  not  liable  to  the  payee,  because  the  latter  knows  that  he  was 
only  an  accommodation  acceptor,  then  it  follows  that  the  drawer  is 
liable.^"  And  where  the  drawer  of  a  bill  accepted  for  his  accommoda- 
tion indorses  for  value  to  his  bankers,  and  the  latter  have  knowledge 
of  its  character,  they  cannot,  to  prevent  circuity  of  action,  recover 
from  the  acceptor  more  than  the  amount  of  their  balance  as  between 
them  and  the  drawer  at  the  time  the  drawer  becomes  bankrupt.--^^ 
It  is  also  declared  that  the  exceptions  to  the  general  rule  that  an 
acceptor  of  a  bill  can  never  be  discharged  except  by  payment  or  re- 
lease, are  rare,  and  only  when  to  enforce  the  payment  by  the  ac- 
ceptor, would  be  in  violation  of  the  agreement  of  the  parties  at  the 
time  of  the  acceptance,  as  where  a  bill  is  accepted  for  the  accommoda- 
tion of  the  indorser,  who.,  after  putting  it  in  circulation,  afterwards 
receives  it  in  the  course  of  business.  There,  as  between  the  original 
parties  to  the  bill,  it  was  his  primary  duty  to  pay  it,  and  he  cannot 
collect  it  of  the  acceptor,  and  should  he  again  put  it  in  circulation  it  is 
probable  that  the  acceptor  would  not  be  liable  to  any  one  who  should 
receive  it  with  notice.^-*  There  are,  also,  other  qualifications  and  ex- 
ceptions existing  by  reason  of  circumstances,  or  the  intervention  of 
other  legal  or  equitable  rules  generally  or  peculiarly  applicable. 
Thus  where  a  bill  is  accepted  and  indorsed  for  the  accommodation 
of  the  drawer,  with  a  knowledge  of  all  the  circumstances,  and  the 
indorser  is  fully  indemnified  by  an  assignment,  and  the  assignee  has 
sufficient  funds,  and  the  indorser  pays  the  bill,  he  cannot  resort  to  the 

^'Cook  v.  Lister,  13   C.  B.  N.   S.  "^  Thompson  v.  Poston,  62  Ky.  389. 

543,  106  Eng.  Com.  Law  543.  =«  Lewis  v.  Parker,  33  Tex.  121. 

''"  Van  Winkle  Gin  &  Mach.  Co.  v.  "'  Jones  v.  Hibbert,  2  Starkie  304. 

Citizens'   Bank   of   Buffalo,   89   Tex.  "'  Cronise  v.  Kellogg,  20  111.  11,  14, 

147,  33  S.  W.  862.  per  Caton,  C.  J. 

^^^  Davis    V.    Wait,    12    Or.    425,    8 
Pac.  356. 


SS  275-277]        avaxt  or  failure  of  consideratiox.  342 

acceptor,  but  must  resort  to  the  funds  in  the  assignee's  hands,  al- 
though the  acceptor  has  protected  himself  by  attaching  other  funds 
of  the  drawer.--^  And  if  drafts  are  drawn  and  accepted  for  the  payee's 
accommodation,  under  an  express  agreement  between  the  payee  and 
acceptors  that  the  acceptors  shall  look  to  the  payee  for  indemnity, 
the  presumption  that  the  drawee  has  funds  will  be  rebutted.^^^  And 
where  a  partner,  the  maker  of  a  note,  procures  the  discount  thereof 
by  his  own  firm,  after  the  maker's  death,  a  recovery  can  only  be  had 
by  the  sur\dving  partner,  who  had  indorsed  the  note  as  accommoda- 
tion payee  by  proving  the  insufficiency  of  such  maker's  interest  in  the 
firm's  assets,  after  payment  of  debts  of  the  firm,  to  satisfy  the  note.^^^ 

§  275.  Bill  payable  to  order, — A  purchaser  for  value,  without  in- 
dorsement, of  a  bill  of  exchange  payable  to  order,  can  sue  thereon 
in  the  name  of  the  payee,  and  the  acceptor  in  such  case  is  liable  al- 
though he  accepted  for  the  drawer's  accommodation.  But  he  can 
prove  that  being  a  surety  he  is  released  by  the  purchaser's  contract 
of  forbearance  to  the  drawer,  made  by  the  purchaser  with  knowledge 
of  the  fact.==2« 

§  276.  Taking  'before  acceptance. — Where  accommodation  paper  is 
drawn  upon  a  manufacturing  corporation  not  authorized  to  accept  a 
bill  for  the  accommodation  of  the  drawer  a  holder  who  discounts  it 
for  the  drawer  before  acceptance,  notwithstanding  he  receives  the  bill 
and  for  value,  expecting  in  good  faith  that  it  will  be  accepted,  but  in 
ignorance  of  its  accommodation  character  cannot  recover  against  the 
company  thereon,  even  though  it  be  afterwards  accepted,  as  he  is 
presumed  to  have  discounted  on  the  credit  of  .the  drawer  and  not  of 
that  of  the  acceptor.^^^ 

§  277.  Accommodation  paper — Conflict  of  laws — ^Accptance. 
Wliere  a  note  was  written  and  signed  in  Illinois  by  the  makers  and 
sent  to  the  payee  in  Louisiana,  and  he  indorsed  and  returned  it  to 
the  makers  for  their  accommodation,  and  they  negotiated  and  delivered 
it  in  Illinois,  before  due,  to  the  appellee,  and  he  had  no  knowledge  that 
the  note  had  ever  been  elsewhere  than  in  the  hands  of  the  appellant 

=^  Bradford  v.  Hubbard,  25  Mass.  "-^  Meggett  v.  Baum,  57  Mjss.  22. 

(8  Pick.)  155.  =^^  Farmers'  and  Mechanics'  Bank 

^  Thurman     v.     Van     Brunt,     19  v.  Empire  Stone-Dressing  Co.,  18  N. 

Barb.   (N.  Y.)   409.  Y.  Super.  Ct.  (5  Bosw.)  275,  10  Abb. 

-'  Patten  V.  Carr,  117  N.  C.  176,  23  Prac.    47.     See    Webster    v.    Howe 

S.  E.  182.  Mach.  Co.,  54  Conn.  394,  8  Atl.  482. 


343  ACCOMMODATION   PAPER — CONFLICT    OF    LAWS.  [§    277 

and  makers,  it  was  held  to  be  an  Illinois  contract ;  that  the  note  being 
made  there  and  indorsed  in  Louisiana  for  the  accommodation  of  the 
makers,  and  delivered  to  them  so  indorsed  in  Illinois,  the  indorse- 
ment was  governed  by  the  laws  of  the  state  where  delivered  and 
negotiated.-^''  In  another  case  a  party  was  indebted  to  a  person  in 
Georgia  who  agreed  to  take  the  former's  note  with  another,  who  re- 
sided in  Alabama,  as  security ;  said  note  was  drawn,  dated  at  a  place 
in  Georgia,  carried  by  the  makers  to  the  party  intended  to  secure  the 
same,  who  indorsed  the  note  for  accommodation  and  returned  it  to 
tlie  maker,  who  delivered  it  to  the  creditor,  and  the  indorsement  was 
held  a  Georgia  and  not  an  Alabama  contract,  although  the  maker  and 
indorser  resided  in  Alabama  when  the  suit  on  the  note  was  brought.^^^ 
But  where  a  firm  residing  in  New  York  accepted  for  the  accommoda- 
tion of  the  drawer  a  draft,  drawn  upon  them  by  a  corporation  in 
j\Iassachusetts,  and  said  draft  was  subsequently  discounted  by  a  bank- 
ing institution  in  the  latter  state,  and  it  was  thereafter  transferred 
to  the  plaintiff,  it  was  held  that  such  plaintiff  was  entitled  to  re- 
cover, notwithstanding  that,  under  the  laws  of  the  state  where  it  was 
accepted  and  where  by  its  terms  the  bill  was  payable,  it  would  have 
been  subject  to  disability.  Daniels,  J.,  said  in  this  case:  "By  the 
acceptance  of  the  draft  for  the  accommodation  of  the  drawer,  the 
inference  would  seem  to  be  natural  and  proper  that  it  must  have 
l:)een  intended  that  the  drawer  could  use  it  in  any  manner  which  might 
l)e  lawful  at  the  place  of  its  residence,  for  without  that  privilege  it  is 
obvious  that  the  drawer  could  not  be  secured  the  full  benefit  of  the 
paper  accepted.  Its  business  was  in  another  state,  and  the  presump- 
tion would  be  that  the  acceptance  was  procured  to  be  used  where  it 
was  transacted,  and  its  ordinary  corporate  functions  were  exercised; 
and  from  such  a  design,  a  valid  use  of  the  paper  there  ought  to  be 
maintained  by  the  courts  of  tbis  state.  *  *  *  j^  ^r^g  accepted  to  be 
used  by  the  drawer,  carrying  on  its  operations  there,  and  no  restric- 
tion imposed  as  to  what  should  be  done  with  it.  The  drawer  was 
entitled  to  make  any  lawful  use  which  it  could  of  the  acceptance,  and 
one  mode  of  making  such  use  of  it  was  to  render  it  available  for  the 
drawer's  benefit,  in  any  way  in  which  that  could  be  done  consistent 
with  the  laws  of  the  place  under  which,  as  a  corporation,  it  ex- 
isted."^^^    And  where  a  bill  of  exchange  was  drawn  in  another  state, 

-"Gay  V.  Rainey,   86  111.    221,   31        =-=  First  National  Bank  of  N.  Y.  v. 

Am.  Rep.  76.  Morris,  1  Hun   (N.  Y.)   680,  criticiz- 

-''  Stanford   v.   Pruet,  27   Ga.   243,     ing  and  doubting  Jewell  v.  Wright, 

73  Am.  Dec.  734.  30  N.  Y.  259,  and  approving  Bank  of 


il 


§    277]  W4.NT   OR    FAILURE   OF    CONSIDERATION.  344 

upon  a  person  residing  in  New  York,  and  the  contract  was  between 
parties  subject  to  the  laws  of  the  former  state,  and  the  whole  transac- 
tion took  place  there  and  was  performed  there,  so  far  as  the  drawer 
had  anything  to  do  with  it,  and  the  money  was  paid  there  under  an 
agreement  to  transfer  to  the  plaintiff  funds  which  the  drawer  had  in 
New  York,  the  plaintiff's  remedy  would  be  according  to  the  law  of 
the  place  where  the  contract  was  made,  and  the  acceptor  in  New  York, 
having  funds  of  the  drawer,  cannot  refuse  payment  on  the  ground 
of  the  invalidity  of  the  contract  under  the  law  of  New  York.-" 
There  last  two  cases-^*  are,  however,  distinguished  in  the  case  of 
Dickinson  v.  EdwardSj^^s  where  the  defense  by  the  maker  was  that 
the  note  in  suit  was  made  for  the  accommodation  of  the  payee  named 
in  it,  that  it  was  by  him  loaned  to  them,  without  any  consideration  re- 
ceived by  him  from  them,  and  that  they  transferred  it  to  the  as- 
signor of  the  plaintiff  at  a  greater  rate  of  discount  than  was  lawful 
in  New  York.  The  note  was  signed  in  New  York,  was  dated  and  made 
payable  there  and  was  put  in  the  hands  of  the  payees  there,  nor 
was  there  anything  to  show  that  the  maker  knew  or  intended  that  it 
was  to  be  taken  out  of  the  state  for  its  first  use.  But  the  facts  were 
also  set  up  that  the  note  first  passed  into  the  holder's  hands  for  a 
consideration  and  had  its  inception  in  Massachusetts,  in  which  state 
the  discount  taken  was  lawful.  The  court,  however,  affirmed  a 
judgment  in  favor  of  defendant  and  asserted  the  rule  that  a  purely 
personal  contract  is  to  be  governed  by  the  law  of  the  place  where  by 
its  terms  it  is  to  be  performed.-^*^  In  connection  with  the  foregoing  de- 
cisions it  may  be  stated  that  the  general  rule  as  to  acceptors  generally 

Georgia  v.  Lewin,  45  Barb.   (N.  Y.)  governed  by  the  law  of  the  place  of 

340;    Bowen  v.  Bradley,  9   Abb.   N.  performance  as  to  validity,  nature 

S.  (N.  Y.)  395.  and  effect;   cited  also  in  discussion, 

^''  Bank  of  the  State  of  Georgia  v.  in  opinion  of  Haight,  J.,  in  Wilson 

Lewin,  45  Barb.    (N.  Y.)   340.  v.  Lewiston  Mills  Co.,  150  N.  Y.  314, 

-*  First  National  Bank  v.  Morris,  323,  44  N.  E.  959,  55  Am.  St.  Rep. 

1   Hun    (N.   Y.)    680;    Bank   of   the  680,  as  to  the   difficulty   if  not  im- 

State  of  Georgia  v.  Lewin,  45  Barb,  possibility  of  formulating  a  general 

(N.  Y.)  340.  rule  upon  the  question  of  what  law 

-^=  Dickinson  v.  Edwards,  77  N.  Y.  controls  generally. 
573,  cited  in  dissenting  opinion  of        =^°  The   court  considered  the  case 

Vann,  J.,  in  Bath  Gas  Light  Co.  v.  of  Jewell  v.   Wright,   30  N.  Y.  259, 

Claffy,   151   N.   Y.   24,   48,   82   N.   Y.  and  said:    "We  are  satisfied  that  the 

Supp.  843,  84  N.  Y.  App.  Div.  565,  ground  is  stable  on  which  the  ad- 

45  N.  E.  390,  36  L.  R.  A.  664,  to  the  judication    in    that   case    rests.    We 

general  principle  that  the  presump-  follow  it  as  an  authoritative  prece- 

tion   is   that   a  contract   should   be  dent  and  well  decided."  Id.  587. 


345  ACCOMMODATION    PAPER — CONFLICT    OF   LAWS.  [§    277 

is,  that  the  liability  of  acceptors  of  a  bill  of  exchange  is  regulated  by 
the  law  of  the  place  where  the  contract  of  acceptance  is  to  be  per- 
formed.^^'^  So  where  a  bill  of  exchange  for  the  price  of  personal  prop- 
erty was  drawn  and  delivered  in  Louisiana,  payable  in  Kentucky,  and 
it  was  addressed  to  a  party  in  the  latter  state,  it  must  be  presumed 
to  have  been  accepted  there  in  the  absence  of  proof  to  the  contrary, 
and  the  defenses  to  which  it  is  liable  in  the  hands  of  an  innocent 
holder  are  to  be  controlled  by  the  laws  of  the  place  of  acceptance  and 
performance.-^**  And  where  the  drawer  of  a  bill  who  indorsed  it  was 
a  citizen  of  Ohio,  and  it  was  drawn  for  the  accommodation  of  a  New 
York  firm,  who  accepted  it  upon  its  being  transmitted  to  them,  and 
they  negotiated  it  with  the  plaintiffs,  who  were  citizens  of  New  York, 
it  was  decided  that  the  laws  of  that  state  controlled  the  contract.-^^ 
Again,  if  a  bill  of  exchange  is  drawn  in  one  state  upon  a  person  in  an- 
other state,  and  accepted  by  the  latter  for  the  drawer's  accommodation 
and  returned  to  the  drawer  in  his  state,  where  he  negotiates  the  same, 
the  validity  of  the  contract  is  governed  by  the  law  of  the  latter  state, 
as  it  had  its  origin  there,  was  consummated  there,  the  money  loaned 
and  the  security  delivered  in  that  place,  where  it  was  also  dated,  and 
no  other  place  of  performance  was  designated.  And  an  accommodation 
acceptor  is  not  liable  until  the  paper  is  transferred  to  a  holder  for 
value  before  it  becomes  due.  It  then  becomes  an  enforceable  con- 
tract.^*°  So  bills  of  exchange  drawn  in  New  York  upon  a  London 
house,  and  there  accepted  and  paid,  if,  in  connection  with  other  cir- 
cumstances, they  create  a  claim  by  the  acceptor  against  the  drawer, 
are  to  be  considered  as  creating  one  in  London,  which  is  the  place  of 
contract.-*^  And  the  law  of  the  state  where  a  bill  is  verbally  accepted 
and  where  it  is  drawn  governs,  although  drawn  upon  a  firm  in  another 
state.-^^     So  in  an  action  in  Illinois,  upon  the  breach  of  a  verbal 

-'Frazier  v.  Warfield,  17  Miss.  (9  ==' Kelly  &   Co.   v.   Smith  &  Shot- 

S.  &  M.)    220.    In  this  case  the  bill  well,     1     Mete.     (Ky.)     313,     citing 

was  placed  in  the  payee's  hands  by  Chitty   on   Bills,    §§   131-158;    Story 

the   drawers   as   collateral   security  on  Conflict  of  Laws,  §  286. 

for  the  liabilities  incurred  by  them.  =3"  Davis  v.  Clemson,  6  McLean  (U. 

The  payee  indorsed  the  bill  before  S.)  622,  Fed.  Cas.  No.  3630. 

maturity  to  a  bank  as  security  for  =*"  Gallaudet  v.  Sykes,  1  McArthur 

a    note    discounted;     the    bill    was  (D.  C.)  489. 

drawn  at  New  Orleans  and  directed  ="  Lizardi  v.  Cohen,  3  Gill    (Md.) 

to  the  acceptors  at  Lexington,  Ken-  430. 

tucky,  and  by  them  accepted  gener-  ''-  Scudder     v.      Union      National 

ally.  The  firm  of  drawers  was  estab-  Bank,  91  U.  S.  106,  23  L.  Ed.  245. 
lished  at  New  Orleans,  but  one  of 
the  partners  resided  in  Mississippi. 


§    278]  WANT   OR   FAILURE   OF    CONSIDERATION".  346 

agreement  made  in  Missouri,  to  accept  and  pay,  in  Illinois,  drafts 
drawn  upon  the  promisor  by  the  promisee,  the  contract  being  one  upon 
which  no  action  by  a  Missouri  statute  could  be  maintained  in  that 
state,  but  which  was  valid  in  Illinois,  it  was  held  that  nothing  in  the 
case  showed  that  the  parties  had  in  view,  in  respect  to  the  execution 
of  the  contract,  any  other  law  than  that  of  the  place  of  performance, 
and  therefore  that  law  must  determine  the  parties'  rights.^*^  But  it 
is  also  asserted  as  a  rule  that  contracts  are  to  be  governed,  as  to  their 
nature,  their  validity  and  their  interpretation,  by  the  law  of  the  place 
where  they  were  made,  unless  the  contracting  parties  had  some  other 
law  in  view ;  and  that  a  contract  to  accept  drafts  is  governed  by  the 
law  of  the  state  where  made  where  it  is  clearly  apparent  that  the  par- 
ties did  not  have  in  view,  in  respect  to  the  execution  of  the  contract, 
the  law  of  another  state.-**  And  it  is  held  that  a  bill  of  exchange, 
payable  in  New  York  City  and  accepted  in  Indiana,  is  a  contract  to 
be  performed  in  New  York,  and  is  governed  by  the  laws  of  that 
state,^*^  Again,  where  a  draft  was  made  by  a  London  company  upon 
a  manufacturing  corporation  of  Connecticut,  and  it  was  accepted  for 
the  corporation,  payable  at  its  principal  office  in  New  York,  the 
contract  was  held  governed  by  the  law  of  New  York.^*^  It  has  also 
generally  been  held  that  the  law  of  the  state  where  a  note  is  payable 
governs  as  to  the  maker's  liability.^*^  In  a  recent  decision  it  is  de- 
clared that  while  the  common  law  is  presumed  to  be  of  force  in  most 
of  the  American  states,  if  either  party  claims  that  the  statute  or  com- 
mon-law rule  obtaining  in  such  state  is  different  from  the  law  laid 
down  in  the  code,  he  must,  by  pleading,  evidence  or  a  request  to 
charge,  call  the  attention  of  the  court  to  such  difference.  As  to  this 
presumption,  while  there  is  a  conflict  in  the  authorities,  according  to 
many  cases  the  "legal  presumption  is  that  the  lex  loci  is  the  same  as 
our  own" ;  that  is,  that  the  law  of  another  state  as  to  warranty  is  sub- 
stantially the  same  as  that  of  the  state  where  the  case  is  tried.^*^ 

§  278.     Accommodation  check — Bank  check. — As  against  a  bona 
fide  holder  for  value,  without  notice,  of  an  accommodation  check,  a 

"-"^  Hall  v.  Cordell,  142  U.  S.  116,  ^*^  Webster  &  Co.  v.  Howe  Machine 

35  L.  Ed.  956,  12  Sup.  Ct.  154.  Co.,  54  Conn.  394,  8  Atl.  482. 

-"Hubbard  v.  Exchange  Bank,  72  ='' Midland    Steel    Co.   v.   Citizens' 

Fed.  234,  18  C.  C.  A.  525.  Nat.  Bank  of  Kokomo,  34  Ind.  App. 

='=  Bright  v.  Judson,  47  Barb.    (N.  107,  72  N.  E.  290. 

Y.)  29.  -^'^  Wells  V.  Gress,  118  Ga..566,  45  S 

E.  418;  Civ.  Code,  §  3555. 


347  ACCOMMODATION    INDORSEES.  [§    279 

defense  that  .would  not  be  available  had  the  drawer  received  value  for 
the  check  when  he  delivered  it  cannot  be  set  up  by  the  drawer  against 
such  holder,24o  jj.  ijeinor  declared  that  the  drawer  of  such  a  check 
stands  upon  the  same  basis  as  the  drawer  of  regular  commercial 
paper.^^''  Again  the  defense  of  failure  of  consideration  cannot  be 
successfully  availed  of  to  preclude  recovery  by  an  indorser  of  a  bank 
check  for  the  payee's  accommodation  where  he  was  ignorant  of  the 
drawer's  equitable  defenses,  and  payment  had  been  enforced  against 
him.-^^  Nor  is  it  any  defense  that  the  holder  had  delayed  presentment 
for  a  month  of  a  check,  payable  to  bearer,  which  was  drawn  for  the 
accommodation  of  the  originat  payee,  and  the  latter  had  failed  before 
presentment,  it  appearing  also  that  the  holder  was  ignorant  of  the 
relation  of  the  parties.-^^ 

§  279.  Accommodation  indorsers — Availability  of  defenses — Gen- 
eral rule. — A  party  who  makes  or  indorses  a  note  without  considera- 
tion, and  for  the  purpose  of  thereby  lending  his  credit  to  another,  is 
an  accommodation  maker  or  indorser,  and  after  the  note  has  passed 
into  circulation,  and  the  indorser's  liability  has  become  fixed,  he  can- 
not make  the  defense  of  a  want  of  consideration  against  any  one  ex- 
cept the  accommodated  party.  The  note  is  supposed  to  be  taken  by 
third  persons  upon  the  credit  given  to  him,  and  he  is  expected  to  pay 
it,  and  this  rule  seems  to  be  applicable  to  other  defenses.^^^  So  under 
a  Pennsylvania  decision  it  is  held  that  in  that  state,  as  well  as  in  all 
other  commercial  countries,  an  indorser  who  gives  credit  to  a  note  or 
bill  by  his  indorsement,  whether  with  or  without  consideration,  is 
bound  to  make  the  paper  good  in  the  hands  of  any  subsequent  in- 
dorsee, who  receives  it  for  value  and  in  the  ordinary  course  of  busi- 
ness. ^^*    And  in  a  Missouri  case  it  is  decided  that  it  does  not  avail 

='»Harbeck    v.    Craft,    11    N.    Y.  Cas.  No.  859,  8  Am.-L.  Rec.  460,  per 

Super.  Ct.  122.    See  Davis  v.  Day-  Deady,    D.   J.;    Archer  v.    Shea,   14 

ton,  7  Misc.  Rep.  488,  27  N.  Y.  Supp.  Hun  (N.  Y.)  493.    (It  constitutes  no 

969.    Examine   Charuoch   v.   Ander-  defense  by  an  indorser  that  as  be- 

son,  11  N.  Y.  Supp.  639.  tween    maker    and    payee    the    pa- 

-'"Deener  v.  Brown,  1  MacArthur  per  was  accommodation  paper.)    See 

(D.  C.)  350.  Hamburger   v.    Miller,    48    Md.    317. 

^^ Andrews  v.  Meadows  (Ala.),  31  (It  was  held  that  recovery  may  be 

So.  971.  had  against  the  maker  and  first  in- 

^- Stewart  v.    Smith,   17   Ohio   St.  dorser.) 

83.  -■'  Struthers  v.  Kendall,  41  Pa.  St. 

^'  Bank  of  British  North  America  214,  80  Am.  Dec.  610. 
V.  Ellis,   6   Sawy.    (U.    S.)    96,   Fed. 


§    280]  WANT    OR   FAILURE    OF    COXSIDERATION.  348 

as  a  defense  except  as  between  the  indorser  and  the  person  to  whom 
he  grants  the  use  of  his  name,  that  no  consideration  is  received  for 
lending  his  credit,  nor  that  such  fact  is  known  to  liim  when  the  paper 
is  discounted;  that  it  is  sufficient  to  support  the  contract  of  indorse- 
ment that  tlie  accommodation  party  has  lent  his  credit  and  upon  the 
faith  of  that  the  money  has  been  loaned  or  the  discount  effected.^^^ 
In  the  federal  court  it  has  also  been  determined  that  there  can  be  no 
objection  to  the  want  of  consideration  in  an  action  by  the  holder.-^® 
If  a  corporation's  indorsement  of  negotiable  paper  is  ultra  vires,  and 
it  incurs  no  liability  thereby,  its  effect,  nevertheless,  is  to  pass  the 
property  therein;  for  whether  or  not  a  preceding  indorser  has  the 
power  to  make  an  accommodation  indorsement  merely  is  a  question 
of  no  importance,  so  far  as  the  last  indorser's  liability  under  a  sub- 
sequent indorsement  is  concerned,  and  it  constitutes  no  defense  to  a 
subsequent  indorser  and  the  subsequent  indorsement  constitutes  a 
warranty  of  the  genuineness  of  the  paper,  of  the  indorser's  title 
thereto,  and  of  the  capacity  of  all  the  preceding  parties  to  the  con- 
tract; so  that  such  want  of  corporate  power  is  no  defense  to  a  subse- 
quent indorser.  ^^^ 

§  280.  Same  subject — Application  of  rule. — The  above  rule  has 
been  applied  to  preclude  showing  that  the  indorsement  was  anything 
else  than  an  ordinary  one.^^^  And  in  a  suit  against  the  accommodation 
indorser  the  payee  cannot  set  up  a  breach  of  warranty.-^^  Nor  is  it  a 
good  defense  where  plaintiff  obtained  title  from  a  subsequent  indorser 
before  maturity  and  w^ithout  notice.-'^*'  The  rule  also  applies  where  a 
party  has  received  and  discounted  a  bill  hona  fide  and  there  was  noth- 
ing to  put  him  on  inquiry.-*^^     And  where  the  proceeds  of  a  note, 

^  Miller  v.  Meller,  59  Mo.  388-.  party  acting  upon  the  faith  of  that 

^  Bank  of  Columbia  v.  French,  1  indorsement   had   no   notice   of  the 

Cranch    (C.  C.)'  221,  Fed.  Cas.  No.  fact.   This  was  the  situation  of  Wil- 

867,  rev'd  4  Cranch  (U.  S.)  141.  lard"  (the  last  indorsee),  "as  shown 

^'Willard  v.  Crook,  21  App.  D.  C.  by  his  affidavit,  and  the  same  has 

237;  Code  D.  C,  §§  1326,  1369,  1370.  not  been  denied,"  per  Shepard,  J. 

The  court  said  g.lso  that  it  was  un-  ^^Thacher    v.    Stevens,    46    Conn. 

necessary    to    consider    whether    an  561,  33  Am.  Rep.  39. 

ordinary     trading     corporation,     a  -™  Variscope  Co.  v.  Brady,  77  N.  Y. 

prior     indorser,     had     the     implied  Supp.  159. 

power  under  the  laws  of  the  district  ^^  Meyers  v.  Kasten,  9  Misc.  Rep. 

to  make  an  indorsement  of  negotia-  (N.  Y.)  221,  29  N.  Y.  Supp.  677. 

ble  paper  for  accommodation  only.  ="  Bank    of    Genesee    v.    Patchin 

"Assuming  the  want  of  power,  the  Bank,  19  N.  Y.  312. 

defense    is    unavailable    where    the 


349  ACCOMMODATION   INDORSERS.  [§    280 

which  is  afterwards  discoimted  in  bank,  are  applied  to  the  maker's 
benefit,  the  accommodation  indorser  cannot,  on  non-payment  of  the 
note  at  maturity,  plead  a  want  of  consideration  for  the  indorsement.^''^ 
So  in  a  suit  against  an  accommodation  indorser,  a  payee  who  is  an 
indorser  may  recover,  even  though  his  indorsement  is,  in  form,  sul)- 
sequent  to  that  of  the  payee. -''^  And  recovery  may  be  had  by  a  subse- 
quent indorsee  from  a  prior  indorsee  where  the  note  was  in  the  hands 
of  the  maker  before  due.^***  And  even  though  an  indorser  purchased  a 
note  from  the  payee  at  a  discount  greater  than  the  legal  rate  of  in- 
terest, the  indorsee  may  recover  from  the  indorser.^^^  The  rule  has 
also  been  applied  where  a  note  was  indorsed  for  the  maker's  accom- 
modation for  a  premium,  to  be  paid  by  the  maker.-'"'  And  a.  bank  has 
been  held  bound  as  against  a  purchaser  in  good  faith,  for  value,  be- 
fore maturity,  where  the  indorsement  was  made  by  the  bank's 
cashier.^^^  So  a  breach  of  warranty  as  to  chattels  sold  cannot  be 
availed  of  by  an  accommodation  indorser  of  a  purchase-price  note.^°* 
Nor  is  want  of  consideration  for  such  indorsement  any  defense,  even 
though  the  plaintifE  knew  the  purpose  of  the  indorsement,  nor  does 
the  circumstance  that  the  note  was  not  put  in  circulation  make  any 
difference. ^^^  Nor  can  an  accommodation  indorser  avail  himself  of  the 
defense  of  want  of  consideration,  even  though  the  note  was  acquired 
with  knowledge  that  the  defendant  was  such  accommodation  in- 
dorser.^^"  And  where  a  note  was  indorsed  for  the  accommodation  of 
a  firm,  mere  notice  to  the  transferee  at  the  time  he  took  such  note 
that  the  indorser  would  not  be  liable  therefor,  or  a  notice  that  the 
makers  had  dissolved  partnership,  constitutes  no  defense.^^^  So  re- 
covery may  be  had  by  a  holder,  for  value,  against  an  indorser  for  the 
payee's  accommodation,  even  though  he  knew  that  the  indorsement 
was  for  accommodation  only.-''-    The  fact  that  an  indorsement  was 

=«=  Union   Bank  v.   Morgan,   2   La.  Prac.  462;   Id.,  17  N.  Y.  Super.  Ct. 

Ann.  418.  36;  Id.,  25  N.  Y.  306,  Am.  Dec.  355. 

="' Moore  v.  Cross,  19  N.  Y.  227,  75  =<^'' Niles  v.  Porter,  6  Blackf.  (Ind.) 

Am.  Dec.  326.  44. 

="  Erwin  v.  Shaffer,  9  Ohio  St.  43,  -™  Bankers'    Iowa    State    Bank    v. 

72  Am.  Dec.  613.  Mason  Hand  Lathe  Co.  (Iowa  1902), 

="^  Burpee  v.  Smoot,  4  Wkly.  Notes  90  N.  W.  612. 

Cas.  (Pa.)  186.  ='i  Smith    v.     Mulock,     24     N.     Y. 

^''^Kitchel    V.    Schenck,    29    N.    Y,  Super.   Ct.  569,  1   Abb.  Prac.  N.   S. 

515.  374. 

'"  Houghton  V.  First  Nat.  Bank,  26  "'-  Lincoln  Nat.  Bank  v.  Butler,  16 

Wis.  663,  7  Am.  Rep.  107.  Misc.  Rep.  566,  38  N.  Y.  Supp.  776, 

'''Gillespie    v.    Torrance,    7    Abb.  rev'g   14   Misc.   Rep.    464,   36    N.  Y. 

Supp.  1112. 


§    281]  WANT   OR   FAILURE    OF    CONSIDERATION.  350 

procured  by  false  representations  of  the  maker  is  no  defense  by  an 
accommodation  indorser  where  the  note  in  suit  was  given  in  lieu  and 
as  part  renewal  of  a  former  note,  which  was  surrendered  and  on  which 
such  maker  was  liable,  and  which  was  presented  to  plaintiff  in  the 
usual  course  of  business,  with  the  name  of  such  indorser  written 
thereon,  and  plaintiff  was  without  knowledge  of  any  prior  invalidating 
circumstances.^''^  Again,  it  is  held  in  a  New  York  decision  that  re- 
covery may  be  had  by  an  indorsee  without  knowledge  or  notice  of 
defenses,  notwithstanding  an  accommodation  indorsement  for  the 
plaintiff.  It  was  said  in  this  case  that  if  there  had  been  any  fraud 
or  the  plaintiff  had  not  made  any  advances  upon  the  note,  the  taking 
of  it  by  him  with  knowledge  of  defenses  would  preclude  a  recovery.^'* 
The  general  rule  has  always  been  applied,  although  the  note  was  void 
for  fraud  and  want  of  consideration  in  the  hands  of  the  maker.  ^'^^ 
And  knowledge  of  circumstances  does  not  amount  to  a  fraud.^^^ 
Nor  is  it  any  defense,  in  a  suit  brought  against  the  maker  by  an  ac- 
commodation indorser,  who  has  been  compelled  to  take  up  the  note 
when  due,  that  as  between  the  maker  and  payee  the  paper  is  an  ac- 
commodation one.^^^ 

§  281.     Same  subject — Qualifications  of  and  exceptions  to  rule. — It 

is  decided  that  the  position  of  an  accommodation  indorser  is  that  of 
surety  and  that  he  is  entitled  to  all  defenses  available  to  the  princi- 
pal,^'^ including  subrogation  to  rights  which  the  maker  would  have.^'" 
An  accommodation  indorser  may,  by  agreement,  however,  render  him- 
self liable  to  a  subsequent  holder,  with  knowledge,  as  an  actual  in- 
dorser,^^"  There  are  also  other  decisions  which  are  contrary  to,  or  at 
least  not  in  harmony  with  the  principal  rule,  or  which  are  exceptions 
to  or  qualifications  thereof.  Thus  it  is  held  that  in  a  suit  between  in- 
dorsers  and  their  indorsee  with  notice,  the  consideration  may  be  in- 

"^Cristy    v.    Campau,    107    Mich,  ley,  114  Pa.  St.  191,  6  Atl.  465.    (The 

172,  65  N.  W.  12.  decision,     however,     rested  .  largely 

="*  Brown  v.  Mott,  7  Johns.  (N.  Y.)  upon  the  fact  of  the  plaintiff  below 

361.  not  being  a  tona  fide  holder  and  his 

^°  Codwise   v.   Gleason,   Fed.   Cas.  failure  to  comply  with  the  contract 

No.  2939  (Brunner,  Col.  Cas.  40).  on  which  he  received  the  note.) 

='' Powell  v.  Waters,  17  John.   (N.  ="'•  McDonald  Mfg.  Co.  v.  Moran,  52 

Y.)   176.  Wis.  203,  8  N.  W.  864. 

"^Post  V.   Tradesman's   Bank,   28  =*»  Leeke  v.  Hancock,  76  Cal.  127, 

Conn.  420.    '  17  Pac.  937. 

*'*Gunnis  Barrett  &  Co.  v.  Weig- 


\ 


I 


351  ACCOMMODATION    INDOESERS.  [§    281 

quired  into.-^^  And  want  of  consideration  may  be  shown  in  a  case 
where  the  debtor's  wife  indorsed  a  note  for  the  debtor's  accommoda- 
tion and  without  consideration,  that  the  note  might  appear  as  regular 
business  paper.^^-  Again,  in  an  action  against  the  maker  and  in- 
(lorser,  it  is  held  to  be  a  good  defense  as  against  a  demurrer  that  the 
defendant  indorsed  the  note  for  the  accommodation  of  the  plaintiff.-^^ 
And  it  is  decided  that  an  accommodation  indorser  of  a  renewal  note 
may  defend  on  the  ground  that  the  note  was  without  consideration, 
where  such  indorser  was  in  ignorance  of  the  fact  that  the  debt  had  been 
discharged.^**  So  in  an  action  by  a  receiver  of  a  national  bank,  it  is 
a  valid  defense  that  the  note  in  suit,  and  former  notes  which  were 
renewed  by  it,  were  given  for  the  use  of  the  bank,  to  be  paid  at  ma- 
turity, and  that  the  bank  would  retain  and  protect  the  note.^*^  And 
failure  of  consideration  is  available  as  a  defense  where  the  nominal 
plaintifE  stood  upon  the  rights  of  the  payee. ^^'^  Want  of  consideration, 
and  that  the  paper  was  indorsed  to  enable  the  plaintiff  to  carry  out 
an  agreement,  may  also  be  shown  in  an  action  by  the  indorsee  against 
the  indorser  where  the  suit  is  not  between  an  innocent  holder  and  an 
indorser,  but  as  between  the  parties,  however,  and  others  having  no- 
tice, want  of  consideration  may  be  shown.^*^  If  a  note  is  given  in  the 
name  of  a  firm  by  one  of  its  partners  for  the  private  debt  of  such 
partner,  and  it  is  known  to  be  so  by  the  partner  taking  the  note,  the 
other  partners  are  not  bound  by  such  notes  unless  they  have  been 
previously  consulted  and  consent  to  the  transaction,  and  a  person  tak- 
ing such  note  cannot  recover  on  it  against  one  who  indorsed  it  without 
consideration,  believing  it  to  be  the  firm  note.^^*  Again,  where  the 
maker  upon  an  accommodation  note  becoming  due,  procures,  with  the 
knowledge  of  the  accommodation  indorser,  from  a  stranger,  without 
consideration,  a  note  to  the  firm  of  which  both  the  original  maker  and 
indorser  are  members,  and  the  new  note  is  indorsed  by  the  firm  and 
again  by  the  original  indorser,  and  is  discounted  and  the  proceeds  ap- 

^*  Brown   v.   Fort,   1   Mart.   O.    S.  action  was  against  the  indorser  as 

(La.)  34.  maker. 

'^  Produce  Bank  v.  Bache,  30  Hun  ^^"^  Hoopes  v.  Northern  Nat.  Bank, 

(N.  Y.)  351.  102  Fed.  448. 

'^  Simms   v.   Field,  1   Cleve.   Law  =«'  National  Bank  of  Rising  Sun  v. 

Rep.  (Ohio)  337.  Brush,  10  Biss.(U.   S.)    188,   6  Fed. 

^  Price  County  Bank  v.  McKenzie,  132. 

91  Wis.  658,  65  N.  W.  507.  '^  Chaxournes     v.      Edwards,      20 

=*=  Simons  v.  Fisher,  17  U.  S.  App.  Mass.  (3  Pick.)  5. 
1,  5  C.  C.  A.  311,  55  Fed.  905.    The 


§    282]  WANT   OR   FAILURE   OF    CONSIDERATION.  352 

plied  to  the  payment  of  the  original  note,  such  new  note  is  not  prima 
facie  accommodation  paper  between  the  maker  and  indorser,  although 
it  is  as  to  the  maker  of  the  old  note.  The  new  note  being  an  indepen- 
dent security  for  the  original  accommodation  note,  no  dealings  short 
of  payment  and  release  would  affect  a  claim  against  the  maker  of  the 
new  note,  and  a  mortgage  given  to  the  indorser  as  security  for  the 
new  note  would  be  inadmissible  as  a  defense  to  the  note;  and  an 
agreement  of  two  remaining  partners  to  pay  firm  debts  is  not  an 
assumption  by  one  of  the  remaining  partners  of  a  note  on  which  he 
became  indorser  for  the  accommodation  of  the  retiring  partner.-^^ 

§  282.  Bona  fide  holder — Accommodation  paper  taken  after  matur- 
ity— ^Want  of  consideration. — It  seems  by  the  evident  weight  of  au- 
thority to  be  the  rule  that  where  there  are  no  limitations  or  restric- 
tions as  to  time,  use  or  purpose,  qualifying  accommodation  paper,  and 
there  is  no  fraud,  the  fact  that  defendant  is  an  accommodation  party, 
without  consideration,  is  not  of  itself  a  defense  as  against  a  pur- 
chased after  maturity  and  the  character  of  the  paper  was  known  at 
the  time  of  the  purchase.  So  in  an  Alabama  case  the  court,  per 
Brickell,  C.  J.,  says:  "Nor  would  the  title  of  the  holder  be  affected, 
because  he  may  have  acquired  the  paper  after  its  maturity.  When 
accommodation  paper  is  not  made  for  a  specific  purpose,  when  there 
is  by  the  understanding  of  the  parties  no  restriction  upon  its  use, 
there  can  be  no  inference  or  presumption  that  it  is  to  become  value- 
less, or  that  the  authority  of  the  party  intrusted  with  its  use  ceases, 
if  it  is  not  negotiated  before  maturity.  Negotiation  after  maturity 
may  serve  the  very  purpose  of  its  making — in  that  way  only,  it  may 
be,  the  intended  law  of  credit  can  be  made  effectual;  and  certainly, 
putting  in  circulation  accommodation  paper,  after  its  maturity,  can- 
not be  esteemed  fraudulent,  or  mala  fides  attributed  to  the  party  who 
has  the  right  of  using  it."^^'*  And  in  a  comparatively  recent  Connecti- 
cut case.  Prentice,  J.,  asserts  that:  "The  courts  of  England  and  of 
many  of  our  states  have  adopted,  and  the  text-writers  with  general 
unanimity  have  approved  of,  the  doctrine  which  declares  that,  unless 
accommodation  paper  is  shown  to  have  been  misappropriated  by  the 
accommodated  party  to  some  purpose  other  than  that  for  which 
it  was  given,  the  accommodation  makers  may  not  set  up  the  want  of 
consideration  in  an  action  b}',  one  who  has  acquired  it  in  good  faith. 

=«»Mosser  v.  Criswell,  150  Pa.  St.  =»"  Connerly  v.  Planters'  &  Mer- 
409,  24  Atl.  618.  chants'  Ins.  Co.,  66  Ala.  432. 


I 


353  ACCOMMODATION  PAPER  TAKEN  AFTER  MATURITY.         [§    283 

in  the  ordinar}'  course  of  business  and  for  value,  although  after  ma- 
turity."-"^ It  was  also  declared  by  the  court  asserting  the  above  rule 
that:  "The  cases  holding  otherwise,  in  so  far,  at  least,  as  the  rule 
laid  down  by  them  is  made  to  embrace  situations  where,  as  here,  the 
holder  for  value  parted  with  the  consideration  without  notice  of  the 
accommodation  character  of  the  paper,  do  not  have  the  support  of 
sound  reason  or  safe  policy.  We  are  not  prepared  to  introduce  into 
the  commercial  law  a, principle  so  repugnant  to  its  spirit  and  so 
fraught  with  danger."  Again,  in  an  Illinois  decision,  Scott,  J.,  says 
tliat :  "The  very  purpose  of  making  accommodation  paper  is  that  the 
party  favored  ma}^  dispose  of  it,  and  unless  restricted  he  may  trans- 
fer it  either  before  or  after  maturity,  and  the  maker  will  be  equally 
bound.  The  usage  in  this  regard  is  sanctioned  by  the  practice  that 
has  prevailed  in  mercantile  transactions  eveiywhere,  in  this  country 
and  in  England.  That  usage  now  has  the  consistence  of  law.  Any 
other  rule  would  permit  the  maker  of  such  paper  to  practice  a  fraud 
on  persons  who  should  take  the  paper  he  had  put  out  to  be  negotiated 
in  the  usual  course  of  business.''-"-  In  a  Maryland  case  the  rule 
is  laid  down  that  accommodation  notes  are  an  exception  to  the  rule 
which  lets  in  the  defenses  of  want  or  failure  of  consideration  in  cases 
where  a  regular  note  is  indorsed  when  overdue :  "Cases  of  the  highest 
authority  recognize  a  wide  distinction  between  accommodation  notes 
or  bills,  and  those  which  are  wholly  without  consideration  or  fraudu* 
lent,  and  as  such  nudum  pactum  at  law.  Some  of  the  cases  go  to  the 
length  of  asserting  that  though  the  holder  of  a  note,  claiming  by 
virtue  of  an  indorsement  made  after  the  same  was  due,  knew  when 

-"^Connecticut. — Mersick  v.  Alder-  English. — Sturtevant    v.    Ford,    4 

man,  77  Conn.  634,  636,  60  Alt.  109,  Man.    &   G.    102;    Stein   v.   Yglesias, 

citing:  1   Cromp.   M.  &   H.   565;    Charles  v. 

Illinois. — Miller    v.    Larned,    103  Marsden,  1  Taunt.   223;   Carruthers 

111.  570.  v.   West,   11    Q.   B.   143;    Atwood   v. 

Maine. — Dunn  v.  Weston,  71   Me.  Crowdie,  1   Stark.   485;    Daniels  on 

270,  36  Am.  Rep.  510.  Neg.    Inst,   §§   726,   786,   790;    Story 

Maryland. — Maitland  v.  Bank,  40  on  Promissory  Notes  194;  Clutty  on 

Md.  540,  17  Am.  Rep.  520.  Bills    218;    2    Parsons    on    Notes    & 

Is'eio    Jersey.— Seyfert   v.    Edison,  Bills  28;   Byles  on  Bills  285;   Eaton 

45  N.  J.  L.  343.  &    Gilbert   on    Commer.    and    Paper 

Neio  Yorfc.— East   River   Bank   v.  (Ed.,  1903),  p.  312,  §  55f;    Redfield 

Butterworth,  45  Barb.   (N.  Y.)   476;  &  Bigelows  Lead.  Cas.  216. 

Harrington  v.  Dorr,  3  Rob.   (N.  Y.)  ^''^  Miller   v.    Larned.    103    111.    562, 

275.  570,  571,  per  Scott,  J. 

Virginia. — Davis     v.     Miller,     14 
Grat.  (Va.)  1. 

Joyce  Defense.s — 23. 


§    282]  WANT   OR   FAILURE   OF    CONSIDERATION.  354 

he  received  it  that  it  was  an  accommodation  paper,  still  such  fact 
would  not  defeat  his  right  to  recover  against  the  maker. "^^^  So  in  a 
Maine  decision-^*  it  is  declared  that  the  fact  that  such  a  note  "was 
indorsed  after  due,  without  some  equity  in  the  maker,  will  not  de- 
feat the  rights  of  the  holder.  The  maker  of  an  accommodation  note 
holds  himself  out  to  the  public  to  be  absolutely  bound  to  every  per- 
son who  shall  take  the  same  for  value — 'a  party  who  lends  his  note 
without  limitation  as  to  the  time  of  its  use,'  observes  Robertson, 
C,  J.,  ^cannot,  therefore,  be  presumed  in  law  to  have  limited  such 
time  to  that  before  its  maturity.'-""  The  authorities  are  decisive  on 
this  question."  And  in  another  case  in  that  state^"°  the  rule  is  as- 
serted that:  "One  who  takes  an  accommodation  note  after  its  dis- 
honor may  recover  from  the  maker  or  indorser  if  it  be  used  for  the 
purpose  for  which  it  was  given. -'*"  The  party  giving  the  accommoda- 
tion must  show  he  was  injured  by  the  misappropriation,  'If  the  in- 
dorsee knew  of  the  fact  of  the  paper  being  made  for  accommodation 
at  the  time  he  received  it  there  could  be  no  difference  whether  he  re- 
ceived it  before  or  after  due;  *  *  *  j-j^g  proper  question  seems 
to  be  whether  the  paper  was  misapplied  by  the  party  accommodated,' 
*  *  *  unless  there  is  an  agreement  Restraining  the  transfer  of  an 
accommodation  note  after  due,  and  it  is  used  for  the  purpose  for 
which  it  is  given,  it  is  immaterial  whether  the  holder  advances  money 
upon  it  before  or  after  its  maturity,"  provided  also  that  such  note 
is  delivered  without  any  restriction  or  limitation  upon  the  payee's 
authority  to  use  it.  And  a  subsequent  holder  from  the  payee,  who  be- 
comes the  owner  of  an  accommodation  note  after  its  maturity,  may 
recover,  in  the  absence  of  proof  of  payment  of  the  note,  from  the 
maker  of  such  note,  where  it  has  been  discounted  by  the  payee,  who 
received  the  money  on  it.^"^  So  the  rule  making  an  accommodation 
note  negotiable  after  its  maturity,  and  obligatory  iipon  the  parties 
thereto  when  taken  for  value,  has  been  applied  in  a  New  Jersey 
case,-''''  where  there  was  no  pretense  of  any  misapplication  of  the  note 

=°^  Renwick  v.  Williams,  2  Md.  356,  274,  36  Am.  Rep.  310,  per  Appleton, 

363,  per  Mason,  J.  C.  J. 

^  First  National  Bank  of  Salem  v.  -•''  Citing    2    Parsons    on    Bills    & 

Grant,  71  Me.  374,  376,  36  Am.  Rep.  Notes,  28  et  seq. 

334,  per  Appleton,  C.  J.  -"*  Warder,    Bushnell    &    Glessner 

^"'^  Harrington  v.  Dorr,  3  Rob.   (N.  Co.  v.  Gibbs,  92  Mich.  29,  52  N.  W. 

Y.)  283.  73. 

^''Dunn    v.    Weston,    71    Me.    270,  ="' Seyfert  v.   Edison,   45   N.   J.  L. 

393. 


355  ACCOMMODATION  PAPER  TAKEN  AFTER  MATURITY.         [§    283 

and  nothing  in  the  terms  of  the  agreement  prohibiting  its  use 
after  the  pay-day  of  the  instrument.  In  a  New  York  case"""  it  is 
held  that  accommodation  notes,  or  bills  without  limitation  as  to  time 
or  purpose,  may  be  negotiated  when  past  due,  so  as  to  bind  accommo- 
dation makers  or  acceptors,  and  this  rule  applies  even  though  the 
holder  had  knowledge  of  its  origin.^*^^  In  an  English  case^°-  it  is 
held  that  it  is  not  of  itself  a  defense  to  an  action  by  the  indorser  to  a 
bill  of  exchange  to  plead  that  it  was  accepted  for  the  accommodation 
of  the  drawer  without  consideration,  and  was  indorsed  after  it  be- 
came due,  there  being  no  allegation  of  fraud  and  no  averment  that 
plaintiff  did  not  give  a  valuable  and  full  consideration  for  the  bill; 
that  it  was  not  necessarily  to  be  inferred,  because  it  was  an  accommoda- 
tion bill,  that  there  was  an  agreement  not  to  negotiate  it  after  it  be- 
came due,  and  if  there  was  such  an  agreement,  it  was  the  defendant's 
own  fault  that  the  bill  was  outstanding.^''^  So  in  another  English  case 
it  is  decided  that  a  plea  by  the  acceptor  of  a  bill  to  an  action  by  the 
indorsee  that  the  bill  was  accepted  before  it  became  due  and  for 
accommodation  and  without  any  value  or  consideration  for  the  ac- 
ceptance or  for  the  payment,  and  that  the  bill  was  indorsed  to  the 
plaintiff  after  it  became  due,  is  bad.^"*  Again,  the  indorsee  of  a  note, 
who  receives  it  for  value  from  the  second  indorser,  after  it  has  been 
dishonored  by  the  maker,  can  recover  thereon  against  the  maker, 
although  he  knew  when  he  received  it,  that  as  between  the  maker  and 
the  first  indorser,  it  was  an  accommodation  note.^°^  So  in  a  Pennsyl- 
vania case  it  is  held  that  it  is  no  defense  to  an  accommodation  note 
that  it  came  into  the  plaintiff's  hands  after  maturity,  if  he  acquired  it 
from  one  who  acquired  it  for  value  before  maturity.^""  Notwith- 
standing the  preceding  authorities,  there  are  many  decisions  both  in 
this  country  and  in  England  which  have  been  relied  on  as  sustaining 
the  contrary  rule,  to  the  effect  that  if  the  accommodated  party  trans- 
fers accommodation  paper  after  its  maturity  it  is  subject,  in  the  hands 

'°"  Harrington   v.    Dorr,   26    N.   Y.  '°*  Sturtevant  v.  Ford,  4  Man.  &  G. 

Super.  Ct.  (3  Rob.)  275.  101,  43  Eng.  Com.  L.  61.    See  Stein 

'"East     River     Bank     v.     Butter-  v.  Yglesias,  1  Cromp.  M.  &  R.  565; 

worth,  30  How.  Pr.    (N.  Y.)   444,  45  Carruthers  v.  West,  112  B.  143. 

Barb.    (N.   Y.)    476,   affd.    51    N.    Y.  ■"'•Thompson      v.      Shepherd,      12 

637.  Mete.  (Mass.)   311,  46  Am.  Dec.  676. 

'"^Charles    v.    Marsden,    1    Taunt.  •    ■'''<' Riegely  v.  Cunningham,  9  Phila. 

224,  per  Mansfield,  Ch.  J.  (Pa.)    177.    See   Tinson   v.   Francis, 

^"^  Examine   Watkins   v.   Maule,   2  1  Camp.  19, 
Jac.  &  W.  237,  244. 


282] 


WANT    OR   FAILURE   OF    CONSIDERATION. 


35G 


of  the  transferee,  to  the  same  defenses  as  would  be  available  against 
the  accommodated  party;  many  of  these  cases,  however,  rested  also 
upon  other  factors.""^    So  in  a  New  York  case,  the  rule  is  dissented 


^"''Alabama. — Battle  v.  Weems,  44 
Ala.  105  (bill  drawn  and  indorsed 
by  defendant  for  accommodation  of 
acceptors) ;  Glasscock  v.  Smith,  25 
Ala.  474  (delivered  after  indorser's 
death  and  legal  title  did  not  pass). 

California. — Coghlin  v.  May,  17 
Cal.  515  (note  reissued  and  diverted 
after  it  had  answered  its  purpose; 
there  was  also  the  factor  of  col- 
lateral security). 

Georgia. — Strauss  v.  Friend,  73 
Ga.  782  (under  Code,  §  1783— de- 
fendant also  frequently  demanded 
return  of  note — action  was  by  in- 
dorsee against  maker). 

Kentucky. — Gazzam  v.  Armstrong, 
3  Dana  (Ky.)  554  (action  by  holder 
against  acceptor;  plaintiff  paid  the 
bill  for  drawer's  honor  at  maturity). 

Louisiana. — Whitwell  v.  Crehore, 
8  La.  (0.  S.)  540,  28  Am.  Dec.  141 
(action  by  holder  against  indorser; 
note  was  received  as  collateral  for 
debt;  it  was  agreed  that  indorser  was 
never  to  be  liable). 

Maine. — Gumming  v.  Little,  45 
Me.  183  (action  by  indorsee  against 
several  persons  as  defendants;  no- 
tice held  implied  by  indorsement 
after  maturity  and  purchaser  and 
indorsee  held  subject  to  defenses. 
Holder  had  collateral  securities  of 
the  principal  and  surrendered  them 
to  the  latter  with  the  securities'  as- 
sent. 

Massachusetts. — Kellogg  v.  Bar- 
ton, 94  Mass.  (12  Allen)  527  (con- 
tract against  indorser;  written 
agreement  as  to  payment  in  consid- 
eration of  indorsement). 

Michigan. — Simons  v.  Morris,  53 
Mich.  155,  18  N.  W.  625  (suit 
against  indorser;  note  was  payable 
to  order  of  indorser  and  indorsed  in 


blank    and    was    transferred    about 
five  years  after  maturity). 

Pennsylvania. — Peale  v.  Addicks, 
174  Pa.  St.  549,  34  Atl.  203  (no 
recovery  can  be  had  from  indorser 
for  accommodation  of  payee  by  in- 
dorsee after  maturity) ;  Long  v. 
Rhawn,  75  Pa.  St.  128  (suit  by  in- 
dorsee against  maker  held  a  good 
defense  that  note  was  taken  up 
and  reissued,  and  so  diverted).  Hoff- 
man V.  Foster,  45  Pa.  St.  137  (fraud- 
ulently obtained  and  fraudulently 
circulated  by  payee;  action  by  in- 
dorsee against  maker  and  note  in- 
dorsed in  blank);  Bower  v,  Hast- 
ings, 36  Pa.  St.  285  (action  by  in- 
dorsee against  maker). 

Rhode  Island. — Bacon  v.  Harris, 
15  R.  I.  599,  10  Atl.  647  (suit 
against  makers  by  indorsee;  a  de- 
mand note  and  question  of  reason- 
able time  arose,  note  being  nego- 
tiated nearly  two  years  after  date. 
The  rule  as  to  defenses  was,  how- 
ever, affirmed). 

Virginia. — Cottrell  v.  Watkins,  89 
Va.  801,  17  S.  E.  328,  37  Am.  St.  Rep. 
897,  19  L.  R.  A.  754  (paid  by  real 
debtor  and  reissued). 

English. — Parr  v.  Jewell,  16  C.  B. 
684,  13  C.  B.  909  (a  case  of  accom- 
modation acceptance  for  drawer; 
the  drawee  paid  note  at  maturity 
and,  in  violation  of  his  express 
agreement  with  acceptor,  reissued 
the  note) ;  Overend,  Gurney  &  Co., 
In  re,  L.  R.  6  Eq.  344  (bill  was 
taken  up  supra  protest  for  honor 
of  drawer) ;  Lazarus  v.  Cowie,  3  Q. 
B.  459,  2  G.  &  D.  487,  11  L.  J.  Q. 
B.  310  (reissued  in  violation  of  55 
Geo.  in,  C.  184,  §  19);  Wrixon  v. 
Macoboy,  6  Vict.  Law  R.  350. 


357  PAYMENT   FOR  PKK-EXISTIXG  DEBT.  [§§    283,    284 

from  which  places  an  accommodation  note,  indorsed  after  due,  upon 
a  different  basis  from  other  notes,  indorsed  after  maturity,  and  it  is 
held  that  the  fact  even  that  a  transferee  paid  full  value  for  such  note 
does  not  render  the  accommodation  indorser,  without  consideration, 
liable  where  the  note  is  taken  after  maturity  from  the  person  for 
whose  accommodation  it  was  indorsed,  and  that  to  a  note  so  taken 
the  defense  of  want  of  consideration  is  available  against  any  per- 
son into  whose  hands  it  may  come,  and  if  the  indorsement  of  the 
payee  is  given  after  the  note  is  overdue  to  enable  the  person  for  whose 
accommodation  the  note  is  indorsed  to  get  such  accommodation  in- 
dorsement from  the  defendant,  a  subsequent  holder  cannot  recover.^"^ 

§  283.  Accommodation  of  other  parties  in  general. — It  constitutes 
no  defense  to  a  suit  brought  against  the  maker  and  indorser  of  a  note, 
on  paper  given  for  accommodation  of  the  maker's  husband  that  plain- 
tiff had  knowledge  of  such  fact,  it  not  appearing  that  there  were  any 
restrictions  as  to  the  use  which  might  be  made  of  the  indorsement; 
nor  can  the  defense  of  coverture,  it  is  decided,  be  availed  of  to  pre- 
vent a  recovery,  the  note  being  in  the  usual  form.^"^  And  a  payee 
may  recover  from  his  immediate  indorsee  the  amovmt  which  an  in- 
nocent holder  has  compelled  him  to  pay  by  reason  of  his  indorsement, 
where  such  immediate  indorsee  has  received  the  benefit  of  the  note, 
the  nominal  ownership  having  passed  to  the  latter  and  being  merely 
by  said  indorsement  without  consideration  between  the  parties,^^* 
It  has  also  been  decided  that  a  guarantor  is  liable  to  a  bona  fde 
holder  under  a  guaranty  of  payment  expressly  indorsed  on  a  note  for 
accommodation  of  the  payee,  and  the  contention  that  it  was  intended 
by  the  parties  to  give  the  benefit  of  the  guaranty  to  a  mere  surety 
for  the  maker  cannot  be  maintained. ^^^ 

§  284.  Payment  of  pre-existing  debt — Bona  fide  holder  against  ac- 
commodation maker. — If  a  note  is  witliout  restriction  as  to  its  use  tlic 
fact  that  an  accommodation  note  was  taken  in  ])aymcnt  of  a  pre- 
existing debt  constitutes  no  defense  in  favor  of  the  maker  against  a 
bona  fide  indorsee  or  holder  without  notice.-''^-   And  if  an  accommoda- 

=°* Chester  v.   Dorr,  41   N.   Y.   279,  ^"Baldwin  v.  Dow,  130  Mass.  416. 

284.     Two  judges  dissented.  ='- Grocers  Bank  v.  Penfield,  69  N. 

^Archer  V.  Shea,  14  Him  (N.  Y.)  Y.    502,    25    Am.    Rep.    231,    aff'g    7 

493.  Hun  N.  Y.  279;    Schepp  v.  Carpen- 

"» Abraham  v.  Mitchell,  112  Pa.  St.  ter,  51  N.  Y.  602,  aff'g  49  Barb.   (N. 

320,  3  Atl.  830.  Y.)    542;    Purchase    v.    Mattison,    6 


285] 


WANT   OR   FAILURE   OF    CONSIDERATION. 


358 


tion  indorser  of  a  note,  transferred  in  part  payment,  has  received  the 
proceeds  thereof,  part  payment  of  such  note  by  the  maker  constitutes 
no  defense,  the  holder  of  said  note  being  a  bona  fide  holder.^^^  Again 
unless  the  note  was  originally  made  for  the  payee's  accommodation, 
or  he  had  fraudulently  put  it  in  circulation  after  it  was  satisfied  in  his 
hands,  a  demand  which  the  maker  had  against  the  payee  at  the  time 
of  transfer  cannot  be  set  off  against  a  note  taken  as  collateral.^" 
But,  although  the  fact  that  accommodation  paper  has  been  diverted 
to  a  different  purpose  than  that  agreed  upon  between  the  maker  and 
the  payee,  may  be  set  up  as  a  defense,^^^  still  the  fact  that  the  use  of 
the  note  is  not  in  exact  conformity  with  the  purpose  for  which  the 
accommodation  was  intended,  does  not  make  an  indorsement  and 
transfer  of  paper,  without  restriction,  in  payment  of  an  antecedent 
debt  a  fraudulent  diversion.^^**  The  general  rule  first  stated  also 
applies,  even  though  the  plaintiff  had  knowledge  of  the  accommoda- 
tion character  of  the  paper.^^^ 

§  285,  Same  subject — Particular  rulings  and  opinions. — In  Ala- 
bama it  is  held  that  a  creditor  taking  a  note  with  an  accommodation 
indorsement  in  payment  of  an  antecedent  debt  is  a  purchaser  for 
value. ^^^  In  Illinois  it  is  declared  that  it  is  a  principle  of  general 
application  that  the  beneficiary  of  an  accommodation  note,  without 
restriction  as  to  the  mode  of  its  use,  may  transfer  it  either  in  payment 
of  his  indebtedness  or  as  collateral  security  for  a  concurrent  or  even 
an  antecedent  debt,  and  the  maker  will  have  no  defense.^ ^^  In  a 
Maine  decision  it  is  said  that  a  holder  of  an  accommodation  note, 
which  is  without  any  restriction  or  limitation  as  to  the  payee's  au- 
thority to  use  it,  may  recover  thereon,  even  though  he  received  the 
note  in  payment  of  a  precedent  debt,  or  received  it  as  collateral  secur- 
ity for  such  indebtedness.^^"    So,  under  a  Maryland  ruling,  a  person 


Duer  (N.  Y.)  587;  Montross  v. 
Clark,  2  Sandf.  (N.  Y.)  115;  Pitts 
v.  Foglesong,  37  Ohio  St.  676;  Sny- 
der v.  Elliot,  2  Penny.  (Pa.)  474; 
Crosby  v.  Lane,  Fed.  Cas.  No.  3425. 

='"Ward  v.  Howard,  88  N.  Y.  74. 
But  see  Lintz  v.  Howard,  18  Hun 
(N.  Y.)  424. 

^"  Smith  V.  Van  Loan,  16  Wend. 
(N.  Y.)  659. 

^"  Schepp  V.  Carpenter,  51  N.  Y. 
602,  604,  aff'g  49  Barb.  (N.  Y.)  542; 


Pitts  V.  Foglesong,  37  Ohio  St.  676; 
Coon  V.  Moore,  2  Pa.  Co.  Ct.  R.  246. 

8'"  Graf  V.  Smith,  62  Hun,  621,  16 
N.  Y.  Supp.  892. 

^"Montross  v.  Clark,  2  Sandf.  (N. 
Y.)  115. 

^^'^  Marks  v.  First  Nat.  Bank,  79 
Ala.  550,  58  Am.  Rep.  620. 

^'"Miller  v.  Lamed,  103  111.  562, 
570,  per  Scott,  J. 

^•^"Dunh  V.  Weston,  71  Me.  270, 
274,  36  Am.  Rep.  310,  per  Appleton, 


I 


359  PAYMENT   FOR   PKE-EXISTIXG    DEBT.  [§    28G 

is  entitled  to  protection  as  a  bona  fide  holder  for  value,  even  though 
he  takes  an  accommodation  note  in  payment  of  a  precedent  debt  or 
has  taken  it  as  collateral  security  for  a  precedent  debt,  or  for  future 
as  well  as  past  advances.^^^  In  a  New  York  case  the  court  says: 
"'It  is  universally  conceded  that  the  holder  of  an  accommodation 
note,  without  restriction  as  to  the  mode  of  paying  it,  may  transfer  it 
either  in  payment,  or  as  collateral  security  for  an  antecedent  debt, 
and  the  maker  will  have  no  defense.  It  is  only  where  the  note  has  been 
diverted  from  the  purpose  for  which  it  was  entrusted  to  the  payee,  or 
some  other  equity  exists  in  favor  of  the  maker,  that  it  is  necessary 
that  the  holder  should  have  parted  with  value  on  the  faith  of  the  note 
in  order  to  cut  off  such  equities  of  the  maker.'  "^^  Again,  under  a 
federal  decision,  the  transferee,  before  maturity  and  without  knowl- 
edge of  its  character,  of  an  accommodation  note  taken  in  settlement 
of  a  pending  suit,  is  a  bona  fide  holder,  and  the  defense  that  said  note 
was  an  accommodation  note  is  not  available.^-^ 

§  286.  Payment  of  pre-existing  debt — Bona  fide  indorsee  against 
indorser. — An  indorsee  who  purchases  before  maturity  and  without  no- 
tice a  bill  drawn  and  indorsed  for  the  accommodation  of  the  ac- 
ceptors may  recover  thereon  in  an  action  against  the  drawers,  al- 
though such  indorsee  may  have  taken  the  bill  in  payment  of  a  pre- 
existing debt.^^*  So  a  bona  fide  indorsee,  without  notice,  may  recover 
against  an  accommodation  indorser  in  case  the  payee  could  recover, 
notwithstanding   the   transfer    was    made    for    a    precedent    debtf-^ 

C.  J.,  quoting  from  Robbins  v.  Rich-  dent  debt  the  holder  may  recover, 

ardson,    2    Bosw.    (N.    Y.)    253,   per  The  rule  is  otherwise  where  the  note 

Woodruff,  J.  has  been  obtained  by  fraud,  or  was 

^^  Maitland    v.    Citizens'    National  given   for  a  specific   purpose   or   is 

Bank  of  Baltimore,  40  Md.  540,  562,  void  in  the  hands  of  the  payee  on 

17   Am.   Rep.    620,   citing   Story   on  grounds  of  public  policy.     In  such 

Bills,    §    192,    Story   on    Promissory  cases   the   precedent   debt   is   not   a 

Notes,  §  195.  consideration  and  the  holder  cannot 

'^Leslie    v.     Bassett,    59     N.     Y.  recover. 
Super.  Ct.  (27  J.  &  S.)  403,  14  N.  Y.         ^"Tollman    v.    Quincy,    129    Fed. 

Supp.    380,    quoting    from    Grocers'  974. 

Bank  v.  Penfield,  69  N.  Y.  504.    See         "'  Frank  v.  Quast,  86  Ky.  644,  6  S. 

Schepp  v.   Carpenter,  49   Barb.    (N.  W.  909. 

Y.)  542,  aff'd  in  51  N.  Y.  602.- Where         '=' Marks   v.    First   Nat.    Bank,   79 

the  rule  is  asserted  that  if  an  ac-  Ala.  550,  58  Am.  Rep.  620  (action  by 

commodation  note,  not  restricted  as  payee  against  indorser);  Uchtmann 

to   the   mode  of   its   use.   has  been  v.    Tonyes,   64    Hun    634,    18   N.    Y. 

transferrea  to  pay  or  secure  a  prece-  Supp.   889;    Varnum   v.   Ballamy,   4 


§    287]  WANT   OR   FAILURE    OF    CONSIDERATION".  360 

cspeciall}'  so,  where  the  paper  was  indorsed  without  restriction,"-*' 
and  even  though  the  indorsement  was  procured  by  fraud,  such  fact  is 
lield  to  be  no  defense  ;^-^  nor,  it  is  determined,  are  proceedings  in 
bankruptcy  a  defense. ^-^  But  where  the  debt,  which  the  indorsement 
was  given  to  secure,  was  from  the  maker  to  the  plaintiff,  and  was  based 
upon  an  agreement  that  a  suit  brought  by  the  latter  to  recover  the  debt 
should  be  discontinued,  it  constitutes  a  good  defense  that  the  plain- 
tiff had  violated  such  agreement  and  had  obtained  judgment  and 
levied  execution  on  the  property  of  the  maker  whereby  he  was  pre- 
vented from  eventually  paying  the  note."-^  If  an  overdue  check, 
which  represents  part  of  the  indebtedness,  is  surrendered  and  the 
balance  thereof  is  canceled,  the  creditor  becomes  a  bona  fide  holder 
for  value,  as  against  an  accommodation  indorser  of  a  note  made  for 
the  entire  debt."^° 

^  287.  Payment  of  pre-existing  debt — Drafts  and  bills — Payee — 
Accommodation  acceptor. — If  a  draft  is  taken  by  the  payee  in  pay- 
ment and  satisfaction  of  the  drawer's  indebtedness  to  him,  and  with- 
out notice  on  his  part  of  any  fraudulent  circumstances  inducing  the 
acceptance,  and  it  is  accepted  for  the  accommodation  of  the  drawer, 
the  payee  is  a  bona  fide  holder  and  entitled  upon  established  prin- 
ciples to  recover  upon  the  draft,  especially  where  it  is  accepted  with- 
out restriction.  And  although  such  draft  is  in  form  in  favor  of 
the  payee,  yet  the  case  stands  on  the  same  footing  in  contemplation 
of  law  as  if  the  draft  had  been  drawn  in  favor  of  the  debtor  and  in- 
dorsed Ijy  him  to  the  payee.^^^  And  bona  fide  holders  without  notice 
of  a  bill  of  exchange  transferred  before  maturity  can  recover  against 
accommodation  acceptors,  although  the  bill  was  given  to  the  plain- 
tiffs in  liquidation  of  a  pre-existing  debt  from  the  drawers  to  them, 
even  though  they  knew  that  defendant  was  an  accommodation  ac- 
ceptor, especially  so  as  the  paper  was  transferred  to  accomplish  the 
very  purpose  had  in  view  in  making  the  acceptance,  and,  therefore, 
a  recovery  against  such  acceptor  would  only  compel  him  to  do  Avhat  lie 

McLean    (U.    S.)    87,   Fed.   Cas.   No.  -^  Ken  worthy  v.  Hopkins,  1  John 

16886.    See  Rowe  v.  Gohlman    (Tex.  Cas.  (N.  Y.)  107. 

Civ.  App.  1907),  98  S.  W.  1077.  "=' Bookstaver  v.   Jayne,   60   N.   Y. 

==«  Molson    V.    Hawley,    1    Blatchf.  146,  revg.  3  Thomp.  &  Co.  397. 

(U.  S.)  409,  Fed.  Cas.  No.  9702.  •'»  Burkhalter  v.  Pratt,  1  City  Ct. 

="Uchtinann    v.    Tonyes,    64    Hun  R.  (N.  Y.)  22. 

(N.    Y.)    634,    18    N.    Y.    Supp.    889.  ""' Pugh  v.  Durfee,  1  Blatchf,    (C. 

But    see    Farrington    v.    Frankfort  C.)  412,  Fed.  Cas.  No.  11460. 
Bank,  31  Barb.   (N.  Y.)  183. 


f 


361  PAYMENT    FOR   PRK-EXISTING   DEBT,  [§    387 

agreed  to  do  when  he  put  his  name  to  the  hiU.-''''-  And  secret  agree- 
ments, of  which  a  purchaser  has  no  notice,  will  not  preclude  his  re- 
covery, against  an  accommodation  drawer,  upon  a  hill  drawn  and 
indorsed  for  the  accommodation  of  acceptors,  even  though  he  may 
have  taken  the  bill  in  payment  of  a  pre-existing  debt.^^^  But  the  rule 
is  also  asserted  that  one  who  indorses  a  bill,  without  consideration 
and  for  accommodation  of  the  maker,  has  the  right  to  annex  such 
terms  and  conditions  as  he  pleases,  and  if  the  maker  does  not  comply 
with  the  full  terms  of  an  agreed  upon  condition  with  the  indorser, 
but  uses  the  bill  in  payment  of  an  execution,  the  indorsee,  who  has 
notice  and  knowledge  of  such  conditioii,  cannot  recover,  even  though 
the  indorsement  was  also  made  to  enable  the  maker  to  obtain  the 
money  to  pay  off  such  execution.  The  bill  was  also  received  in  pay- 
ment of  a  pre-existing  debt,  and  it  was  therefore  held  upon  this  point 
that  it  was  taken  subject  to  all  equities  and  defenses  which  the  in- 
dorser could  lawfully  set  up  against  the  liability  in  the  hands  of  the 
maker-^^**  In  a  Connecticut  case  a  drawer  of  a  bill  was  largely  in- 
debted to  a  corporation  at  the  time  of  the  acceptance  by  its  treasurer, 
and  said  acceptance  was  solely  a  loan  of  its  credit  to  the  drawer  for 
accommodation  and  was  an  abuse  of  the  power  conferred  upon  the 
treasurer,  and  the  corporation  had  no  power  to  give  such  accept- 
ance. Thereafter  a  creditor  of  the  drawer,  having  indorsed  the  drafts, 
sold  them  for  the  drawer  and  gave  him  credit  therefor  on  account, 
and  such  creditor,  one  of  the  drafts  having  been  duly  protested, 
took  up  said  draft  as  payee  and  indorser,  the  debt  was  not  discharged 
or  released,  nor  was  anything  of  value  relinquished  by  the  plaintiffs, 
but  the  fact  that  the  paper  was  solely  for  accommodation  was  not 
known  to  them.  Upon  these  facts  it  was  held  that  plaintiffs  were  not 
hona  fide  holders,  and  were  subject  to  any  defense  which  could  have 
been  availed  of  had  the  drawer  been  the  plaintiff,  even  though  they 

"'Jewett  V.  Hone,  1  Woods  (C.  C.)  where  new  notes  are  given  by  the 

530,  536,  Fed.  Cas.  No.  7311.   Woods,  same  or  other  parties  by  way  of  re- 

C.  J.,  said   in  this  case:     "To  hold  newal  or  security  to  banlts,  in  lieu 

that  because  Hone  was  an  accommo-  of  old  securities  discounted  by  them, 

dation   acceptor,   and    the   plaintiffs  which  have  arrived  at  maturity?" 

knew   it,   therefore    the   bill    is   not  ''=  Frank  v.   Quast,  86   Ky.   649,  6 

good,    would    be    to    strike    a    fatal  S.  W.  909. 

blow  at  all  discounts  of  negotiable  "'^  Hickerson  v.  Raiguel  &  Co.,  49 
securities  for  pre-existing  debts.  Tenn.  (2  Heisk.)  329.  Compare, 
Upon  such  a  doctrine  what  would  however,  chapter  herein  on  Diver- 
become  of  that  large  class  of  cases  sion  and  Fraudulent  Transfer. 


287] 


WANT   OR   FAILURE   OF    COXSIDERATIOX. 


362 


had  taken  up  and  paid  said  draft;  but  it  was  also  asserted  that  if  a 
person  holds  an  acceptance  without  notice  that  it  is  for  the  accommo- 
dation of  the  drawer,  and  it  is  by  an  officer  authorized  to  accept  if 
the  drawer  has  funds,  he  is  not  to  be  affected  by  the  intrinsic  want  of 
funds,  and  can  enforce  it  if  he  holds  bona  fide;  for  as  between  such 
holders  of  negotiable  paper  without  notice,  and  stockholders  of  a 
corporation,  the  law  gives  preference  to  the  former.^^^ 


^  Webster  &  Co.  v.  Howe  Machine     Co.,  54  Conn.  357,  8  Atl.  472,  1  Am. 
Co.,  54   Conn.   394,   8  Atl.   482.    See     St.  Rep.  123. 
Credit  Co.,  Ltd.  v.   Howe   Machine 


CHAPTER    XII. 


ILLEGAL   OR   IMMORAL    CONSIDERATION. 


Sec. 

288.  Illegal    consideration — Original 

parties — Bona  fide  holders. 

289.  Same   subject — Exceptions   and 

qualifications    —    Notice    — 
Knowledge — Fraud,  etc. 

290.  Illegal     considerations  —  Effect 

on  surety. 

291.  Paper   given   for   consideration 

in  violation  of  statute. 

292.  Same  subject. 

293.  Where    constitution    and    laws 

violated — Enemy   aided. 

294.  Illegal  sales. 


Sec. 

295.  Compounding  criminal  acts. 

296.  "Where  consideration   is  money 

or  property  won  at  gambling 
device. 

297.  Same    subject — Statutory    pro- 

hibitions. 

298.  Same     subject — Qualifications 

of  rule — Other  instances. 

299.  Illegal  and   immoral  considera- 

tions. 

300.  Same    subject — Decisions. 

301.  Same    subject — Decisions    con- 

tinued. 


§  288.  Illegal  consideration — Original  parties — Bona  fide  holders. 
— A  note  is  unenforceable  a.s  between  the  immediate  parties  where  it  is 
based  upon  a  consideration  which  is  illegal  in  the  law  or  by  reason  of 
a  statute,  or  because  it  is  against  public  policy,  religion  or  morals.^ 


^Ball  V.  Putnam,  123  Cal.  134,  55 
Pac.  773,  holding  that  where  the 
consideration  is  against  public  pol- 
icy or  good  morals  or  the  express 
mandate  of  the  law  the  note  is  void. 
Bill  or  note  is  illegal  and  void 
when  given  in  consideration  of  ab- 
duction of  person  (Barker  v.  Par- 
ker, 23  Ark.  390) ;  when  given  to  an 
afiianced  husband  because  of  seduc- 
tion or  alienation  of  affections  of  his 
betrothed  (Case  v.  Smith,  107  Mich. 
416,  65  N.  W.  279);  when  for  sur- 
render of  other  void  notes  (Kuhl 
V.  Galley  Universal  Press  Co.,  123 
Ala.  452,  26  So.  535).  So  a  note  is 
held  void  when  made  on  Sunday 
(Reeves  v.  Butcher,  31  N.  J.  L.  [2 


Vr.]  224);  or  when  in  settlement  of 
account  for  goods  sold  and  deliv- 
ered, some  of  the  items  being  for 
goods  sold  on  Sunday  and  some  for 
the  price  of  liquors  (Wadswarth  v. 
Dunnam,  117  Ala.  661.  23  So.  699); 
when  for  the  price  of  goods  sold  of 
which  the  sale  is  prohibited  by  law 
(Carlton  v.  Bailey,  27  N.  H.  230); 
where  part  of  consideration  is  for 
liquors  sold  contrary  to  statute 
(Widoe  V.  Webb,  20  Ohio  St.  431); 
when  for  intoxicating  liquors  sold 
without  a  license  or  in  violation  of 
a  statute  (Snyder  v.  Koehler,  17 
Kan.  432;  Bick  v.  Seal,  45  Mo.  App. 
475;  Gammon  v.  Plaisted,  51  N.  H. 
444;  Kidder  v.  Blake,  45  N.  H.  530; 


363 


288] 


ILLEGAL   OR   IMMORAL    COXSIDERATION. 


3G4 


But  the  fact  that  a  negotiable  instrument  was,  as  between  the  immedi- 
ate  parties   thereto,   based  upon   an   illegal  consideration,   will   not 


Coburn    v.    Odell,    30    N.    H.    540; 
Fuller  V.   Bean,   30  N.   H.   181;    see 
Garland  v.  Lane,  46  N.  H.  245;  Doo- 
little  V.   Lyman,  44  N.   H.   608;    Os- 
wald V.  Moran,  8  N.  D.   Ill,  77   N. 
W.  281;  Craig  &  Co.  v.  Proctor,  6  R. 
L    547;     Gorsuth    v.    Butterfield,    2 
Wis.    237.     Compare    Doe    v.    Burn- 
ham,    31    N.    H.    226;     Carleton    v. 
Woods,  28  N.  H.  290,  as  to  beer  sold 
in  violation   of   law,  see    Sheary  v. 
O'Brien,  77  N.  Y.  Supp.  378,  75  N. 
Y.    App.    Div.    121,    aff'd,    76    N.    E. 
1108).     So   a  note   given   to   a   mu- 
nicipality  to   enable  the    maker   to 
carry    on    the    liquor    business,    the 
license     therefor     being     postponed 
contrary   to   the   provisions    of   the 
city  charter  under  the  statute,  is  il- 
legal and  void   (Meyers-Marx  Co.  v. 
City  of  Ennessley,  141  Ala.  602,  37 
So.  639);  and  rule  applies  to  paper 
given    for    rebating    insurance    pre- 
miums (Tillinghast  v.  Craig,  9  Ohio 
Cir.  Dec.  459;    see  Heffron  v.  Daly, 
133  Mich.  613,  95  N.  W.  714,  10  Det. 
L.   N.    344);    or   for   insurance   pre- 
mium    where     insurance     company 
had    not    complied    with    state    re- 
quirements (Swing  V.  Cider  &  Vine- 
gar Co.,  77  Mo.  App.  391) ;  or  a  note 
given    to    an    unlicensed    physician 
(Coyle    v.    Campbell,    10    Ga.    570); 
when    given    for    import    duties    in 
violation    of    the    act    admitting    a 
state     into     the     Union     (City     of 
Natchez  v.  Trimble,  Walker  [Miss.] 
376);    in  case  of  a  bond  in  consid- 
eration of  certain  tickets,  notes,  or 
checks,  with  intent  to  circulate  the 
same  as  currency  in  lieu  of  money 
(Yeates   v.   Williams,   5   Ark.   684); 
a   note    given    in    furtherance    of   a 
contract,  void  as  against  public  pol- 
icy  and    good    morals    (Parsons   v. 


Randolph,  21  Mo.  App.  353);  a  note 
given     bank     in     consideration     of 
transaction   violating   statute   as  to 
withdrawal  or   payments  of  capital 
stock    by    directors    (City   Bank   v. 
Barnard,  1  Hall  [1  N.  Y.  Super.  Ct.] 
70) ;    or   where   note   discounted    in 
unauthorized  banking  business  (Ru- 
ber   V.     German     Congregation,     16 
Ohio   St.    371);    a  note  based   upon 
contract     violating      the      national 
bankrupt    law    (Clafflin    v.    Torlina, 
56  Mo.  369);    illegal  banking  notes 
in  the  similitude  of  bank  post-notes 
(Attorney  Gen'l  v.  Life  &  Fire  Ins. 
Co.,    9    Paige    [N.    Y.]    470);     and 
where  the  consideration  is  fictitious 
stock    of    a    corporation    (Alabama 
Nat.  Bk.  V.  Halsey,  109  Ala.  196,  19 
So.  522.    See  Haas  v.  Hall  &  Farley, 
111  Ala.  442,  20  So.  78).     So  a  note 
given  in   compromise  of  a  suit  by 
scire  facias  to  condemn  land  under 
a  lottery  law,  violates  the  statute, 
and  is  contrary  to  public  policy' and 
void  as  between  maker  and  payee; 
but  otherwise  as  to  an  indorsee  be- 
fore   due    and    without   notice,    and 
as  to  the  maker  such  fact  is  no  de- 
fense (Poe  v.  Justices  of  the  Peace, 
Dudley   [Ga.]    249).     The  rule  also 
applies   to   a  note   given   in   pursu- 
ance of  an  agreement  between  hus- 
band   and    wife    in    respect   to    ali- 
mony, to  facilitate  procuring  a  di- 
vorce by  making  no  defense  to  an 
action  pending  or  about  to  be  com- 
menced (Viser  v.  Bertrand,  14  Ark. 
267,  283,  284;   Everhart  v.  Puckett, 
73   Ind.   409;    Adams  v.  Adams,   25 
Minn.    72,   79;    Sayles   v.   Sayles,    21 
N.  H.  312;   Stoutenberg  v.  Lybrand, 
13  Ohio  St.  228,  232.     See  Stokes  v. 
Anderson,  118  Ind.  533);    to  an  as- 
signing debtor's  note  given  to  one 


i 


365 


ORIGINAL    PARTIES — BONA   FIDE    HOLDERS. 


[§  288 


creditor  to  induce  acceptance  of 
assignment  (Brown  v.  Everett  Rid- 
ley Ragan  Co.,  Ill  Ga.  404,  36  S.  E. 
813);  to  a  note  received  to  induce 
one  creditor  to  sign  composition 
deed  without  knowledge  of  other 
creditors,  parties  to  deed  (Winn  v. 
Thomas,  55  N.  H.  294;  to  paper 
given  by  insolvent  to  creditor  to 
sign  his  petition,  the  note  being  in 
blank  to  be  filled  up  after  the  debt- 
or's exoneration  (Payne  v.  Eden,  3 
Caines  [N.  Y.]  213.  See  also  Yea- 
mans  v.  Chatterton,  9  Johns.  [N. 
Y.]  295);  to  a  note  made  for  prop- 
erty transferred  to  drawer  to  de- 
fraud payee's  creditors  (Church  v. 
Muir,  33  N.  J.  L.  [4  Vr.]  318).  A 
note  is  also  void  as  in  restraint  of 
trade,  as  creating  monopoly  and 
contrary  to  public  policy  where 
based  upon  a  consideration  not  to 
engage  in  a  competitive  business 
(Tuscaloosa  Co.  v.  Williams  [Ala.] 
28  So.  669.  But  see  Moore  v.  Hand- 
ley  Hardware  Co.  v.  Towers  Hard- 
ware Co.,  87  Ala.  207,  6  So.  41). 
So  drafts  based  upon  an  assign- 
ment to  equalize  prices,  or  a  com- 
bination in  restraint  of  trade  are 
illegal  and  unenforceable  (Morris 
Run  Coal  Co.  v.  Barclay  Coal  Co., 
68  Pa.  St.  173).  The  rule  also  ap- 
plies to  paper  based  upon  a  threat 
of  the  payee  to  oppose  the  allow- 
ance by  the  city  council  of  the  mak- 
er's claim  for  street  paving,  as  such 
transaction  is  contrary  to  public 
policy  (French  v.  Talbot  Paving 
Co.,  100  Mich.  443,  59  N.  W.  166); 
to  a  note  given,  by  applicants  for  a 
public  road,  to  a  caveator  to  with- 
draw his  opposition  (Smith  v.  Ap- 
plegate,  23  N.  J.  L.  [3  Zabr.]  352. 
Examine  Burkhart  v.  Hart,  36  Ore. 
586,  60  Pac.  205)  ;  to  paper  received 
for  any  sum,  the  payment  of  which 
by  the  petitioners  therefor  is  made 
a  condition   of   laying   out   a   high- 


way (Dudley  v.  Cilley,  5  N.  H. 
558);  when  note  given  upon  con- 
dition that  payee  would  not  bid  at 
judicial  sale  (Jones  v.  Caswell,  3 
Johns.  Cas.  [N.  Y.]  29);  when  pa- 
per is  for  lease  of  lands  within  In- 
dian reservation  and  lessor  makes 
title  under  an  Indian  (Chaffee  v. 
Garrett,  6  Ohio  421.  That  it  is  no 
defense  that  maker  was  an  Indian, 
see  Warnock  v.  Itawis,  38  Wash. 
144,  80  Pac.  297);  or  in  considera- 
tion of  the  sale  of  a  claim  to  pub- 
lic lands  while  title  still  in  United 
States  (Jarvis  v.  Campbell,  23  Kan. 
370);  or  a  note  based  upon  a  con- 
sideration of  a  sale  of  an  interest, 
where  the  vendor  can  sell  none,  in 
an  Indian  trader's  license,  in  viola- 
tion of  the  public  policy  of  the  gov- 
ernment and  of  the  statute  (Hob- 
ble V.  Zaepffell,  17  Neb.  537);  or 
paper  made  to  procure  or  corruptly 
influence  officer  to  violate  his  oflB- 
cial  duty  (Devlin  v.  Brady,  36  N.  Y. 
531);  or  to  bribe  a  public  officer 
(Collier  v.  Waugh,  64  Ind.  456); 
or  to  secure  the  consideration 
agreed  to  be  paid  for  a  sale  of  a 
public  ofl!ice  (Meredith  v.  Ladd,  2 
N.  H.  517);  or  for  sale  of  ofl^ce 
of  deputy  sheriff  (Carleton  v. 
Whitcher,  5  Vt.  196);  when  based 
upon  consideration  to  give  to  can- 
didate for  election  the  payee's  in- 
terest (Swanze  v.  Hull,  8  N.  J.  L. 
[3  Halst.]  54;  when  based  upon 
consideration  to  resign  public  office 
in  favor  of  another  and 'to  use  in- 
fluence in  appointment  of  successor 
(Meachem  v.  Dow,  32  Vt.  721); 
when  in  consideration  that  -candi- 
date for  election  withdrawn  from 
ticket  in  favor  of  another  candi- 
date (Ham  V.  Smith,  87  Pa.  St.  63); 
or  for  appointment  to  office  of  dep- 
uty sheriff  (Ferris  v.  Adams,  23 
Vt.  136);  when  based  upon  an 
agreement   to   procure   and   have   a 


288] 


ILLEGAL   OR  IMMORAL   CONSIDERATION. 


366 


person  appointed  administrator 
(Porter  v.  Jones,  52  Mo.  399).  Nor 
can  a  surety  upon  a  promissory 
note  be  legally  defrauded  by  a 
promise  made  to  another  to  have 
the  principal  appointed  to  a  public 
office;  as  such  a  promise  is  contrary 
to  the  policy  of  the  law  and  unen- 
forceable (Graham  v.  Marks  &  Co., 
98  Ga.  67,  25  S.  E.  931).  So  a  note 
given  by  a  trustee  of  a  savings  as- 
sociation, for  a  consideration  mov- 
ing to  himself,  to  secure  the  elec- 
tion of  another  to  the  office  of 
trustee  is  void  as  against  public 
policy  and  is  based  upon  an  illegal 
consideration  (Dickson  v.  Kittson, 
75  Minn.  168,  74  Am.  St.  Rep.  447, 
77  N.  W.  820);  likewise  so  when 
given  to  secure  payment  of  money 
won  on  election  (Russell  v.  Pyland, 
2  Humph.  [21  Tenn.]  131).  So  a 
bet  on  a  foot  race  constitutes  gam- 
ing (Jones  V.  Cavanaugh,  149  Mass. 
124,  21  N.  E.  306);  and  note  is  ille- 
gal when  for  the  sales  of  products 
understood  to  be  solely  a  specula- 
tion on  chances  (Pearce  v.  Dill,  149 
Ind.  136,  48  N.  E.  788;  Plank  v. 
Jackson,  128  Ind.  424,  26  N.  E.  568, 
27  N.  E.  1117.  See  Farmers'  & 
Drovers'  Bk.  of  La.  v.  Unser,  13 
Ky.  L.  Rep.  965) ;  or  when  given  on 
grain  options  ("Wade  v.  Wicker- 
sham,  27  Neb.  457,  43  N.  W.  259); 
or  when  for  services  in  aiding  sale 
of  personal  property  to  be  delivered 
in  future  (Kahn,  Jr.,  v.  Walton,  46 
Ohio  St.  195,  20  N.  E.  203).  See 
Rogers  v.  Corre,  6  Ohio  Cir.  Dec. 
602);  or  in  consideration  of  "Bo- 
hemian Oats"  contract  (Schmueckle 
V.  Waters,  125  Ind.  265,  25  N.  E. 
281;  Payne  v.  Raubinek,  82  Iowa 
587,  48  N.  W.  995).  And  a  note 
given  for  sale  of  "prolific  oats  *  * 
as  a  speculation,"  though  not  a 
gambling  contract  is  against  public 
policy    (Merrill  v.   Packer,  80   Iowa 


542,  45  N.  W.  1076).  So  a  wager 
as  to  the  collection  of  an  execution, 
while  not  gaming  within  a  stat- 
ute, is  void  as  against  public  policy 
between  the  original  parties,  but 
valid  as  to  a  bona  fide  holder  or 
transferee  of  a  check  given  there- 
for (Boughner  v.  Meyer,  5  Colo.  71, 
40  Am.  Rep.  139).  And  a  note  for 
price  of  slot  machine  is  illegal 
(Kuhl  v.  M.  Galley  Universal  Press 
Co.,  123  Ala.  452,  26  So.  535).  The 
rule  also  applies  to  paper  received 
in  satisfaction  of  a  personal  injury 
if  compromise  of  public  offense  in- 
cluded (Bailey  v.  Stiles,  3  N.  J.  Eq. 
[2  Green.]  249) ;  to  a  note  intended 
to  defeat  execution  of  the  criminal 
law  (Baker  v.  Paris,  61  Mo.  389, 
390) ;  or  to  favor,  protect,  or  not  to 
prosecute  a  criminal  (Brittin  v. 
Chegary,  20  N.  J.  L.  [Spenc]  625); 
when  given  for  money  lent  know- 
ingly to  suppress  the  prosecution  or 
the  evidence  (Plummer  v.  Smith,  5 
N.  H.  553);  or  in  consideration 
that  payee  use  his  influence  to  se- 
cure acquittal  in  prosecution  for 
felony  (Ricketts  v.  Harvey,  106 
Ind.  564,-  6  N.  E.  325;  when  intend- 
ed to  influence  one  not  to  appear  as 
a  witness  in  a  fraud  investigation 
(Hoyt  V.  Macon,  2  Colo.  502);  or 
when  only  to  aid  in  suppression  of 
criminal  prosecution,  even  though 
note  under  seal  (Morrill  v.  Goode- 
now,  65  Me.  178) ;  when  based  upon 
an  agreement  to  indemnify  the 
maker  against  a  voluntary  escape 
(Ayer  v.  Hutchins,  4  Mass.  370) ; 
or  where  consideration  is  not  to 
search  plaintiff's  house  for  stolen 
property,  and  to  secure  its  restora- 
tion (Merrill  v.  Carr,  60  N.  H.  114) ; 
when  based  upon  agreement  not  to 
prosecute  maker  for  adultery 
(Clark  V,  Ricker,  14  N.  H.  44);  or 
when  received  in  consideration  of 
bond  to  indemnify  against  any  pub- 


II 


3G7 


ORIGINAL   PARTIES BONA   FIDE   HOLDERS. 


[§  288 


lie  prosecution   (Hinds  v.  Chamber- 
lin,  6  N.  H.  225). 

When  bill  or  note  is  not  illegal 
and  void.  Knowledge  that  notes  to 
be  used  for  unlawful  purpose  does 
not  invalidate  (Henderson  v.  Wag- 
goner, 2  Lea  [70  Tenn.]  133).  And 
paper  is  held  valid  when  executed 
on  Sunday  (Wilkie  v.  Chandon,  1 
Wash.  355,  25  Pac.  464).  So  a  note 
is  held  not  illegal  which  is  given 
for  paper  in  the  similitude  of  bank 
notes  circulated  as  money  (Wright 
V.  Hughes,  13  Ind.  109).  A  note 
given  to  legislature  in  divorce  leg- 
islation may  also  be  valid  (Day  v. 
Cutler,  22  Conn.  632,  633);  nor  is 
paper  given  for  one  of  the  parties' 
benefit  during  pendency  of  divorce 
suit,  after  adultery  testified  to, 
against  public  policy  (Adams  v.  Ad- 
ams, 91  N.  Y.  381) ;  nor  is  note  ille- 
gal when  given  to  discontinue  pro- 
ceedings in  bankruptcy  (Repplier  v. 
Bloodgood,  1  Sweeny  [31  N.  Y. 
Super.  Ct.]  34);  and  when  given 
instead  of  cash  for  a  liquor  license 
note  is  collectible  (Appling -County 
y.  McWilliams,  69  Ga.  840);  nor  is 
paper  void  when  based  on  consider- 
ation of  loan  to  maker  of  state 
notes  used  by  borrower  (Gowen  v. 
Shute,  4  Baxt.  [63  Tenn.]  57);  nor 
when  for  the  sale  of  diseased  sheep 
(Vining  v.  Bricker,  14  Ohio  St. 
331);  and  a  liquor  dealer's  note 
given  county  treasurer  for  loan 
made  by  latter  out  of  his  private 
funds  for  the  amount  of  a  liquor 
tax,  is  not  void  as  being  based  upon 
a  transaction  against  public  policy 
(Hatch  V.  Reid,  112  Mich.  430.  70 
N.  W.  418,  dist'g  Doran  v.  Phillips, 
47  Mich.  228);  nor  is  paper  invalid 
when  based  upon  a  condition  that 
payment  be  made  when  horse  pur- 
chased had  won  a  race,  part  of  the 
purchase  money  having  been  -paici. 


(Treacy  &  Wilson  v.  Cbinn,  79  Mo. 
App.  648) ;  nor  a  note  given  for  use 
of  billiard  table,  unless  payee  kept 
a  tavern  (Northrup  v.  Minturn,  13 
Johns.  [N.  Y.]  85).  So  a  note  is 
valid  when  taken  as  security  for 
appearance  in  court  in  one  state  of 
person  arrested  in  another  state 
(Harp  V.  Osgood,  2  Hill  [N.  Y.]  216; 
and  it  is  not  void  when  for  pay- 
ment of  money  resulting  in  release 
of  accused  (Armstrong  v.  Southern 
Express  Co.,  4  Baxt.  [63  Tenn.] 
376) ;  nor  when  given  for  oats  sold 
at  fictitious  price  with  bond  to  buy 
more  at  same  price  (Kurz  v.  Fish, 
58  Hun  [N.  Y.]  602,  11  N.  Y.  Supp. 
209,  33  N.  Y.  St.  R.  674). 

"The  general  principle  is  well  es- 
tablished that  a  contract  founded  on 
an  illegal  consideration,  or  which  is 
made  for  the  purpose  of  furthering 
any  matter  or  thing  prohibited  by 
statute,  or  to  aid  or  assist  any  party 
therein,  is  void.  This  rule  applies 
to  every  contract  which  is  founded 
on  a  transaction  malum  in  se,  or 
which  is  prohibited  by  statute,  on 
the  ground  of  public  policy,"  and 
includes  a  note  given  for  part  of 
the  purchase  money  for  timber 
growing  on  public  lands,  to  which 
the  payee  claimed  a  possessory 
right.  Swanger  v.  Mayberry,  59 
Cal.  91. 

Although  mere  knowledge  of 
lender  of  use  for  illegal  or  immoral 
purpose  will  not  prevent  recovery, 
yet  aiding  or  participating  in  un- 
lawful scheme  or  design  precludes 
recovery.  Singleton  v.  Bank  of 
Monticello,  113  Ga.  527,  38  S.  E.  947. 

Where  part  of  consideration  of 
entire  contract  illegal,  contract  is 
void  and  unenforceable  as  to  imme- 
diate parties  having  knowledge  oth- 
erwise as  to  negotiable  note  in 
hands  of   bona  fide  holder   without 


288] 


ILLEGAL    OR   IMMORAL    CONSIDERATION. 


3G8 


prevent  a  bona  fide  holder  or  purchaser,  for  value  before  maturity 
without  notice  or  knowledge  of  the  illegality  from  recovering 
thereon.^*    And  it  is  held  that  the  taint  of  illegality  in  the  old  note 


knowledge.  Bozeman  v.  Allen,  48 
Ala.  512.  See  also  Frick  v.  Moore, 
82  Ga.  163,  8  S.  E.  80. 

Payee's  unsigned  memorandum  on 
back  of  note  is  invalid  as  a  testa- 
mentary disposition  and  constitutes 
no  defense  to  a  note  payable  on  de- 
mand, where  such  memorandum  di- 
rects the  amount  of  the  note  unpaid 
at  the  testator's  death  to  be  expend- 
ed by  the  maker  for  a  monument 
and  funeral  expenses,  even  though 
so  expended.  Moore  v.  Weston  (N. 
D.),  102  N.  W.  163. 

Note  originally  invalid  may  sub- 
sequently become  valid  by  the  con- 
duct of  the  maker  so  as  to  render 
him  liable  thereon.  Curtin  v.  Sal- 
mon River  Hydraulic  Gold  Mining 
&  Ditch  Co.,  141  Cal.  308,  74  Pac. 
851.  Examine  Central  Nat.  Bank 
V.  Copp,  184  Mass.  328.  68  N.  E.  334. 

^*  Alabama :  Bozeman  v.  Allen,  48 
Ala.  512;  Saltmarsh  v.  Tuthill,  13 
Ala.  390. 

Georgia:  Rhodes  v.  Beall,  78  Ga. 
641;  Meadow  v.  Bird,  22  Ga.  246. 

Illinois:  Eagle  v.  Kohn,  84  111. 
292;  Hemenway  v.  Cropsey,  37  111. 
357. 

Indiana:  Johnston  v.  Dickson,  1 
Blackf.  (Ind.)  256. 

Iowa:  Payne  v.  Raubinek,  82 
Iowa  587,  591,  48  N.  W.  995  (but 
void  in  other  hands.  "Bohemian 
Oats  Contract");  Merrill  v.  Pack- 
er, 80  Iowa  543,  45  N.  W.  1076; 
Hanks  v.  Brown,  79  Iowa  560,  44 
N.  W.  811;  Lake  v.  Streeter,  34 
Iowa  601;  Anderson  v.  Stark- 
weather, 28  Iowa  409. 

Kansas:  Draper  v.  Cowles,  27 
Kan.  484. 

Kentucky:  Maddox  v.  Graham.  2 
Mete.    (Ky.)    56    (negotiable  bonds). 


Louisiana:  Succession  of  Weil,  24 
La.  Ann.  139;  Knox  v.  White,  20 
La.  Ann.  326. 

Maine:  Hapgood  v.  Needham,  59 
Me.  442;  Nutter  v.  Stover,  48  Me. 
163. 

Maryland:  Gwyn  v.  Lee.  1  Md. 
Ch.  445. 

Massachusetts:  Robertson  v.  Cole- 
man, 141  Mass.  231,  4  N.  E.  619,  55 
Am.  Rep.  471;  Williams  v.  Cheney. 
3  Gray  (Mass.)  215. 

Michigan:  Macomb  v.  Wilkinson, 
82  Mich.  486,  47  N.  W.  336. 

Missouri:  Third  National  Bank  v. 
Tinsley,  11  Mo.  App.  498. 

New  York:  Rockwell  v.  Charles.  2 
Hill  (N.  Y.)  499;  Gould  v.  Arm- 
strong. 2  Hall  (N.  Y.)  266. 

North  Carolina:  Glenn  v.  Farm- 
ers' Bk.  of  North  Carolina,  70  N.  C. 
191  (negotiable  security). 

Tennessee:  Ferris  v.  Tavel,  87 
Tenn.  886,  11  S.  W.  93,  3  L.  R.  A. 
414. 

Vermont:  Converse  v.  Foster,  32 
Vt.  828. 

United  States:  Goodman  v.  Si- 
monds,  20  How.  (U.  S.)  343,  15  L. 
Ed.  934;  Atlas  Bank  v.  Holm,  34  U. 
S.  App.  472,  19  C.  C.  A.  94,  71  Fed. 
489. 

See  Iowa:  First  Nat.  Bk.  v.  Getz, 
96  Iowa  139,  64  N.  W.  799. 

Michigan:  Hunt  v.  Rumsey.  83 
Mich.  136.  47  N.  W.  105,  9  L.  R.  A. 
674  ("Red  Cyon  Wheat  Note"). 

Mississippi:  Hart  v.  Machine  Co.. 
72  Miss.  809,  834,  17  So.  769. 

New  York:  Devlin  v.  Brady,  36 
N.  Y.  581,  2  Transc.  App.  271,  aff'g 
32  Barb.  518  (note  to  procure  official 
to  violate  his  duty). 

Pennsylvania:  Albertson  v.  Laugh- 
lin,  173  Pa.  St.  525,  34  Atl.  216. 


i 


369  NOTICE   OR   KNOWLEDGE — FRAUD.  [§    289 

does  not  affect  a  renewal  note."  Again,  if  notes  based  upon  an  illegal 
consideration  pass  into  a  hona  fide  assignee's  hands,  and  he,  on  re- 
peated promises  of  payment,  repeatedly  indulges  the  obligor,  and 
ultimately  surrenders  such  notes  to  the  latter  and  takes  a  new  note 
payable  to  his  own  creditor,  the  obligor  waives  the  original  considera- 
tion and  is  liable.^  So  a  new  note  from  the  obligor  is  valid  in  the 
hands  of  a  lona  fide  assignee  without  notice  of  the  illegal  considera- 
tion of  the  original.-*  And  a  bona  fide  indorsee  of  notes  of  a  municipal 
corporation  sold  below  par  may  be  valid  in  the  hands  of  such  holder 
for  value  where  the  circumstances  of  the  sale  justify  it.^  If  the  con- 
sideration of  a  note  was  the  loan  of  state  notes  valuable  as  money  at 
the  date  of  the  loan  such  note  cannot  be  avoided  on  the  ground  of 
unlawful  issuance  where  the  maker  used  them  as  money  at  the  time 
and  was  benefited  thereby.^ 

§  289.  Same  subject — Exceptions  and  qualifications — Notice  or 
knowledge — Fraud,  etc.— The  above  general  rule  is,  however,  subject 
to  certain  exceptions  and  qualifications,  and  may  be  thus  stated :  Ille- 
gality between  original  parties  will  not  affect  an  innocent  indorsee  ex- 
cept under  the  statutes  of  gaming  and  usury,  unless  he  had  notice  or 
took  the  bill  after  it  became  due,  and  in  order  to  render  negotiable 
security  void  for  illegality  in  the  hands  of  an  innocent  holder  for 
value  without  notice,  and  before  due,  the  statute  which  makes  the 

South    Carolina:    Carroll    County  lently  issued  by  employe  of  a  bank 

Sav.  Bank  v.  Atrother,  28  S.  C.  504,  may   hold   the  proceeds,  where   the 

6  S.  E.  313;  Bell  v.  Weed,  1  Bay  (S.  bank  has  been  negligent  in  leaving 

^•)  249.  blank  drafts  signed  by  the  cashier 

Tennessee:  First  Nat.  Bk.  of  Mas-  in    such    employe's   hands.     Clifford 

sillon  V.  Coughron   (Tenn.  1899),  52  Banking    Co.    v.    Donovan    Commis- 

S.    W.    1112    (note    held    void;    for-  sion  Co.    (Mo.,  1906),  94  S.  W.  527. 

eign  corporation  had   not  complied  =>  Buchanan  v.   Drovers'  Nat.   Bk., 

with  state  laws  as  to  terms  of  do-  6  U.  S.  App.  506,  5  C.  C.  A,  83,  55 

ing  business).  Fed.   223;    Seventh   Ward   Nat.    Bk. 

Federal:    Hamilton  v.  Fowler,  99  v.  Newbold,  2  City  Ct.  Rep.  (N.  Y.) 

Fed.  18.  125. 

Note   founded    on    illegal    or    im-  •  ^  shreve  v.   Olds,   2  A.   K.   Marsh. 

moral     consideration     is     valid     in  (Ky.)   141. 

hands    of   bona   fide    holder    unless  *  Woolridge     v.     Gates,     2     J.     J. 

statute  makes  note  invalid.    Henry  Marsh.  (Ky.)  222. 

v.  State  Bank  of  Laurend    (Fidelity  ''Rockwell  v.  Charles,  2   Hill    (N. 

Savings  Bank   of   Iowa,   1906),    107  Y.)  499. 

N.  W.  1034.  "Goweb  v.  Shute,  4  Baxt.  (Tenn.) 

Bona  fide  payee  of  drafts  fraudu-  57. 
Joyce  Defenses — 24. 


§§    290,    291]  ILLEGAL    OR   IMMORAL    CONSIDERATION.  370 

contract  illegal  and  void  must  make  the  same  a  crime,  or  the  act  itself 
must  be  immoral  and  contra  hones  mores.^*  Such  paper  has  also  been 
held  not  collectible  when  the  statute  declares  negotiable  securities 
void  under  certain  circumstances.'^**  So  knowledge  of  the  illegality 
will  defeat  a  recovery.'^  And  a  note,  the  consideration  of  which  was 
valid  and  legal  as  between  the  original  parties,  may  become  void  for 
illegality  as  to  subsequent  parties  who  are  also  parties  to  the  illegality, 
and  even  as  to  a  hona  fide  holder,  if  he  be  compellable  to  trace  his  title 
through  the  parties  to  the  illegal  consideration,  and  such  passage  of 
title  is  void  by  law.'^*  So  where  two  parties  enter  into  a  contract  for 
a  fraudulent  purpose,  they  being  in  pari  delicto,  the  law  will  leave 
them  where  it  finds  them  and  will  not  enforce  the  collection  of  a  note 
given  for  such  a  consideration.*  Other  exceptions  and  qualifications 
exist  and  are  noted  herein  under  subsequent  sections.^ 

§  290.  Illegal  considsration — Effect  on  surety. — Sureties  may  set 
up  the  illegality  of  a  transaction  as  a  defense  in  an  action  by  a  payee 
where  the  note  is  made  to  a  public  officer  in  contravention  of  public 
policy  and  against  the  statute  for  the  private  and  illegal  use  or  loan 
of  public  funds. ^°  Nor  is  a  surety  bound  by  an  illegal  contract  not 
obligatory  upon  the  principal. ^^ 

§  291.     Paper  given  for  consideration  in  violation  of  statute. — The 

consideration  of  a  note  may  be  so  far  illegal  as  to  invalidate  it,  even  in 
a  hona  fide  holder's  hands,  where  such  note  is  given  in  violation  of 
the  express  terms  of  a  statute.^-     So  the  general  rule  as  to  illegality 

«*  Rhodes  v.  Beall,  73  Ga.  641.  "Gill  v.  Morris,  11  Heisk.  (Tenn.) 

»**  Eagle  v.   Kohn     84    111.    292.  614,  27  Am.  Rep.  744.     But  see  Da- 

^  Norton   &   Macauiey   v.   Pickens,  vis  v.  Board,  74  N.  C.  374,  72  N.  C. 

21  La.  Ann.  575;    Gould  v.  Leavitt,  441. 

92  Me.  416,  43  Atl.  17;   Macomb  v.  "Irwin  v.  Marquet,  26  Ind.  App. 

Wilkinson,  83  Mich.   486,  47   N.  W.  383,  59  N.  E.  38.     See  also  the  fol- 

336;   Brisbane  v.  Lesterjette,  1  Bay  lowing  cases: 

(S.  C.)  113.  Alahama.—KvLhl  v.  Press  Co.,  123 

^*  Adams  v.   Rowan,   8   Smedes   &  Ala.  452,  26  So.  535;   Hanover  Bank 

M.  (Miss.)  624.  v.  Johnson,  90  Ala.  549,  8  So.  42. 

*Cowell  v.  Harris,  2  Ohio  Cir.  Ct.  Arkansas. — Wyatt  v.   Wallace,   67 

R.  404.  Ark.  575,  55  S.  W.  1105. 

"See    §§    291,    292,    298,    300,    301  Georflria.— Cunningham    v.    Bank, 

herein.  71  Ga.  400,  51  Am.  Rep.  266;   Weed 

^0  Board   of   Education   v.    Thomp-  v.  Bond,  21  Ga.  195. 

son,  33  Ohio  St.  321.   See  §  288,  note  Connecticut. — Conklin  v.  Roberts, 

1,  herein.  36  Conn.  461. 


371 


VIOLATION    OF    STATUTE. 


291 


of  consideration  and  bona  fide  holders^-*  does  not  apply  where  the  note 
is  postively  made  wholly  and  utterly  void  by  statute.^^**    But  where 


Illinois. — Town  of  Eagle  v.  Kohn, 
84  111.  292;  Chapin  v.  Dake,  57  111. 
295;  Bank  v.  Vankirk,  39  111.  App. 
23. 

Iowa. — Bank  v.  Alsop,  64  Iowa  97, 
19  N.  W.  863. 

Kentucky. — Morton  v.  Fletcher,  2 
A.  K.  Marsh.  (Ky.)  137,  12  Am. 
Dec.  366. 

Louisiana. — Groves  v.  Clark,  21 
La.  Ann.  567  (Const.  1868,  Art. 
128). 

Maine. — Sproule  v.  Merrill,  16 
Shep.  (Me.)   260. 

Maryland. — Emerson  v.  Town- 
send,  73  Md.  224,  20  Atl.  984. 

Massachusetts. — Bayley  v.  Taber, 
5  Mass.  286. 

Nevada. — Evans  v.  Cook,  11  Nev. 
69. 

New  York. — Vallett  v.  Parker,  6 
Wend.  (N.  Y.)  615. 

North  Carolina. — Glenn  v.  Bank, 
70  N.  C.  191. 

Ohio. — Bank  v.  Portner,  46  Ohio 
St.  381,  21  N.  E.  634. 

South  Carolina.  —  Mordecai  v. 
Dawkins,  9  Rich.  L.  (S.  C.)   262. 

Tennessee. — Snoddy  v.  Bank,  88 
Tenn.  573,  13  S.  W.  127,  7  L.  R.  A. 
705. 

Virginia. — Woodson  v.  Barrett,  2 
Hen.  &  M.  80,  3  Am.  Dec.  612. 

United  States. — Root  v.  Merriam, 
27  Fed.  909. 

England. — Hitchcock  v.  Way,  6 
Adol.  &  E.  943,  33  E.  C.  L.  249; 
Shillito  v.  Theed,  7  Bing.  405,  20 
E.  C.  L.  181;  Henderson  v.  Benson, 
8  Price  281.    . 

Canada. — Summerfeldt  v.  Worts, 
12  Ont.  48.  Examine  Durkee  v. 
Conklin,  13  Colo.  App.  313,  57  Pac. 
486;  Noble  v.  Cornell,  1  Hilt.  (N. 
Y.)  98. 


Where  notes  were  given  for  com- 
mercial fertilizer,  which  fertilizer 
was  not  tagged  as  required  by  law, 
such  notes  rest  upon  a  void  con- 
tract and  are  not  valid  in  the  hands 
of  a  bona  fide  purchaser-  for  value. 
Alabama  Nat.  B'k.  v.  C.  C.  Parker  & 
Co.  (Ala.,  1906),  40  So.  987.  That 
invalidity  of  notes  for  fertilizers 
may  be  set  up  as  a  defense,  see 
Boyett  V.  Standard  Chemical  and 
Oil  Co.   (Ala.,  1906),  41  So.  756. 

Void  notes — Illegality  as  to  brand- 
ed or  marked  fertilizers.  See  Kirby 
V.  Huntsville  Fertilizer  &  Milling 
Co.,  105  Ala.  529,  17  So.  38;  Merri- 
man  &  Co.  v.  Knox,  99  Ala.  93,  9  So. 
427;  Steiner  v.  Ray,  84  Ala.  93,  4 
So.  172,  note  here  valid;  Holt  v. 
Nevassa  Guano  Co.,  114  Ga,  666,  40 
S.  E.  735;  Allen  v.  Pearce,  84  Ga. 
606,  10  S.  E.  1015;  Conley  v.  Sims, 
71  Ga.  161;  Reeves  v.  Grafting,  67 
Ga.  512. 

"*  §  288  and  note  1  herein. 

^-**  Alabama. — Bozeman  v.  Allen, 
48  Ala.  512. 

New  York. — ^Vallett  v.  Parker,  6 
Wend.  (N.  Y.)  615;  Grimes  v.  Hil- 
lenbrand, 6  Thomp.  &  C.  (N.  Y.) 
620,  4  Hun  354. 

North  Carolina. — Glenn  v.  Farm- 
ers' Bank  of  North  Carolina,  70  N. 
C.  101. 

South  Carolina. — Brisbane  v.  Les- 
terjette,  1  Bay  (S.  C.)  113  (indorsee 
cannot  recover  if  he  appears  to  have 
had  knowledge  or  if  he  did  not  give 
valuable  consideration). 

United  States. — Hatch  v.  Bur- 
roughs, 1  Woods  (U.  S.)  439,  Fed. 
Cas.  No.  6203.  See  Shank  v.  Bank, 
124  Ga.  508. 

See  as  to  Massachusetts  statute: 
Kendall     v.     Robertson,     12     Cush. 


>92] 


ILLEGAL    OR   IMMORAL   CONSIDERATION. 


372 


paper  is  given  for  a  loan  of  money  it  is  enforceable  even  though  a 
license  is  a  prerequisite  to  engaging  in  the  loaning  business,  the  loan 
of  money  being  neither  an  act  malum  in  se  nor  malum  prohibitum, ^^ 
and  if  a  bank  violates  a  federal  statute  in  certifying  paper  it  cannot 
avail  itself  of  such  violation  to  avoid  its  liability.^*  And  where  the  law 
has  been  violated  by  the  issuance  of  state  notes,  which  are  received 
as  a  loan  by  the  maker  of  a  note  and  used  by  him  as  money,  he  is 
liable,  notwithstanding  the  illegal  issue  ;^^  and  where  tona  fide  holders 
have  not  been  parties  to  the  illegal  transaction  on  which  the  note  was 
based  an  exception  has  qualifiedly  been  made.^*^  So  where  a  statute 
merely  declares  a  note  illegal  it  has  been  decided  that  the  note  is  good 
in  the  hands  of  an  innocent  holder,  the  distinction  being  made  between 
such  a  provision  ajid  one  declaring  the  note  void.^'^  Again  a  subse- 
quent illegal  contract  does  not  prevent  recovery  upon  a  note  otherwise 
enforceable  and  valid  at  its  inception.^* 

§  292.  Same  subject. — Although  a  statute  provides  that  notes  given 
for  a  patent  right  shall  express  upon  its  face  its  consideration,  such 
note  is  not  void  because  of  non-compliance  with  such  requirement,  and 
a  hona  fide  holder  thereof  is  protected.    It  is  only  where  the  considera- 


(Mass.)  156;  Rev.  Stat.  Mass.  35, 
§  2. 

But  see  as  to  English  statute: 
Fitch  V.  Jones,  5  El.  &  Bl.  238; 
Henderson  v.  Benson,  8  Price  281 
(5  &  6  Wm.  IV,  c.  41,  8  &  9  Vict, 
c.  109) ;  Hay  v.  Ayling,  16  Q.  B.  423; 
Parsons  v.  Alexander,  5  El.  &  Bl. 
263. 

Where  there  is  plea  of  illegal  con- 
sideration and  some  evidence  to 
sustain  it  onus  of  proof  is  on 
plaintiff  to  show  that  he  is  indorsee 
and  holder  for  valuable  considera- 
tion. Bozeman  v.  Allen,  48  Ala.  512, 
516. 

"Vermont  Loan  Co.  v.  Hoffman, 
5  Idaho  376,  49  Pac.  314.  See  Meyer- 
Marx  Co.  v.  Ensley  City,  141  Ala. 
602,  37  So.  639;  American  Ins.  Co. 
V.  Wellman.  69  Ind.  413.  See  §  288, 
note  1  herein. 

"Thompson  v.  Bank,  146  U.  S. 
240,   13  Sup.  Ct.  66    (violating  Rev. 


St.  U.  S.,  §  5208.  Statutory  penalty 
is  the  only  remedy.  Thompson  v. 
Bank,  113  N.  Y.  325,  21  N.  E.  57). 

i^Gowen  v.  Shute,  4  Baxt.  (Tenn.) 
57.    See  §  288,  note  1,  herein. 

"  Sproule  v.  Merrill,  16  Shep. 
(Me.)  260,  Stat.,  c.  158,  §  16. 

See  also  Maine. — Cattle  v.  Cleaves, 
70  Me.  256. 

Massachusetts. — Cazet  v.  Field,  9 
Gray  (Mass.)  329. 

New  Hampshire. — Norris  v.  Lang- 
ley,  19  N.  H.  423;  Doe  v.  Burnham, 
11  Fost.  (N.  H.)  426. 

New  York. — Cowing  v.  Altman,  71 
N.  Y.  435,  27  Am.  Rep.  70  [reversinff 
1  Thomps.  &  Co.   (N.  Y.)  494]. 

Texas. — Campbell  v.  Jones,  2  Tex. 
Civ.  App.  263,  21  S.  W.  723. 

"Ward  V.  Sugg,  113  N.  C.  489,  18 
S.  E.  717,  24  L.  R.  A.  280. 

"  Wilcoxon  V.  Logan,  91  N.  C. 
449. 


373 


VIOLATION    OF    STATUTE. 


[§   292 


tion  is  expressed  in  the  note  that  the  indorsee  before  maturity  and  for 
value  takes  it  subject  to  all  defenses.  ^^  It  is  also  decided,  however, 
that  where  a  statute  provides  that  a  negotiable  instrument  given  in 
payment  for  an  interest  in  a  patent  riglit  shall  be  absolutely  void  when 
it  does  not  show  upon  its  face  that  it  was  executed  for  such  considera- 
tion, it  is  void  in  the  hands  of  a  bo7ia  fide  holder  for  a  valuable  con- 
sideration.2°  But  a  "peddler's  note"  is  not  necessarily  void  for  non- 
compliance with  a  statutory  requirement,  but  the  principle  of  estoppel 


^^  Georgia. — Parr  v.  Erickson,  115 
Ga.  873,  42  S.  E.  240,  under  act  of 
1897,  Van  Epps'  Code  Supp.,  §  6650, 
et  seq.;  Smith  v.  Wood,  111  Ga.  221, 
36  S.  E.  649. 

Indiana. — Tescher  v.  Merea,  118 
Ind.  586,  21  N.  E.  316.  Mitchell, 
J.,  said  in  this  case  that  a  promis- 
sory note  fair  upon  its  face  con- 
taining the  requisite  words  of  ne- 
gotiability, although  taken  by  a 
payee  in  violation  of  such  a  statute, 
is  nevertheless  a  valid  obligation  in 
the  hands  of  an  innocent  holder  for 
value.  New  v.  Walker,  108  Ind. 
365,  9  N.  E.  386. 

Nebraska. — Moses  v.  Comstock,  4 
Neb.  516. 

Islew  York. — Canajoharie  Nat. 
Bank  v.  Diefendorf,  4  N.  Y.  Supp. 
262  (compare  this  case  in  123  N.  Y. 
191  as  to  good  faith  and  burden  of 
proof).  Vosburgh  v.  Diefendorf,  48 
Hun  (N.  Y.)  619,  1  N.  Y.  Supp.  58 
(compare  this  case  in  119  N.  Y.  357). 

Pennsylvania. — Hunter  v.  Hennin- 
ger,  93  Pa.  St.  373;  Haskell  v.  Jones, 
86  Pa.  St.  173;  Metropolitan  Bank  v. 
Sieber,  33  Leg.  Int.  193,  11  Phila. 
558. 

Tennessee. — Harmon  v.  Haggerty, 
88  Tenn.  705,  13  S.  W.  690.- 

Fermon^.— Pendar  v.  Kelley,  48  Vt. 
27. 

=*  Arkansas.— \Nya.\.t  v.  Wallace.  67 
Ark.  575.  55  S.  W.  1105,  decided  un- 
der Sand.  &  H.  Dig.  Ark..  §§  493- 
496.       See     the     following     cases: 


Georgiia.— Rhodes  v.  Beall,  73  Ga. 
641;  Weed  v.  Bond,  21  Ga.  195. 

Indiana. — Aurora  v.  West,  22  Ind. 
88,  85  Am.  Dec.  413. 

Louisiana. — Baldwin  v.  Sewell,  23 
La.  Ann.  444;  Levy  v.  Germillion,  21 
La.  Ann.  635;  Coco  v.  Callihan,  21 
La.  Ann.  624;  Groves  v.  Clark,  21 
La.  Ann.  567. 

Massachusetts. — Bayley  v.  Taber, 
5  Mass.  286,  4  Am.  Dec.  57. 

Nebraska. — Kittle  v.  DeLamater,  3 
Neb.  325. 

New  York. — Claflin  v.  Boorum,  122 
N.  Y.  385,  25  N.  E.  360. 

North  Carolina. — Ward  v.  Sugg, 
113  N.  C.  489,  18  S.  E.  717,  24  L.  R. 
A.  280. 

Texas. — Andrews  v.  Hoxie,  5  Tex. 
171. 

Note  given  for  patent  rights;  va- 
lidity of,  see  United  States. — Pe- 
grau  V.  American  Alkali  Co.,  122 
Fed.  1000. 

Indiana. — Jones  v.  Peoples'  State 
Bank,  32  Ind.  App.  119,  69  N.  B. 
466. 

A'ansas.— Pinney  v.  First  National 
Bank,  68  Kan.  223,  75  Pac.  119. 

Kentucky. — Hays  v.  Walker,  25 
Ky.  L.  Rep.  1045,  76  S.  W.  1099. 

Maine. — Hathorn  v.  Wheelwright, 
99  Me.  951,  59  Atl.  517. 

Pennsylvania. — Troxell  v.  Malin, 
9  Pa.  Super.  Ct.  483,  43  W.  N.  C. 
547. 

Wisconsin. — J.  H.  Clark  Co.  v. 
Rice  (Wis.  1906),  106  N.  W.  231. 


§    292]  ILLEGAL    OR   IlIMORAL    COXSIDERATIOK,  374 

arising  from  acts  of  the  maker  may  preclude  him  from  claiming  a  de- 
fense on  the  grounds  that  the  statute  has  been  violated,  the  purchaser 
having  no  notice  that  the  payee  was  a  peddler.-^  In  a  Georgia  case  it 
is  held  that  though  it  may  be  declared  by  statute  that  all  contracts, 
covenants  or  security  based  on  the  consideration  of  permitting  a  bank- 
rupt to  be  discharged  are  void,  yet  where  a  negotiable  note  was  given 
by  a  bankrupt  debtor  to  his  creditor  for  the  amount  of  his  debt  in 
consideration  that  the  creditor  would  withdraw  his  objections  to  the 
discharge  of  the  debtor,  such  note  was  not  void  in  the  hands  of  a  hona 
fide  purchaser  before  due  and  without  notice. ^^  So  under  a  New  York 
decision  it  is  decided  that  a  check  given  to  carry  out  an  agreement 
made  in  contravention  of  the. bankrupt  act  as  to  fees  of  officers  of 
courts  is  not  absolutely  void,  even  though  founded  on  an  illegal  con- 
sideration, but  is  valid  in  the  hands  of  a  hona  fide  holder  for  value 
taking  it  before  it  was  dishonored  and  without  notice  of  its  illegality.^^ 
But  a  note  given  for  a  balance  due  on  a  transaction  itself  void  by  stat- 
ute or  for  money  lent  to  pay  bills  which  the  person  taking  the  note  had 
illegally  assisted  to  circulate  cannot  be  enforced.^*  Nor  is  a  note  en- 
forceable when  issued  by  a  bank  in  violation  of  the  general  law.~^  If 
the  defense  of  illegal  consideration  is  set  up  the  whole  statute  must  be 
examined  to  see  whether  the  legislature  intended  to  prevent  enforcing 
a  contract  relating  to  the  thing  prohibited.^^  Again,  it  is  held  that 
the  repeal  of  the  statute  before  action  brought  precludes  the  defense 
of  the  original  prohibition.^^  But  a  subsequently  enacted  statute  pro- 
hibiting an  act  will  not  preclude  recovery  Avhere  the  consideration  of 
the  note  was  lawful. ^^ 

^  Billington   v.    McColpin,   22    Ky.  Examine  Bacon  v.  Lee,  4  Iowa  490. 

L.  Rep.  1281,  60  S.  W.  923.  ="  Nichols    v.    Gee,    30    Ark.    135; 

-  Rhodes  v.  Beall,  73  Ga.  641.    See  Holmes    v.     French,     68    Me.     525; 

§  125,  herein.  Smith  v.  Glanton,  39  Tex.  365.     But 

="  Cowing  v.  Altman,  71  N.  Y.  435,  see    Pond   v.    Home,    65    N.    C.    84; 

27  Am.  Rep.  70,  rev'g  1  Thomp.  &  C.  Ayres  v.  Probasco,  14  Kan.  175. 

494.    See  §  125  herein.  ^Arkansas. — Newton  v.  Wilson,  31 

=*  Brown    v.    Tarkington,    3    Wall.  Ark.  484. 

(U.  S.)  377.    See  §  288,  note  1,  here-  Connecticut.— RnhhSiT A    v.     Calla- 

in.  han,  42  Conn.  524. 

^Root  v.  Wallace,  4  McLean    (U.  Massachusetts. — North          Bridge- 

S.)  8,  Fed.  Cas.  No.  12039.    Examine  water    Bank    v.    Copeland,    7    Allen 

Oneida    Bank   v.    Ontario    Bank,    21  (Mass.)  139. 

N.  Y.  490.  Virginia.— Cecil  v.  Hicks,  29  Grat. 

^^  Harris  v.  Runnels,  12  How.   (U.  (Va.)  1. 

S.)   79.     See  Darby  v.  Institution,  1  United  States. — Boyce  v.  Tabb,  18 

Dill.  (U.  S.)  141,  Fed.  Cas.  No.  3571.  Wall.  (U.  S.)  546.   But  see  Weed  v. 


375  CONSTITUTION   AND    LAWS    VIOLATED ENEMY   AIDED.      [§    293 


§  293.  Where  constitution  and  laws  violated — Enemy  aided. 
Where  a  note  is  given  for  a  debt  created  by  a  municipality  in  violation 
of  the  constitution  it  cannot  be  enforced  and  is  invalid  even  in  the 
hands  of  a  bona  fide  indorsee  for  value  before  it  became  due.-^  The 
constitution  and  laws  of  the  United  States  made  in  pursuance  thereof 
are  the  supreme  laAV  of  the  land,  and  any  contract  or  undertaking  of 
any  kind  which  destroys  or  impairs  its  supremacy  or  operates  to  aid 
or  encourage  any  attempt  to  that  end,  is  unlawful  and  violates  the  su- 
preme paramount  law  of  the  land,  and  no  court  sitting  under  the 
constitution  and  exercising  authority  by  virtue  of  its  provisions  will 
treat  such  acts  as  a  meritorious  consideration  for  the  promise  of  any 
one.  Such  a  transaction  is  palpably  illegal  and  contrary  to  public 
policy.  This  principle- applies  to  notes  given  in  aid  of  the  enemy  or  in 
aid  of  a  rebellion  or  treasonable  combination  against  the  United  States, 
in  which  case  all  the  illegal  facts  and  the  entire  transaction  may  be 
shown  in  defense  to  an  action  on  such  instrument  even  by  a  transferee 
for  value.^**     Kecovery  has  been  allowed  in  some  cases  on  the  ground 


Snow,  3  McLean  (U.  S.)  265,  Fed. 
Cas.  No.  17347. 

^  Town  of  Wadley  v.  Lancaster, 
124  Ga.  354. 

■-"  Alabama. — Oxford  Iron  Co.  v. 
Spradley,  46  Ala.  98;  Oxford  Iron 
Co.  V.  Quinchett,  44  Ala.  487. 

Arkansas. — Booker  v.  Robbins,  26 
Ark.  660  (horse  bought  by  the  maker 
for  the  confederate  service  with 
payee's  knowledge  held  a  good  de- 
fense in  suit  by  payee);  Portis  v. 
Green,  25  Ark.  376;  McMurtry  v. 
Ramsey,  25  Ark.  350;  Ruddell  v. 
Landers,  25  Ark.  238  ("there  can  be 
no  question  but  the  whole  transac- 
tion was  not  only  contrary  to  public 
policy,  but  was  palpably  illegal  and 
treasonable  from  its  inception,  and 
all  attempted  obligations  made  or 
passed  between  the  parties  were  ab- 
solutely void") ;  Tatum  v.  Kelley,  25 
Ark.  209. 

Georgia. — Murphy  v.  Weems,  69 
Ga.  687;  O'Byrne  v.  City  of  Savan- 
nah, 41  Ga.  331  (a  note  given  for  a 
tax  assessed  during  the  existence  of 
the  confederate  government  but  not 


collected  is  void,  but  there  may  be 
two  considerations  which  are  sever- 
able and  the  note  be  good  as  to 
part) ;  Chancely  v.  Bailey,  37  Ga. 
532. 

North  Carolina. — Lewis  v.  Latham, 
74  N.  C.  283  (illegal  consideration 
exists  and  vitiates  a  note  given  for  a 
horse  with  knowledge  of  its  treason- 
able use);  Logan  v.  Plummer,  70  N. 
C.  388;  Cronly  v.  Hall,  67  N.  C.  9  (il- 
legality appeared  upon  face  of  in- 
strument and  so  bound  subsequent 
holders) ;  Kingsbury  v.  Fleming,  66 
N.  C.  524  (if  money  be  lent  to  aid  in 
the  accomplishment  of  an  illegal 
purpose  such  illegality  is  not  purged 
by  the  borrower  failing  so  to  apply 
the  money)  ;  Kingsbury  v.  Gooch,  64 
N.  C.  528. 

Tennessee. — Gill  v.  Creed,  3  Coldw. 
(43  Tenn.)  295;  Thornburg  v.  Har- 
ris, 3  Coldw.  (43  Tenn.)  157. 

Texas. — Roquemore  v.  Alloway,  33 
Tex.  461  (such  illegal  contract  can 
acquire  no  validity  by  transfer  be- 
fore or  after  maturity). 

West  Virginia. — Slifer  v.  Howell's 


§    293]  ILLEGAL   OR   IMMORAL    CONSIDERATION.  376 

that  the  mere  knowledge  by  the  vendor  that  the  purchaser  intends  to 
make  an  illegal  or  immoral  use  of  the  article  purchased  does  not  in- 
validate the  note  given  in  payment  for  such  article,  that  there  must  be 
something  to  show  participation  in  the  illegal  transaction  or  an  intent 
to  aid  and  promote  the  illegal  purpose  f^  and  that  mere  knowledge  that 
the  funds  might  possibly  or  probably  be  used  in  advancing  such  illegal 
purpose  is  insufficient,  the  borrower  being  engaged  in  business  which 
was  also  not  illegal  f^  and  where  a  note  in  the  usual  form  was  given 
for  a  loan  of  money  which  the  lender  knew  was  intended  to  be  used 
for  the  equipment  of  cavalry  to  serve  the  confederate  states,  but  that  by 
the  contract  the  borrower  was  not  restricted  in  any  way  as  to  the  use  of 
the  money,  but  might  use  it  as  he  saw  fit,  it  was  held  that  the  loan 
could  be  recovered.^^  So,  if  the  contract  be  unconnected  with  the  il- 
legal act,  but  is  founded  on  a  new  consideration,  the  courts  will  enforce 
it,  especially  if  the  party  is  in  possession  of  all  the  gains  and  profits.^* 
So,  where  a  note  was  given  after  the  war  for  money  borrowed  to  pay  a 
debt  incurred  during  the  war  for  such  illegal  purpose,  the  illegality 
was  held  to  be  too  remote.^^  So,  where  a  note  was  given  for  the  lease 
of  a  tract  of  land  and  the  purpose  of  the  lease  was  to  raise  food  for 
laborers  in  manufacturing  iron  for  the  confederate  government,  it 
was  held  that  such  indirect  and  remote  consequences  would  not  be  con- 
sidered.^® So,  where  a  note  was  given  in  connection  with  partnership 
interests  by  some  of  the  firm  members  to  others  the  fact  that  it  had, 
with  other  business,  a  contract  for  the  enemy's  government,  does  not 
render  the  note  illegal,  though  based  upon  the  proceeds  of  the  general 

Admr.,  9  W.  Va.  391    (where  a  con-  ^^^  Wallace  v.  Lark,  12  S.  C.  576. 

tract   is  connected   by  its   consider-  ^^  Oxford  Iron  Co.  v.  Spradley,  51 

ation  with  an  illegal  transaction  of  Ala.   171;    Jones  v.   Bank,  9   Heisk. 

such   a   character   it   cannot  be   en-  (56     Tenn.)     455.       See    Cooper    v. 

forced).  Thompson,  20  La.  Ann.    (La.)    182; 

United  States. — Taylor  v.  Thomas,  Walker  v.  Jeffries,  45  Miss.  160. 

22  Wall.  (89  U.  S.)  479;  Hanauer  v.  =^  Walker  v.  Jeffries,  45  Miss.  160. 

Woodruff,  15  Wall.    (82  U.  S.)    439,  Examine     Bank     of     Tennessee     v. 

442,  per  Field,  J.;  Hanauer  v.  Doane,  Cummin gs,  9  Heisk.  (56  Tenn.)  465. 

12   Wall.    (79   U.    S.)    342.    But  see  ■*  Gilliam  v.  Brown,  43  Mis?.  641. 

Murphy  v.  Weems,  69  Ga.  687;  Glenn  See    Williams    v.    Alexander,    79    N. 

V.  Bank,  70  N.  C.  191;  Kingsbury  v.  C.   411;    Powell  v.   Smith,   66   N.   C. 

Suit,  66  N.  C.  601  (a  case  of  a  single  401;  Thornburg  v.  Harris,  3  Coldw. 

bill  given  for  money  borrowed  to  pay  (43    Tenn.)     157;     Puryear    v.    Mc- 

a  debt  theretofore  contracted) ;  Bank  Gavock,  9  Heisk.   (56  Tenn.)  461. 

of  Tennessee  v.  Cummings,  9  Heisk.  -'^  Poindexter    v.    Davis,    67    N.    C. 

(Tenn.)    465;    Hatch  v.   Burroughs,  112. 

1  Woods  439,  Fed.  Cas.  No.  6203.  '"  McKesson  v.  Jones,  66  N.  C.  258. 


J 


377   ILLEGAL  SALES — COMPOUNDING  CRIMINAL  ACTS.   [§§  294,  295 

business.^^  And  notes  given  in  consideration  of  bonds  issued  by 
the  enemy  during  the  civil  war  in  aid  of  the  rebellion,  commonly 
known  as  war  bonds,  are  not  based  upon  a  valid  consideration,  the  is- 
suing of  the  bonds  being  an  open  act  of  liostility  to  the  United  States, 
especially  where  every  holder  of  the  paper  knew  the  object  for  which 
it  was  issued.^* 

§  294.  Illegal  sales. — The  fact  that  goods  sold  in  violation  of  the  law 
constitutes  the  consideration  of  a  note  is  not  a  defense  available  against 
one  who  holds  the  paper  for  a  valuable  consideration  before  maturity 
and  without  notice  of  the  illegality.^^  Such  a  defense,  however,  may 
be  available  against  the  payee  or  his  transferee  after  maturity.*"  But 
the  rule  does  not  apply  to  illegal  sales  made  by  an  agent  who  receives 
a  note  in  payment,  but  gives  the  payee  his  own  note,  the  last  note  not 
being  open  to  the  defense  that  the  law  was  violated  by  such  sales.*^  If 
a  sale  of  certain  property  is  void  under  a  statute,  because  of  non-com- 
pliance with  the  laws  of  the  state,  it  has  been  decided  that  such  non- 
compliance constitutes  a  good  defense  to  an  action  on  a  note  given  for 
the  purchase  price  of  property  of  the  particular  class  specified." 

§  295.  Compounding  criminal  acts. — Notes  given  for  the  purpose 
of  compounding  or  procuring  the  dismissal  of  a  criminal  prosecution 
are  not  enforceable,  as  they  are  contrary  to  public  policy  and  void,  and 
therefore  such  a  settlement  is  a  good  defense  to  an  action  thereon  by 
the  payee.*^    But,  as  will  appear  hereafter,  a  distinction  exists  between 

"  Gullatt  V.  Thrasher,  42  Ga.  429.  New  York.— Allen  v.  McFadden,  20 

'^  Tucker  v.  Horner,  28  Ark.  335;  N.  Y.  Supp.  360. 

Thornburg  v.  Harris,  3  Coldw.    (43  reo-as.— Campbell  v.  Jones,  2  Tex. 

Tenn.)   157;   Gill  v.  Creed,  3  Coldw.  Civ.  App.  263,  21  S.  W.  723. 

(43  Tenn.)  295  (note  given  for  con-  Yermon?.— Converse  v.  Foster,  32 

federate  treasury   notes);    Grant  v.  Vt.    828;    Pindar   v.    Barlow,   31  Vt. 

Ryan,  37  Tex.  37;  Hanauer  v.  Wood-  529.    See  §  288,  note  1,  herein, 

ruff,  15  Wall.  (82  U.  S.)  439.  ^»  Glass  v.  Alt,  17  Kan.  444;    Mer- 

'■" Maine.— Cottle  v.  Cleaves,  70  Me.  rick  v.  Butler,  2  Lans.   (N.  Y.)   103. 

256;    Hapgood  v.   Needham,   59   Me.  ■"Domestic    Sewing   Mach.    Co.    v. 

442;    Field  v.  Tibbetts,  57  Me.   358,  Hatfield,  58  Ind.  187. 

99  Am.  Dec.  779 ;  Baxter  v.  Ellis,  57  "  Hanover  Nat.  Bank  v.  Johnson, 

Me-  178.  90  Ala.  549,   8   South.  42;    Streit  v. 

Massachusetts.— Cazet  v.   Field,   9  Sanborn,  47  Vt.  702. 

Gray  (Mass.)  329.  "Kirkland   v.   Benjamin,   67   Ark. 

New      Hamjyshire.— Great      Falls  480,  55  S.  W.  840;  Rogers  v.  Blythe, 

Bank  v.  Farmington,  41   N.   H.  32;  51  Ark.  519,  11  S.  W.  822;  Woodham 

Doe  V.  Burnham,  11  Fost.    (N.  H.)  v.  Allen,  130  Cal.  194,  62  Pac.  398; 

426;  Norris  V.  Langley,  19  N.  H.  423.  Bell   v.   Wood,    1    Bay    (S.   C.)    249. 


§  296] 


ILLEGAL    OR   IMMORAL    CONSIDERATION. 


378 


a  private  and  a  public  suit,  as  in  case  of  seduction  or  bastardy.*^* 
And  it  has  been  decided  that  an  indorser  of  a  note  signed  by  the  maker 
to  avoid  a  criminal  prosecution  is  not  within  the  rule  as  to  such  a  de- 
fense.*^ It  is  also  held  that  the  rule  permitting  such  a  defense  does 
not  apply  as  against  an  innocent  indorsee  for  value,  there  being  no 
statute  to  that  effect.*^  And  as  against  such  an  indorsee  without  no- 
tice before  maturity  of  a  note  based  upon  a  consideration  which  was 
a  forbearance  to  sue  the  maker  for  slander  in  stating  that  a  written 
order  of  the  maker  held  by  the  payee  was  forged,  there  can  be  a  re- 
covery, even  if  said  order  was  forged.*^ 

§  296.  Where  consideration  is  money  or  property  won  at  gambling 
device. — In  the  absence  of  a  statutory  provision  that  a  bill  or  note 
given  for  a  wagering  contract  shall  be  void,  the  defense  that  it  was  for 
such  a  consideration  cannot  be  sustained  against  a  hana  fide  holder 
thereof  for  value  before  maturity  and  without  notice;*^  and  where 


See  also  Turley  v.  Bartlett,  10 
Heisk.  (Tenn.)  221.  See  §  288,  note 
1,  herein. 

***  See   §§    299-301   herein. 

"Bowman  v.  Hiller,  130  Mass.  153, 
39  Am.  Rep.  442. 

"Wentworth  v.  Blaisdell,  17  N. 
H.  275;  Clark  v.  Ricker,  14  N.  H. 
44;  Hill  v.  Northrup,  1  Hun  (N.  Y.) 
612,  4  Thomp.  &  C.  120.  But  see 
Bell  v.  Wood,  1  Bay  (S.  C.)  249. 

**  Herrick  v.  Swomley,  56  Md.  439. 

^^  California. — Haight  v.  Joyce,  2 
Cal.  64,  56  Am.  Dec.  311. 

Colorado. — Boughner  v.  Meyer,  5 
Colo.  71,  40  Am.  Rep.  139. 

Illinois. — Shirley  v.  Howard,  53 
111.  455;  Adams  v.  Wooldridge,  3 
Scam.  (111.)  255;  Biegler  v.  Mer- 
chants Loan  &  Trust  Co.,  62  111.  App. 
560. 

Indiana. — Schmueckle  v.  Waters, 
125  Ind.  265,  25  N.  E.  281. 

Rhode  Island. — Atwood  v.  Weeden, 
12  R.  I.  293. 

Texas. — Thompson  v.  Samuels 
(Tex.),  14  S.  W.  143.  See  §  288, 
note  1,  herein. 


A  defense  that  notes  had  been 
given  on  Sunday  and  on  account  of 
a  stock-gambling  transaction  is  not 
available,  where  the  notes  are  regu- 
lar upon  their  face,  as  against  a  pur- 
chaser in  good  faith  for  value,  be- 
fore maturity  and  without  notice. 
Myers  v.  Kessler  (C.  C.  A.),  142 
Fed.  730. 

Bet  at  billiards  for  game  and 
liquors.  If  plaintiff  kept  a  billiard 
saloon  and  played  with  the  defend- 
ant upon  the  terms  that  the  defend- 
ant should  pay  for  the  use  of  the 
table  by  both  parties  in  case  he  lost, 
but  otherwise  he  should  pay  nothing, 
it  is  gaming.  It  is  also  gaming  if 
the  parties  played  together  upon  the 
terms  that  the  defendant,  in  case  he 
lost,  should  pay  the  plaintiff  for 
liquors  and  cigars  to  be  used  by  the 
plaintiff  but  otherwise  not,  and  the 
same  would  apply  to  the  price  of  the 
use  of  table  or  to  the  price  of  the 
liquors,  so  that  a  note  given  for  the 
amount  therefor  would  be  void  both 
as  to  the  original  note  and  the  re- 
newal thereof  where  such  acts  are 


379  STATUTORY   PROHIBITIONS.  [§    297 

paper  is  signed  at  the  maker's  request  by  accommodation  indorsers  to 
be  discounted  at  a  certain  bank,  which  has  no  knowledge  that  the  pro- 
ceeds are  to  be  used  for  gambling  purposes,  such  use  will  constitute  no 
defense  to  an  action  on  the  paper.*^  As  a  general  rule,  however,  paper 
based  upon  such  a  consideration  is  open  to  a  defense  showing  that  the 
actual  consideration  was  a  Avager  or  gambling  where  the  action  is 
brought  by  an  original  party  or  by  subsequent  holders  taking  it  after 
maturity  or  with  notice.*^  It  is  also  held  that  the  general  rule  also 
governs  what  are  known  as  "Bohemian  Oats"  notes  ;^"  and  the  same 
rule  governs  as  to  the  assignee  of  a  note  given  for  wagers  intentionall}^ 
lost  at  cards  to  enable  the  obligee  to  sell  it  for  the  joint  benefit  of  the 
obligor  and  himself.^ ^ 

§  297.  Same  subject — Statutory  prohibitions. — Wliere  a  statute 
provides  that  all  judgments  by  confession,  conveyances,  bonds,  bills, 
notes  and  securities,  when  the  consideration  is  money  or  property  won 
at  any  game  or  gambling  device,  shall  be  void  and  may  be  set  aside  and 
vacated  by  any  court  of  competent  jurisdiction  upon  suit  brought  for 
that  purpose  by  the  person  so  confessing,  giving,  entering  into  or  ex- 
ecuting the  same,  or  by  his  executors,  etc.,  purchaser  or  other  person 
interested  therein,  the  main  purpose  of  such  an  act  is  to  discourage 

contrary  to  the  statute  against  gam-  Term  R.  630,  2  Esp.  631;   Aubert  v. 

ing,  and  so  even  though  the  plaintiff  Maze,    2    Bos.    &    P.    374;    Steers    v. 

was    licensed    to    sell    such    goods.  Lashley,  6  T.  R.  61,  533;   Amory  v. 

Murphy  v.    Rogers,    151    Mass.    118,  Merry  weather,    2    Barn.    &    C.    573; 

120,   24  N.  E.   335;    Holden   v.    Cos-  Amory  v.  Merry  weather,  4  Dowl.  & 

grove,  12  Gray  (78  Mass.)  216.  R.  86. 

Gambling — That  statute   constitu-  =■"  Schmueckle  v.  Waters,  125   Ind. 

tional   as   to   assignment   of   bill   or  265,  25  N.  E.  281;    Payne  v.  Raubi- 

note  based   on   gambling  considera-  nek,    82    Iowa    587,    48    N.    W.    995; 

tion  see  Higgenbotham  v.  McGready,  Merrill  v.   Packer,   80   Iowa  542,   45 

183  Mo.  96,  81  S.  W.  883.  N.    W.    1076;     Ward    v.    Doane,    77 

"'Birdsall    v.     Wheeler,    62    App.  Mich.   328,  43   N.  W.  980;    Davis  v. 

Div.  (N.  Y.)  625,  71  N.  Y.  Supp.  67.  Seeley,  71  Mich.  209,  38  N.  W.  901; 

^'^  Indiana. — Spray     v.     Burk,     123  McNamara  v.  Gargett,  68  Mich.  454, 

Ind.  565,  24  N.  E.  588.  36  N.  W.  218;  Jacobs  v.  Mitchell,  46 

/OTTO.— Peoples  Sav.  Bank  v.  Gif-  Ohio    St.    601,   22    N.   E.   768.     Com- 

ford,  108  Iowa  277,  79  N.  W.  63.  pare    Stewart    v.    Simpson,    2    Ohio 

Massachusetts. — Scollans  v.  Flynn,  Cir.   Ct.  R.  415.    See  §   288,  note   1, 

120  Mass.  271.  herein. 

Rhode  Island. — Atwood  v.  Weeden,  "  Thompson    v.    Moore,    4    T.    B. 

12  R.  I.  293.  Mon.  (Ky.)  79. 

England. — Brown     v.     Turner,     7 


298] 


ILLEGAL    OK   IMMOliAL    COXSIDEKATION. 


380 


and  suppress  gaming  by  preventing  retention  of  the  spoils  by  the 
gambler,  or  the  successful  transfer  of  them  to  his  colleagues.  And 
where  a  transfer  or  indorsement  is  made  of  drafts  given  as  security 
for  money  loaned  and  to  be  loaned  for  the  purpose  of  gambling  with 
the  lender,  such  indorsement  is  within  the  inhibitions  of  the  statute, 
as  it  is  to  be  regarded  either  as  a  security  or  as  a  new  bill,  nor  in  such 
case  does  the  rule  as  to  parties  in  pari  delicto  apply  ;^-  and  generally 
such  express  statutory  prohibitions  as  to  notes  or  paper  given  for  such 
wagering  or  gambling  considerations,  or  based  upon  such  gaming 
transactions,  precludes  a  recovery,  it  being  a  good  defense  that  it  was 
so  given,  even  against  a  lona  fide  holder.^^ 

§  298.     Same  subject — Qualifications  of  rule — Other  instances. — In 

determining  whether  a  note  given  in  an  option  or  "future"  deal  shall 
be  subject  in  the  hands  of  a  bona  fide  holder  to  the  defense  of  an  illegal 
consideration,  it  seems  that  the  inhibition  in  the  statute  must  be  suffi- 


"*  Morton  v.  Provident  Nat.  Bank 
of  Waco,  Tex.  Civ.  App.  1906,  93  S. 
W.  189  (under  Rev.  Stat.  Mo.  1899, 
§  3426),  considering  Williams  v. 
Wall,  60  Mo,  318  (which  cites  2 
Bouv.  L.  Diet.  493;  Slacum  v.  Pom- 
eroy,  6  Cranch  (U.  S.)  221,  3  L.  Ed. 
204;  Coffee  v.  Planters'  Bank  of 
Tenn.,  13  How.  (U.  S.)  183,  14  L. 
Ed.  105;  Van  Stophorst  v.  Pearce,  4 
Mass.  258;  Chapin  v.  Duke,  57  111. 
295,  11  Am.  Rep.  15) ;  Savings  Bank 
of  Kansas  v.  National  Bank  of  Com- 
merce, 38  Fed.  800,  and  distinguish- 
ing Higginbotham  v.  McCready 
(Mo.),  S.  W.  883. 

'-^Alabama. — Ivey  v.  Nicks,  14  Ala. 
564. 

Colorado. — Ayer  et  al.  v.  Younker, 
10  Colo.  App.  27,  50  Pac.  Rep.  218. 

Connecticut. — Conklin  v.  Roberts, 
36  Conn.  461. 

Illinois. — Williams  v.  Judy,  8  111. 
282,  44  Am.  Dec.  699;  Pope  v.  Hanke, 
52  111.  App.  453;  International  Bank 
v.  Vankirk,  39  111.  App.  23;  Tenney 
V.  Foote,  4  111.  App.  594. 

Indiana. — Irwin  v.  Marquett,  26 
Ind.  App.  383,  59  N.  E.  38. 


Iowa. — Koster  v.  Seney,  99  Iowa 
584,  68  N.  W.  824;  Traders'  Bank  v. 
Alsop,  64  Iowa  98,  19  N.  W.  863. 

Kentucky. — Pace  v.  Martin,  2  Duv. 
(Ky.)  522;  Early  v.  McCart,  2  Dana 
(Ky.)   414. 

Mississippi. — Lucas  v.  Waul,  12 
Smedes  &  M.  (Miss.)  157. 

Ohio. — Lagonda  Nat.  Bank  v.  Port- 
ner,  46  Ohio  St.  381,  21  N.  E.  634. 

Pennsylvania. — Harper  v.  Young, 
112  Pa.  St.  419,  3  Atl.  670;  Unger  v. 
Ross,  13  Pa.  St.  601. 

South  Carolina. — Mordecai  v.  Daw- 
kins,  9  Rich.  Law.   (S.  C.)   262. 

Tennessee. — Snoddy  v.  American 
Nat.  Bank,  88  Tenn.  573,  13  S.  W. 
127,  17  Am.  St.  Rep.  918,  7  L.  R.  A. 
705. 

Texas. — Stewart  v.  Miller,  3  Will- 
son   (Tex.  Civ.  App.),  §  292. 

Wyoming. — Swinney  v.  Edwards, 
8  Wyo.  54,  55  Pac.  306. 

United  States. — Pearce  v.  Rice,  142 
U.  S.  28,  12  Sup.  Ct.  130.  But  see 
Crawford  v.  Spencer,  92  Mo.  498,  4 
S.  W.  713.    See  §  288,  not«  1,  herein. 


■ 


381  ILLEGAL    AXD    IMMORAL    COXSIDl- RATIOX.  [§    299 

ciently  specific  to  cover  cases  of  this  character  to  warrant  such  a  de- 
fense being  sustained ;  so  that  the  general  rule  governing  in  cases  of 
statutes  as  to  gambling  must  be  qualified  to  the  above  extent;^*  al- 
though where  the  statute  expressly  and  in  sufficiently  specific  terms 
makes  such  notes  void  it  constitutes  an  available  and  good  defense  even 
against  a  bona  fide  holder  f^  but  the  note  may  not  be  subject  to  such 
a  defense  as  that  of  a  gambling  consideration  where  the  transaction 
is  valid,  in  that  the  intent  of  one  of  the  parties  was  an  actual  purchase 
and  sale  of  stocks,  the  gambling  purpose  being  only  that  of  the  other 
party.^^  Again,  a  certificate  of  deposit  may  be  based  upon  a  gambling 
transaction  and  be  iAdorsed  and  assigned  in  a  foreign  state,  and  still 
the  indorser  or  assignor  be  liable  at  the  suit  of  a  bona  fide  holder  for 
value,  although  such  negotiable  paper  be  void  in  such  bona  fide  holder's 
hands  under  express  declaration  of  the  statute  of  the  state  where  suit 
is  brought.^'^ 

§  299.'  Illegal  and  immoral  considerations. — It  is  a  well  settled  rule 
that  contracts  based  upon  a  consideration  in  furtherance  of  immorality 
are  illegal,  against  public  policy,  vicious  and  void,  and  this  applies  to 
bills  and  notes,  but  a  distinction  has  been  made  between  a  note  given 
as  a  compensation  for  an  injury  committed,  although  an  immoral  act, 
and  a  note  given  to  encourage  future  immorality,  it  being  held  that 
the  paper  is  valid  in  the  former  case,  although  it  is  void  in  the  latter, 
another  distinction  is  also  made  in  this  connection  between  bonds  and 
deeds  and  instruments  under  seal,  and  those  not  under  seal,  it  being 
held  that  the  rule  governing  in  the  former  case  has  no  application  in 
the  latter.  These  distinctions  will  fully  appear  in  the  next  following 
sections. 

'•*  Indiana. — Sondheim    v.    Gilbert,  Fed.  592;   Jackson  v.  Foote,  12  Fed. 

117  Ind.  71,  18  N.  E.  687,  10  Am.  St.  37;   Third  Nat.  Bank  v.  Harrison,  3 

Rep.  23,  5  L.  R.  A.  432.  McCrary    (U.   S.)    316,   10  Fed.  243. 

Michigan.— Shaw     v.      Clark,     49  But  see  Hawley  v.  Bibb,  69  Ala.  52; 

Mich.  384.  Cunningham    v.    Bank,    71    Ga.    400. 

ITtssoMn.— Crawford    v.     Spencer,  See  §  288,  note  1,  herein. 
92  Mo.  498,  4  S.  W.  713;  Third  Nat.         ^=*Pope  v.   Hanke,  155   111.  617,  40 

Bank  v.  Tinsley,  11  Mo.  App.  498.  N.  E.  839;  Snoddy  v.  Bank,  88  Tenn. 

New   York.— Provost  v.    McEnroe,  573.  13  S.  W.  127;  Root  v.  Merriam, 

102  N.  Y.  650,  5  N.  E.  795.  27  Fed.  909. 

Pennsylvania.— Northern  Nat.  Bk.        '^'' Bangs  v.  Hornick,  30  Fed.  97. 
of  Lancaster  v.  Arnold    (Pa.  Sup.),         "Sullivan  v.   German   Nat.  Bank, 

40  Atl.  794.  18  Colo.  App.  99,  70  Pac.  162. 

United  States.— Uentz  v.  Jewell,  20 


300] 


ILLEGAL   OR   IMMORAL    COXSIDERATION. 


382 


§  300.  Same  subject — Decisions. — Future  cohabitation  is  a  vicious 
consideration,  and  contracts  upon  it  may  be  rescinded  by  the  party 
or  those  claiming  in  priority  under  him,  but  a  meretricious  connection 
between  a  man  and  a  woman  does  not  disable  her  from  receiving  of  him 
by  gift  or  contract.^"*  A  distinction  is  made,  however,  between  con- 
tracts under  seal  and  not  under  seal  as  to  past  cohabitation  as  a  con- 
sideration, although  future  cohabitation  as  a  consideration  makes  the 
contract  utterly  void.^^  So,  a  bond  or  note  under  seal  is  not  invalid  be- 
cause based  upon  past  cohabitation  as  a  consideration,  it  not  appearing 
that  there  was  any  stipulation  for  future  cohabitation,  even  though 
cohabitation  continues  after  the  execution  of  theT)ond,  the  onus  being 
upon  defendant  to  prove  the  immoral  consideration  in  such  case.^®  So, 
a  bond  for  cohabitation  with  a  woman  seduced  by  the  obligor  and  for 
maintenance  after  his  death  is  illegal  and  void  in  law,  where  it  is  the 
price  of  prostitution,  prwmium  prostitutionis,  especially  where  by  the 
condition  in  the  bond  if  she  became  virtuous  she  was  to  lose  the  an- 
nuity.^°  Again,  where  a  statute  forbids  a  person  having  a  wife  or 
lawful  children  from  giving  a  woman  with  wliom  he  lives  in  adultery, 
or  to  his  bastard  children,  more  than  one-fourth  the  clear  value  of  his 
estate,  either  by  deed  or  will,  "or  by  any  other  ways  or  means  what- 
soever," a  promissory  note  is  within  such  proviso,  and  when  given  to 
such  paramour  can  only  be  recovered  to  that  amount  in  case  the  statute 
is  applicable.    And  where  the  jury  were  instructed  that  if  the  consid- 

Weisiger,  3  T. 


"*  Winebrinner  v. 
B.  Men.  (19  Ky.)  33. 

"Contracts  made  in  furtherance  of 
immorality,  or  designed  to  facili- 
tate and  continue  an  immoral  course 
of  life,  are  illegal  and  void  at  com- 
mon law;  as  where  rooms  are  let 
for  the  purpose  of  prostitution,  or 
notes  or  bonds  are  given  to  secure 
the  continuance  of  an  illicit  inter- 
course. But  where  there  is  an  ex- 
isting obligation,  either  legal  or 
moral,  arising  out  of  past  illicit  in- 
tercourse, to  recompense  the  injured 
party,  it  is  held  that  a  bond  or 
other  specialty  executed  for  that 
purpose  alone  is  a  valid  instru- 
ment." Edwards  on  Bills  &  Prom. 
Notes  (2d  ed.)   321. 

"A  bond  given  in  consideration 
of  future  illicit  cohabitation  is  void. 


but  not  so  if  given  for  past  cohabi- 
tation, nor  is  it  void  if  given  to 
support  a  putative  child;  but  a  bill 
or  note  as  between  immediate  par- 
ties would  not  be  enforced  if  given 
for  past  cohabitation  because  not 
founded  upon  a  consideration." 
Daniel  on  Neg.  Inst.  (5th  ed.),  §  195. 

=«  Potter  &  Son  v.  Grade,  58  Ala. 
303,  29  Am.  Rep.  748. 

Future  illicit  intercourse  as  con- 
sideration makes  contract  void. 
Walker  v.  Gregory,  36  Ala.  180. 

A  promissory  note  based  on  past 
cohabitation  is  not  supported  by  a 
sufficient  consideration.  Singleton 
V.  Bremar,  1  Harp.  (S.  C.)  201,  dis- 
tinguishing between  notes  and 
bonds  or  deeds. 

'-^  Brown  v.  Kinsey,  81  N.  C.  245. 

«"  Walker  v.  Perkins,  3  Burr.  1568. 


383  ILLEGAL   OR   IMMORAL   CONSIDERATION.  [§    301 

eration  thereof  was  solely  for  past  cohabitation  they  should  find  for 
the  plaintiff  to  the  full  amount  thereof,  and  if  for  future  cohabitation 
then  they  should  find  for  the  defendant,  and  they  found  for  the  latter, 
the  Judgment  was  affirmed.''^  And  where  a  married  man  living  with 
his  wife  cohabited  for  several  years  with  another  woman  who  knew 
he  was  married,  and  upon  ceasing  to  cohabit  with  her  he  gave  her  a 
bond  to  secure  an  annuity  to  her  for  life  and  the  payment  of  a  sum 
of  money  to  provide  for  her  children  borne  to  him  by  her  during  co- 
habitation, an  action  at  law  was  sustained.  Upon  such  bond  Bayley,  J., 
said :  "It  is  clearly  established  that  a  bond  given  to  a  single  woman  by 
a  single  man,  as  a  prcemium  pudicitiae,  at  the  time  he  determines  the 
illicit  connection  is  valid  between  the  parties  *  *  *  j^  having 
been  once  established  that  a  bond  given  to  secure  a  provision  to  a  wom- 
an who  has  lived  with  a  man  in  a  state  of  fornication  is  valid,  my  pres- 
ent impression  is  that  we  ought  not  to  hold  that  a  bond  given  to  a  wom- 
an who  has  lived  with  a  man  in  a  state  of  adultery  is  void,  because  in 
one  case  the  woman  has  been  guilty  of  a  greater  degree  of  immorality 
than  in  the  other."^^  gg^  j^  ^^  action  on  an  annuity  bond,  given  by 
a  man  to  a  woman  with  whom  he  cohabits,  it  is  for  the  jury  to  deter- 
mine whether  at  the  time  it  was  given  there  was  or  was  not  an  inten- 
tion and  agreement  to  continue  the  connection  in  future,  for  if  such 
intention  existed  the  bond  was  given  in  furtherance  thereof,  and  no 
recovery  can  be  had  thereon,"^ 

§  301.  Same  subject — Decisions  continued. — "^Tiere  a  note  is  given 
after  seduction  and  as  a  compensation  for  the  injury  caused  thereby, 
and  not  in  settlement  of  a  criminal  prosecution,  the  consideration  is 
valid  independently  of  the  compromise  of  the  suit.*'*  Again,  a  prom- 
issory note  given  in  compromise  of  bastardy  proceedings  is  valid  and 
of  sufficient  consideration  for  a  recovery  at  law,  even  though  the  off- 
spring comes  into  the  world  stillborn  after  a  compromise  has  been 
effected ;«'  and  so  even  though  the  child  lived  but  a  few  days  after 
birth.««    And  in  another  similar  case  it  is  held  that  where  the  law  au- 

•>•  Massey  v.  Wallace,  32  S.  C.  149,  "  Friend  v.  Harrison,  2  Carr.  &  P. 

10  S.  E.  937.  584,  12  Eng.  C.  Law  276. 

"Nye  v.   Moseley,   6   Barn.  &  Cr.  "Smith  v.  Richards,  29  Conn.  232. 

133.     See  People  v.  Hayes,  70  Hun  See  Shenk  v.  Mingle,  13  Serg.  &  R. 

(N.  Y.)    Ill,   54   N.   Y.   St.   R.    184;  (Pa.)   29. 

aff'd,  140  N.  Y.  484,  35  N.  E.  95,  37  '^  Merritt  v.  Flemming,  42  Ala.  234 

Am.    St.   Rep.   573,   23   L.   R.   A.   83.  (action  by  payee  against  maker). 

Examine    Gray   v.    Mathias,    5    Ves.  ^  Maxwell  v.  Campbell,  8  Ohio  St. 

Jr.  286,  294.  265. 


§    301]  ILLEGAL   OR   IMMORAL   COXSIDEEATIOK.  384 

thorizes  no  one  but  the  mother  of  a  bastard  to  institute  a  prosecution 
against  the  putative  father,  she  may  or  may  not,  at  her  option,  com- 
rnence  such  prosecution.  So  that  a  note  given  by  the  father  of  the 
bastard  in  consideration  of  her  promise  not  to  commence  such  a  suit 
is  valid  and  collectible,  and  the  death  of  the  child  in  such  a  case  can- 
not in  any  degree  affect  the  consideration  of  the  note,  as  such  a  note 
is  given  not  to  secure  a  maintenance  of  the  child,  but  to  avoid  a  prose- 
cution for  bastardy.®^  If  a  promissory  note  recites  two  considerations 
for  promise  therein  contained,  and  either  of  them  is  inconsistent  with 
law,  morality  or  public  policy,  it  is  held  that  the  whole  contract  is 
vicious  and  void;  yet  a  promissory  note  for  past  cohabitation,  or 
based  upon  the  obligation  to  support  defendant's  bastard  child,  is  legal 
and  valid  even  though  the  mother  agrees  not  to  prosecute  the  defend- 
ant under  the  statute.®^  In  an  English  case  it  is  held  that  where  the 
statute  only  authorizes  the  parish  officers  to  take  security  from  the 
putative  father  of  a  bastard  to  indemnify  the  parish,  and  they  take  a 
promissory  note  absolute  for  a  sum  certain,  and  there  is  a  tender  of 
a  lesser  sum  as  the  amount  of  the  charge  actually  sustained  by  the 
parish,  no  further  recovery  can  be  had.  The  security  being  given  for 
indemnity  excludes  every  other  consideration.  The  parish  officers  are 
not  to  speculate,  but  to  take  the  security  as  a  matter  of  public  duty  in 
the  form  prescribed  in  the  statute.  Lord  Ellenbourgh  said :  "I  am  of 
opinion  that  the  plaintiffs  are  not  entitled  to  recover  beyond  the  sum 
paid  into  court,  whether  considering  the  contract  as  void  upon  prin- 
ciples of  public  policy,  or  considering  it  with  relation  to  the  individ- 
uals with  whom  it  was  made,  as  a  contract  for  gain  or  loss  by  persons 
clothed  with  a  public  trust  upon  the  subject-matter  of  their  trust,  and 
giving  them  an  interest  in  the  mal-execution  of  it."®^  Again,  where 
a  lodging  under  a  weekly  tenancy  was  not  originally  let  for  the  pur- 
poses of  prostitution,  but  it  was  subsequently  so  used  with  the  plain- 
tiff's knowledge  recovery  was  denied  for  such  subsequent  rental.'^"  But 
where  plaintiff  was  employed  to  wash  clothes  for  defendant,  who  was  a 
prostitute,  knowing  her  to  be  such,  it  was  decided  that  the  use  to  which 
the  clothes  might  be  applied  could  not  bar  a  recovery  in  an  action  for 
work  and  labor.''^ 

"Harter  v.  Johnson,  16  Ind.  271.  Examine   Hoit  v.   Cooper,  41  N.   H. 

^  Burgen    v.    Straughan,    7    J.    J.  111. 

Marsh.     (30    Ky.)     584.      See    also  '"Jennings     v.     Throgmorton,     21 

Hays  V.   McFarlan,   32    Ga.    699,    79  Eng.  C.  Law  744. 

Am.    Dec.    317;    Jackson    v.    Finney  "Lloyd   v.    Johnson,   1   Bos.   &   P. 

and  Riley,  33  Ga.  512.  340. 

"Cole  v.  Garver,  6  East.  109,  110. 


CHAPTER  XIII. 


USURY. 


Sec. 

302.  Usury — Generally. 

303.  Bona  fide  holders — Paper  based 

on  usurious  contract  between 
original  parties. 


Sec. 

304.  Maker     and     transferee  —  Dis- 

count and  transfer. 

305.  Renewal    bill    or    note — Exten- 

sions. 

306.  Corporations. 


§  302.  Usury — Generally. — The  general  rule  that  contracts  to  pay 
usurious  interest  are  void  and  unenforceable,  or  at  least  voidable  at 
the  option  of  the  borrower  or  those  in  privity  with  him,  since  that 
which  the  statute  declares  unlawful  and  void  can  have  no  validity  to 
the  extent  specified,^  applies  to  an  action  by  a  nayee  on  a  note  tainted 


^  Arkansas. — Sapp  v.  Cobb,  60  Ark. 
367,  30  S.  W.  349. 

Florida. — Maxwell  v.  Jacksonville 
Loan  &  Imp.  Co.,  45  Fla.  425,  468,  34 
So.  255;  Lyle  v.  Winn,  45  Fla.  419, 
34  So.  158. 

Georgia. — Howell  v.  Pennington, 
118  Ga.  494,  45  S.  E.  272. 

Kentucky. — Guenther  v.  Wisdom, 
27  Ky.  L.  Rep.  230,  84  S.  W.  771. 

Michigan. — George  N.  Fletcher  & 
Sons  v.  Alpena  Cir.  Judge,  136  Mich. 
511,  99  N.  W.  748,  11  Det.  Leg.  N. 
105. 

Missouri. — Missouri  Real  Estate 
Syndicate  v.  Sims,  179  Mo.  679,  78 
S.  W.  1006;  Vette  v.  Geist,  155  Mo. 
27,  55  S.  W.  871;  Osborn  v.  Payne, 
111  Mo.  App.  29,  85  S.  W.  667;  Cow- 
gill  V.  Jones,  99  Mo.  App.  390,  73 
S.  W.  995. 

Nebraska. — Hare  v.  Hooper,  56 
Neb.  480,  76  N.  W.  1055. 


New  Jersey. — Clarke  v.  Day  (N. 
J.),  60  Atl.  39. 

Neio  York. — Union  Credit  &  In- 
vestment Co.  V.  Union  Stockyard  & 
Market  Co.,  92  N.  Y.  Supp.  269; 
Reich  V.  Cochran,  85  N.  Y.  Supp. 
247,  41  Misc.  621. 

North  Carolina. — Erwin  v.  Morris 
(N.  C),  40  S.  E.  53;  Churchill  v. 
Turnage,  122  N.  C.  426,  30  S.  E.  122, 

Oklaho  m  a. — Metz  v.  W  i  n  n  e 
(Okla.),  79  Pac.  223. 

West  Virginia. — Lorentz  v.  Pin- 
nell,  55  W.  Va.  114,  46  S.  E.  796.  Ex- 
amine Matz  v.  Avick,  76  Conn.  388, 
56  Atl.  630. 

If  one  is  financially  embarrassed 
and  he  employs  another  to  assist 
him,  and  the  value  of  his  services  is 
afterward  agreed  upon  and  paid  by 
a  promissory  note  it  is  not  usury. 
Noyes  v.  Landon,  59  Vt.  569,  10  Atl. 
342. 


Joyce  Defenses — 25. 


385 


302] 


USURY. 


386 


with  usury  and  such  a  defense  is  good  as  to  him,-  and  a  scheme  or  de- 
vice to  evade  the  usury  laws  brings  the  note  within  the  rule.^  Such  a 
defense  extends  not  only  to  parties  but  to  privies  ;*  and  where  one  seek- 
ing relief  was  neither  a  party  nor  privy  it  was  refused.^  But  such  de- 
fense, it  is  declared,  is  available  against  personal  representatives.®  It 
is,  however,  so  it  is  determined,  a  personal  defense  limited  to  immedi- 
ate parties  or  the  debtor,'^  and  a  purchaser  of  mortgaged  property  can- 


*  Georgia. — Howell  v.  Pennington, 
118  Ga.  494,  45  S.  E.  272;  Angler 
V.  Smith,  101  Ga.  844,  28  S.  E.  167. 

Illinois. — Armour  v.  Moore,  5  111. 
App.  433. 

Iowa. — Pardoe  v.  State  Nat.  Bk., 
106  Iowa  345,  76  N.  W.  800. 

Minnesota. — Johnson  v.  Joyce,  90 
Minn.  377,  97  N.  W.  113. 

Missouri. — Citizens'  Nat.  Bk.  v. 
Donnell,  172  Mo.  384,  72  S.  W.  925, 
aff'd  195  U.  S.  369,  49  L.  Ed.  238,  25 
Sup.  Ct.  49. 

Nebraska. — Allen  v.  Dunn  (Neh.), 
99  N.  W.  680. 

New  York. — Strickland  v.  Henry, 
66  N.  Y.  App.  Div.  23,  73  N.  Y.  Supp. 
12;  Dunham  v.  Day,  13  Johns.  (N. 
Y.)  40;  Ketchum  v.  Barber,  4  Hill 
(N.  Y.)  224,  234. 

Texas. — Webb  v.  Galveston  &  H. 
Inv.  Co.  (Tex.  Civ.  App.),  75  S.  W. 
355. 

United  States. — McLean  v.  Lafay- 
ette Bank,  2  McLean  (U.  S.)  587. 
Examine  Scott  v.  Kennedy,  201  Pa. 
462,  51  Atl.  384;  Peterson  v.  Berry, 
125  Fed.  902,  60  C.  C.  A.  610. 

=  Missouri  K.  &  T.  Trust  Co.  v. 
Krumseig,  172  U.  S.  351,  19  Sup. 
Ct.  179,  43  L.  Ed.  474,  aff'g  23  U.  S. 
C.  C.  A.  1,  40  U.  S.  App.  620,  77  Fed. 
32,  which  affirmed  71  Fed.  350. 

*Laux  V.  Gildersleeve,  23  N.  Y. 
App.  Div.  352,  48  N.  Y.  Supp.  301. 
See  Crawford  v.  Nimmons,  180  111. 
143,  54  N.  E.  209,  rev'g  80  111.  App. 
543.  Examine  generally  Ford  v. 
Washington  Building  &c.  Asso.,  10 
Idaho  30,  76  Pac.  1010. 


''Vette  V.  Geist,  155  Mo.  27,  55  S. 
W.  871.  See  generally  Missouri 
Real  Estate  Syndicate  v.  Sims,  179 
Mo.  679,  78  S.  W.  1006. 

» Fox  V.  Whitney,  16  Mass.  118. 

''Alabama. — Stickney  v.  Moore,  108 
Ala.  590,  19  So.  76;  Cain  v.  Gimon, 
36  Ala.  168. 

Connecticut. — Loomis  v.  Eaton,  32 
Conn.  550. 

Idaho. — Anderson  v.  Oregon  Mortg. 
Co.,  8  Idaho  418,  69  Pac.  130. 

Illinois. — Crawford  v.  Nimmons, 
180  111.  143,  54  N.  E.  209,  rev'g  80 
111.  App.  543. 

loiva. — Conger  v.  Babbet,  67  Iowa 
13,  24  N.  W.  569. 

New  Hampshire. — Savage  v.  Fox, 
60  N.  H.  17. 

New  York. — Bullard  v.  Raynor,  30 
N.  Y.  197. 

North  Carolina. — Faison  v.  Grandy 
(N.  C.  1901),  38  S.  E.  897. 

South  Carolina. — Zeigler  v.  Maner, 
53  S.  C.  115,  30  S.  E.  129. 

West  Virginia. — Smith  v.  McMil- 
lan, 46  W.  Va.  577,  33  S.  E.  283.  But 
see  Prather  v.  Smith,  101  Ga.  283, 
28  S.  E.  85;  Akers  v.  Demond,  103 
Mass.  318. 

Examine  generally  Bacon  v.  Iowa 
Savings  &  Loan  Ass'n,  121  Iowa  449, 
96  N.  W.  977;  People's  Building  & 
Loan  Ass'n  v.  Pickard  (Neb.),  96  N. 
W.  337;  People's  Building  &  Loan 
Ass'n  V.  Palmer  (Neb.),  89  N.  W. 
316;  Bird  v.  Kendall,  62  S.  C.  178. 
40  S.  E.  142;  Harper  v.  Middle 
States  Loan.  Building  &  Construc- 
tion Co.,  55  W.  Va.  149,  46  S.  E.  817. 


387 


USURY    GENERALLY. 


[§  30; 


not  avail  himself  of  the  defense  f  nor  as  against  an  indorser  can  usury 
between  maker  and  payee  be  set  up;"  nor,  as  against  the  payee,  is 
usury  between  the  payee  and  acceptor  of  a  bill  a  defense  ;^"  althougli  it 
is  held  that  usury  on  the  part  of  the  maker  is  available  in  behalf  of  an 
accommodation  indorser,"  or  of  an  acceptor  of  a  bill  in  an  action  by 
the  holder.^^  But  as  against  a  surety  an  usurious  contract  between  the 
principal  and  holder  of  a  note  constitutes  no  defense,^^  although  if 
collateral  has  been  pledged  by  a  surety  for  payment  he  may  set  up  this 
defense;^*  although  where  tlie  principal  has  obtained  an  extension  by 
an  usurious  contract  the  surety  is  entitled  to  the  benefit  of  the  pay- 
ments made/^  but  an  indorser  has  been  denied  such  a  defense,^*' 
though  it  has  been  held  available  to  a  surety  against  one  who  pur- 
chases the  paper  after  maturity."  But  in  construing  the  language 
used  the  words  will  not  be  strained  to  sustain  such  a  defense/^  Again, 
where  a  usurious  loan  has  been  obtained  by  a  pledge  of  notes  fraudu- 
lently obtained  the  owner  may  set  up  the  defense  of  usury  under  a 
statute  making  a  pledge  based  on  usury  illegal  and  void.^**  So,  a  mort- 
gage given  to  secure  a  usurious  note  will,  so  it  is  decided,  be  likewise 


I 


Receivers  may  set  up  defense. 
Short  V.  Post,  58  N.  J.  Eq.  130,  42 
Atl.  569. 

*Town  of  Reading  v.  Town  of 
Weston,  7  Conn.  409;  Read  v.  East- 
man, 50  Vt.  67. 

"Challis  V.  McCrum,  22  Kan.  157; 
McKnight  v.  Wheeler,  6  Hill  (N.  Y.) 
492;  Ely  v.  Bank,  79  Pa.  St.  453. 

'"Woolfolk  V.  Plant,  46  Ga.  422. 

"  Newport  Nat.  Bank  v.  Tweed,  4 
Houst.  (Del.)  225;  Nat.  Bank  of 
Auburn  v.  Lewis,  75  N.  Y.  516  [re- 
versing 10  Hun    (N.  Y.)    468]. 

'=  Jackson  v.  Fassit,  33  Barb.   (N. 
Y.)   645,  21  How.  Prac.   (N.  Y.)  279, 
12  Abb.  Prac.  (N.  Y.)  281. 
111.  123. 

"  Illinois. — Sanner  v.  Smith,  89 
111.  123. 

Kansas. — Jenness  v.  Cutler,  12 
Kan.  500. 

Kentucky. — Burks  v.  Wonterline, 
6  Bush  (Ky.)   20. 

Mississippi. — Brown  v.  Prophit,  53 
Miss.  649. 


New  Hampshire. — Cole  v.  Hills,  44 
N.  H.  227. 

Ohio. — First  Nat.  Bank  of  Colum- 
bus V.  Garlinghouse,  22  Ohio  St.  492; 
Selser  v.  Brock,  3  Ohio  St.  302. 

Vermont. — Lamoille  County  Nat. 
Bank  v.  Bingham,  50  Vt.  105;  Davis 
V.  Converse,  35  Vt.  503;  Ward  v. 
Whitney,  32  Vt.  89. 

"Buquo  V.  Bank  of  Erin  (Tenn.), 
52  S.  W.  775. 

"  Lemmon  v.  Whitman,  75  Ind. 
318. 

•"Stewart  v.  Bramhall,  74  N.  Y. 
85  [affirming  11  Hun  (N.  Y.)  139]; 
Union  Nat.  Bank  v.  Wheeler,  60  N. 
Y.  612. 

"  Maher  v.  Lanfrom,  86  111.  513. 

^^  Hamilton  v.  Le  Grange,  2  H.  Bl. 
144. 

'"Keim  v.  Vette,  167  Mo.  389,  67 
S.  W.  223.  Examine  Chambers  v. 
Gilbert,  68  Minn.  183,  70  N.  W.  1077. 
See  generally  Osborn  v.  Payne,  111 
Mo.  App.  29,  85  S.  W.  667. 


§  302]  USURY.  •         388 

affected,-"  and  so  discharge  the  mortgagor  from  paying  interest  in  cer- 
tain cases.- ^  So,  the  defense  of  usury  is  open  to  a  trustee  who  has 
mortgaged  the  trust  estate.^^  But  the  fact  that  a  larger  per  cent  has 
heen  charged  than  the  usual  time  prices  does  not  make  usurious  a  bond 
and  mortgage  given  for  personalty  purchased  f^  and  in  case  of  a  junior 
mortgagee,  the  debtor  being  insolvent,  it  is  held  that  the  former  can- 
not avail  himself  of  the  defense  of  usury  against  a  prior  incum- 
Ijrancer.-*  So  an  agreement,  based  upon  usurious  interest,  to  extend 
the  time  for  payment  does  not  taint  with  usury  the  original  note  and 
mortgage  which  were  not  so  tainted  ;^^  nor  does  the  receiving,*  after 
maturity,  usurious  interest  invalidate  a  note  and  mortgage  not  other- 
wise tainted  with  usury  f^  for  receiving  such  usurious  interest  on  a 
note  after  it  becomes  due  does  not  constitute  usury,  such  note  not  being 
originally  tainted  with  usury.^'^  So,  a  note  for  prior  advances  and  a 
mortgage  for  future  advances  will  be  valid  as  to  such  of  the  secured 
debts  as  are  not  usurious.-®  Again,  the  validity  of  a  note  is  not  de- 
stroyed by  the  taking  of  a  separate  note  under  a  usurious  contract.^" 
If  an  agent  is  authorized  to  make  a  loan  to  a  person  and  is  entrusted 
with  a  certain  sum  of  money  for  that  purpose,  and  he  violates  the 
usury  laws,  the  principal  is  responsible  for  such  unlawful  exactions  by 
his  agent,  and  cannot  maintain  that  the  contract  was  not  usurious.^" 

=»J«inois.— Kleeman  v.  Frisbie,  63  =' Churchill  v.  Turnage,  122  N.  C. 

111.  482.  426,  30  S.  E.  122. 

Nebraska. — Farm    Land    Security  -*  Stickney  v.  Moore,  108  Ala.  590, 

Co.  v.  Nelson,  52  Neb.  624,  72  N.  W.  19  So.  76. 

1048.  -^  Morse  v.  Welcome,  68  Minn.  210, 

North   Carolina.— Beard   v.    Bing-  70  N.  W.  978. 

ham,  76  N.  C.  285.  -"  McEwin     v.     Humphrey      (Ind. 

Sotith  Carolina. — Erhardt  v.  Yarn,  Ty.),  45  S.  W.  114. 

51  S.  C.  550,  29  S.  B.  225.  ='  Dell  v.  Oppenheimer,  9  Neb.  454, 

Federal. — Krumbieg    v.    Missouri,  4  N.  W.   51;    Mahler  v.  Merchants' 

K.  &  T.  Trust  Co.,  71  Fed.  350.    See  Nat.  Bk.,  65  Minn.  37,  67  N.  W,  655. 

Bouker  v.  Galligan    (N.  J.  Eq.),  57  =«  Atkinson   v.  Burt,  65   Ark.   316, 

Atl.  1010.    Examine  Kellogg,  In  re,  45  S.  W.  987. 

113  Fed.   120;    Sherwood  v.   Haney,  ="  Cooper  v.  Tappan,  4  Wis.  362. 

63  Ark.  249,  38  S.  W.  15;   Elder  v.  '"Robinson  v.  Sims,  85  Minn.  242, 

Elder,   119   Ga.    174,    45    S.   E.    990;  88  N.  W.  845.     See  Short  v.  Pullen, 

Burdette   v.   Robinson,   97   Ga.   612,  63  Ark  385,  38  S.  W.  1113;  Beach  v. 

25  S.  E.  349.  Lattner,  101  Ga.  357,  28  S.  E.  110; 

=^May  V.  Folsom,  113  Ala.  198,  20  Ridgway    v.    Davenport,    37    Wash. 

So.  984.     Examine  Wallace  v.  Good-  134,  79  Pac.  606.     Compare  Whaley 

lett,  104  Tenn.  670.  58  S.  W.  343.  v.    American    Freehold    Land    Mort- 

"Wagnor  v.   Pease,    104   Ga.    417,  gage  Co.,  74  Fed.  73,  20  C.  C.  A.  306, 

30  S.  E.  895.  42  U.  S.  App.  90. 


I 


389 


USURY   GENERALLY. 


[§    302 


So  a  principal  may  be  bound  by  notice  to  his  agent  that  a  note  pur- 
chased by  the  latter  is  tainted  with  usury.^^.  But  a  mortgage  note  may 
provide  for  a  greater  than  a  legal  rate  of  interest  after  its  maturity.^- 
The  question  of  the  availability  of  the  defense  of  usury  in  actions  on 
bills,  notes,  etc.,  is  so  largely  a  matter  of  statutory  regulation  in  dif- 
ferent jurisdictions,  and  is  so  largely  dependent  thereupon  that  re- 
course must  be  had  to  those  statutes  to  determine  who  is  entitled 
and  who  not  to  make  such  a  defense,  and  the  relative  and  respective 
rights  of  the  parties.^^    It  may  be  stated,  however,  that  the  repeal 


"Haynes  v.  Gay,  37  Wash.  230, 
79  Pac.  794. 

'*Sloane  v.  Lucas  (Wash.),  79 
Pac.  949. 

"  Georgia. — Lanier  v.  Cox,  65  Ga. 
265  (Ga.  Acts  1875,  p.  105). 

Idaho. — Anderson  v.  Oregon,  8 
Idaho  418,  69  Pac.  130  (Idaho  Rev. 
St.  1887,  Sec.  1266). 

Illinois. — Carter  v.  Moses,  39  111. 
539  (111.  Acts  1845  &  1857);  Hemen- 
way  v.  Cropsey,  37  111.  357  (111.  Acts 
1849). 

Maine. — Tuxbury  v.  Abbott,  59  Me. 
466  (Me.  Rev.  St.  1857,  c.  45)  ;  Wing 
v,  Dunn,  24  Me.  128  (Me.  Rev.  St., 
c.  69,  Sec.  6). 

Massachusetts. — North  Bridge- 
water  Bank  v.  Copeland,  7  Allen 
JMass.)  139  (Mass.  St.  1863,  c. 
"242 );  Kendall  V.  Robertson,  12  Cush. 
(Mass.)  156  (Mass.  Rev.  St.,  c.  35, 
Sec.  2;  Mass.  Rev.  St.  1846,  c.  199). 

Michigan. — Coatsworth  v.  Barr,  11 
Mich.  199  (Mich.  Comp.  Laws,  Sec. 
1316). 

Mississippi. — Rozelle  v.  Dickerson, 
63  Miss.  538  (Miss.  Code  1880, 
§  1141). 

New  York. — Claflin  v.  Boorum,  122 
N.  Y.  385,  25  N.  E.  360  (4  N.  Y.  Rev. 
St.,  p.  2513,  §  5);  Aeby  v.  Rapelye, 
1  Hill  (N.  Y.)  9  (1  N.  Y.  Rev.  St., 
p.  772,  §  5). 

North  Carolina. — Ward  v.  Sugg, 
113  N.  C.  489,  18  S.  E.  717,  24  L.  R. 
A.  280  (N.  C.  Code,  §  3836). 


South  Carolina. — Gaillard  v.  Le 
Seigneur,  1  McMullan  (S.  C.)  225 
(S.  C.  Acts  1777  &  1831). 

Virginia. — Lynchburg  Nat.  Bank 
v.  Scott,  91  Va.  652,  22  S.  E.  487,  29 
L.  R.  A.  827  (Va.  Code  1887,  §  2818) ; 
Moffet  V.  Bickle,  21  Gratt.  (Va.)  280 
(Va.  Code,  ch.  177,  §  19,  p.  733). 

Upon  this  subject  of  the  effect  of 
statutory  provisions  and  the  rights 
of  parties  with  relation  to  defenses 
under  usurious  contracts  see  gen- 
erally the  following  cases: 

Alabama. — Turner  v.  Merchants' 
Bank,  126  Ala.  397,  28  So.  469  (Code' 

1886,  §  4140,  Discount  by  banks). 
Connecticut. — Matz    v.    Arick.    76 

Conn.  388,  56  Atl.  630  (Gen.  Stat. 
1902,  §  4599). 

Idaho. — First  Nat.  Bank  v.  Glenn, 
10  Idaho  224,  77  Pac.  623    (Rev.  St. 

1887,  §  425);  Finney  v.  Moore.  9 
Idaho  284,  74  Pac.  806  (Rev.  Stat. 
1887,  §  1266). 

Kentucky. — Tomlin  v.  Morris,  26 
Ky.  L.  Rep.  681  (Ky.  Stat.  1903, 
§  2219). 

Michigan. — Becker  v.  Headstein 
(Mich.),  100  N.  W.  752  (Comp.  Laws, 
§  4857);  Green  v.  Grant,  134  Mich. 
462,  96  N.  W.  583,  10  Det.  Leg.  N. 
546  (Comp.  Laws  1897,  §  4857). 

Minnesota. — Lee  v.  Melby,  93 
Minn.  4,  100  N.  W.  379  (Laws  1877, 
p.  52,  c.  15). 

Missouri. — Vette  v.  Geist.  155  Mo. 
27,  55  S.  W.  871  (Laws  1891,  p.  170) ; 


§  303]  USURY.  390 

of  a  statute  which  validates  an  usurious  note  does  not  make  the  note 
invalid  and  subject  to  the  defense  of  usury  ;^*  and  where  a  subsequent 
statute  reduces  the  rate  of  interest,  continuing  to  pay  the  former  legal 
rate  does  not  constitute  usury  f^  nor  does  the  enactment  of  a  statute 
with  reference  to  usury  make  it  retroactive  as  to  contracts  existing  at 
the  time  it  became  a  law,^**  Under  the  New  York  statute,  which 
makes  it  lawful  to  receive,  or  to  contract  to  receive  and  collect,  any 
sum  agreed  upon  in  writing  by  the  parties,  for  making  advances  of 
money  repayable  on  demand  to  an  amount  not  less  than  five  thousand 
dollars,  upon  bills  of  exchange  or  other  negotiable  instruments  as  col- 
lateral security  for  such  repayment,  it  is  held  that  such  excess  of  the 
legal  rate  of  interest  upon  loans  so  made  are  not  usurious  even  though 
orally  agreed  upon.^'^  Again,  actions  at  law  and  in  equity  are  within 
the  meaning  of  the  term  "action"  in  a  usury  statute.^^ 

§  303.  Bona  fide  holders — Paper  based  on  usurious  contract  be- 
tween original  parties. — Whether  paper  based  on  a  usurious  contract 
between  the  original  parties  is  or  is  not  subject  to  the  defense  of  usury 
as  against  a  bona  fide  holder  before  maturity,  without  notice,  and  for 
value,  is  a  question  upon  which  the  decisions  are  far  from  being  in 
harmony.    The  general  rule,  however,  seems  to  be  that  such  a  defense 

Davis,  McDonald  &  Davis  v.  Tandy,  ley,  55  S.  C.  132,  32  S.  E.  531,  33  S. 

107  Mo.  App.  437,  81  S.  W.  457  (Rev.  B.  1  (Rev.  Stat..  §  1390). 

Stat.  1899,  §  3710.  Washington.— Ridgway  v.    Daven- 

Nebraska.— Allen  v.  Dunn  (Neb.),  port,  37  Wash.  134,  79  Pac.  606    (1 

99    N.   W.   680    (Cobbey's   Ann.    St.  Ballinger's     Ann.      Codes     &      St., 

1903,  §  6725).  §  3669). 

New  York. — Samuel  Wilde's  Sons,  '*  First      Ecclesiastical      Soc.      v. 

In  re,  133  Fed.  562  (Laws  N.  Y.  1882,  Loomis,  42  Conn.  570. 

p.    290,    c.    237,   warehouse   receipts  '^  Mastin    v.    Cochran,    25    Ky.    L. 

clause).  Rep.  712,  76  S.  W.  343. 

North  Carolina. — Faison  v.  Grandy,  ^'  North      Bridgewater     Bank     v. 

186  N.  C.  827,  36  S.  B.  276    (Code,  Copeland,   7   Allen    (89    Mass.)    139. 

§  3635;  Acts  1895,  c.  69).  See  Hackley  v.   Sprague,  10  Wend. 

North  Dakota.— Waldner  v.   Bow-  (N.  Y.)   113. 

den  State  Bank  (N.  D.),  102  N.  W.  =^  Samuel  Wilde's  Sons,  In  re,  133 

169  (Rev.  Codes  1899,  §  4066).  Fed.  562;    Laws  N.  Y.  1882,  c.  237; 

Oklahoma. — Metz  v.  Winne  (Okla.),  2  Cumming  &  Gilbert's  Gen'l  Laws 

79  Pac.   223    (Wilson's  Rev.  &  Ann.  N.  Y.,  p.  1994. 

Stat.  1903,  §  848).  ^^  Coatsworth    v.    Barr,    11    Mich. 

South  Carolina. — Newton  v.  Wood-  199,  construing  Mich.   Comp.  Laws, 

§  1316. 


I 


f 


391 


BONA   FIDE   HOLDERS. 


[§   303 


is  not  available  against  such  holder  in  the  absence  of  a  statutory  pro- 
vision making  such  paper  absolutely  void.^^     In  several  jurisdictions, 


^'Alabama. — Orr  v.  Sparkman,  120 
Ala.  9,  23  So.  829. 
Arkansas. — Tucker  v.  Wilamouicz, 

8  Ark.  (3  Eng.)  157. 

Illinois. — Hemenway  v.  Cropsey, 
37  111.  358;  Sherman  v.  Blackman, 
24  111.  347;  Conkling  v.  Underhill,  3 
Scam.  (111.)  388. 

Indiana. — See  Harbaugh  v.  Tan- 
ner, 163  Ind.  574,  71  N.  E.  145. 

Iowa. — Dickerman  v.  Day,  31 
Iowa  444;  Brown  v.  Wilcox,  15 
Iowa  414. 

Kansas. — Gross  v.  Funk,  20  Kan. 
655. 

Kentucky. — Roby  v.  Sharp,  6  T.  B. 
Mon.  (Ky.)  375;  Owings  v.  Grimes, 
5  Litt.   (Ky.)  331. 

Maryland. — Gwynn  v.  Lee,  9  Gill 
(Md.)  137;  Burt  v.  Gwinn,  4  Har.  & 
J.   (Md.)  507. 

Massachusetts. — Towne  v.  Rice, 
122  Mass.  67;  Ayer  v.  Tilden,  15 
Gray  (Mass.)  178. 

Minnesota. — Robinson  v.  Smith,  62 
Minn.  62,  64  N.  W.  90;  First  Nat. 
Bank  v.  Bentley,  27  Minn.  87,  6  N. 
W.  422. 

Nebraska. — Cheney  v.  Janssen,  20 
Neb.  128,  29  N.  W,  289;  Sedgwick 
V.  Dixon,  18  Neb.  545,  26  N.  W.  247; 
Darst  v.  Backus,  18  Neb.  231,  24 
N.  W.  681;  Evans  v.  De  Roe,  15  Neb. 
630,  20  N.  W.  99;  Cheney  v.  Cooper, 
14  Neb.  415,  16  N.  W.  471;  State 
Sav.  Bank  v.  Scott,  10  Neb.  83,  4 
N.  W.  314;   Wortendyke  v.  Meehan, 

9  Neb.  221,  2  N.  W.  339.  See  Bovier 
V.  McCarthy,  4  Neb.  (unofficial) 
490,  94  N.  W.  965. 

New  Hampshire. — Young  v.  Berke- 
ley, 2  N.  H.  410. 

Neto  York. — Long  Island  Bank 
V.  Boynton,  105  N.  Y.  656,  11  N.  E. 
837;   Chatham  Bank  v.  Betts,  37  N. 


Y.  356,  affirming  9  Bosw.  (N.  Y.) 
552,  23  How.  Prac.  (N.  Y.)  476; 
Farmers'  &  Merchants'  Bank  of  Gen- 
esee v.  Parker,  37  N.  Y.  148;  Kitchel 
V.  Schenk,  29  N.  Y.  515;  Bank  v. 
Flanigan,  39  Leg.  Int.  (N.  Y.)  264; 
Hackley  v.  Sprague,  10  Wend.  (N. 
Y.)  113;  Munn  v.  Commission  Co., 
15  Johns.  (N.  Y.)  44,  8  Am.  Dec. 
219;  Odell  v.  Greenly,  4  Duer  (N. 
Y.)  358.  See  McWhirter  v.  Long- 
street,  81  N.  Y.  Supp.  334,  39  Misc. 
331. 

North  Carolina. — Coor  v.  Spicer, 
65  N.  C.  401. 

Pennsylvania. — Bly  v.  Second  Nat. 
Bank,  79  Pa.  St.  (29  P.  F.  Smith) 
453;  Creed  v.  Stevens,  4  Whart. 
(Pa.)   223. 

South  Carolina. — Foltz  v.  Mey,  1 
Bay  (S.  C.)  486. 

Tennessee. — Bradshaw  v.  Van  Val- 
kenburg,  97  Tenn.  316,  37  S.  W.  88. 

Virginia. — Lynchburg  Nat.  Bank 
V.  Scott,  91  Va.  652,  22  S.  E.  487. 

United  States. — Tilden  v.  Blair, 
21  Wall.  (U.  S.)  241,  22  C.  Ed.  632; 
Palmer  v.  Call,  2  McCrary  (U.  S. 
C.  C.)  522.  See  Fleckner  v.  United 
States  Bank,  8  Wheat.    (U.  S.)   339. 

Examine  Wilson  v.  Knight,  59  Ala. 
172;  Saylor  v.  Daniels,  37  111.  339; 
Robinson  v.  Smith,  62  Minn.  62,  64 
N.  W.  90;  Holmes  v.  Bank,  53  Minn. 
350,  55  N.  W.  555;  Mason  v.  An- 
thony, 42  N.  Y.  (3  Keyes)  609,  35 
How.  Pr.  477,  3  Abb.  Dec.  207; 
Holmes  v.  Williams,  10  Paige  (N. 
Y.)  326;  Ramsey  v.  Clark,  4  Humph. 
(Tenn.)  244;  Fant  v.  Miller,  17 
Gratt.  (Va.)  77;  Otto  v.  Surgee,  14 
Wis.  571. 

Action  against  payee  as  indorser 
by  bona  fide  holder,  the  originally 
usurious    contract    is   not   available 


303] 


USURY. 


392 


liowever,  such  a  defense  is  good  against  a  bona  fide  holder*"  where  such 
an  instrument  is  expressly  declared  void  by  statute,*^  although  the  term 
"unlawful"  in  a  statute  is  held  not  to  have  such  an  effect.*^  Again, 
although  there  has  been  a  waiver  of  all  defenses  as  against  a  ho7ia  fide 
holder,  the  statutory  defense  of  usurious  contract  may  be  sustained,*^ 
and  knowledge  or  notice  of  this  statutory  infirmity  in  the  paper  pre- 
cludes recovery.** 


as  a  defense.  McKnight  v.  Wheeler, 
6  Hill  (N.  Y.)  492. 

Usurious  contract  between  inter- 
mediate holders  of  paper  transferred 
before  maturity  can  not  be  set  up 
against  indorsee  without  notice. 
King  V.  Johnson,  3  McCord  (S.  C.) 
365. 

^"Alabama. — Orr  v.  Sparkman,  120 
Ala.  9,  .23  So.  829;  Pearson  v.  Bai- 
ley, 23  Ala.  537. 

Connecticut. — Townsend  v.  Bush, 
1  Conn.  260. 

Georgia. — Walton  Guano  Co.  v. 
Copeland,  112  Ga.  319,  37  S.  E.  411; 
Clarke  v.  Havard,  111  Ga.  242,  36 
S.  E.  837;  Angler  v.  Smith,  101  Ga. 
844,  28  S.  E.  167;  Laramore  v.  Bank, 
69  Ga.  722. 

Iowa. — Bacon  v.  Lee,  4  Iowa 
(Clarke  Rept.)  490. 

Kentucky. — True  v.  Triplett,  4 
Mete.  (Ky.)  57;  Early  v.  McCart,  2 
Dana   (Ky.)   414. 

Maryland. — Cockey  v.  Forrest,  3 
Gill  &  J.  (Md.)  482;  Burt  v.  Gwinn, 
4  Har.  &  J.  (Md.)  507. 

Massachusetts. — Whitten  v.  Hay- 
den,  7  Allen  (Mass.)  407;  North 
Bridgewater  Bank  v.  Copeland,  7 
Allen  (Mass.)  139;  Sylvester  v. 
Swan,  5  Allen  (Mass.)  134;  Knapp 
v.  Briggs,  2  Allen  (Mass.)  551. 

Islew  York. — Union  Bank  of  Roch- 
ester V.  Gilbert,  83  Hun  (N.  Y.) 
417,  31  N.  Y.  Supp.  945;  Clark  v. 
Loomis,  5  Duer  (N.  Y.)  468;  Clark 
V.  Sisson,  4  Duer  (N.  Y.)  408;  Pow- 
ell v.  Waters,  8  Cow.  (N.  Y.)  669. 


North  Carolina. — Faison  v.  Grandy, 
128  N.  C.  438,  38  S.  E.  897. 

United  States. — Hamilton  v.  Fow- 
ler, 99  Fed.  18. 

England. — Young  v.  Wright,  1 
Camp.  139.  Examine  further,  Ro- 
decker  v.  Littauer,  8  C.  C.  A.  320, 
59  Fed.  857;  Aeby  v.  Rapelye,  1 
Hill  (N.  Y.)  9;  Lynchburg  v.  Nor- 
vell,  20  Gratt.  (Va.)  601;  Ackland 
v.  Pearce,  2  Camp.  599;  Lowe  v.  Wal- 
ler, 2  Doug.  736;  Lowes  v.  Mazzare- 
do,  1  Starkie  385;  Chapman  v. 
Black,  2  Barn.  &  Aid.  590;  Hender- 
son V.  Benson,  8  Price  288. 

^'^  Alabama. — Pearson  v.  Bailey,  23 
Ala.  537;  Paris  v.  King,  1  Stew. 
(Ala.)  255. 

Kentucky. — True  v.  Triplett,  4 
Mete.  (Ky.)  57. 

Massachusetts. — Bridge  v.  Hub- 
bard, 15  Mass.  96,  8  Am.  Dec.  86. 

Neio  York. — Claflin  v.  Boorum,  122 
N.  Y.  385,  25  N.  E.  360. 

South  Carolina. — Solomons  v. 
Jones,  3  Brev.  (S.  C.)  54,  5  Am.  Dec. 
538;  Payne  v.  Trezevant,  2  Bay  (S. 
C.)  23. 

United  States. — Kellogg.  In  re,  113 
Fed.  120  (under  laws  of  New  York) ; 
Rodecker  v.  Littauer,  59  Fed.  857,  8 
C.  C.  A.  320. 

*^  Pickaway  Co.  Bank  v.  Prather, 
12  Ohio  St.  497.  See  Ewell  v. 
Daggs,  108  U.  S.  143. 

"Union  Nat.  Bank  v.  Fraser,  63 
Miss.  231. 

"Torrey  v.  Grant,  10  Smedes  & 
M.   (Miss.)   89;   Berry  v.  Thompson, 


393 


DISCOUNT   AND   TRANSFER — RENEWAL    NOTE.  [§§    304,    305 


§  304.  Maker  and  transferee — Discount  and  transfer. — In  a  suit 
by  the  transferee  against  the  maker  it  constitutes  no  defense  that  the 
paper  was  indorsed  and  discounted  under  a  usurious  contract  at  an  un- 
lawful rate  of  interest.*^  But  it  seems,  under  a  comparatively  recent 
decision,  that  such  a  rule  would  not  apply  to  a  bill  or  note  which  had 
its  inception  only  at  the  time  of  being  discounted  under  such  usurious 
contract.**' 

§  305.  Renewal  bill  or  note — Extensions. — A  renewal  note  is  taint- 
ed with  usury  where  the  original  note  was  so  tainted,*'^  for  a  note  is  not 
purged  of  the  taint  of  usury  by  a  mere  renewal  of  the  note  without 
changing  the  contract  or  restoring  the  overcharge  of  interest  ;**  so 


3  Johns.  Ch.  (N.  Y.)  395,  aff'd  17 
Johns.  436. 

*'^  Alabama. — Capital  City  Ins.  Co. 
V.  Quinn,  73  Ala.  558. 

Georgia. — See  Campbell  v.  Mor- 
gan, 111  Ga.  200,  36  S.  B.  621. 

Iowa. — Dickerman  v.  Day,  31 
Iowa  444,  7  Am.  Rep.  156. 

Maine. — Clapp  v.  Hanson,  15  Me. 
(3  Shep.)   345. 

Massachusetts. — Knights  v.  Put- 
nam, 3  Pick.  (Mass.)  184. 

Mississippi. — Newman  v.  Wil- 
liams, 29  Miss.  212. 

New  Jersey. — Importers  &  Trad- 
ers' Nat.  Bank  v.  Littell,  47  N.  J.  L. 
233;  Durant  v.  Banta,  27  N.  J.  L.  624. 

New  York. — Archer  v.  Shea,  14 
Hun  (N.  Y.)  493;  Stewart  v.  Bram- 
hall,  11  Hun  (N.  Y.)  139;  Cameron 
V.  Chappell,  24  Wend.  (N.  Y.)  94; 
Dowe  V.  Schutt,  2  Denio  (N.  Y.)  621. 

Pennsylvania. — Gaul  v.  Willis,  26 
Pa.  St.  (2  Casey)   259. 

Vermotit. — Cady  v.  Goodnow,  49 
Vt.  400. 

United  States. — Nichols  v.  Fear- 
son,  7  Pet.  (U.  S.)  103. 

England. — Parr  v.  Eliason,  1  East 
92;  Daniel  v.  Cartony,  1  Esp.  274. 
Compare  Clark  v.  Sisson,  4  Duer  (N. 
Y.)  408;  Fish  v.  De  Wolf,  17  N.  Y. 
Super.  Ct.  (4  Bosw.)  573. 

"Simpson    v.    Hefter,    87    N.    Y. 


Supp.  243,  42  Misc.  482.  See  also 
the  following  cases: 

Arkansas. — German  Bank  v.  De 
Shon,  41  Ark.  331. 

Delaware. — Nailor  v.  Daniel,  5 
Houst.  (Del.)  455. 

Maine. — Tufts  v.  Shepherd,  49  Me. 
312. 

Massachusetts. — Whitten  v.  Hay- 
den,  7  Allen  (Mass.)  407. 

New  York. — Eastman  v.  Shaw,  65 
N.  Y.  522;  Clark  v.  Sisson,  22  N.  Y. 
312;  French  v.  Hoffmire,  43  N.  Y. 
Supp.  496,  19  Misc.  Rep.  714;  Pratt 
V.  Adams,  7  Paige  (N.  Y.)  615; 
Clark  V.  Sissons,  5  Duer  (N.  Y.) 
468;  Bennett  V.  Smith,  15  Johns.  (N. 
Y.)  355. 

United  States. — Rodecker  v.  Lit- 
tauer,  8  C.  C.  A.  320.  59  Fed.  857. 

"  Pardoe  v.  Iowa  State  Nat.  Bank, 
106  Iowa  345,  76  N.  W.  800;  Clark 
V.  Sisson,  4  Duer  (N.  Y.)  408;  Ma- 
cungie  Sav.  Bank  v.  Hottenstein,  89 
Pa.  St.  328.  See  Ives  v.  Bosley,  35 
Md.  262;  Union  Nat.  Bank  v.  Fra- 
ser,  63  Miss.  231;  Wild  v.  Howe,  74 
Mo.  551;  Derrick  V.  Hubbard,  27  Hun 
(N.  Y.)  347;  Niblack  v.  Champeny, 
10  S.  D.  165,  72  N.  W.  402;  Fay  v. 
Tower,  58  Wis.  286,  16  N.  W.  558. 

^'Nicrosi  v.  Walker,  139  Ala.  369, 
37  So.  97. 


§  305]  USURY.  394 

the  original  transaction  is  not  purged  by  taking  a  renewal  note,  no 
rights  of  ho7ia  fide  holders  being  involved;*''  and  a  transaction  may  be 
usurious  as  to  a  renewal  note  although  it  bears  the  legal  rate  of  interest 
where  the  note  is  but  an  agreement  to  pay  an  old  debt  with  usurious 
interest.^"  But  an  accommodation  note  delivered  in  payment  of  an- 
other and  usurious  note  is  not  a  renewal  of  the  latter  so  as  to  permit 
of  the  defense  of  usury  f  ^  and  if  a  new  note,  not  tainted  with  usury, 
is  substituted  for  another  but  usurious  note,  the  new  security  is  held 
to  be  valid  in  a  bona  fide  holder's  hands.^^  ^nd  a  note  may  be  purged 
of  usury  by  the  repeal  of  a  statute  so  that  a  renewal  note  given  there- 
after, will  not  be  affected  by  the  taint  ;^^  nor  will  the  usurious  contract 
as  to  the  original  note  be  a  defense  to  a  renewal  note  while  in  the  hands 
of  a  bona  fide  holder,  where  such  holder  could  otherwise  be  free  from 
such  defense  of  usury. ^*  A  bonus  for  extending  the  time  of  payment 
of  a  note  then  bearing  the  full  legal  rate  of  interest  precludes  recovery 
of  the  bonus  ;^^  and  if  the  time  of  payment  is  extended  the  test  of 
whether  the  contract  is  usurious  or  not  is  the  rate  of  interest  borne 
by  the  debts  for  which  there  is  a  forbearance.^*'  But  the  taking  of 
usury  for  forbearance  in  extending  the  time  is  held  not  to  make  usuri- 
ous a  note  and  mortgage  originally  valid.^^ 

^''Nicrosi  v.  Walker,  139  Ala.  369.  (N.   Y.)    291;    Powell   v.   Waters,   8 

^"Citizens'  Nat.  Bank  v.  Donnell,  Cow.  (N.  Y.)  669. 

172  Mo.  384,  72  S.  W.  925.  Texas. — Smith  v.  White  (Tex.  Civ. 

"Palmer    v.    Carpenter,    53    Neb.  App.),   25   S.  W.  809;   Keys  v.  Cle- 

394,  73  N.  W.  690.  burne    B.    &    L.    Assn.     (Tex.    Civ. 

"Powell    V.    Waters,    8    Cow.    (N.  App.),  25  S.  W.  809. 

Y.)   669.     See  Masterson  v.  Grubbs,  United  States.— Palmer  v.  Call,  7 

70  Ala.  406;   Faison  v.  Grandy,  128  Fed.  737,  2  McCrary   (U.  S.)    522. 

N.  C.  438,  38  S.  E.  897.  England. — Cuthbert    v.    Haley,    8 

'^^Houser    v.    Bank,    57    Ga.    95;  Term  R.  390. 

Flight  V.  Reed,  1  Hurl.  &  C.  703.  '=  Missouri  Real  Estate  Syndicate 

"  AZo&ama.— Masterson  v.  Grubbs,  v.  Sims,  179  Mo.  679,  78  S.  W.  1006. 

70    Ala.    406;     Mitchell    v.    McCul-  See   Green   v.   Lake,   2   Mackey    (D. 

lough,  59  Ala.  179.  C.)    162.    Examine  Ganz  v.  Lancas- 

I^e&rasfca.— Palmer    v.    Carpenter,  ter,  169  N.  Y.  357,  62  N.  E.  413,  rev'g 

53  Neb.  394,  73  N.  W.  690.  63  N.  Y.  Supp.  800;  Fay  v.  Tower,  58 

Neio    Yorfc.— Kent    v.    Walton,    7  Wis.    286;    Vary  v.   Norton,   6   Fed. 

Wend.     (N.  .Y.)     256;     Smalley    v.  808. 

Doughty,  6  Bosw.   (N.  Y.)  66;  Odell  ="  Kassing    v.    Ordway,    100    Iowa 

V.    Greenly,    4    Duer    (N.    Y.)    358;  611,  69  N.  W.  1013. 

Brinckerhoff  v.   Foote,   1   Hoff.   Ch.  "  Morse  v.  Welcome,  68  Minn.  210, 

70  N.  W.  978. 


■I 


395 


CORPORATIONS. 


[§   306 


§  306.  Corporations. — Corporations  are  generally  subject  to  the 
usury  laws  to  the  same  extent  as  in  the  case  of  individuals,^®  although 
there  are  exceptions  f°  and  where  this  defense  is  not  available  to  a  cor- 
poration it  will  not  be  sustained  when  urged  by  indorsers  in  actions 
against  them.^"  Again,  by  the  national  bank  act  the  local  law  as  to 
the  rates  of  discount  controls  banking  associations,  unless  a  special  rate 
is  allowed  to  banks  of  issue  organized  under  the  state  laws,  or  unless 
no  rate  is  specified,  in  which  case  the  rate  is  fixed  by  the  revised  stat- 
utes, and  if  a  rate  is  charged  in  violation  of  these  provisions  it  will 
be  a  good  defense  to  the  recovery  of  interest  ;'^^  but  the  note  cannot  be 


'^^  Iowa. — National  Bank  of  Win- 
terset  v.  Eyre,  52  Iowa  114,  2  N.  W, 
995. 

Massachusetts. — Maine  Bank  v. 
Butts,  9  Mass.  49. 

Missouri. — Farmers'  &  Traders' 
Bank  v.  Harrison,  57  Mo.  503. 

New  York. — Bank  of  Utica  v.  Hil- 
lard,  5  Cow.  (N.  Y.)  153. 

Ohio. — Niagara  Co.  Bank  v.  Baker, 
15  Ohio  St.  68. 

Tennessee. — Chafin  v.  Bank,  7 
Heisk.  (Tenn.)  499. 

'°  Freese  v.  Brownell,  35  N.  J.  L. 
285;  Ex  parte  Aynsworth,  4  Ves. 
678.  See  2  Cummings  &  Gilberts 
Genl.  Laws  N.  Y.,  p.  1994,  Laws  N. 
Y.  1850,  ch.  172;  Freese  v.  Brownell, 
35  N.  J.  L.  285. 

*"'  Massachusetts. — Maine  Bank  v. 
Butts,  9  Mass.  49. 

New  York. — Union  Nat.  Bank  v. 
Wheeler,  60  N.  Y.  612;  Rosa  v.  But- 
terfield,  33  N.  Y.  665;  Stewart  v. 
Bramhall,  11  Hun  (N.  Y.)  139;  Lud- 
dington  v.  Kirk,  16  Misc.  Rep.  301, 
37  N.  Y.  Supp.  1141. 

Tennessee. — Chafin  v.  Bank,  7 
Heisk.  (Tenn.)  499.  But  see  Bock 
V.  Lauman,  24  Pa.  St.  435;  Hunger- 
ford's  Bank  v.  Potsdam  &  W.  R. 
Co.,  10  Abb.  Prac.  (N,  Y.)  24,  rev'g 
9  Abb.  Prac.  (N.  Y.)  124;  Hunger- 
ford's  Bank  v.  Dodge,  30  Barb.  (N. 
Y.)    626. 


As  to  sureties,  see  Freese  v. 
Brownell,  35  N.  J.  L.  285. 

As  to  accommodation  acceptor 
who  is  liable  as  a  surety,  see  First 
Nat.  Bank  of  New  York  v.  Morris, 
1  Hun  (N.  Y.)   680. 

^^  Nebraska. — Tomblin  v.  Higgins, 
53  Neb.  92,  73  N.  W.  461;  Norfolk 
Nat.  Bank  v.  Schwenk,  46  Neb.  381, 
64  N.  W.  1073. 

North  Carolina. — Wachovia  Nat. 
Bank  v.  Ireland,  122  N.  C.  571,  29 
S.  E.  835. 

Pennsylvania. — Guthrie  v.  Reid, 
107  Pa.  St.  251. 

South  Dakota. — See  First  Nat. 
Bank  v.  McCarthy  (S.  D.),  100  N. 
W.  14. 

Texas. — First  Nat.  Bank  v.  Ledbet- 
ter  (Tex.  Civ.  App.),  34  S.  W.  1042. 

United  States. — U.  S.  Rev.  St., 
§§  5197,  5198.  See  Citizens'  Nat. 
Bank  v.  Donnell,  195  U.  S.  369,  49 
L.  Ed.  238,  25  Sup.  Ct.  49,  aff'g  172 
Mo.  384,  72  S.  W.  925;  First  Nat. 
Bank  v.  Lasater,  196  U.  S.  115,  49 
L.  Ed.  408,  25  Sup.  Ct.  206,  rev'g 
(Tex.  Civ.  App.)  72  S.  W.  1054. 

This  act  supersedes  state  usury 
laws  as  to  rtational  banks.  Nat. 
Bank  of  Winterset  v.  Etre,  52  Iowa 
114,  2  N.  W.  995;  Davis  v.  Randall, 
115  Mass.  547;  Central  Nat.  Bank 
V.  Pratt,  115  Mass.  539;  Bramhall  v. 
Bank,   36  N.  J.   L.  243;    First  Nat. 


306] 


USUKY. 


39G 


Bank  of  Columbus  v.  Garlinghouse, 
22  Ohio  St.  492.  Compare  Hinter- 
mister  v.  Bank,  3  Hun  (N.  Y.)  345, 
or  an  act  declaring  the  contract  void 
for  usury.  Importers  &  Traders  Nat. 
Bank  V.  Littell,  46  N.  J.  L.  506. 
Compare  First  Nat.  Bank  of  White- 
hall V.  Lamb,  50  N.  Y.  95,  rev'g  57, 
Barb.  (N.  Y.)  429,  or  prohibiting 
it  as  a  misdemeanor.  Slaughter  v. 
Bank,  109  Ala.  157,  19  South.  430. 

Accommodation  and  business  pa- 
per are  within  the  intent  of  the  U. 
S.  statutes. 

New  York. — Johnson  v.  Bank,  74 
N.  Y.  329. 

Ohio. — Barbour  v.  Bank,  45  Ohio 
St.  133,  12  N.  E.  5. 

Tennessee. — Barrett  v.  Bank,  85 
Tenn.  426,  3  S.  W.  117. 

Vermont.— Um  v.  Bank,  56  Vt. 
582. 

United  States.— Rey.  St.  U.  S., 
§§  5197,  5198. 

Defense  of  usury  is  not  available 
against  a  state  or  national  bank. 
Schlesinger  v.  Lehmeier  (City  Ct. 
N.Y.),  99  N.  Y.  Supp.  819. 

Federal  and  state  usury  laws — 
National  state  banks  and  private 
bankers.  In  the  late  case  of  Schle- 
singer v.  Kelly  (N.  Y.  App.  Div. 
1906),  99  N.  Y.  Supp.  1083,  it  is  de- 
cided that  the  federal  statutes  cover 
the  whole  question  of  usury  as  to 
banks  and  are  exclusive  of  the  oper- 
ations of  the  state  usury  law,  so  far 
as  national  banks  are  concerned,  and 
repeal  the  usury  law  by  implication 
so  far  as  state  banks  are  concerned, 
not  only  where  the  bank  has  di- 
rectly participated  in  the  usurious 
transaction,  but  also  where  it  is  the 
innocent  holder  of  paper  void  in  the 
hands  of  private  parties  for  usury  in 
its  inception.  The  decision  is  of  im- 
portance and  we  give  the  opinions 
of  the  court  in  full,  as  follows: 
"Clarke,  J.    This  action  was  brought 


by  the  plaintiff,  as  receiver  of  the 
Federal  Bank  of  New  York,  to  re- 
cover upon  two  promissory  notes, 
amounting,  in  the  aggregate,  to  the 
sum  of  $2,798,  made  by  the  defend- 
ant. The  Federal  Bank  was  a  state 
bank.  The  notes  in  suit  were  ac- 
quired by  the  receiver  as  part  of  the 
assets  of  said  bank  when  he  took 
possession  thereof  under  his  ap- 
pointment by  the  court.  The  plain- 
tiff concedes  that  the  notes  were 
usurious  notes  at  their  inception, 
and  that  the  defendant's  dealings 
which  resulted  in  the  giving  of  the 
notes  were  had  with  one  David 
Rothschild  or  Louis  Rothschild,  do- 
ing business  as  J.  Gould  &  Co.,  or 
the  Globe  Security  Company,  or  one 
Muirhead,  and  not  directly  with  the 
Federal  Bank,  and  the  notes  so 
given  were  given  to  one  of  the  afore- 
said persons,  and  at  no  time  did  the 
defendant  have  dealings  with  or  bor- 
row directly  from  the  Federal  Bank. 
The  defendant  concedes  that  the 
bank  was  a  bona  fide  holder  of  the 
notes  in  due  course;  that  the  notes 
were  complete  and  regular  upon 
their  face;  that  the  bank  became 
such  holder  before  maturity,  and 
without  notice  of  any  infirmity  in 
the  instruments,  or  defect  in  the 
title  of  the  person  negotiating  them. 
The  defendant  claims  that  the  notes 
in  suit,  not  having  been  given  di- 
rectly to  the  plaintiff's  assignor,  and 
being  admittedly  usurious  in  their 
inception,  were  absolutely  void,  no 
matter  into  whose  hands  they  came. 
The  plaintiff  claims  that  the  Fed- 
eral Bank,  having  been  a  state  bank, 
was  on  a  parity  by  express  statute 
with  national  banks,  and  was  not 
subject  to  the  provisions  of  the 
usury  law  declaring  usurious  notes 
void,  and  that,  being  the  holder  in 
due  course  for  value  without  notice, 
it  held   the   instruments   free   from 


597 


CORPORATIONS. 


[§   306 


any  defect  of  title  of  prior  parties, 
and  free  from  defenses  available  to 
prior  parties  among  themselves,  and 
is  entitled  to  enforce  payment  for 
the  full  amount  thereof  against  all 
parties  liable  thereon.  It  is  now  set- 
tled beyond  controversy,  as  the  re- 
sult of  a  series  of  cases  in  the  court 
of  appeals  and  in  the  Supreme  Court 
of  the  United  States,  that  because 
of  the  federal  legislation  now  em- 
braced in  §§  5197  and  5198  of  the 
revised  statutes  of  the  United  States 
(U,  S.  Comp.  St.  1901,  p.  3493),  and 
of  the  statutory  law  of  this  state, 
first  embodied  in  chapter  163,  p.  437, 
of  the  laws  of  1870,  and  now  appear- 
ing substantially  without  change  in 
§  55  of  the  banking  law  (chapter 
689,  p.  1869,  of  the  laws  of  1892), 
that  the  provisions  of  the  usury 
law  (1  Rev.  St.  [1st  Ed.],  pp.  771, 
772,  pt.  2,  c.  4,  tit.  3,  §  5)  declaring 
usurious  notes  void  have  been  re- 
pealed by  implication  when  said 
notes  had  been  given  to,  and  said 
usurious  interest  received  by,  a  na- 
tional bank  or  state  bank  or  pri- 
vate banker.  Section  5197,  Rev.  St. 
U.  S.,  provides  that  any  banking  as- 
sociation may  take  and  charge  upon 
any  note  interest  at  the  rate  allowed 
by  the  laws  of  the  state,  territory 
or  district  where  the  bank  was  lo- 
cated, and  no  more,  and  §  5198, 
Rev.  St.  U.  S.,  provides  that  the 
taking  or  charging  a  rate  of  inter- 
est greater  than  that  allowed  by 
the  preceding  section,  when  know- 
ingly done,  should  be  deemed  a  for- 
feiture of  the  entire  interest  which 
the  note  carried  with  it,  or  which 
had  been  agreed  to  be  paid  thereon, 
and  that,  in  case  a  greater  rate  of 
interest  had  been  paid,  there  could 
be  recovered  back  twice-  the  amount 
of  the  interest  thus  paid,  provided 
such  action  was  commenced  within 
two  years  from  the  time  the  usuri- 


ous transaction  occurred.  Section 
55  of  the  banking  law  of  this  state 
makes  substantially  the  same  pro- 
visions, and  concludes  as  follows: 
'The  true  intent  and  meaning  of  this 
section  is  to  place  and  continue 
banks  and  private  and  individual 
bankers  on  an  equality  in  the  par- 
ticulars herein  referred  to  with  the 
national  banks  authorized  under  the 
act  of  congress  entitled  "An  act  to 
provide  a  national  currency,  secured 
by  pledges  of  United  States  bonds, 
and  to  provide  for  the  circulation 
and  redemption  thereof,"  approved 
June  30,  1864.' 

"In  Whitehall  v.  Lamb,  50  N,  Y. 
95,  10  Am.  Rep.  438,  the  court  of 
appeals  held  that  national  banks  in 
this  state  were  subject  to  the  usury 
laws  of  the  state,  and  that  the  pro- 
visions of  the  national  bank  act  lim- 
iting forfeitures  for  taking  usury 
applied  only  to  banks  located  in 
states  and  territories  where  no  usury 
law  existed. 

"In  Farmers'  Bank  v.  Hale,  59  N. 
Y.  53,  following  the  decision  in  the 
former  case,  and  applying  the  prori- 
sions  as  to  parity,  the  court  held 
that,  it  having  been  decided  that 
national  banks  located  in  this  state 
are  subject  to  the  usury  laws  there- 
of, those  laws  were  not  repealed  by 
chapter  163,  p.  437,  of  the  laws  of 
1870,  as  to  state  banks,  but  that  they 
were  also  subject  thereto. 

"Thereafter,  the  Supreme  Court 
of  the  United  States,  in  Farmers'  & 
Mechanics'  National  Bank  v.  Bear- 
ing, 91  U.  S.  29,  23  L.  Ed.  196,  in  a 
case  originating  in  this  state,  over- 
ruled the  doctrine  as  laid  down  by 
the  court  of  appeals,  and  held  that 
the  only  forfeiture  was  that  pro- 
vided by  the  act  of  congress,  and 
that  no  loss  of  the  entire  debt  was 
incurred  by  a  national  bank,  as  a 
penalty  or  otherwise,  by  reason  of 


306] 


USURY. 


398 


the  provisions  of  the  usury  law  of 
the  state.  The  court  said:  'These 
clauses,  examined  by  their  own 
light,  seem  to  us  too  clear  to  admit 
of  doubt  as  to  anything  to  which 
they  relate.  They  form  a  system  of 
regulations.  All  the  parts  are  in 
harmony  with  each  other,  and  cover 
the  entire  subject.  *  *  *  The  na- 
tional banks  organized  under  the 
act  are  instruments  designed  to  be 
used  to  aid  the  government  in  the 
administration  of  an  important 
branch  of  the  public  service.  They 
are  means  appropriate  to  that  end. 
Of  the  degree  of  the  necessity  which 
existed  for  creating  them  congress 
is  the  sole  judge.  Being  such  means, 
brought  into  existence  for  this  pur- 
pose, and  intended  to  be  so  em- 
ployed, the  states  can  exercise  no 
control  over  them,  nor  in  any  wise 
affect  their  operation,  except  in  so 
far  as  congress  may  see  proper  to 
permit,' 

"Thereafter,  the  Court  of  Appeals, 
in  Hintermister  v.  First  National 
Bank,  64  N.  Y.  212,  held  that,  since 
the  Supreme  Court  of  the  United 
States  had  given  its  interpretation 
to  the  act  of  congress,  the  cases  of 
the  National  Bank  of  Whitehall  v. 
Lamb,  and  Farmers'  Bank  of  Fay- 
etteville  v.  Hale,  supra,  could  no 
longer  be  considered  as  furnishing 
a  rule  of  decision  in  cases  within 
the  principle  of  adjudication  by  the 
federal  court,  and  said:  'It  follows 
that  in  order  to  give  effect  to  the 
evident  intention  of  the  legislature 
of  this  state,  the  statute  enacted  in 
1870  to  put  the  state  banks  upon  an 
equality  with  the  national  banks 
should  have  the  same  interpretation 
and  effect  as  is  given  to  the  act  of 
congress.  Any  other  interpretation 
would  do  violence  to  the  clearly  ex- 
pressed will  of  the  legislature,  do 
injustice    to  the   state    institutions, 


and  give  undue  effect  to  the  legisla- 
tion of  congress,  so  far  as  it  is  hos- 
tile to  the  state  banks.  Both  cases 
may,  therefore,  be  regarded  as  over- 
ruled.' 

"Exclusive  control  over  national 
banks  and  their  freedom  from  the 
operation  of  state  laws,  as  laid 
down  in  the  Bearing  case,  supra, 
has  been  reasserted  in  Haseltine  v. 
Central  National  Bank,  183  U.  S. 
131,  22  Sup.  Ct.  49,  46  L.  Ed.  117, 
and  Easton  v.  Iowa,  188  U.  S.  220,* 
23  Sup.  Ct.  288,  47  L.  Ed.  452.  The 
effect  of  these  decisions  and  these 
statutes  is  that,  if  an  usurious  note 
is  directly  given  to  a  state  bank, 
and  said  bank  takes,  receives,  or  re- 
serves interest  beyond  the  amount 
allowed  by  law,  that  nevertheless 
the  note  is  not  void,  and  the  sole 
forfeiture  is  that  provided  in  regard 
to  the  interest,  and  the  right  of  ac- 
tion to  recover  double  the  amount 
of  interest  paid  within  two  years. 
The  amount  of  the  note  is  a  valid 
and  enforceable  debt. 

"The  appellant  concedes  the  force 
and  effect  of  the  foregoing  cases, 
but  asserts  that  the  principle  there- 
in laid  down  applies  only  when  the 
usurious  transaction  is  made  di- 
rectly with  the  bank,  and  the  bank 
receives,  or  reserves,  charges,  or  is 
paid  the  usurious  interest.  The  ar- 
gument is  that  the  usury  law  has 
not  been  repealed  as  between  pri- 
vate parties,  and  that,  as  a  note 
usurious  in  its  inception  between 
private  parties  is  by  the  statute 
void,  it  never  can  acquire  validity; 
and  cites  Claflin  v.  Boorum,  122  N. 
Y.  385,  25  N.  E.  360,  where  the  court 
said:  'A  note  void  in  its  inception 
for  usury  continues  void  forever, 
whatever  its  subsequent  history 
may  be.  It  is  as  void  in  the  hands 
of  an  innocent  holder  for  value  as  it 
was  in  the  hands  of  those  who  made 


i 


399 


CORPORATIONS. 


[§   306 


the  usurious  contract.  No  validity 
can  be  given  to  it  by  sale  or  ex- 
change, because  that  which  the  stat- 
ute has  declared  void  cannot  be 
made  valid  by  passing  through  the 
channels  of  trade.' 

"That  case  was  not  a  case  involv- 
ing a  bank,  but  was  between  private 
individuals,  and  involved  the  sale 
of  accommodation  paper,  which  the 
court  held  was  merely  a  loan  of 
money,  the  purchaser  being  the  lend- 
er and  the  seller  the  borrower. 
None  of  the  cases  or  statutes  affect- 
ing banks  hereinbefore  alluded  to 
were  cited  or  were  involved  in  that 
case,  and  the  result  of  applying  the 
rule  there  laid  down  to  the  case  at 
bar  would  be  this:  That  whereas, 
when  the  bank  was  the  wrong-doer, 
and  took  the  usurious  interest,  that 
although  the  usury  statute  declared 
the  note  void,  the  banking  statutes 
made  it  valid  as  to  its  face  value, 
and  the  wrong-doer  escaped  all  for- 
feiture except  in  so  far  as  the  inter- 
est was  concerned;  while  if  the 
bank  were  an  absolutely  innocent 
party,  and  had  taken  the  note  in 
good  faith  for  valuable  considera- 
tion and  without  notice,  receiving 
therefor  only  the  legal  interest,  yet 
nevertheless  it  would  be  punished 
for  the  illegal  act  of  others  by  the 
loss  of  the  full  amount  advanced  by 
it.  Such  a  result  would  be  so  in- 
equitable and  illogical  as  to  demon- 
strate that  the  reasoning  must  be 
fallacious.  The  answer  to  it  is 
clearly  found  in  the  cases  already 
cited. 

"In  Farmers'  Bank  v.  Hale,  59  N. 
Y.  53,  the  court  said:  'It  may  be 
conceded  that  the  first  section  of 
the  act,  standing  alone,  would  super- 
sede the  usury  laws,  and  operate  as 
a  repeal  by  implication,  so  far  as 
applicable  to  banking  associations.' 

"That  statement  of  the   effect  of 


the  statute  becomes  effective  by  rea- 
son of  the  Bearing  case,  supra,  and 
the  reiteration  of  the  doctrine  by 
the  Supreme  Court  of  the  United 
States  that  the  federal  statutes 
were  exclusive  in  their  application 
to  national  banks,  and  absolutely 
withdrew  such  banks  from  the  oper- 
ation of  the  state  laws.  That  being 
true,  no  provision  of  the  state  law 
declaring  an  usurious  law  void 
would  affect  a  national  bank,  not 
only  if  it  were  guilty  of  usury,  but 
also  if  it  bought  or  discounted  usu- 
rious paper. 

"The  supreme  court,  in  the 
Easton  case,  188  U.  S.  220,  23  Sup. 
Ct.  288,  47  L.  Ed.  452,  after  citing 
the  Bearing  case,  as  follows:  'The 
states  can  exercise  no  control  over 
national  banks,  or  in  any  wise  affect 
their  operation,  except  in  so  far 
as  congress  may  deem  proper  to 
permit.  Anything  beyond  this  is  an 
abuse,  because  it  is  the  usurpation  of 
power,  which  a  single  state  cannot 
give.'  And  Bavis  v.  Elmira  Savings 
Bank,  161  U.  S.  275,  16  Sup.  Ct.  502, 
40  L.  Ed.  700:  'National  banks  are 
instrumentalities,  and,  as  such, 
necessarily  subject  to  the  para- 
mount authority  of  the  United 
States.  It  follows  that  an  attempt 
by  a  state  to  define  their  duties  or 
control  the  conduct  of  their  affairs 
is  absolutely  void,  wherever  such 
attempted  exercise  of  authority  con- 
flicts with  the  laws  of  the  United 
States,  and  either  frustrates  the 
purpose  of  the  national*  legislation, 
or  impairs  the  efficiency  of  those 
agencies  of  the  federal  government 
to  discharge  the  duties  for  the  per- 
formance of  which  they  were  en- 
acted. These  principles  are  axio- 
matic, and  are  sustained  by  the  re- 
peated adjudications  of  this  court" 
— stated:  'Our  conclusions,  upon 
principle    and    authority,    are    that 


§  306] 


USURY. 


400 


congress,  having  power  to  create  a 
system  of  national  banks,  is  the 
judge  as  to  the  extent  of  the  powers 
which  should  be  conferred  upon 
such  banks,  and  has  the  sole  power 
to  regulate  and  control  the  exercise 
of  their  operations.' 

"Therefore,  applying  the  parity 
principle,  as  the  United  States  stat- 
utes cover  the  whole  question  of 
usury  as  affecting  banks,  and  there- 
fore being  exclusive  so  far  as  na- 
tional banks  are  concerned,  and  ex- 
cluding from  their  operations  our 
state  law  in  that  regard,  it  follows 
that  the  usury  statute  has  been  re- 
pealed by  implication  so  far  as  state 
banks  are  concerned,  not  only  where 
the  bank  itself  has  been  a  direct 
participator  in  the  usurious  trans- 
action, but  where  it  is  the  innocent 
holder  in  due  course  of  the  paper 
which,  in  the  hands  of  private  par- 
ties, would  be  void  for  usury  in  its 
inception.  The  argument  that  a 
void  note  could  never  acquire  va- 
lidity applies  with  as  much  force 
and  effect  to  the  usurious  note 
taken  by  the  bank,  but,  as  we  have 
seen,  such  a  note,  by  the  operations 
of  the  state  and  federal  statutes,  is 
not  void;  in  other  words,  the  man- 
date of  the  state  has  yielded  to  the 
superior  command  of  the  nation  as 
to  national  banks,  and  by  its  own 
statutes  the  state  has  assimilated 
such  rule  to  its  own  banks. 

"It  follows  that  the  judgment  ap- 
pealed from  should  be  affirmed,  with 
costs."  O'Brien,  P.  J.,  and  Mc- 
Laughlin, and  Houghton,  J.  J.,  con- 
cur. 

"I^aughlin,  J.  (concurring) :  I 
agree  with  Mr.  Justice  Clarke  that 
the  judgment  should  be  affirmed, 
but  for  different  reasons  than  those 
expressed  in  his  opinion.  I  doubt 
whether  section  5197  of  the  Revised 
Statutes  of  the  United  States,  regu- 


lating the  charge  of  interest  by  na- 
tional banks,  and  section  55  of  the 
banking  law  of  our  state  (chapter 
689,  p.  1869,  Laws  1892),  in  effect 
extending  the  same  rights  and  privi- 
leges to  state  banks  as  are  conferred 
upon  national  banks  by  the  act  of 
congress,  are  susceptible  of  the  con- 
struction that  they  relate  not  only 
to  discounts  of  paper  by  a  bank,  but 
also  to  discounts  by  any  party  prior 
to  the  time  the  bank  becomes  a 
holder.  I  am  of  opinion,  however, 
that  the  effect  of  the  enactment  of 
section  96  of  the  Negotiable  Instru- 
ments Law  (Laws  1897,  p.  732,  c. 
612),  which  provides  that  'A  holder 
in  due  course  holds  the  instrument 
free  from  any  defect  of  title  of 
prior  parties  and  free  from  defenses 
available  to  prior  parties  among 
themselves,  and  may  enforce  pay- 
ment of  the  instrument  for  the  full 
amount  thereof  against  all  parties 
liable  therefor,'  is  to  render  the  de- 
fense of  usury  inapplicable  to  a 
hona  fide  holder  of  negotiable  paper 
acquiring  the  same  in  due  course. 

"Mr.  Crawford,  in  the  preface  of 
the  first  edition  of  his  Annotated 
Negotiable  Instruments  Law,  states 
that  the  first  draft  of  the  law  was 
prepared  by  him  for  a  sub-com- 
mittee of  the  committee  on  com- 
mercial law  for  the  commissioners 
of  the  different  states  on  uniformity 
of  law;  that  the  draft  was  submit- 
ted to  the  commissioners  on  uni- 
formity of  laws  at  the  conference  in 
Saratoga,  in  1896,  at  which  twenty- 
seven  commissioners,  representing 
fourteen  different  states,  were  pres- 
ent; that  his  draft  was  revised  by 
the  commissioners  in  a  manner  to 
make  changes  in  the  existing  laws 
which  he  had  not  felt  at  liberty  to 
incorporate  in  the  original  draft, 
and,  as  thus  amended,  adopted.  In 
an  explanatory  note  to  the  Negotia- 


401 


CORPORATIONS. 


[§  306 


ble  Instruments  Law,  as  reported  to 
the  legislature  in  1897  by  the  com- 
missioners of  statutory  revision,  it 
appears  that  the  Negotiable  Instru- 
ments Law,  as  prepared  by  the  com- 
mission on  uniformity  of  law  in  the 
United  States,  was  introduced  in  the 
senate  of  the  state  of  New  York  by 
Senator  Lexow,  and  that  at  the  re- 
quest of  the  judiciary  committee  of 
the  senate  the  commission  of  statu- 
tory   revision    rearranged    the    bill, 
and  added  several  statutes  relating 
to     negotiable     instruments     which 
were  not  included  in  the  bill  as  orig- 
inally introduced,  but  which  were  in 
the  commercial  paper  law  prepared 
by    this    commission.,'     It    thus    ap- 
pears that  the  legislature,  in  enact- 
ing    the      Negotiable      Instruments 
Law,  had  in  mind  that  there  was  a 
concerted    move    to   have   that   law 
adopted    in    the   various    states   and 
territories,  and  it  has  been  enacted 
in    practically    the    same    form    in 
most  of  the  states  and  some  of  the 
territories  of  the  Union.    The  only 
case    to    which    our    attention    has 
been  called  in  which  a  court  of  re- 
view has  been  called  upon  to  decide 
whether  the  Negotiable  Instruments 
Law    supersedes,    as    to    b07ia    fide 
holders    in    due    course    for    value, 
local   laws   declaring  negotiable  pa- 
per   tainted    with    usury    null    and 
void,  is  Wirt  v.  Stubblefield,  17  App. 
D.   C.  283.    In  that  case,  Alvey,  C. 
J.,    delivering    the    opinion    of    the 
court,  construing  the  same  provision 
of  the  Negotiable  Instruments  Law 
enacted  by  congress  for  the  District 
of  Columbia,  said:    'We  know,  more- 
over, that  the  great  and  leading  ob- 
ject of  the  act,  not  only  with  con- 
gress, but  with  the  large  number  of 
the   principal   commercial   states  of 
the  Union  that  have  adopted  it,  has 
been  to  establish  a  uniform  system 
of  law  to  govern  negotiable  instru- 
JoYCE  Defexses — 26. 


ments  wherever  they  might  circu- 
late or  be  negotiated.  It  was  not 
only  uniformity  of  rules  and  princi- 
ples that  was  designed,  but  to  em- 
body in  a  codified  form,  as  fully  as 
possible,  all  the  law  upon  the  sub- 
ject, to  avoid  conflict  of  decisions, 
and  the  effect  of  mere  local  laws 
and  usages  that  have  heretofore 
prevailed.  The  great  object  sought 
to  be  accomplished  by  the  enact- 
ment of  the  statutes  to  free  the  ne- 
gotiable instrument,  as  far  as  pos- 
sible, from  all  latent  or  local  in- 
firmities that  would  otherwise  in- 
here in  it  to  the  prejudice  and  dis- 
appointment of  innocent  holders  as 
against  all  the  parties  to  the  instru- 
ment professedly  bound  thereby. 
This  clearly  could  not  be  effected  so 
long  as  the  instrument  was  ren- 
dered absolutely  null  and  void  by 
local  statutes,  as  against  the  origi- 
nal maker  or  acceptor,  as  is  the  case 
by  the  operation,  indeed,  by  the  ex- 
press provision,  of  the  statutes  of 
Charles  and  Anne.' 

"I  agree  with  the  views  expressed 
in  that  opinion.  It  is,  I  think,  evi- 
dent that  the  purpose  of  the  com- 
mission representing  the  various 
states  of  the  Union  in  preparing  the 
draft  of  the  Negotiable  Instruments 
Law,  and  of  the  various  legislatures 
in  enacting  it,  will  be  thwarted  if 
section  96  is  to  receive  the  con- 
struction that,  even  as  against  bona 
fide  holders  in  due  course  for  value, 
the  maker  of  the  note  may  success- 
fully defend,  upon  the  ground  that 
in  the  inception  of  the  note  some 
local  law  was  violated.  The  force 
and  effect  of  the  statute  against 
usury  will  not  be  seriously  impaired 
by  the  construction  which  I  think 
should  be  given  the  Negotiable  In- 
struments Law.  The  usury  laws  re- 
main in  full  force,  but  to  facilitate 
the    free    circulation    of    negotiable 


§  306] 


USURY. 


402 


avoided  by  reason  of  usury  charged  by  a  national  bank;®-  nor  can  a 
bank,  by  offering  to  remit  the  excess,  evade  the  statute  as  to  forfeiture 
of  the  entire  interest.®^  But  it  is  held  that  an  action  for  the  statutory 
penalty  is  the  only  remedy  for  the  recovery  of  usury.®* 


paper  by  protecting  holders  thereof 
in  due  course  for  value  in  their 
right  to  enforce  the  same,  the  usury- 
laws  are  to  that  extent  superseded 
by  the  provisions  of  section  96  of 
the  Negotiable  Instruments  Law 
(Laws  1897,  p.  732,  c.  612).  Of 
course,  it  was  perfectly  competent 
for  the  legislature  to  do  this.  The 
only  question  is  whether  or  not  it 
so  intended,  and  I  am  of  opinion 
that  it  did. 

"The  case  of  Strickland  v.  Henry, 
66  App.  Div.  23,  73  N.  Y.  Supp.  12, 
does  not  hold  that  the  Negotiable 
Instruments  Law  has  not  to  any  ex- 
tent superseded  the  usury  law.  It 
was  there  merely  held  that  a  hold- 
er of  commercial  paper,  who  re- 
ceived the  same  at  a  usurious  dis- 
count, is  not  protected  under  the 
Negotiable  Instruments  Law,  where 
it  appears  that  the  note  never  had 
a  legal  inception,  and  that  its  first 
transfer  was  at  the  usurious  dis- 
count. The  court  there  say:  'The 
holder  is  bound  to  know  the  char- 
acter of  the  paper  he  is  dealing 
with,  and,  if  it  turns  out  to  be  ac- 
commodation paper,  the  transaction 
is  usurious.'  Of  course,  a  person 
taking  negotiable  paper  must  deter- 
mine at  his  peril  whether  or  not  it 
has  had  an  inception,  but,  having 
ascertained  that  fact,  I  think  that 
it  was  the  purpose  and  intent  of  the 
legislature  to  relieve  him  from  any 
latent  infirmity,  as  by  a  discount  at 
a  usurious  rate  of  interest  at  its 
inception,  or  other  analogous  latent 
infirmities. 

"I  therefore  vote  to  aflBrm  the 
judgment." 


The  case  of  Farmers'  &  Mechan- 
ics' National  Bank  v.  Bearing,  91 
U.  S.  29,  23  L.  Ed.  196  (cited  in  the 
above  opinion)  is  also  cited  in 
Christopher  v.  Norvell,  201  U.  S. 
216,  225,  to  the  point  that  "The 
bank,  although  its  shares  of  stock 
were  private  property,  was  an  in- 
strumentality of  the  general  govern- 
ment in  the  conduct  of  its  affairs." 
The  latter  case  also  cites  Davis  v. 
Elmira  Savings  Bank,  151  U.  S.  275, 
16  Sup.  Ct.  502,  40  L.  Ed.  700  (quot- 
ed from  in  the  above  opinion), 
quoting  the  words:  "National  banks 
are  instrumentalities  of  the  federal 
government,  created  for  public  pur- 
poses, and  as  such  are  necessarily 
subject  to  the  paramount  authority 
of  the  United  States,"  citing  also. 
Eastern  v.  Iowa,  188  U.  S.  220,  237. 

"-Chase  Nat.  Bank  v.  Faurot,  149 
N.  Y.  536,  44  N.  E.  164;  Stephens  v. 
Bank,  111  U.  S.  197,  4  Sup.  Ct.  337; 
Cox  V.  Beck,  83  Fed.  269.  See  Sec- 
ond Nat.  Bk.  V.  Fitzpatrick,  27  Ky. 
L.  Rep.  483,  84  S.  W.  1150. 

"^  Citizens'  National  Bank  v.  Don- 
nell,  195  U.  S.  369,  49  L.  Ed.  238,  25 
Sup.  Ct.  49,  aff'g  172  Mo.  384,  72  S. 
W.  925;  Rev.  Stat.  U.  S.,  §  5198,  U. 
S.  Comp.  Stat.  1901,  p.  3493. 

"*  Kentucky. — Marion  Nat.  Bank  v. 
Thompson,  101  Ky.  277,  40  S.  W. 
903. 

Nebraska. — Montgomery  v.  Bank, 
50  Neb.  652,  70  N.  W.  239;  Lanham 
V.  Bank,  46  Neb.  663,  65  N.  W.  786; 
Norfolk  Nat.  Bank  v.  Schwenk,  46 
Neb.  381,  64  N.  W.  1073. 

Pennsylvania. — Nat.  Bank  of  Fay- 
ette Co.  V.  Dushane,  96  Pa.  St.  340. 
•    Texas. — Comanche    Nat.    Bank    v. 


403  CORPORATIONS.  [§    306 

Dabney   (Tex.  Civ.  App.),  44   S.  W.  nell,  195  U.  S.  3C9,  25  Sup.  Ct.  49, 

413.  49  L.  Ed.  238,  aff'g  172  Mo.  384,  72 

United  States. — Driesbach  v.  Bank,  S.  W.  925. 
104  U.  S.  52;  Bamet  v.  Bank,  98  U.         Demand  is  unnecessary  to  recover 

S.   555;    Cox  v.   Beck,   83   Fed.   269.  penalty.   First  Nat.  Bank  v.  Turner 

Examine  Citizens'  Nat.  Bk.  v.  Don-  (Kan.  1895),  42  Pac.  936. 


CHAPTER    XIV. 


EFFECT    OF    CONDITIONS    OR    AGREEMENTS. 


Sec.  Sec, 

307.  Collateral  conditions  or  agree-    325. 

ments — General  rules. 

308.  Same   subject — Illustrations. 

309.  Evidence    explanatory    of    con- 

tract. 326. 

310.  When    note     and     contempora- 

neous agreement  are  mutual     327. 
and  dependent. 

311.  Conditions       precedent — Gener-     328. 

ally. 

312.  Conditional  delivery— Maker  to     329. 

payee — Effect  of. 

313.  Same  subject  continued — Appli-     330. 

cation  of  rule.  331. 

314.  Same    s  u  b  j  e  c  t — Effect    upon     332. 

third  parties — Bona  fide  hold-    333. 
ers. 

315.  Condition  that  other  signatures     334. 

be  procured.  335. 

316.  Same  subject  continued. 

317.  Delivery  in  escrow.  336. 

318.  Same     subject — Payee    without 

notice.  337. 

319.  Same    subject — Where    paper    338. 

taken    as    security    for    ante- 
cedent debt. 

320.  That  instrument  is  to  be  void     339. 

or  payable  on  contingency.  340. 

321.  Same     subject — Happening     of 

contingency  prevented  by  act     341. 
of  maker.   .    , 

322.  Conditions   affecting  considera- 

tion. 342. 

823.  Same    subject — Application     of 

rule  generally.  343. 

324.  Same  subject — When  not  a  de-    344. 

fense.  345. 

404 


Same  s  u  b  j  e  c  t — Performance 
prevented  by  maker — Non- 
performance prevented  by 
maker. 

Same  subject — Agreement  not 
to  do  certain  acts. 

Same  subject  —  Purchase-price 
notes. 

Same  subject  —  Purchase-price 
notes — Subsequent  holder. 

Same  subject — Agreement  to 
render  services  or  labor. 

Note  not  to  be  negotiated. 

As  to  place  of  payment. 

As  to  amount. 

As  to  mode  or  manner  of  pay- 
ment. 

Same  subject  continued. 

Same  subject — Note  to  admin- 
istrator. 

Executed  agreement  as  a  de- 
fense. 

Agreements  not  to  sue. 

Same  subject — Where  simulta- 
neous or  subsequent  and  for 
a  limited  time. 

As  to  time  of  payment. 

Subsequent  agreements  extend- 
ing time. 

Same  subject — What  essential 
to  render  such  an  agreement 
a  defense. 

Agreements  to  release  from  or 
limit  liability. 

Effect  of  conditions  in  note. 

Same  subject  continued. 

Same  subject — Substantial  per- 
formance of  condition. 


405 


COLLATERAL    CONDITIONS    OR   AGREEMENTS. 


[§  307 


SEC.  SEC. 

346.  Same    subject — Condition    that    348.  Conditional    or     restricted     in- 

contract  be  completed  to  ac-  dorsement. 

ceptance  of  agent.  349.  Indorsement  of  condition  to  en- 

347.  Conditional  acceptance.  force  which  would  be  illegal. 

350.  Waiver  of  conditions. 

§307.     Collateral  conditions  or  a^eements — General  rules. — The 

right  of  a  bona  fide  holder  of  commercial  paper  to  recover  thereon 
against  a  maker,  drawer,  or  iudorser  cannot  be  defeated  by  the  fact 
that  a  condition  or  agreement  to  which  the  defendant  was  a  party  has 
not  been  performed  or  complied  with,  where  it  was  not  contained  in  the 
instrument  or  is  not  a  part  thereof  and  the  holder  had  no  notice  of  the 
same.^     As  has  been  said  in  reference  to  an  acceptance  of  an  instru- 


^  Alabama. — Bank  of  Luverne  v. 
Birmingham  Fertilizer  Co.  (Ala. 
1905),  39  So.  126;  Garner  v.  Fite,  93 
Ala.  405,  9  So.  367;  Hair  v.  La 
Brouse,  10  Ala.  548. 

Colorado. — Mcintosh  v.  Rice,  13 
Colo.  App.  393,  58  Pac.  358;  Kinkel 
V.  Harper,  7  Colo.  App.  45,  42  Pac. 
173. 

Connecticut. — Goodrich  v.  Stan- 
ley, 23  Conn.  79. 

Georgia. — Wooten  v.  Inman,  33 
Ga.  41. 

Illinois. — Metropolitan  Nat.  Bank 
V.  Merchants'  Nat.  Bank,  182  111. 
367,  55  N.  E.  360;  Hodges  v.  Nash, 
141  111.  391,  31  N.  E.  151;  Foy  v. 
Blackstone,  31  111.  538. 

Indiana. — Clanin  v.  Esterly  Har- 
vesting Mach.  Co.,  118  Ind.  372,  21 
N.  E.  35;  Strough  v.  Gear,  48  Ind. 
100. 

Iowa.— Grafl  v.  Logue,  61  Iowa 
704,  17  N.  W.  171;  Skinner  v. 
Church,  36  Iowa  91;  Gage  v.  Sharp, 
24  Iowa  15. 

Kentucky. — Frank  v.  Quast,  86 
Ky.  649,  6  S.  W.  909;  Gano  v.  Fin- 
nell,  13  B.  Mon.  (Ky.)  390;  Roby  v. 
Sharp,  6  T.  B.  Mon.  (Ky.)  375. 

Maine. — "Wait  v.  Chandler,  63  Me. 
257;  Gushing  v.  Wyman.  44  Me.  121. 

Massachusetts. — Patten     v.     Glea- 


son,  106  Mass.  439;  Carrier  v.  Sears, 
4  Allen  (Mass.)  336,  81  Am.  Dec. 
707. 

Minnesota. — First  National  Bank 
V.  Campo.  Board  Mfg.  Co.,  61  Minn. 
274,  63  N.  W.  731. 

Mississippi. — Hart  v.  Taylor,  70 
Miss.  655. 

Missouri. — Jennings  v.  Todd,  118 
Mo.  296,  24  S.  W.  148,  40  Am.  St.  R. 
373;  Henshaw  v.  Button,  59  Mo.  13». 

New  Hampshire.  —  Matthews  v. 
Crosby,  56  N.  H.  21. 

New  Jersey. — Haines  v.  Dubois,  30 
N.  J.  L.  259;  Gulick  v.  Gulick,  16  N. 
J.  L.  186. 

New  York. — Maas  v.  Chatfield,  90 
N.  Y.  303;  Adams  v.  Blancan,  6  Rob. 
(N.  Y.)  334;  Moore  v.  Miller,  6 
Lans.  (N.  Y.)  396;  Harbeck  v. 
Craft,  4  Duer  (N.  Y.)   122. 

North  Carolina. — Potts  v.  Dublin, 
125  N.  C.  413,  34  S.  E.  514. 

Ohio. — First  National  Bank  v. 
Fowler,  36  Ohio  524. 

Pennsylvania. — Mishler  v.  Reed, 
76  Pa.  St.  76. 

Tennessee. — Merritt  v.  Duncan,  7 
Heisk.  (Tenn.)  156;  Bowers  v. 
Douglass,  2  Head   (Tenn.)  376. 

Texas. — Heffron  v.  Cunningham, 
76  Tex.  312,  13  S.  W.  259. 

Wisconsin. — Gillman  v.  Henry,  53 


308] 


EFFECT    OF    CONDITIONS   OR   AGREEMENTS. 


40G 


ment :  "If  one  purpose  making  a  conditional  acceptance  only,  and  com- 
mit the  acceptance  to  writing,  he  should  be  careful  to  express  the  con- 
dition thereon.  He  cannot  use  general  terms,  and  then  exempt  himself 
from  liability  by  relying  upon  particular  facts  which  have  already 
happened,  though  they  are  connected  with  the  condition  expressed. 
Why?  Because  the  particular  fact  is,  of  itself,  susceptible  of  being 
made  a  distinct  condition.  It  matters  not  what  the  acceptor  meant  by 
a  cautious  and  precise  phraseology,  if  it  be  not  expressed  as  a  condi- 
tion."^ The  rule  is  equally  applicable  though  the  condition  or  agree- 
ment referred  to  is  in  writing.^  This  is  also  the  general  rule  even  as 
between  the  maker  and  payee  or  other  parties  who  are  not  bona  fide 
holders,  parol  evidence  not  being  admissible  to  contradict  or  vary  the 
terms  of  a  written  contract.*  Certain  exceptions,  however,  exist,  as  in 
the  case  of  a  conditional  delivery  or  a  delivery  in  escrow,  in  which  case 
such  evidence  is  admissible  for  the  purpose  of  showing  that  the  in- 
strument never  became  a  binding  one,  and  also  where  the  condition 
goes  to  the  consideration  of  the  paper. '^ 

§  308.  Same  subject  continued — Illustrations. — Where  a  person's 
name  appears  on  an  instrument  as  a  joint  promisor  he  cannot  show  as 
against  a  bon{i  fide  holder  that  by  agreement  of  the  parties  he  signed 
the  note  as  surety  merelj^  and  this  has  been  held  true  though  the 
holder  was  a  purchaser  after  maturity  where  he  purchased  without 


Wis.  465,  10  N.  W.  692;  Murdock  v. 
Arndt.  1  Pin.  (Wis.)  70. 

United  States. — McMurray  v.  Mo- 
ran,  134  U.  S.  150,  10  Sup.  Ct.  427; 
Burnes  v.  Scott,  117  U.  S.  582,  9 
Sup.  Ct.  865;  Brown  v.  Spofford,  95 
U.  S.  474;  Forsythe  v.  Kimball,  91 
U.  S.  291. 

Indian  Territory. — Compare  Meh- 
lin  v.  Mutual  Reserve  Fund  L.  A.,  2 
Ind.  Terr.  R.  396.  51  S.  W.  1063. 

So  it  is  said  by  the  United  States 
Supreme  Court:  "The  general  rule 
that  a  written  contract  cannot  be 
contradicted  or  waived  by  evidence 
of  an  oral  agreement  between  the 
parties  before  or  at  the  time  of  such 
contract,  has  been  often  recognized 
and  applied  by  this  court,  especially 
in  cases  in  which  it  was  sought  to 


deprive  bona  fide  holders  of,  or  par- 
ties to,  negotiable  securities  of  the 
right  to  which  they  were  entitled 
according  to  the  legal  import  of  the 
terms  of  such  contract."  Per  Mr. 
Justice  Harlan  in  Burke  v.  Dulaney, 
153  U.  S.  228,  232,  14  Sup.  Ct.  816. 

''La  Wayne,  J.,  in  United  States 
Bank  v.  Bank  of  the  Metropolis,  15 
Pet.  (U.  S.)  377. 

^Hoare  v.  Graham,  3  Camp.  57; 
Montague  v.  Perkins,  22  Eng.  L.  & 
Eq.  516.  See  Kervan  v.  Townsend, 
25  App.  Div.  256,  49  N.  Y.  Supp.  137; 
Bowerbank  v.  Monteiro,  4  Taunt. 
844. 

*  See  sections  following  in  this 
chapter. 

■^  See  §§  312-319  herein. 


407  '  "^  EVIDENCE    EXPLANATORY   OF    CONTRACT.  [§309 

notice;®  and  where  a  note,  the  property  of  a  married  woman,  is  in- 
dorsed by  her  in  blank,  without  restriction,  and  delivered  to  a  creditor 
of  her  husband  as  security  for  the  latter's  debt,  she  cannot  show,  in 
an  action  by  a  lona  fide  purchaser,  without  notice,  from  such. cred- 
itor, that  her  assignment  was  other  than  what  it  purports  to  be  from 
the  instrument  itself  ;^  and  an  acceptance  in  the  following  terms :  "ac- 
cepted on  condition  that  his  contracts  be  complied  with,"  will  not 
retroact  to  embrace  forfeiture  which  had  been  incurred  at  the  time,  so 
as  to  relieve  the  acceptor  from  liability  on  the  paper  f  and  where  drafts 
are  indorsed  in  blank  by  the  owner  to  a  person  for  collection  who  trans- 
fers to  another  purchasing  without  notice  of  the  want  of  ownership, 
the  latter  becomes  a  bona  fide  holder  and  may  retain  the  proceeds  as 
against  the  true  owner.** 

§■309.     Evidence  explanatory  of  contract. — Where  it  is  apparent 

that  a  bill  or  note  is  incomplete  or  contains  but  part  of  the  agreement 
of  the  parties,  evidence  is  admissible  for  the  purpose  of  proving  the  en- 
tire contract.^ ^  So,  in  a  suit  on  an  instrument,  in  form  a  conditional 
note,  evidence  is  admissible  that  the  note  was  signed  by  the  maker  on 
distinct  admission  by  payee  that  it  did  not  contain  the  terms  of  their 
contract,  and  that  it  was  agreed  that  they  should  subsequently  meet 
and  draw  another  instrument  which  would  truly  express  their  con- 
tract." Such  evidence  must  not,  however,  be  repugnant  to  or  incon- 
sistent with  the  intention  of  the  parties,  as  is  already  shown  by  the 
instrument  itself.^ ^ 

'■'Lewis  V.  Long,  102  N.  C.  206,  9  in  these  instruments  passed  by  de- 

S.  E.  637,  11  Am.  St.  R.  725.  livery  as  the  property  in  bank  notes, 

'  Shirk  V.  North,  138  Ind.  210,  37  exchequer  bills,  or  bills  of  exchange 

N-  E.  590.  payable     to     bearer,     and     that     a 

'  United  States  v.  Bank  of  the  Me-  pledgee,  taking  such  paper  from  an 

tropolis,  15  Pet.  (U.  S.)  377.  agent  of  the  owner  without  knowl- 

'Coors  V.  German  National  Bank,  edge    of   the   ownership   or   agency, 
14  Colo.  202,  23  Pac.  328,  7  L.  R.  A.  obtained  a  good  title  thereto. 
845.     See   Rainsbotham  v.   Cator,   1  "West    v.    Kelly's   Exrs.,    19    Ala. 
Starkie  228;    Gorgier  v.   Mieville,  3  353,   54    Am.    Dec.    192;    Ruggles   v. 
Barn.  &  C.  45,  holding  that  where  a  Swanwick,  6  Minn.  526;  Hill  v.  Hun- 
foreign  prince  gave  bonds,  whereby  tress,    43    N.    H.    480;    Juilliard    v. 
he    declared    himself   and    his    sue-  Chaffee,  92  N.  Y.  529.   See  Gorrell  v. 
cessors  bound  to  every  person  who  Home  Life  Ins.  Co.,  63  Fed.  371,  24 
should    for   the   time   being   be    the  U.  S.  App.  188,  11  C.  C.  A.  240. 
holders   of   the   bonds   for   the   pay-  "  Hopper  v.  Eiland,  21  Ala.  714. 
ment  of  the  principal   and   interest  "West   v.    Kelly's    Exrs.,    19    Ala. 
in   a  certain   manner,   the   property  353,  54  Am.  Dec.  192. 


310] 


EFFECT    OF    CONDITIONS    OR   AGREEMENTS. 


408 


§  310.  Where  note  and  contemporaneous  agreement  are  mutual 
and  dependent. — The  rule  that  parol  evidence  of  a  contemporane- 
ous agreement  is  not  admissible  to  contradict  the  terms  of  a  bill  or 
note  does  not  operate  to  exclude  evidence  of  such  an  agreement  in  all 
cases.  It  is  a  general  rule  in  the  construction  of  contracts  that  two 
contemporaneous  writings,  where  they  are  between  the  same  parties 
and  relate  to  the  same  subject  matter  and  are  mutually  dependent,  con- 
stituting, in  fact,  but  one  contract,  of  which  each  is  evidence  of  a  part 
only  thereof,  may  be  read  and  construed  as  one  contract  in  actions  be- 
tween the  parties  or  their  representatives.  And  this  rule  has  been 
frequently  applied  in  the  case  of  a  bill  or  note  and  a  contemporaneous 
agreement  in  writing,  such  agreement  being  construed  as  a  part  of  the 
same  contract  for  the  purpose  of  explaining  or  controlling  the  terms 
of  the  former  or  as  a  condition  precedent. ^^  The  cases  in  which  evi- 
dence of  such  an  agreement  has  been  admitted  have  generally  been 
those  where  the  agreement  constituted  the  consideration  for  which  the 
note  was  given.^*  So,  a  contract  of  sale  and  a  note  may  be  construed 
together  where  executed  under  such  circumstances  ;^^  and  where  a  note 
and  a  lease  were  each  the  consideration  for  the  other,  both  are  to  be 
construed  as  one  contract,  and  if  upon  breach  of  the  lessor's  agreement 
to  make  certain  improvements  or  repairs  upon  the  premises  the  lessee 
refuses  to  accept  possession,  in  an  action  against  the  latter  on  the  note 


^^  Arkansas. — Richardson  v.  Thom- 
as, 28  Ark.  387,  391. 

California. — Prouty  v,.  Adams,  141 
Cal.  304,  74  Pac.  545;  Goodwin  v. 
Nickerson,  51  Cal.  166. 

Georgia. — Montgomery  v.  Hunt,  93 
Ga.  439. 

Illinois. — Bailey  v.  Cromwell,'  4 
111.  71,  21  N.  E.  59. 

Indiana. — Hickman  v.  Rayl,  55 
Ind.  551. 

Maryland. — Duvall  v.  Farmers' 
Bank  of  Maryland,  9  Gill  &  J.  (Md.) 
31. 

Michigan. — Fink  v.  Chambers,  95 
Mich.  508,  55  N.  W.  375;  Sutton  v. 
Beckwith,  68  Mich.  303,  36  N.  W.  79, 
13  Am.  St.  R.  344. 

New  Hampshire. — Hill  v.  Hunt- 
ress, 43  N.  H.  480. 

New   York. — Rogers  v.   Smith,   47 


N.  Y.  324;  Hoag  v.  Parr,  13  Hun 
(N.  Y.)   95. 

North  Carolina. — Sydnor  v.  Boyd, 
119  N.  C.  481,  26  S.  E.  92,  37  L.  R. 
A.  734;  Carrington  v.  WafE,  112  N. 
C.  115,  16  S.  E.  1008. 

Ohio. — Jacobs  v.  Mitchell,  46  Ohio 
St.  601,  22  N.  E.  768. 

Oregon. — Sayre  v.  Mohney,  30 
Oreg.  238,  47  Pac.  197. 

Texas.— Kelly  v.  Webb,  27  Tex. 
368;  Glass  v.  Adone  (Tex.  Civ. 
App.  1905),  86  S.  W.  798. 

English. — Webb  v.  Salmon,  19  L. 
J.  Q.  B.  N.  S.  34;  Savage  v.  Aldren, 
2  Starkie  232. 

"  See  cases  in  preceding  note  and 
§§  322-329  herein. 

"May  v.  Cole,  8  Blackf.  (Ind.) 
479;  Hoag  v.  Parr,  13  Hun  (N.  Y.) 
95. 


ii 


409  CONDITIONS   PRECEDENT.  [§    311 

given  for  the  rent  he  may  avail  himself  of  such  failure  by  the  lessor 
as  a  defense.^^  So  evidence  has  been  held  admissible,  in  an  action  on  a 
note  to  the  creditor  of  the  maker,  of  a  contemporaneous  written  agree- 
ment which  is  a  part  of  the  same  contract  by  which  the  payee  agreed 
to  give  work  to  the  maker  at  a  certain  price  per  day  until  such  note 
was  paid  and  that  there  has  been  a  breach  of  such  agreement.  ^^  And 
in  an  action  on  purchase-money  notes  it  was  decided  that  a  deed,  con- 
taining covenants  to  the  effect  that  plaintiff  would  look  to  no  other 
property  for  the  satisfaction  of  his  debt  than  that  mentioned  therein, 
was  to  be  construed  with  the  note  as  parts  of  one  contract  and  that  the 
vendor  should  be  confined  in  his  recovery  to  the  property  named  in  the 
deed.^**  And  where  a  note  and  the  contract,  in  pursuance  of  which  it 
was  executed,  are  a  part  of  the  same  transaction  and  may  be  taken  to- 
gether in  determining  the  intent  of  the  parties  it  may  be  shown  that  by 
the  terms  of  the  contract  the  obligation  of  the  signers  of  the  note, 
though  in  form  joint  and  several,  was  not  in  fact  to  be  such  but  each 
was  to  be  liable  for  his  proper  share.^^  But  in  the  case  of  mortgage 
notes  it  has  been  decided  that  the  indebtedness  is  represented  by  the 
notes  to  which  the  mortgage  is  collateral  and  that  it  refers  to  them  for 
the  purpose  of  identification  of  the  contract  and  that  therefore,  in  the 
case  of  an  irreconcilable  contradiction  between  the  mortgage  and  the 
note  as  to  the  time  of  payment,  the  terms  of  the  latter  instrument 
must  control.^''  The  breach  of  such  an  agreement  may  be  shown  in 
defense  to  an  action  by  an  indorsee  after  maturity,^  ^  or  by  an  assignee 
with  notice  or  knowledge  thereof. -^  Where,  however,  a  defendant  re- 
lies upon  an  agreement  of  this  kind  as  a  bar  to  an  action  against  him 
and  pleads  it  as  such,  it  is  decided  that  it  must  be  alleged  to  be  in  writ- 
ing. ^^ 

§  311.     Conditions  precedent — Generally. — In  many  cases  an  in- 
strument for  the  payment  of  money  is  dependent  either  as  to  the  time 

"Hickman  v.  Rayl,  55  Ind.  551.  -Thomas  v.  Page,  3  McLean    (U. 

"Minzey    v.    Marcy    Mfg.    Co.,    25  S.)  167. 

Ohio  Cir.  Ct.  R.  593.  "-^  Osborne  v.  Taylor,  58  Conn.  439, 

"'Richardson  v.  Thomas,  28  Ark.  20  Atl.  605. 

387.  If  plaintiff  counts  upon  a  writing 

"*City  Deposit  Bank  Co.  v.  Green  and   the   plea   shows  an   agreement 

(Iowa  1905),  103  N.  W.  96.  contemporaneous  and  modifying  its 

™  Ferris  v.  Johnson   (Mich.  1904),  terms,  it  must  show  that  this  agree- 

98  N.  W.  1014.  ment  was  also  in  writing.    Peddie  v. 

="  Munro  v.  King,  3  Colo.  238.  Donnelly,     1     Colo.     421,     423,     per 

Wells,  J. 


312] 


EFFECT  OF  CONDITIONS  OR  AGREEMENTS. 


410 


of  payment  or  as  to  the  rights  and  liabilities  of  the  parties  upon  the 
performance  of  some  condition  or  the  happening  of  some  contingency 
which  is  in  the  nature  of  a  condition  precedent.^^*  In  order,  however, 
that  a  condition  or  contingency  should  so  control  the  operation  of  such 
an  instrument  it  is  essential  that  it  should  either  be  expressed  therein 
or  contained  in  a  contemporaneous  agreement  which  is  to  be  construed 
with  the  instrument  as  one  contract.-^  And  if  the  performance  of  such 
a  condition  by  the  party  obligated  to  perform  is  prevented  by  the  other 
party,  the  latter  cannot  avail  himself  of  such  non-performance  as  a 
defense.-''  In  some  cases  a  request  or  demand  of  the  thing  claimed 
may  constitute  a  condition  precedent  to  the  obligation  of  the  defend- 
ant. When  this  is  the  case,  such  demand,  before  suit  brought,  should 
be  averred  and  proved  to  enable  the  plaintifE  to  maintain  the  action  and 
to  preclude  the  defense  of  want  or  failure  of  consideration."  Non- 
performance of  a  condition  precedent  may  be  a  good  defense  to  an  ac- 
tion against  the  maker  by  an  assignee'^  or  indorsee,  where  it  is  pro- 
vided by  statute  that  any  defense  which  a  maker  has  against  a  payee 
before  notice  of  the  transfer  is  available  against  an  indorsee.^^ 


§  312.  Conditional  delivery — Maker  to  payee — Effect  of. — Al- 
though it  is  held  in  many  cases  that  a  delivery  of  a  note  to  the  payee 
by  the  maker  will  operate  as  an  absolute  delivery,  though  it  is  agreed 
that  its  taking  effect  is  dependent  upon  a  condition  or  contingency,  on 
the  ground  that  such  an  instrument  cannot  be  delivered  as  an  escrow 
to  the  payee,^"  yet  the  weight  of  authority  supports  the  rule  that  in  an 


^  California. — McLaughlin  v.  Clau- 
sen, 85  Cal.  322,  24  Pac.  636. 

Georgia. — Keaton  v.  Read,  32  Ga. 
493. 

Massachusetts. — Tufts  v.  Kidder, 
8  Pick.  (Mass.)  537. 

Michiga/n. — Sutton  v.  Beckwith,  68 
Mich.  303,  36  N.  W.  79,  13  Am.  St. 
R.  344. 

New  York. — Coffin  v.  Grand  Rap- 
ids Co.,  61  N.  Y.  Super.  Ct.  51,  18  N. 
Y.  Supp.  782. 

Pennsylvania. — Massey  v.  Blair, 
176  Pa.  St.  34,  34  Atl.  925. 

SEE  cases  cited  in  §  322  herein 
as  to  "conditions  affecting  consider- 
ations." 


=^  See  §§  307,  308  herein. 

="  Massey  v.  Blair,  176  Pa.  St.  34, 
34  Atl.  925. 

-'  Rowland  v.  Edmonds,  24  N.  Y. 
307.  See  Edgerton  v.  Aspinwall,  3 
Conn.  445. 

=8  Jefferson  v.  Hewitt,  103  Cal.  624, 
37  Pac.  638;  Johnson  v.  First  Na- 
tional Bank,  24  111.  App.  352.  See 
Billings  v.  Everett,  52  Cal.  661. 

^Shoe  &  Leath.  Nat.  Bank  v. 
Wood,  142  Mass.  563,  8  N.  E.  753. 

="  Converse  v.  Moulton,  2  Root 
(Conn.)  195;  Neely  v.  Lewis,  10 
111.  31;  Stewart  v.  Anderson.  59 
Ind.  375;  Roche  v.  Roanoke  Semi- 
nary, 56  Ind.  198;  Robb  v.  Victory,  6 


I 


411 


CONDITIONxiL    DELIVERY — MAKER   TO    PAYEE. 


[§   313 


action  by  the  payee  of  a  note  against  the  maker,  the  latter  may  show 
that  he  delivered  the  instrument  to  the  payee,  it  being  agreed  that  it 
should  not  take  effect  until  the  happening  of  a  certain  contingency  or 
the  performance  of  a  certain  condition  and  that  neither  the  contin- 
gency has  occurred  nor  the  condition  been  performed. ^^  "Such  parol 
evidence  does  not  contradict  the  note  or  seek  to  vary  its  terms.  It 
merely  goes  to  the  point  of  its  non-delivery.  The  note  in  its  terms  is 
precisely  what  both  the  maker  and  the  payee  intended  it  to  be.    No 


Blackf.  (Ind.)  47;  Jones  v.  Shaw, 
,G7  Mo.  667;  Henshaw  v.  Button,  59 
Mo.  139;  Massman  v.  Holscher,  49 
Mo.  87.  See  Underwood  v.  Simonds, 
12  Mete.  (Mass.)  275;  Porter  v. 
Pierce,  22  N.  H.  275,  55  Am.  Dec. 
151. 

"'  Connecticut. — M  cFarland  v. 
Sikes,  54  Conn.  250,  7  Atl.  408,  1 
Am.  St.  R.  111. 

Illinois. — Belleville  Savings  Bank 
V.  Bornman,  124  111.  200,  16  N.  E. 
210;  Harding  v.  Commercial  Loan 
Co.,  84  111.  251. 

Indiana. — Carlisle  v.  Terre  Haute 
&c.  R.  R.  Co.,  6  Ind.  316. 

Indian  Territory. — Mehlin  v.  Mu- 
tual Reserve  Fund  L.  A.,  2  Ind. 
Terr.  396,  51  S.  W.  1063. 

Iowa. — Oakland  Cemetery  Assn.  v. 
Lakins  (Iowa  1904),  101  N.  W.  778; 
Ware  v.  Smith,  62  Iowa  159,  17  N. 
W.  479;  Williams  v.  Donaldson,  8 
Clarke  (Iowa)  109.  • 

Maine. — Goddard  v.  Cutts,  11  Me. 
440. 

Maryland. — Devries  v.  Shumate, 
53  Md.  211. 

Massachusetts. — Wilson  v.  Powers, 
131  Mass.  539;  Watkins  v.  Bowers, 
119  Mass.  383. 

Minnesota. — Mendenhall  v.  Ulrich 
(Minn.  1905),  101  N.  W.  1057; 
Smith  v.  Mussetter,  58  Minn.  159,  59 
N.  W.  995;  Holt  v.  Mclntire,  50 
Minn.  466,  52  N.  W.  918. 


Missouri. — Hert  v.  Ford  (Mo. 
1896),  36  S.  W.  671. 

Netv  Hampshire.  —  Porter  v. 
Pierce,  22  N.  H.  275,  55  Am.  Dec. 
151;  Congregational  Society  v.  God- 
dard, 7  N.  H.  430. 

New  York. — Seymour  v.  Cowing, 
4  Abb.  Dec.  (N.  Y.)  200;  Claflin  v. 
Tushler,  66  Barb.   (N.  Y.)   649. 

North  Carolina. — Carrington  v. 
Waff,  112  N.  C.  115,  16  S.  E.  1008. 

Rhode  Island. — Sweet  v.  Stevens, 
7  R.  I.  375. 

South  Carolina. — Barton  v.  Ander- 
son, 4  Rich.  (S.  C.)  507. 

South  Dakota. — McCormick  Har- 
vesting Mach.  Co.  V.  Faulkner,  7  S. 
D.  363,  64  N.  W.  163,  58  Am.  St.  R. 
839. 

Tennessee. — Alexander  v.  Wilkes, 
11  Lea  (Tenn.)  221;  Breedon  v. 
Grigg,  8  Baxt.    (Tenn.)  163. 

Utah. — State  Bank  v.  Burton,  14 
Utah  420,  48  Pac.  402. 

Vermont. — Jarvis  v.  Rogers,  3  Vt. 
336. 

Wisconsin. — Hillsdale  College  v. 
Thomas,  40  Wis.  661. 

United  States. — Burke  v.  Dulaney, 
153  U.  S.  228,  14  Sup.  Ct.  816;  Ware 
V.  Allen,  128  U.  S.  590,  9  Sup.  Ct. 
174,  32  L.  Ed.  565;  Burnes  v.  Scott, 
117  U.  S.  582;  Quebec  Bank  v.  Hell- 
man,  110  U.  S.  178,  4  Sup.  Ct.  76,  28 
L.  Ed.  111. 

See  Jennings  v.  Moore  (Mass. 
1905),  75  N.  E.  214. 


313] 


EFFECT    OF    CONDITIONS    OR   AGREEMENTS. 


412 


one  desires  to  vary  its  terms  or  to  contradict  them."^^  So  it  is  said  in 
another  case :  "Of  course,  no  rule  is  more  elementary  than  that  parol 
contemporaneous  evidence  is  inadmissible  to  contradict  or  vary  the 
terms  of  a  valid  written  instrument.  But  the  rule  is  almost  equally 
well  settled  that  parol  evidence  may  he  given  to  prove  the  existence 
of  any  separate  parol  agreement  constituting  a  condition  precedent  to 
the  attaching  of  any  obligation  under  the  written  instrument.  This  is 
not  to  vary  a  written  instrument,  but  to  prove  that  no  contract  was 
ever  made, — that  its  obligation  never  commenced."''^  That  a  delivery 
should  be  conditional,  it  is  not  necessary  that  express  words  to  that  ef- 
fect should  be  used  at  the  time.  That  conclusion  may  be  drawn  from ' 
all  the  circumstances  which  properly  form  a  part  of  the  entire  trans- 
action, whether  in  point  of  time  they  precede  or  accompany  the  de- 
livery.^* But  while  it  is  competent  for  a  maker  to  show  by  parol  that 
the  note  was  to  become  a  binding  agreement  only  on  the  happening  of 
a  certain  contingency  and  that  the  contingency  has  not  happened,  yet 
his  proof  must  be  reasonably  certain  to  that  end.^^ 

§  313.  Same  subject  continued — Application  of  rule. — In  the  ap- 
plication of  the  general  rule  it  has  been  decided  that  a  maker  may 
show  in  defense  to  an  action  by  the  payee  of  a  note  that  such  note  was 
to  become  a  valid  contract  only  upon  the  performance  of  a  condition 
that  a  certain  building  should  be  leased  to  the  defendant  by  a  third  - 
person  and  that  such  lease  was  never  made,^^  or  that  it  was  to  be  valid 
only  on  the  condition  that  the  transaction  in  which  it  was  given  was 
approved  by  a  certain  attorney  and  that  such  attorney  has  refused  to 
approve  thereof."  And  in  an  action  on  a  note  given  to  an  agent  of  an 
insurance  company  by  the  maker  at  the  time  of  his  making  an  applica- 
tion for  insurance  evidence  is  admissible  to  show  that  the  delivery  was 
not  absolute  but  that  the  note  was  to  take  effect  only  upon  the  arrival 
of  the  policy  and  its  being  satisfactory  and  accepted  by  the  defend- 
ant.^^ And  it  may  be  shown  that  the  note  was  given  to  become  an  ab- 
solute obligation  of  the  maker  in  the  event  of  his  electing,  upon  ex- 


"McFarland  v.  Sikes,  54  Conn. 
250,  252,  7  Atl.  708,  1  Am.  St.  R.  Ill, 
per  Park,  C.  J. 

^  Smith  V.  Mussetter,  58  Minn. 
159,  161,  59  N.  W.  995,  per 
Mitchell,  J. 

=^  Wilson  V.  Powers,  131  Mass. 
539,  541,  per  Devens,  J. 


^=Elwell  V.  Turney  (Wash.  1905), 
81  Pac.  1047. 

'"Smith  V.  Mussetter,  58  Minn. 
159,  59  N.  W.  995. 

"Ware  v.  Allen,  128  U.  S.  590,  9 
Sup.  Ct.  174,  32  L.  Ed.  563. 

'*  Graham  v.  Remmel  (Ark.  1905), 
88  S.  W.  899. 


413  CONDITIONxVL   DELIVERY — BONA    FIDE    HOLDERS.  [§    314 

amination  or  investigation,  to  take  a  certain  interest  in  property,  and 
was  delivered  and  accepted  only  as  a  memorandum  of  what  the  maker 
was  to  pay  in  case  he  decided  to  take  such  interest  and  that  he  never 
decided  to  accept  the  interest  referred  to.^°  So  where  subscription 
notes  were  executed  to  an  institution  on  conditions  which  were  not 
expressed  therein,  it  was  decided  that,  in  an  action  against  the  receiver 
to  determine  the  liability  of  the  makers  to  creditors,  it  might  be  shown 
by  the  subscribers  what  the  conditions  were  on  which  such  notes  were 
given,  and  that  they  were  not  performed,  such  evidence  not  being  con- 
tradictory or  avoiding  their  effect,  but  going  to  show  that  the  notes 
never  went  into  effect.'**'  Where,  however,  a  bill  or  note  is  not  to  be- 
come a  binding  obligation  upon  the  maker  until  the  performance  of  a 
certain  condition,  and  by  the  connivance  or  consent  of  the  maker  it  is 
not  performed,  he  cannot  avail  himself  of  non-performance  as  a  de- 
fense to  an  action  on  the  instrument.*^  One  who  relies  on  such  a  de- 
fense has  the  burden  of  establishing  it.*^ 

§314.  Same  subject — Effect  upon  third  parties — Bona  fide  hold- 
ers.— It  is  no  defense  to  an  action  by  a  bona  fide  holder  of  a  note 
against  the  maker  that  the  latter  delivered  the  instrument  to  the  payee 
under  an  agreement  that  it  was  to  take  effect  only  upon  the  happening 
of  a  certain  event  or  the  performance  of  some  condition  and  that  it 
was  transferred  to  the  holder  prior  to  tlie  occurrence  of  the  event  or  the 
performance  of  the  condition  upon  which  its  taking  effect  depended.*^ 

™  Burke  v.  Dulaney,  153  U.  S.  228,  Minnesota. — Mendenhall  v.  Ulrich 

14  Sup.  Ct.  816,  38  L.  Ed.  698.  (Minn.  1905),  101  N.  W.  1057. 

"» Catt  V.  Oliver,  98  Va.  580,  36  S.  Missouri.— Dono\a.n    v.    Fox,    121 

E.  980.  Mo.  236,  25  S.  W.  915;   Jennings  v. 

^'Batavian    Bank    v.    North,    114  Todd,  118  Mo.  296.  24  S.  W.  148,  40 

Wis.  637,  90  N.  W.  1016.  Am.  St.  R.  373;  Henshaw  v.  Dutton, 

"Perley  v.  Perley,  144  Mass.  104,  59  Mo.  139. 

10  N.  E.  726.  ISlew  Yorfc.— Chase  National  Bank 

*^  Georgia. — Goodman   v.    Fleming,  v.  Faurot,  149  N.  Y.  532,  44  N.  E. 

57  Ga.  350.  164;  Cowles  v.  Gridley,  24  Barb.  (N. 

Illinois.— Foj    v.    Blackstone,    31  Y.)  301. 

111.  538,  83  Am.  Dec.  246.  Compare     Dodd      v.      Dunne,     71 

Indiana.— Clanin   v.   Esterly   Har-  Wis.    578,    37    N.    W.    430,    holding 

vesting  Mach.  Co.,  118  Ind.  372,  21  where   one   executed   a   note    for   a 

N.  E.  35,  3  L.  R.  A.  863.  purchase    of    land,    it    being   agreed 

Iowa. — Grafif    v.    Logue,    61    Iowa  that    the    note    should    take    effect 

704,  17  N.  W.  171;  Gage  v.  Sharp,  24  when  the   contract   for  the  sale  of 

Iowa  15.  the  land  was  consummated,  and  the 

Maine. — Wait  v.  Chandler,  63  Me.  payee  took  the  note  from  the  mak- 

257;  Adams  v.  Smith,  35  Me.  324.  er's  desk,  though  without  objection 


I 


§  315] 


EFFECT  OF  CONDITIONS  OR  AGREEMENTS. 


414 


This  rule  is  based  upon  the  familiar  principle  that  where  one  of  two 
parties  must  suffer  by  reason  of  the  fraud  or  misconduct  of  another 
the  loss  must  be  borne  b}^  the  one  who  has  put  it  in  the  power  of  such 
third  person  to  so  act.**  Upon  proof,  however,  of  the  fact  that  a  note 
was  delivered  to  the  payee  to  take  effect  upon  the  performance  of  some 
condition  or  the  happening  of  some  contingency  the  burden  then  rests 
on  a  plaintiff  to  show  that  he  is  a  bona  fide  holder  without  notice/^ 
And  as  against  an  assignee,  with  notice  of  the  condition  attending  the 
delivery  of  a  bill  or  note,  the  defense  of  non-performance  is  availa- 
ble.*^ And  an  assignee  who  takes  a  note  for  indemnity  is  held  to  take 
it  subject  to  equities  existing  between  the  original  parties,  and  there- 
fore to  the  defense  of  a  failure  of  the  contingency  or  conditions  upon 
which  the  note  was  to  take  effect.'*^ 

§  315.  Condition  that  other  signatures  be  procured. — Where  a 
note  is  signed  by  a  person  upon  the  condition  that  it  is  not  to  take 
effect  until  the  signature  of  another  has  been  procured  it  may  be  shown 
in  defense  to  an  action  on  the  paper  by  a  payee  or  holder  with  notice 
of  such  fact  that  there  has  been  a  breach  of  the  condition  upon  which 
defendant  affixed  his  signature  to  the  paper.*^   So  where  a  person  signs 


by  the  latter,  that  a  hona  fide  pur- 
chaser could  not  recover  thereon,  as 
there  was  no  delivery  of  the  note. 
See  §  13  herein  as  to  "Execution  or 
Delivery  Procured  by  Force  or 
Fraud."  See  §  20  herein  as  to 
"Want  of  Delivery." 

"Galvin  v.  Syfers,  22  Ind.  App. 
43,  52  N.  E.  96,  per  Wiley,  J. 

*^Mendenhall  v.  Ulrich  (Minn. 
1905),  101  N.  W.  1057. 

^«  Shufeldt  V.  Gillilan,  124  111.  460, 
16  N.  E.  879;  French  v.  Wallack, 
12  N.  Y.  St.  R.  159.  See  Stricklin 
V.  Cunningham,  58  111.  293. 

'■Brooks  V.  Whitson,  7  Sm.  &  M. 
(Miss.)   513. 

*^  Alabama. — First  National  Bank 
V.  Dawson,  78  Ala.  67. 

Georgia. — Clark  v.  Bryce,  64  Ga. 
486;  Cleghorn  v.  Robison,  8  Ga.  559. 

Illinois. — Stricklin  v.  Cunning- 
ham, 58  111.  293. 

Iowa. — Daniels  v.  Gower,  54  Iowa 
319,  3  N.  W.  424.  6  N.  W.  525. 


KentuCrcy. — Murphy  v.  Hubble,  2 
Duv.  (Ky.)  247;  Bivins  v.  Helsley, 
4  Mete.  (Ky.)  78;  Coffman  v.  Wil- 
son, 2  Mete.  (Ky.)   542. 

Minnesota.  —  German-Amer.  Nat. 
Bank  v.  People's  Gas  &  Elec.  Co.,  63 
Minn.  12,  65  N.  W.  90;  Yellow  Medi- 
cine County  Bank  v.  Tagley,  57 
Minn.  391,  59  N.  W.  486. 

Neiv  York. — Twenty-Sixth  Ward 
Bank  v.  Stearns.  148  N.  Y.  515,  42 
N.  E.  1050;  Miller  v.  Gamble,  4  Barb. 
(N.  Y.)  146;  Alexander  v.  Wilkes, 
11  Lea  (Tenn.)   221. 

Texas. — Reynolds  v.  Dechaums,  24 
Tex.  174. 

Washington. — Seattle  v.  Griffith 
Realty  &  Bkg.  Co.,  28  Wash.  605,  68 
Pac.  1036;  Young  v.  Smith,  14 
Wash.  565,  45  Pac.  45. 

English. — Leaf  v.  Gibbs,  4  Car.  & 
P.  466.  Compare  Garrison  v.  Nel- 
son (Tex.  1892),  19  S.  W.  248.  hold- 
ing that  a  maker  cannot  defend 
against  a  note  payable  to  a  creditor 


II 


415  TflAT    OTHER   SIGNATURES    BE    PROCURED.  [§    316 

a  note  as  surety  and  leaves  it  with  the  principal  pa3'or,  on  condition 
that  the  signature  of  another  be  obtained  before  delivering  the  same,  it 
may  be  shown  in  an  action  by  the  payee  or  holder  with  notice  that  the 
instrument  was  delivered  in  violation  of  such  condition,  as  the  payor 
will  be  regarded  as  the  agent  of  the  surety  in  such  a  case.*®  And 
where  a  note  is  signed  by  a  surety  for  a  principal  who  is  to  sign  as 
maker,  and  it  is  delivered  to  the  payee  to  obtain  such  signature  and  to 
hold  for  his  debt  when  so  signed,  the  failure  to  obtain  the  signature 
of  the  principal  will  discharge  the  surety  as  between  the  parties.^"  And 
the  discharge  of  a  surety  on  account  of  the  breach  of  such  a  condition 
will  operate  as  a  discharge  of  subsequent  co-sureties.^^  Again  the  fact 
that  paper  has  been  so  delivered  may  be  shown  as  against  a  transferee 
without  a  valuable  consideration  or  after  maturity. '^^  So  the  transfer 
of  a  note  by  the  maker,  with  the  name  of  an  indorser  thereon,  to  a  third 
party,  without  any  act  of  transfer  from  the  payee  and  witliout  his 
knowledge,  does  not  impress  upon  the  signature  of  the  indorser  the 
legal  quality  of  a  full  indorsement  or  invest  the  holder  with  a  legal 
title  thereto,  and  in  an  action  by  him  against  the  indorser,  the  latter 
may  show  that  the  note  was  intrusted  to  the  maker  upon  the  express 
condition  that  the  signature  of  the  defendant  was  not  to  be  considered 
as  an  indorsement  unless  the  indorsement  of  the  payee  should  also  be 
procured  at  once.^^ 

§  316.  Same  subject  continued. — This  question  as  to  the  liability 
of  a  party  who  has  signed  negotiable  paper  on  the  condition  that  the 
signature  of  another  person  be  obtained  where  it  has  been  delivered  in 
violation  of  sucli  condition  has  generally  arisen  where  a  person  has 
affixed  his  name  to  a  note  as  a  surety  under  an  agreement  that  another 

on  the  ground  that  a  condition,  that  of   opinion   that  they  cannot   claim 

another  party  was  to  sign  the  note  immunity    from    liability    upon    the 

as  maker,  had  been  broken  and  dis-  ground    that   other    parties   equally 

tinguishing    between    the    case    of  liable  with  them  failed  to  sign  the 

sureties    and    indorsers    and    those  note  as  obligors." 

primarily  liable.    The  court  said  in  ''"Hubble  v.  Murphy,  1  Duv.  (Ky.) 

this  case,   per   Davidson,   J.:     "The  278. 

distinction    in    such    cases    between  ^°  Knight  v.  Hurlbut,  74  111.  133. 

one    originally    liable    for   the    debt  "  Daniels  v.  Gower,  54   Iowa  319, 

and  partners  or  indorsers  primarily  3  N.  W.  424,  6  N.  W.  525. 

liable,  is,  in   our  opinion,  one  of  a  "Merchants'    Exchange    Bank    v. 

most     material     character.      As     to  Luckow,  37  Minn.  542,  35  N.  W.  434. 

such  former  parties,  that  is,  parties  ^^  Gibson   v.   Miller,   29   Mich.   355, 

primarily  liable  for  the  debt,  we  are  18  Am.  Rep.  98. 


I 


317] 


EFFECT    OF    CONDITIONS    OR   AGEEEMEN'TS. 


41G 


person  shall  sign  the  same  before  it  is  to  become  binding  against  the 
former  as  surety.  In  this  class  of  cases  it  is  a  general  rule  that  such 
a  defense  is  not  available  to  defeat  an  action  by  a  payee  without  notice 
or  a  hona  fide  holder  against  a  party  to  the  instrument  who  has  signed 
the  same  upon  such  a  condition.^^  Where,  however,  a  non-negotiable 
note  is  signed  by  a  surety  on  the  condition  that  the  signatures  of  other 
persons  as  sureties  be  obtained  if  the  note  is  delivered  to  the  payee 
without  a  compliance  with  such  condition  and  comes  into  the  hands  of 
a  holder  without  notice  it  is  held  that  the  delivery  in  violation  of  the 
agreement  may  be  shown  as  a  defense  even  in  an  action  by  such  a 
holder.^^ 

§  317.  Delivery  in  escrow. — It  may  be  shown  in  defense  to  an  ac- 
tion by  the  payee  that  the  instrument  was  delivered  in  escrow  to  a 
third  party,  who  has  delivered  the  same  to  the  payee  in  violation  of  the 
conditions  imposed  and  of  which  the  payee  had  knowledge.  Evidence 
to  this  effect  does  not  contradict  or  vary  the  terms  of  the  written  in- 
strument but  rather  shows  that  as  between  the  parties  thereto  it  has 


"  Arkansas. — Craighead  v.  Build- 
ing &  Loan  Ass'n,  69  Ark.  332,  63 
S.  W.  668;  Tabor  v.  Merchants'  Na- 
tional Bank,  48  Ark.  454,  3  S.  W. 
805,  3  Am.  St.  R.  241. 

Georgia. — Clark  v.  Bryce,  64  Ga. 
486;  Bonner  v.  Nelson,  57  Ga.  433. 

Indiana. — Whitcomh  v.  Miller,  90 
Ind.  384;  Deardorff  v.  Foresman,  24 
Ind.  481. 

loiva. — Micklewait  v.  Noel,  69 
Iowa  344,  28  N.  W.  630. 

Kentucky. — Smith  v.  Moberly,  10 
B.  Mon.  (Ky.)  266,  52  Am.  Dec.  543. 

Minnesota. — "Ward  v.  Hackett,  30 
Minn.  150,  14  N.  W.  578,  44  Am.  Rep. 
187. 

Missouri. — North  Atcheson  Bank 
v.  Gay,  114  Mo.  203,  21  S.  W.  479; 
Bank  of  Missouri  v.  Phillips,  17  Mo. 
29. 

Nebraska. — Brumbach  v.  Bank,  46 
Neb.  540,  65  N.  W.  198. 

Nem  Hampshire.  —  Merriam  v. 
Rockwood,  47  N.  H.  81. 


North  Carolina. — Gwyn  v.  Patter- 
son, 72  N.  C.  189. 

Tennessee. — Lookout  Bank  v.  Aull, 
93  Tenn.  645,  27  S.  W.  1014,  42  Am. 
St.  R.  934. 

Texas. — Davis  v.  Gray.  61  Tex. 
506. 

Vermont. — Farmers'  &  M.  Bank  v. 
Humphrey,  36  Vt.  554,  86  Am.  Dec. 
671;  Dixon  v.  Dixon,  31  Vt.  450,  76 
Am.  Dec.  128;  Passumpsic  Bank  v. 
Goss,  31  Vt.  315. 

See  Dair  v.  United  States,  16 
Wall.   (U.  S.)  1. 

Compare  Ayres  v.  Milroy,  53 
Mo.  516,  14  Am.  Rep.  465. 

Effect  of  Subsequent  Verbal  Prom- 
ise.— Where  a  note  has  been  de- 
livered in  violation  of  such  a  condi- 
tion a  subsequent  verbal  promise  by 
a  surety  to  pay  the  note,  made  with- 
out any  consideration,  will  not  be 
sufficient  to  bind  him.  Loving  v. 
Dixon,  56  Tex.  75. 

^^  Daniels  v.  Gower,  54  Iowa  319, 
6  N.  W.  525. 


■I 


417 


DELIVERY    IX    ESCROW. 


[§   317 


never  acquired  any  binding  force  by  reason  of  the  fact  that  there  has 
been  no  legal  delivery  thereof.^**  And  such  a  defense  may  also  be  avail- 
able against  an  indorsee  with  notice.'^'^  But  where  a  payee  is  ignorant 
of  a  condition  attached  to  the  delivery  of  such,  paper,  as  where  the 
signature  of  another  is  to  be  obtained  before  it  is  delivered  and  it  is 
delivered  without  obtaining  such  signature,  it  is  held  to  be  no  defense 
against  the  payee,  who,  in  such  a  case,  is  said  to  occupy  the  position 
of  a  bona  fide  holder,^^  against  whom  the  defense  that  a  note  was 
placed  in  escrow  to  be  delivered  on  the  performance  of  some  condition 
or  the  occurrence  of  some  event  and  that  it  has  been  delivered  in  vio- 
lation of  the  conditions  imposed,  cannot  be  set  up.^^  So  it  has  been 
declared  that:  "It  is  perfectly  well  settled  that  any  arrangement 
made  between  parties  that  a  bond  or  instrument  is  to  be  held  in  escrow 
and  not  to  be  delivered  except  in  certain  contingencies  would  be  bind- 
ing between  tlie  parties  to  the  arrangement ;  but  the  law,  as  applied  to 
negotiable  paper,  is  equally  well  settled  that  if  the  note  passes  for  value 
to  a  third  person  without  notice  of  such  arrangement,  he  is  to  be  pro- 
tected."®"   And  if  a  note  when  executed  is  by  agreement  of  the  parties 


"  Davis  V.  Bower,  29  Colo.  App. 
422.  68  Pac.  292;  Mills  v.  Williams, 
16  S.  C.  593.  "It  is  well  settled  that 
where  a  writing  obligatory  is  placed 
in  the  hands  of  a  third  party  to  be 
held  in  escrow,  and  to  be  delivered 
to  either  party  upon  conditions  to 
be  performed  by  him,  a  delivery  to 
him  without  such  performance  will 
not  constitute  a  delivery  as  to  the 
other  party,  and  as  to  such  party 
the  instruments  will  be  without 
force."  Per  Zollars,  C.  J.,  in  String- 
er V.  Adams,  98  Ind.  539,  541.  Com- 
pare Martin  v.  Witty,  104  Mo.  App. 
262,  78  S.  W.  829. 

"Boutelle  v.  Wheaton,  13  Pick. 
(Mass.)  499;  Brown  v.  Willis,  13 
Ohio  26. 

''Jordan  v.  Jordan,  10  Lea 
(Tenn.)  124,  43  Am.  Rep.  291. 

'■"District  of  Columbia. — Hutchin- 
son V.  Brown,  19  Dist.  Col.  136. 

Indian  Territory.  —  Garrett  v. 
Campbell,  2  Ind.  Terr.  301,  51  S.  W. 
956. 

Joyce  Defenses — 27. 


Iowa. — Graff  v.  Logue,  61  Iowa 
704,  17  N.  AV.  171. 

Massachusetts. — Fearing  v.  Clark, 
16  Gray  (Mass.)  74,  77  Am.  Dec. 
394. 

Nebraska. — Morris  v.  Morton,  14 
Neb.  358,  15  N.  W.  725. 

New  York. — Vallett  v.  Parker,  6 
Wend.  (N.  Y.)  615;  Moore  v.  Miller, 
6  Lans.  (N.  Y.)  396;  Woodhull  v. 
Holmes,  10  Johns.   (N.  Y.)  231. 

In  some  ca^es,  however,  it  is 
held  that  delivery  is  essential  to 
render  the  instrument  operative  and 
that  in  such  a  case  there  has  never 
been  a  delivery  of  such  a  character 
as  will  bind  a  party,  in  the  absence 
of  further  facts  which  would  charge 
him  with  negligence  in  allowing  the 
instruments  to  be  negotiated. 

Wisconsin. — See  Roberts  v.  Wood, 
38  Wis.  60;  Roberts  v.  McGrath,  38 1 
Wis.  52;  Chipman  v.  Tucker,  38 
Wis.  43,  20  Am.  Rep.  1. 

""Hutchinson  v.  Brown,  19  Dist. 
Col.  136,  per  Mr.  Justice  Cox. 


318] 


EFFECT    OF    CONDITIONS    OR  AGREEMENTS. 


418 


delivered  to  a  third  person  by  whom  delivery  is  to  be  made  to  the  payee 
upon  the  performance  of  a  condition  precedent,  the  delivery  is  held  to 
become  complete  upon  the  performance  of  the  condition,  though  this 
does  not  occur  until  after  the  death  of  the  maker.®^  Upon  proof  that 
a  bill  was  delivered  in  escrow  the  holder  then  has  the  burden  of  show- 
ing that  he  is  a  bona  fide  holder.^^ 

§  318.  Same  subject — Payee  without  notice.- — The  fact  that  there 
was  an  agreement  between  a  maker  and  his  co-makers  or  an  indorser, 
surety  or  guarantor  that  the  instrument  is  to  be  delivered  to  the  payee 
upon  the  performance  of  some  condition  or  happening  of  some  event 
will  be  no  defense  to  an  action  by  the  payee  on  the  instrument  to  whom 
it  was  delivered  with  no  notice  or  knowledge  of  such  agreement.*^^   The 


"  Gandy  v.  Bissell's  Estate  (Neb. 
1904),  100  N.  W.  803,  citing  Wheel- 
wright V.  Wheelwright,  2  Mass.  447, 
3  Am.  Dec.  66. 

BUT  SEE  In  re  Helfenstein,  77 
Pa.  St.  328,  18  Am.  Rep.  449,  hold- 
ing that  where  a  note  is  delivered 
to  a  third  person  to  be  in  force  upon 
the  acceptance  by  the  payee  of  cer- 
tain conditions  and  such  conditions 
are  not  accepted  by  the  payee  until 
after  the  maker's  death,  it  is  to  be 
construed  as  an  offer  merely  which 
is  countermanded  by  the  death  of 
the  maker  and  that  there  can  be  no 
recovery  on  the  same. 

"Vallett  V.  Parker,  6  Wend.  (N. 
Y.)  615. 

See  Flour  City  Bank  v.  Connery, 
12  Man.  R.  305,  wherein,  under  the 
Bills  of  Exchange  Act,  1890,  §  3Q, 
sub  sec.  2  (53  Vict.  33),  providing 
that  "every  holder  of  a  bill  is  prima 
facie  deemed  to  be  a  holder  in  due 
course;  but,  if  in  an  action  on  a  bill, 
it  is  admitted  or  proved  that  the 
acceptance,  issue  or  subsequent  ne- 
gotiation of  the  bill  is  affected  with 
fraud,  duress  or  force  and  fear,  or 
illegality,  the  burden  of  proof  that 
he  is  such  a  holder  in  due  course 
shall  be  on  him,  unless  and  until  he 


proves  that,  subsequent  to  the  al- 
leged fraud  or  illegality,  value  has 
in  good  faith  been  given  for  the  bill 
by  some  other  holder  in  due  course," 
it  was  decided  that  in  an  action  by 
the  indorsee  against  the  maker  of  a 
note  the  latter  was  entitled  to  de- 
fend without  giving  evidence  to  re- 
but presumption  that  plaintiff  was 
not  a  holder  in  due  course  where  he 
had  filed  an  affidavit  that  the  note 
had  been  handed  by  him  to  another 
to  hold  in  escrow  until  certain  ac- 
counts between  him  and  the  payee 
had  been  settled  and  that  it  had 
been  delivered  over  to  the  payee 
in  violation  of  such  condition.  And 
it  was  decided  also  that  in  such  a 
case  the  burden  rests  on  the  plain- 
tiff to  show  both  that  he  had  given 
value  and  had  done  so  in  good  faith. 

^^  Alabama. — Sharp  v.  Allgood,  100 
Ala.  183,  14  So.  16. 

Georgia. — Clark  v.  Bryce,  64  Ga. 
486. 

Indiana. — Whitcomb  v.  Allen,  90 
Ind.  384;  Deardorff  v.  Foresman,  24 
Ind.  481. 

Iowa. — Nicklewait  v.  Noel,  69 
Iowa  344. 

Kansas. — Carter  v.  Moulton,  51 
Kan.  9,  32  Pac.  633. 


i 


419  DELIVERY  IN  ESCROW.  [§§  319,  3 "30 

following  from  the  opinion  in  a  case  in  Kansas,  in  which  this  question 
is  considered,  is  pertinent  in  this  connection;  "Where  a  negotiahle 
promissory  note,  perfect  in  form,  executed  by  a  number  of  persons,  is 
entrusted  to  one  of  the  makers  by  all,  we  think  there  is  a  presumption 
that  the  party  so  holding  the  note  has  authority  to  deliver  it  to  the 
payee.  When  a  note  so  executed  is  presented  by  the  principal  to  the 
payee  without  any  notice  to  the  payee  of  any  understanding  between 
the  makers  affecting  the  right  of  the  principal  to  deliver  to  the  payee, 
we  tliink  he  is  justified  in  assuming  that  the  parties  who  so  signed  the 
note  intended  to  be  bound  thereby,  and  that  he  may  receive  the  note 
and  deliver  to  the  principal  the  consideration  therefor,  without  first 
making  inquiries  of  the  other  parties  to  the  instrument  for  the  pur- 
pose of  learning  whether  there  are  any  secret  agreements  or  under- 
standings affecting  the  instrument."®* 

§  319.  Same  subject — Where  paper  taken  as  security  for  an  ante- 
cedent debt. — As  against  one  who  has  taken  paper  merely  as  security 
for  an  antecedent  debt,  without  any  other  consideration,  it  has  been 
decided  that  an  indorsee  may  set  up  the  defense  that  he  signed  the  pa- 
per under  an  agreement  in  respect  to  its  delivery  on  the  performance 
of  some  condition,  and  that  it  has  been  delivered  in  violation  of  such 
condition,  the  holder  in  this  case  being  declared  not  to  be  a  bona  fide 
holder  for  value.® '^ 

§  320.  That  instrument  is  to  be  void  or  payable  on  contingency. 
A  note  which  is  absolute  upon  its  face,  providing  unconditionally  for 
the  payment  of  a  specified  sum  of  money,  and  which  is  a  complete  and 
perfect  instrument  cannot  be  varied  by  parol  evidence  of  an  inde- 
pendent collateral  agreement  showing  that  it  was  to  be  either  void  or 

Kentucky. — Gano    v.    F  a  r  m  e  r  s'  Texas. — Davis    v.    Gray,    61    Tex. 

Bank.  103  Ky.  508,  45  S.  W.  519.  506. 

Missouri. — North    Atchison    Bank  Compare  Dunn  v.  Smith,   12  Sm. 

V.  Gay,  114  Mo.  203,  21  S.  W.  479.  &  M.  (Miss.)   602. 

Nebraska. — Brumback  v.  Bank,  46  "^  Per  Allen,  J.,  in  Carter  v.  Moul- 

Neb.  540,  65  N.  W.  198.  ton,  51  Kan.  9,  32  Pac.  63,  27  Am. 

New    HampsMre.—M  e  r  r  i  a  m   v.  St.  R.  259,  20  L.  R.  A.  309. 

Rockwood,  47  N.  H.  81.  "=■  Prentiss  v.  Graves,  33  Barb.  (N. 

South  Carolina. — Fowler  v.  Allen,  Y.)  621. 

32  S.  C.  229,  10  S.  E.  947,  7  L.  R.  A.  See    as    to    such    transfer,    §  246 

745.  herein. 

Tennessee. — Jordan  v.  Jordan,  10 
Lea  (Tenn.)  124. 


320] 


EFFECT    OF    CONDITIONS    OR   AGREEMENTS, 


420 


payable  only  upon  the  performance  of  some  condition  or  the  happen- 
ing of  some  contingency.®*'  So  in  an  action  on  a  note  evidence  is  not 
admissible  of  an  oral  agreement  that  the  note  should  be  void  in  case 
there  was  a  total  failure  of  crops  on  the  land  for  the  rent  of  which 
the  obligation  was  given. ®^  And  a  verbal  agreement  at  the  time  notes 
were  executed  that  in  case  the  makers  should  dissolve  partnership  the 
notes  should  be  returned  to  them  and  that  the  partnership  was  subse- 
quently dissolved  is  held  not  admissible  in  evidence  to  defeat  an  action 
by  the  payee.®^  So  it  was  held  proper  to  exclude  evidence  of  an  agree- 
ment that  the  note  sued  upon  "was  not  to  be  paid  unless  called  for 
during  the  lifetime  of"  the  payee, •'^  or,  in  the  case  of  a  note  given  for 
money  advanced  to  carry  on  a  partnership  business,  that  the  note  was 
only  to  be  paid  in  tlie  event  that  the  affairs,  of  the  co-partnership 
should  prove  to  be  prosperous,''^  or,  in  an  action  upon  notes  given  to 
attorneys,  that  they  were  not  to  be  paid  unless  the  payees  should  be 
successful  in  a  suit  they  were  to  bring,  and  for  the  bringing  of  which 
the  note  was  given,'' ^  or,  in  the  case  of  a  note  and  mortgage  given  to 
secure  the  purchase  money  for  certain  real  estate  upon  which  there 
was  a  mill,  that  the  maker  was  only  to  be  liable  if  the  property  should 


^Federal. — Gorrell  v.  Home  Life 
Ins.  Co.,  63  Fed.  371,  11  C.  C.  A. 
240. 

Connecticut. — Converse  v.  Moul- 
ton,  2  Root  (Conn.)  195. 

Georgia. — Stafford  v.  Staunton,  88 
Ga.  298,  14  S.  E.  479;  Adams  v.  Rob- 
inson, 69  Ga.  627. 

Illinois. — Walker  v.  Crawford,  56 
111.  444,  8  Am.  Rep.  701;  Foy  v. 
Blkckstone,  31  111.  538,  83  Am.  Dec. 
246;  Harlow  v.  Boswell,  15  111.  57; 
Remy  v.  Graves.  12  111.  287. 

Michigan. — Hyde  v.  Tenwinkel  26 
Mich.  85. 

Minnesota. — Curtice  v.  Hokanson, 
38  Minn.  510,  38  N.  W.  694. 

Missouri. — Henshaw  v.  Button,  59 
Mo.  139,  143. 

Nebraska. — Western  Mfg.  Co.  v. 
Rogers,  54  Neb.  456,  74  N.  W.  849; 
Van  Etten  v.  Howell,  40  Neb.  850, 
59  N.  W.  859. 

New  York. — Erwin  v.  Saunders,  1 


Cow.  (N.  Y.)  249,  13  Am.  Dec.  520; 
Ely  V.  Kilborn,  5  Denio  (N.  Y.)  514. 

Pemisylvania.— Rogers  v.  Dono- 
van, 13  Phila.  (Pa.)  51. 

Vermont. — Hatch  v.  Hydes,  14  Vt. 
25,  39  Am.  Dec.  203;  Farnhani  v. 
Ingham,  5  Vt.  514. 

EnglisU. — Rawson  v.  Walker,  1 
Starkie  161;  Free  v.  Hawlcins,  8 
Taunt.  92,  1  Moore  535. 

But  see  Lyons  v.  Stills,  97  Tenn. 
514,  37  S.  W.  280. 

"  Neverman  v.  Bank  of  Cass 
County,  14  Okla.  417,  78  Pac.  382 
(action  by  holder  with  notice). 

*' Oppenheimer  v.  Kruckman  (N. 
Y.  App.  Div.  1903),  84  N.  Y.  Supp. 
129. 

""Boody  v.  McKenney,  23  Me.  517, 
522. 

'"  Jones  V.  Shaw,  67  Mo.  667. 

"West  v.  Kelly's  Ex'rs,  19  Ala. 
353,  54  Am.  Dec.  192. 


421  PAYABLE   ON    HAPPENING    OF   CONTINGENCY.  [§    321 

• 

be  destroyed  by  fire,'-  or,  that  the  payment  of  the  note  should  be  condi- 
tional upon  the  allowance  by  the  ordinar}'  of  a  claim  against  the  es- 
tate by  the  payee,"  or  that  the  makers  would  not  be  called  upon  to  pay 
it  unless  the  money  should  be  actually  needed  and  required  for  the 
support  of  the  payee  during  her  lifetime/*  or  that  at  the  time  the 
maker  signed  and  delivered  the  note  it  was  agreed  that  the  same  should 
not  be  payable  unless  he  should  be  found  to  have  certain  funds  suffi- 
cient to  pay  it,^^  or  that  he  would  not  be  obliged  to  pay  it  unless  he 
received  the  amount  thereof  from  a  third  party.'^^  Again  where  a 
contemporaneous  contract  is  to  be  construed  as  a  part  of  a  note  a  de- 
fendant cannot  introduce  evidence  in  an  action  by  the  payee  of  a  col- 
lateral understanding  or  agreement,  inconsistent  with  the  terms  of  the 
contract,  that  the  note  is  to  be  payable  only  upon  the  happening  of  a 
contingency.'^^  But  where  a  person  took  paper  with  notice  of  an  agree- 
ment that  it  was  not  to  be  paid  by  the  acceptors  until  the  maker  should 
collect  a  certain  claim  from  the  county  for  building  a  courthouse, 
which  condition  was  omitted  from  the  instrument  by  mistake,  and  the 
claim  had  not  been  collected,  and  due  diligence  was  b'eing  used  by  the 
maker  to  collect  it,  it  was  held  that  the  indorsee  could  not  recover 
against  the  acceptor. '^^  Again  where  an  order  for  the  payment  of 
money  is  payable  out  of  a  certain  payment  to  which  the  maker  will  be 
entitled  under  a  contract  with  the  acceptor  the  latter  may  show  in  de- 
fense to  an  action  thereon  that  the  maker  was  never  entitled  to  such 
payment  by  reason  of  his  failure  to  perform  certain  conditions  which 
were  conditions  precedent  to  his  right  thereto. '** 

§  321.     Same  subject — Happening  of  contingency  prevented  by  act 

of  maker. — If  the  time  of  the  payment  of  a  note  is  actually  dependent 

"Farmer  v.   Perry,   70   Iowa   358,  paid  "unless  it  was  established"  in 

30  N.  W.  752.  court  that  the  plaintiff  was  the  own- 

"McGrath  v.  Barnes,  13  S.  C.  328,  er  of  the  land  for  the  rent  of  which 

36  Am.  Rep.  687.  .  it  was  given. 

"Osborn  v.  Taylor,  58  Conn.  439,  "Greer  v.  Bently,  19  Ky.  Law  R. 

20  Atl.  605.  1251,  43  S.  W.  219.     The  court,  how- 

"  Adams      v.      Wilson,      12      Met.  ever,  declared  in  this  case  that  it  did 

(Mass.)  138,  45  Am.  Dec.  240.  not  decide  that  there  could  eventu- 

"Torpey  v.   Tebo,   184   Mass.   307,  ally  be  no  recovery  if  the  claim  was 

68  N.  E.  223.  not  paid. 

"Prouty.  V.  Adams,  141   Cal.   304,  '"Glidden    v.    Massachusetts    Hos- 

74  Pac.   545,  so  holding  where  the  pital  L.  I.  Co.,  187  Mass.  538,  73  N. 

defendant   sought   to   introduce  evi-  E.  538.     See  §§  343-346  herein  as  to 

dence,  outside  of  the  contract,  of  an  conditions  in  note, 
agreement  that  the  note  need  not  be 


§  323]        EFFECT  OF  CONDITIONS  OR  AGREEMENTS.  422 

* 

upon  the  happening  of  some  contingency  either  by  reason  of  a  con- 
temporaneous agreement  which  may  be  construed  with  the  note,  or 
from  the  terms  of  the  note  itself,  and  the  happening  of  such  contin- 
gency is  prevented  by  some  act  of  the  maker  he  cannot  avail  himself 
of  the  fact  that  it  has  not  happened  as  a  defense  to  an  action  against 
him.^^  So  where  there  was  an  agreement  between  the  parties  that  a 
note  was  not  to  be  paid  if  certain  mines  belonging  to  the  maker  should 
yield  no  profits  and  before  they  had  yielded  any  he  sold  and  conveyed 
them  to  a  stranger  it  was  held  that  he  had  voluntarily  committed  an 
act  which  rendered  it  impossible  for  the  contingency  upon  which  the 
note  would  become  due  and  payable  to  ever  arise  and  that  when  he  did 
that  he  violated  his  contract  and  the  note  at  once  became  due  and  pay- 
able.^ ^  And  where  it  was  conditioned  that  payment  of  a  note  need  not 
be  made  in  case  a  certain  decision  was  rendered  against  the  maker,  it 
was  decided  that  the  latter  could  not  avail  himself  of  such  condition 
as  a  defense  to  an  action  on  the  instrument  where  he  had  rendered  the 
fulfillment  of  such  condition  impossible  by  a  compromise  of  the  suit 
by  his  own  voluritary  act.^-  And  in  this  connection  it  has  been  decided 
that  one  who  accepts  a  bill  on  the  condition  that  he  can,  prior  to  its 
maturity,  sell  certain  goods  of  the  drawer,  may  show  in  defense  to  an 
action  against  him  on  his  acceptance  that  the  goods  have  been  attached 
by  the  drawer's  creditors.®^ 

§  322.  Conditions  affecting:  consideration. — While  parol  evidence 
is  not  admissible  to  vary  the  terms  of  an  instrument  yet  it  is  compe- 
tent to  show  a  want  or  failure  of  consideration  in  actions  between  the 
parties  and  therefore  in  an  action  on  a  note  by  a  payee  evidence  will 
be  admitted,  for  such  a  purpose,  of  a  failure  to  perform  a  contempo- 
raneous agreement  which  was  the  consideration  for  the  note.^*     It  is 

'"  Crocker  v.  Holmes,  65  Me.  195,  California. — Stockton    Savings    & 

20     Am.     Rep.     687;     Vandemal     v.  L.   Soc.  v.  Giddings,  96  Cal.  84,  30 

Dougherty,    17    Mo.    277;    Clark    v.  Pac.  1016,  21  L.  R.  A.  406,  31  Am. 

Condit,  11  Mo.  79.  St.  R.  181;   Braly  v.  Henry,  71  Cal. 

"Wold  v.  Marsh,  54  Cal.  228.  481,  11  Pac.  385,  12  Pac.  623,  60  Am. 

*^Rightor  v.  Aleman,  4  Rob.  (La.)  Rep.  543;  Goodwin  v.  Nickerson,  51 

45.  Cal.  166. 

«=>  Brown  v.  Coit,  1  McCord  (S.  C.)  Georgia. — Lightfoot    v.    West,    98 

408.  Ga.  546,  25  S.  E.  587. 

^*  Alabama. — Barlow  v.  Fleming,  6  Idaho. — Maydole    v.     Peterson,     7 

Ala.  146.  Idaho  502,  63  Pac.  1048. 

Arkansas. — Gale  v.  Harp,  64  Ark.  Illinois. — Hill    v.    Enders,    19    111. 

462,  43  S.  W.  144.  163;  Penny  v.  Graves,  12  111.  287. 


433 


CONDITIONS   AFFECTING    CONSIDERATION. 


[§   32-3 


said  in  this  connection  that  although  a  note  is  absolute  in  its  terms,  it 
is  competent  for  the  maker  in  an  action  brought  on  it,  either  by  the 
payees  or  their  indorsees,  with  notice  of  the  original  agreement  under 
which  it  was  made,  to  avail  himself  of  any  defense  of  want  or  failure 
of  consideration  growing  out  of  such  agreement  and  consequently  to 
show  what  were  the  terms  thereof.*^    And  a  transferee  after  maturity 


Indiana. — Booth  v.  Fitzer,  82  Ind. 
66;  Jeffries  v.  Lamb,  73  Ind.  202. 

Iowa. — Simpson  College  v.  Bryan, 
50  Iowa  293. 

Kansas. — Dodge  v.  Oatis,  27  Kans. 
762. 

Kentucky. — McVicker  v.  Shrop- 
shire, 6  J.  J.  Marsh  (Ky.)  328. 

Massachusetts. — Shoe  &  Leather 
National  Bank  v.  Wood,  142  Mass. 
563,  8  N.  E.  753;  Hawks  v.  Trues- 
dell,  12  Allen  (Mass.)  564. 

Michigan. — Brown  v.  Smedley,  136 
Mich.  65,  98  N.  W.  856;  Fink  v. 
Chambers,  95  Mich.  508,  55  N.  W. 
375;  Sutton  v.  Beckwith,  68  Mich. 
303,  36  N.  W.  79,  13  Am.  St.  R.  344. 

Minnesota. — Slater  v.  Foster,  62 
Minn.  150,  64  N.  W.  160;  Wager  v. 
Brooks,  37  Minn.  392,  34  N.  W.  745. 

New  Hampshire. — Shepherd  v. 
Temple,  3  N.  H.  455. 

Nexo  York. — Juilliard  v.  Chaffee, 
92  N.  Y.  529;  O'Brien  v.  McDonald, 
78  Hun  (N.  Y.)  420,  60  N.  Y.  St.  R, 
748,  29  N.  Y.  Supp.  191;  Small  v. 
Smith,  1  Denio  (N.  Y.)  583. 

North  Carolina. — Sydnor  v.  Boyd, 
119  N.  C.  481,  26  S.  E.  92.  37  L.  R. 
A.  734;  Sayre  v.  Mohney,  30  Oreg. 
238,  47  Pac.  197. 

Pennsylvania. — Clinch  Valley  Coal 
&  I.  Co.  V.  Willing,  180  Pa.  St.  165, 
36  Atl.  737,  57  Am.  St.  R.  626;  Clar- 
idge  V.  Kleet,  15  Pa.  St.  255. 

Wisconsin. — Smith  v.  Carter,  25 
Wis.  283. 

United  States. — Brown  v.  Noyes, 
2  Woodb.  &  M.  (U.  S.)  75,  Fed.  Cas. 
No.  2023.  See  Weeks  v.  Medler,  20 
Kan.  57. 


If  a  collateral  agreement  which 
forms  the  consideration  of  a  note  is 
not  performed,  and  the  condition  is 
that  upon  non-performance,  the  note 
shall  be  returned,  the  terms  of  the 
condition  should  be  performed.  If 
the  note  is  transferred  to  another, 
the  maker  may  pay  the  same  and 
recover  as  damages  from  the  trans- 
ferer the  amount  so  paid  not  in  ex- 
cess of  the  principal  and  interest. 
Serviss  v.  Stockstill,  30  Ohio  St. 
418. 

^Dulles  v.  De  Forest,  19  Conn. 
190,  per  Storrs,  J.  See  also  Small 
v.  Smith,  1  Denio  (N.  Y.)  583.  But 
see  Jennings  v.  Todd,  118  Mo.  296, 
24  S.  W.  148,  40  Am.  St.  R.  373,  in 
which  the  court  distinguished  be- 
tween notice  of  a  condition  to  be 
performed  and  knowledge  at  time 
of  purchase  of  a  breach  of  such  a 
condition  and  says:  "We  think, 
however,  that  no  well  considered 
case  can  be  found  in  which  a  col- 
lateral contemporaneous  agreement,- 
providing  that  the  note  should  not 
be  paid  in  the  event  that  an  execu- 
tory contract,  which  was  considera- 
tion of  the  note,  should  not  be  per- 
formed, has  been  allowed  to  defeat 
the  negotiability  of  the  note  in  the 
hands  of  an  indorsee,  though  he  had 
notice  of  such  agreement.  A  great 
part  of  the  improvement  of  the 
country,  and  of  business  generally, 
is  carried  on  with  money  raised  by 
the  discount  of  notes  given  upon 
executory  contracts,  and  if  the 
maker  could  be  allowed  to  defend 
against   such   notes,    in    case    of    a 


§    323]  EFFECT    OF    CONDITIONS   OR   AGREEMENTS.  42-1 

is  also  subject  to  this  defense.^ ^  So  a  maker  of  a  note  may  also  show 
in  defense  to  an  action  thereon  that  it  was  given  in  consideration  of 
an  executory  contract  by  the  payee  which,  is  impossible  of  perform- 
ance.^^ If,  however,  the  consideration  of  a  note  is  an  agreement  by 
the  payee  to  subsequently  perform  some  act  at  the  request  of  the 
maker,  the  latter  must,  in  order  to  establish  the  defense  of  want  or 
failure  of  consideration,  show  that  he  requested  the  payee  to  do  such 
act  and  that  he  failed  to  do  it.  This  is  subject,  however,  to  the  excep- 
tion that  it  is  sufficient  to  show  an  incapacity  on  the  part  of  the  payee 
to  do  the  promised  act,  constituting  the  consideration,  and  if  the  payee 
was  legally  incapable  of  doing  the  act,  it  would  be  unnecessary  to  make 
the  request.^*  In  such  cases  the  burden  does  not  rest  upon  the  payee  to 
show  that  he  has  performed  the  condition  which  was  the  consideration 
for  the  note  but  upon  the  maker  to  show  that  he  has  not.^® 

§  323.  Same  subject — Application  of  rule  generally. — Where  a 
promissory  note  was  given  in  consideration  of  an  agreement  to  furnish 
a  policy  of  insurance  on  the  life  of  the  maker's  wife  of  which  the  hus- 
band was  to  be  the  beneficiary,  the  failure  to  perform  such  agreement 
will  be  a  good  defense  to  an  action  against  the  maker  on  the  note.^** 
And  where  a  note  and  bond  are  to  be  construed  as  forming  parts  of  the 
one  and  same  contract  and  it  is  apparent  that  the  note  would  not  have 
been  given  without  the  bond,  which  formed  the  principal  if  not  the 
entire  inducement  to  the  making  of  the  note,  and  the  stipulations  of  the 
bond  have  not  been  performed,  it  constitutes  a  failure  of  consideration 
which  may  be  shown  to  defeat  an  action  by  any  one  not  a  bona  fide 

breach   of  contract,   on   the   ground        *' Billings  v.  Everett,  52  Cal.  661; 

that  the  indorsee,  though   in  other  Perkins  v.  Oilman,  8  Pick.   (Mass.) 

respects  bona  fide,  had  knowledge  of  229;  Hill  v.  Huntress,  43  N.  H.  480; 

the   transaction    out   of   which    the  Rogers  v.  Broadnax,  24  Tex.  538. 
notes   grew,  all   confidence   in  such        "  German  American  Security  Go's 

notes  as  negotiable  paper  would  be  Assignee   v.   McCulloch    (Ky.   C.   A. 

destroyed  and  such,  business  would  1905),  89  S.  W.  5. 
be  paralyzed.    By  making  and  deliv-        ^  Nelson  v.  Lovejoy,  14  Ala.  568. 
ering  a  negotiable  note  the  maker        *'  Jennison    v.    Stafford,    1    Gush, 

is  held  to  intend  that  it  may  be  put  (Mass.)    168,  so  holding  where  the 

in  circulation  and  that  no  defenses  consideration   for  the   note   was  an 

against    it    exist.     *     *     *     if    the  agreement  to  forbear  to  sue  a  third 

breach  had  occurred  to  the  knowl-  person  for  a  certain  period, 
edge  of  the  indorsee  when  he  pur-        '"' Sydnor  v.  Boyd,  119  N.  C.  481, 

chased,  he  would  not,  of  course,  be  26  S.  E.  92,  37  L.  R.  A.  734. 
protected."    Per  Macfarlane,  J. 


II 


425  CONDITIONS   AFFECTING    CONSIDERATION.  [§    324 

holder."^  So  where  a  surety  signed  a  note  upon  a  condition  that  the 
payee  should  advance  the  principal  a  sum  of  money  which  he  failed  to 
do  it  was  held  that  there  was  a  failure  of  consideration,  of  which  the 
surety  might  avail  himself  as  a  defense  to  an  action  by  the  payee.°^ 
And  where  a  person  indorsed  a  note  under  an  agreement  that  certain 
collateral  should  be  deposited  to  secure  the  payment  of  the  note  it  was 
decided  that,  in  an  action  by  the  indorsee,  who  was  a  party  to  such 
agreement,  it  might  be  shown  that  such  collateral  had  not  been  de- 
posited.^^ And  in  such  an  action  against  an  indorser  it  has  been  held 
improper  to  exclude  evidence  showing  that  the  defendant  indorsed  the 
note  as  collateral  security  for  a  debt  owing  to  the  plaintiff  by  the  maker 
upon  the  former  agreeing  to  discontinue  a  suit  therefor  against  the 
maker  which,  however,  he  did  not  do  but  proceeded  to  obtain  a  judg- 
ment and  execution  ajid  to  have  a  levy  made  upon  the  goods  of  the 
debtor.^*  Again  it  has  been  decided,  where  a  note  was  given  for  part 
of  the  consideration  for  the  lease  of  certain  lands  and  by  the  terms  of 
the  lease  contract  the  entire  possession  and  use  of  the  leased  premises 
was  guaranteed  for  a  certain  time,  that  in  an  action  on  the  note  the  de- 
fendant, upon  proof  of  a  breach  of  such  agreement,  was  entitled  to  an 
offset  therefor.^^ 

§  324.  Same  subject — When  not  a  defense. — Where  the  promises 
are  independent  of  each  other  and  the  collateral  agreement  did  not 
constitute  the  whole  consideration  for  the  note  but  is  separable  from 
the  other  parts  thereof  it  has  been  decided  that  a  non-performance  of 
such  agreement,  not  amounting  to  an  entire  failure  or  want  of  con- 

"  Griffith  V.   Shipley,   74  Md.  591,  son,  17  Ark.  254,  holding,  where  a 

601,  22  Atl.  1107,  14  L.  R.  A.  405.  note  was  given  for  the  purchase  of 

'*Bushley    v,    Reynolds,    31    Ark.  land,  that  the  breach  of  an  agree- 

657.  ment     to     release     certain     encum- 

»*  Baumgardner  v.  Reeves,  35  Pa.  brances    thereon    was    no    defense. 

St.  250.  Clough  V.  Baker,  48  N.  H.  254,  hold- 

•*  Bookstaver   v.   Jayne,   60   N.   Y.  ing,  where  a  note  was  given  for  the 

146-  purchase  price  of  a  dentist's  busi- 

■"  Stirling     v.     Gray     (Tex.     Civ.  ness,  that  the  breach  of  an  agree- 

App.  1904),  81  S.  W.  789.  ment  not  to  practice  dentistry  with- 

»•  Comelander  v.  Bird,  11  Ala.  913,  in    certain    limits    was   no   defense, 

holding  where  a  note  was  given  for  SEE   Stewart  v.  Anderson,  59   Ind. 

the   purchase   of  a   brickyard,   that  375;    Gibson    v.    Newman,    1    How. 

the  breach  of  an  agreement  not  to  (Miss.)  341;  Plumb  v.  Niles,  34  Vt. 

make  bricks  in  the  same  town,  will  230. 
not  defeat  recovery.     Key  v.   Hen- 


§    324]  EFFECT   OF    CONDITIONS    OR  AGREEMENTS.  42G 

sideration,  will  not  be  a  defense  to  an  action  on  the  instrument.""  So 
it  has  been  said  that :  "There  is  a  class  of  cases  where  the  agreement 
does  not  go  to  the  whole  consideration  on  both  sides,  and  where  the 
supposed  condition  is  distinctly  separable  from  other  parts  of  the 
agreement,  so  that  much  of  the  contract  may  be  performed  on  both 
sides,  as  though  the  condition  were  not  there,  it  will  be  held  as  a  stipu- 
lation, the  breach  of  which  only  gives  an  action  to  the  injured  party/'"'^ 
So  where  a  promissory  note  was  payable  absolutely  it  was  held  to  be 
no  defense  that  the  consideration  therefor  was  a  sale  of  a  horse  upon 
the  condition  that  if  the  purchaser  was  dissatisfied  with  the  horse  he 
might  return  it  within  three  months  and  that  he  was  dissatisfied  and 
had  offered  to  return  it  within  the  time  specified.  The  transfer  of  the 
possession  of  the  horse  in  this  case  was  declared  to  be  sufficient  con- 
sideration for  the  note,  it  being  said  that  the  consideration  had  never 
failed  and  that  the  evidence  of  such  agreement  would,  if  competent, 
prove  an  agreement  to  give  up  the  note  on  the  happening  of  a  contin- 
gency thus  engrafting  a  condition  upon  an  absolute  promise  and  by 
force  thereof  defeating  a  recovery.''^  And  where  a  new  agreement  is  en- 
tered into  by  the  original  parties  to  a  note  as  a  substitute  for  the  old 
one  the  failure  of  the  original  consideration  will  be  no  defense  to  an 
action  by  a  bona  fide  holder  against  the  maker.®®  ISTor  are  defenses  of 
this  character  available  to  defeat  an  action  by  a  hoj2u  fide  holder.^"*' 
It  has  also  been  held  to  be  no  defense  to  an  action  against  one  who  has 
accepted  a  bill  of  exchange  in  consideration  of  certain  payments  being 
made  by  the  payee  that  he  has  violated  the  agreement,  it  being  de- 
clared that  there  is  no  failure  of  consideration  so  long  as  he  is  by  such 
promise  legally  obligated  to  make  the  payments.^®^     And  similarly 

"Hickman  v.   Rayl,   55   Ind.   551,  ing  that,  where  paper  is  of  a  char- 

558,  per  Biddle,  J.  acter  which  maltes  it  a  common  law 

°^  Allen      V.      Furbish,      4      Gray  obligation  and  it  is  not  placed  upon 

(Mass.)  504,  64  Am.  Dec.  87.  the  footing  of  bills  of  exchange,  it 

"'Young  V.  Grundy,  7  Cranch  (U.  may   be   shown   even   as   against   a 

S.)  548,  3  L.  Ed.  435.  bona  fide  holder  that  there  has  been 

^"*  Cowing  V.  Cloud,  16  Colo.  App.  a  non-performance  of  the  conditions 
326,  65  Pac.  417;  Martina  V.  Muhlke,  in  consideration  of  which  it  was 
186  111.  327,  57  N.  E.  954;  Beatty-  given.  That  non-performance  of 
ville  Bank  v.  Roberts,  25  Ky.  Law  agreement  or  condition  is  no  de- 
Rep.  1796,  78  S.  W.  901;  Cunning-  fense  against  a  bona /Ide  holder  gen- 
ham  V.  Potter,  23  Ky.  Law  Rep.  847,  erally,  see  §§  307,  308,  herein. 
64  S.  W.  493.  Compare  Schnabel  v.  ^"'Vanstrum  v.  Liljengren,  37 
German-American  Title  Co..  21  Ky.  Minn.  191,  33  N.  W.  555. 
Law  Rep.  1063,  53  S.  W.  1031,  hold- 


427  CONDITIONS   AFFECTING    CONSIDERATION.  [§    325 

where  a  note  is  given  to  a  person  in  consideration  of  liis  promise  to  pay 
a  certain  note  due  from  the  maker  to  a  third  person  it  has  been  decided 
that  the  payment  of  the  latter  note  is  not  a  condition  to  be  performed 
before  the  payee  can  sue  on  the  note  to  him.^*'- 

§  325.  Same  subject — Performance  prevented  by  maker — Non- 
performance by  maker.^And  a  maker  cannot  avail  himself  of  a  fail- 
ure of  consideration  by  reason  of  the  non-performance  of  such  an 
agreement  where  he  was  the  cause  of  such  failure.^*^^  So  where  a  bond 
was  given  for  the  conveyance  of  certain  lands  to  the  obligee  upon  his 
payment  of  certain  notes  when  they  came  due,  and  upon  his  failure  to 
pay  such  notes  the  obligor  conveys  away  the  land  he  cannot  enforce 
the  notes,  since  having  elected  to  claim  a  forfeiture  by  conveying  the 
land,  he  cannot  subsequently  enforce  notes  given  in  consideration  of 
such  a  conveyance  to  the  maker, ^°*  And  it  is  no  defense  to  an  action 
on  a  note  given  on  account  of  a  claim  under  an  agreement  that  a  cer- 
tain judgment  should  be  discharged  "when  notes  to  be  agreed  upon  are 
given"  that  there  has  been  no  satisfaction  of  the  judgment  entered,  it 
not  having  been  proven  that  such  other  notes  had  been  given.^"^  Again 
where  the  consideration  for  a  note  is  an  agreement  that  there  shall  be 
a  stay  of  proceedings  against  the  maker  and  that  a  satisfaction  on  the 
judgment  shall  be  entered  when  certain  notes  to  be  agreed  upon  are 
given  it  is  held  that  an  action  on  the  note  cannot  be  defeated  by  proof 
of  such  agreement  and  that  it  has  not  been  performed  by  the  payee 
where  there  is  no  evidence  showing  that  the  other  notes  have  been 
given.^*"* 

"^  Logan  v.  Hodges,  6  Ala.  699.  fore,  without  consideration.  *  *  * 
^*"Cook  V.  "Whitfield,  41  Miss.  541;  The  moment  one  party  fails  to  per- 
Wheeler  v.  Bancroft,  18  N.  H.  537,  form,  he  forfeits  the  right  to  exact 
so  holding  where  a  note  was  given  the  consideration  from  the  other; 
for  a  conveyance  of  a  right  of  flow-  but  that  does  not  deprive  the  latter 
age,  such  conveyance  to  be  void  on  of  the  power  of  enforcing  a  corn- 
failure  of  the  maker  of  the  note  to  pliance;  nor  does  it  absolve  him, 
pay  certain  sums  secured  thereby  having  enforced  it,  from  rendering 
at  the  times  specified,  and  the  con-  the  equivalent  that  would  have  been 
dition  of  the  conveyance  was  broken  due  upon  a  prompt  and  seasonable 
by  his  failure  to  pay.  The  court  compliance."  Per  Gilchrist,  J. 
said  in  this  case:  "If  the  purchaser  ^"*  Little  v.  Thurston,  53  Me.  86. 
omit  to  pay,  the  vendor  may  enforce  See  McKeen  v.  Page,  18  Me.  140; 
the  contract  by  a  suit  upon  the  Arbuckle  v.  Hawks,  20  Vt.  538;  Por- 
notes,  and  the  defendant  cannot  ter  v.  Vaughn,  26  Vt.  624. 
say  that,  by  failing  to  pay  at  the  "'  Klett  v.  Claridge,  31  Pa.  St.  106. 
day,  he  has  lost  the  benefit  of  the  ^"^  Klett  v.  Claridge,  31  Pa.  St.  106. 
purchase,  and  the  notes  are,  there-  See  Shepherd  v,  Merrill,   20  N.   H. 


I 


§§  326,  327]    EFFECT  OF  CONDITIONS  OR  AGREEMENTS.        428 

§326.  Same  subject — Agreement  not  to  do  certain  acts. — Where 
a  note  is  given  in  consideration  of  an  agreement  not  to  do  certain 
acts  the  non-performance  of  such  agreement  will  constitute  a  failure 
of  consideration  which  will  be  a  good  defense  to  an  action  on  the  note 
by  the  payee.  Thus  it  has  been  so  held  in  the  case  of  a  note  given  in 
consideration  of  an  agreement  not  to  sell  any  more  patent  rights  dur- 
ing the  life  of  the  payor  ;^^''  or  not  to  sell  a  certain  class  of  merchan- 
dise at  a  specified  place  ;^°^  or  not  to  take  possession  of  mortgaged 
property  or  foreclose  the  same  for  a  certain  length  of  time."®  Such  a 
defense,  however,  cannot  be  set  up  against  a  bona  fide  holder  for  value 
and  without  notice.  ^^'^ 

§  327.  Same  subject — ^Purchase  price  notes. — In  the  case  of  a  pur- 
chase price  note  evidence  is  often  admissible  of  a  contemporaneous 
agreement,  which  is  to  be  construed  with  the  note  as  one  contract,  for 
the  purpose  of  showing  that  there  has  been  a  failure  of  consideration 
as  a  defense  to  an  action  thereon.^ ^^  So  in  such  an  action  evidence 
was  held  admissible  of  a  contemporaneous  agreement  that  if  part  of 
the  trade  should  fail  the  whole  contract  should  terminate  and  that  the 
notes  need  not  be  paid  unless  the  trade  was  consummated.^^^  And 
where  a  purchaser  of  a  threshing  machine  had  given  a  note  therefor,  he 
was  permitted  to  show  that  there  was  an  agreement  between  him  and 
the  seller  that  the  latter  would  take  the  machine  back  if  it  did  not  work 
satisfactorily  and  that  it  had  not  so  worked,  and  that  he  had  so  noti- 
fied the  plaintiff  and  had  offered  to  return  it.^^^  And  where  an  action 
is  brought  on  a  note  given  in  consideration  of  a  contract  to  convey 
lands  by  the  payee,  the  latter  cannot  recover  without  showing  a  per- 
formance of  the  contract,  that  is,  the  execution  and  delivery  of  a  deed 

415,  in  which  it  is  declared  that  in  ^"^  Mader  v.  Cool,  14  Ind.  App.  299. 

all  mutual  covenants  or  agreements,  42  N.  E.  945. 

if  the  party  who  is  the  first  to  per-  ^°"  Kenney  v.  Wells,  23   Ind.  App. 

form  fails,  he  becomes  by  such  fail-  490,  55  N.  E.  774. 

ure  disenabled  to  require  the  other  ""  Mader  v.  Cool,  14  Ind.  App.  299, 

party  to  perform,  who  is  thereby  in  42  N.  E.  945. 

a  position  in  which  he  may  elect  to  "^Bailey  v.  Cromwell,  4  111.  71; 
abandon  the  contract  entirely  or  to  Jessup  v.  Trout,  77  Ind.  194;  Hub- 
sue  the  delinquent  party  or  to  ac-  bard  v.  Galusha,  23  Wis.  398. 
cept  his  tardy  compliance  with  its  "^  Ela  v.  Kimball,  30  N.  H.  126. 
terms,  if  tendered.  Per  Gilchrist,  J.  "'  Marion  Mfg.  Co.  v.  Harding,  155 
'0'  Ray  v.  Moore,  24  Ind.  App.  480,  Ind.  648,  58  N.  E.  194.  See  Westing- 
56  N.  E.  937.  house  Co.  v.  Gainor,  130  Mich.  393, 

90  N.  W.  52. 


439  CONDITIONS   AFFECTING    CONSIDERATION.  [§    328 

as  called  for  by  the  contract  or  a  tender  of  performance  such  as  the  law 
requires.^^*  So  where  the  agreement  under  which  notes  are  given  is 
rescinded  by  the  payee  the  whole  transaction  is  terminated  and  he  can- 
not recover  thereon  as  the  consideration  for  which  they  were  given  has 
failed."^  Again  where  the  consideration  of  a  note  was  a  lease  under 
seal,  of  a  machine,  and  both  instruments  together  with  an  oral  agree- 
ment as  to  the  time  and  place  of  delivery  of  the  machine  were  all  parts 
of  one  transaction  it  was  decided  that  the  presence  of  the  seal  on  the 
lease  would  not  operate  to  prevent  the  defendant  from  showing  a  fail- 
ure of  consideration  by  non-delivery  of  the  machine  within  the  time 
specified."^  On  the  other  hand,  where  it  is  a  condition  of  the  contract 
that  it  shall  be  void  if  the  notes  are  not  paid  when  due,  if  the  payee 
elects  to  confirm  the  contract  and  brings  suit  on  the  notes,  it  is  decided 
that  the  defendant  cannot  set  up  the  fact  that  they  were  not  paid.^^^ 
If,  however,  a  notice  of  the  failure  of  consideration  is  by  the  agree- 
ment a  condition  precedent  to  the  right  to  set  it  up  as  a  defense,  such 
notice  must  be  given.^^^  And  if  one  makes  a  written  contract  as  agent 
of  another,  for  the  conveyance  of  an  interest  in  lands,  on  the  payment 
of  a  promissory  note,  which  is  given  as  a  consideration  therefor,  and 
the  contract  does  not  bind  the  principal  to  make  the  conveyance,  but 
the  agent  is  personally  responsible  for  damages  for  the  breach  of  the 
contract,  the  payment  of  the  note  cannot  be  avoided  for  want  or  fail- 
ure of  consideration."''  In  an  action,  however,  on  a  note  given  in 
pursuance  of  a  covenant  it  has  been  held  that  the  maker  cannot  im- 
peach the  consideration  thereof.^ ^^ 

§  328.     Same  subject — Purchase  price  notes — Subsequent  holders. 

Evidence  of  the  breach  or  non-performance  of  a  collateral  condition 
or  agreement  for  the  purpose  of  showing  a  want  or  failure  of  consider- 
ation is  not  admissible  to  defeat  an  action  on  a  purchase  price  note  by 
one  who  is  a  ho7ia.  fide  holder. ^-^    And  it  has  also  been  held  that  an  as- 

"*Hoag  V.  Parr,  13  Hun   (N.  Y.)  "^  Lane     v.     Manning,     8     Yerg. 

95,    98.      See    also    May    v.    Cole,    8  (Tenn.)  435,  29  Am.  Dec.  125. 

Blackf.  (Ind.)  479.  "**  Pritchard    v.    Johnsonr    60    Ga. 

"'  Campbell  Printing  Press  &  Mfg.  288. 

Co.   V.   Hickok,   140   Pa.   St.   290,   21  "» Dyer  v.  Burnham,  25  Me.  9. 

Atl.  362;   Flewellin  v.  Hale,  6  Yerg.  ""Fay  v.  Richards,  21  Wend.   (N. 

(Tenn.)    515.      See    also    Ewing    v.  Y.)  626. 

Wightman,    28    App.    Div.    (N.    Y.)  '=' Wilensky     v.     Morrison      (Ga. 

326,  51  N.  Y.  Supp.  268.  1905),  50  S.  E.  472;   Handy  v.  Wil- 

"' Burns  v.  Goddard  (S.  C,  1905),  son,  75  Ga.  840;  Bates  v.  Kemp,  13 

51  S.  E.  915.  Iowa  223;  Louisiana  Mutual  Ins.  Co. 


329] 


EFFECT   OF    CONDITIONS   OR   AGREEMENTS. 


430 


signee  before  maturify  is  not  subject  to  such  a  defense.^^^  But  it  is 
available  against  an  assignee  of  non-negotiable  paper,^^^  or  against  one 
who  is  not  a  hofia  fide  holder/ ^^  or  an  assignee  with  notice.^^^ 

§  329.  Same  subject — Agreement  to  render  services  or  labor. 
Where  the  consideration  for  a  note  is  an  agreement  to  perform  certain 
labor  or  services  in  the  future  a  non-performance  of  such  agreement 
constitutes  a  failure  of  consideration  which  will  defeat  a  recovery  on 
the  note  by  the  payee.  ^^'^  Performance  is  a  condition  precedent  in  such 
cases  and  if  prevented  by  the  death  of  the  one  obligated  to  perform 
there  can  be  no  recovery.^^'^  It  is  no  defense,  however,  to  an  action  on ' 
such  a  note  that  the  amount  specified  therein  is  in  excess  of  the  value 
of  the  services  rendered.^-"*   And  it  has  been  decided  that  a  bona  fide 


V.  Bait,  22  La.  Ann.  621;  Allen  v. 
Furbish,  4  Gray  (Mass.)  504,  64  Am. 
Dec.  87;  Coakley  v.  Christie,  20  Neb. 
509,  31  N.  W.  73;  Brockway  v.  Ma- 
son, 29  Vt.  519. 

^=^  Baldwin  v.  Killian,  63  III.  550; 
Nebraska  National  Bank  v.  Pen- 
nock,  55  Neb.  188,  75  N.  W.  554. 
Compare  Weber  v.  Orton,  91  Mo. 
677,  4  S.  W.  271. 

^^  Benton  v.  Klein,  42  Mo.  97.  See 
Second  National  Bank  v.  Wheeler, 
75  Mich.  546,  42  N.  W.  963. 

*^  Westinghouse  Co.  v.  Gainor,  130 
Mich.  393,  90  N.  W.  52;  Wright  v. 
Irwin,  33  Mich.  32. 

^  Johnson  v.  First  National  Bank, 
24  111.  App.  352;  Gorham  v.  Peyton, 
3  111.  363.  See  Pope  v.  Hays,  19  Tex. 
375. 

^^Corbin  v.  Sistrunk,  19  Ala.  203; 
Wood  v.  Kendall,  7  J.  J.  Marsh. 
(Ky.)  212.  See  Easton  Packing  Co. 
v.  Kennedy,  131  Cal.  XVIII,  63  Pac. 
130;  Richardson  &  Morgan  Co.  v. 
Gudewill,  61  N.  Y.  Supp.  1120. 

"'Voe  V.  Smith,  1  Smith  (Ind.) 
88. 

Compare  Hardin  v.  McKitrick,  5 
J.  J.  Marsh.  (Ky.)  667,  holding, 
where  a  note  was  given  to  an  attor- 
ney in  consideration  of  his  defend- 


ing a  certain  suit,  that  his  death  be- 
fore a  decision  was  rendered  did  not 
show  a  failure  of  consideration,  it 
appearing  that  the  case  was  decided 
in  favor  of  his  client,  and  there  be- 
ing no  evidence  that  other  counsel 
were  employed,  or  that  the  suit  was 
not  fully  prepared  by  the  attorney, 
or  that  he  could  have  done  anything 
further. 

127*  Forbes  v.  Williams,  13  111.  App. 
280.  It  was  declared  in  this  case 
that  where  a  note  is  given,  without 
fraud  or  imposition,  for  property  or 
services  which  are  not  of  certain 
value  fixed  by  law,  market  or  cus- 
tom, nor  exactly  ascertainable  by 
comparison  with  others  of  like  gen- 
eral character,  the  maker  will  be 
bound  by  his  own  estimate  of  it, 
however  extravagant  or  capricious, 
and  though  such  amount  is  based 
upon  an  estimate  by  the  party  for 
whom  they  are  rendered,  far  beyond 
the  value  of  others  of  general  like 
kind,  since  one  may  bind  himself  to 
pay  a  larger  sum  to  one  person  than 
that  for  which  he  could  procure  like 
services  from  another.  Per  Pleas- 
ants, J. 

See  Headley  v.  Good,  24  Tex.  232. 


431  NOTE  NOT  TO  BE  NEGOTIATED.  [§  330 

holder  of  a  note  given  for  services  of  a  physician  cannot  be  defeated  in 
an  action  to  recover  thereon  by  proof  that  the  physician  is  not  quali- 
fied to  practice.^"**  N^or  will  it  be  any  defense  to  an  action  on  such  a 
note  that  there  has  been  a  failure  of  consideration  by  reason  of  the 
non-performance  of  the  agreement  to  render  services  where  perform- 
ance has  been  prevented  by  the  act  of  the  maker.^-^  And  the  death  of 
the  maker  before  the  services  were  rendered  is  held  to  be  no  defense.  ^^9 
So  where  a  person  indicted  for  a  crime  employed  counsel  and  executed 
his  note  for  the  amount  of  the  fee,  and  then  before  his  trial  committed 
suicide,  the  fact  that  the  lawyer  did  not  perform  the  principal  service 
for  which  the  note  was  executed,  that  is,  the  defense  of  the  criminal 
on  his  trial,  was  held  to  be  no  ground  for  the  impeachment  of  the  con- 
sideration either  at  law  or  in  equity  because  the  non-performance  re- 
sulted from  the  act  of  the  obligor  himsell^^"  It  has  also  been  decided 
that  if,  at  the  request  of  the  party  with  whom  he  deals,  one  makes  his 
promissory  note,  which  is  to  be  a  partial  payment  for  a  piece  of  work 
to  be  done  for  him,  payable  to  a  third  party,  who  is  a  creditor  of  the 
party  with  whom  he  contracts  for  the  work,  and  it  is  credited  by  the 
payee  to  such  party,  in  good  faith,  the  maker  cannot  set  up  a  failure 
of  consideration  as  Between  himself  and  the  party  with  whom  he  deals, 
in  defense  of  a  suit  upon  such  note  in  the  name  of  the  payee. ^^'^ 

§  330.  Note  not  to  be  negotiated. — A  contemporaneous  oral  agree- 
ment that  a  note,  payable  to  a  certain  person,  shall  not  be  transferred 
by  the  payee,  cannot  be  shown  in  defense  to  an  action  on  the  instru- 
ment, as  to  allow  such  proof  would  be  to  contradict  the  written  con- 
tract. ^^^  ^Qj.  gjjjj  ^Yie  makers  of  a  note  defeat  a  recovery  by  the  payee 
by  showing  that  it  has  been  negotiated  contrary  to  its  terms  or  the 
agreement  of  the  parties  where  the  makers  themselves  have  put  it  into 
circulation. ^^^ 

'=•**  Roach    v.    Davis    (Tex.    App.  "' South  Boston  Iron  Co.  v.  Brown 

1900),  54  S.  W.  1070.  63  Me.  139. 

'''Adam  v.  Johnson,   11   Ky.   Law  »=  Johnson   v.   Washburn,   98   Ala. 

Rep.   137,   so  holding  where  a  note  258,  13  So.  48;  Dolson  v.  De  Ganah, 

was  given  to  an  attorney  under  an  70  Tex.  620,  8  S.  W.   321;    Knox  v. 

agreement  that  he  should  defend  the  Clifford,  38  Wis.   651,  20  Am.   Rep. 

maker  in  a  certain  criminal  action  28. 

and  the  latter  left  the  state  and  was  Compare    State   Bank   of   Indiana 

never  tried.  v.  Cook,  125  Iowa  111,  100  N.  W.  72. 

"'Hoadley  v.  Good,  24  Tex.  232.  '=^Wardell  v.  Hughes,  3  Wend.  (N. 

""  Mitcherson    v.    Dozier.    7    J.    J.  Y.)   418. 
Marsh.  (Ky.)  53,  22  Am.  Dec.  116. 


§§  331,  332]    EFFECT  OF  COXDITIONS  OR  AGREEMENTS.        432 

§  331.  As  to  place  of  payment. — Where  a  bill  or  note  contains  no 
place  for  payment  it  will  be  presumed  that  it  was  to  be  paid  in  the 
state  in  which  it  was  executed  and  delivered  and  parol  evidence  is  not 
admissible  to  show  that  it  was  to  be  paid  in  another  state.  In  such  a 
case  the  laws  of  the  state,  of  execution  and  delivery,  control  both  as  to 
interest  and  otherwise,  and  to  permit  the  introduction  of  such  evidence 
would  be  a  violation  of  the  rule  that  parol  evidence  is  not  admissible 
to  vary  or  contradict  the  terms  of  a  written  contract.^^*  So  in  an  ac- 
tion brought  in  Georgia  on  a  note  in  which  no  place  of  payment  was 
designated  it  was  held  that  evidence  that  the  note  was  by  agreement  to 
be  paid  in  Chicago  where  the  payee  resided  was  properly  excluded.^^^ 

§  332.  As  to  amount. — Where  the  amount  of  a  note  is  specified 
therein  parol  evidence  is  not  admissible  to  show  that  by  an  agreement 
between  the  parties  a  different  sum  than  that  stated  was  to  be  paid.^^'^ 
So  it  cannot  be  shown  that  in  a  certain  event  only  one-half  of  the 
amount  stated  therein  is  to  be  paid,^"  or  that  by  such  an  agreement  a 
certain  sum  was  to  be  indorsed  thereon  as  paid,^^^  or  that  an  account 
which  the  maker  held  against  the  payee  should  be  deducted  there- 
from,"^ or  that  it  was  agreed  that,  though  the  note  bears  interest  at  a 
specified  rate,  none  would  have  to  be  paid.^*"  And  a  maker  of  a  note 
cannot  show  in  an  action  against  him  that  there  was  an  oral  agree- 
ment that  a  certain  sum  should  in  the  future  be  credited  thereon  and 
that  the  note  should  only  be  obligatory  upon  him  for  the  balance."^ 

1^^  Moore  v.  Davidson,  18  Ala.  209.  ^^'  Smith  v.  Thomas,  29  Mo.  307. 

Examine  Specht  v.  Howard,  16  Wall.  ''*  Walters  v.  Armstrong,  5  Minn. 

(U.  S.)  564.  448.     See  Featherston  v.  Wilson,  4 

"'^Ray  V.   Anderson,   119   Ga.   926,  Ark.  154. 

47  S.  E.  205.  "°  Eaves  v.   Henderson,   17   Wend. 

"« AZa&ama.— Caldwell    v.    May,    1  (N.  Y.)  190. 

Stew.   (Ala.)   425.  ""Tinsdale  v.  Mallett  (Ark.  1904), 

Indiana. — Potter    v.     Earnest,    45  88  S.  W.  481. 

Ind.  418;  Swank  v.  Nichols,  24  Ind.  "*  "Whatever    appellant    may    be 

199.  ready  to  say  about  the  terms  of  his 

Iowa.— Atherton  v.  Dearmond,  33  promise   is   but   descriptive   of   that 

Iowa  353.  which  is  before  the  court  in  physi- 

Massachusetts.—Shed  v.  Pierce,  17  cal   form,   descriptive  of   itself;    no 

Mass.  623.  matter   soever  what  he   may   claim 

Minnesota. — Harrison     v.     Morri-  about  promises  to  pay,  and  amounts, 

son,  39  Minn.  319.  the  senses  of  the  court  cannot  fail 

Missouri. — Lane    v.    Price,    5    Mo.  to  discover  that  he  has  promised  to 

67.  pay  $840  'three  months  after  date,' 

Wisconsin. — Gregory    v.    Hart,    7  and  this  being  written,  permits  the 

Wis.  532.  proof  of  no  contrary  oral  promise  as 


433 


MODE    OR    MANNER   OF    PAYMENT. 


[§  333 


§  333.  As  to  mode  or  manner  of  payment. — A  collateral  inde- 
pendent agreement  that  a  note  is  to  be  discharged  or  paid  by  doing 
something  other  than  by  paying  money  or  in  a  manner  different  from 
that  specified  therein,  so  long  as  it  remains  unperformed  is  inopera- 
tive and  will  be  no  defense  to  an  action  on  the  note  by  the  payee/*-  or 
by  an  assignee.^*^  It  is  neither  payment  nor  accord  and  satisfaction 
until  performed.^**  So  it  has  been  held  proper  to  exclude  oral  testi- 
mony to  show  an  executory  agreement  that  a  note  was  to  be  paid  only 
out  of  a  certain  fund,"^  or  in  labor/ ^"^  or  by  an  exchange  of  other 


a  substitute."  Knight  v.  Walker 
Brick  Co.,  23App.  D.  C.  519,  524, 
per  Mr.  Justice  Wright. 

^*- Alabama. — Tuscaloosa  Cotton 
Seed  Oil  Co.  v.  Perry,  85  Ala.  158,  4 
So.  635;  Powe  v.  Powe,  42  Ala.  113; 
Thompson  v.  Rawles,  33  Ala.  29; 
Hair    v.    La    Brouse,    10    Ala.    548. 

Georgia. — Harper  v.  Wrigley,  48 
Ga.  495. 

Illinois. — Moore  v.  Prussing,  165 
111.  319,  46  N.  E.  184. 

Indiana. — Goldthwait  v.  Bradford, 
36  Ind.  149. 

Maine. — Cushing  v.  Wyman,  44 
Me.  121;  Merrill  v.  Mowry,  33  Me. 
455. 

Neio  York. — Woodin  v.  Foster,  16 
Barb.  (N.  Y.)  146. 

North  Carolina. — McRae  v.  Mc- 
Nair,  69  N.  C.  12. 

Texas. — Haley  v.  Harvey,  1  White 
&  W.  Civ.  Cas.  (Tex.  Ct.  App.), 
§  1096. 

Vermont. — Follett  v.  Eastman,  16 
Vt.  19. 

See  Harmon  v.  Adams,  120  U. 
S.  363;  Brown  v.  Spofford,  95  U.  S. 
474. 

Compare  State  Bank  v.  Whit- 
low, 6  Ala.  135. 

^*^  Alabama. — Sawyer  v.  Hill,  12 
Ala.  575. 

Indiana. — Goldthwait  v.  Bradford, 
36  Ind.  149. 

Missouri. — Bircher  v.  Payne,  7 
Mo.  462. 

Joyce  Defenses — 28. 


New  Hampshire. — Odiorne  v.  Sar- 
gent, 6  N.  H.  401. 

New  York. — Tredwell  v.  Lincoln, 
52  Hun  (N.  Y.)  614,  5  N.  Y.  Supp. 
341;  Franc  v.  Dickinson,  52  Hun 
(N.  Y.)  373,  5  N.  Y.  Supp.  303. 

Compare  Braly  v.  Henry,  71  Cal. 
481,  11  Pac.  385,  60  Am.  Rep.  543. 

Though  the  note  was  acquired  by 
the  holder  after  its  maturity  such  an 
agreement  has  been  held  no  defense. 
Crosly  V.  Tucker,  21  La.  Ann.  512. 
But  see  Shore  v.  Martine,  85  Minn. 
29,  88  N.  W.  254. 

'"  Tuskaloosa  Cotton  Seed  Oil  Co. 
V.  Perry,  85  Ala.  158,  167,  4  So.  635. 

"=  Gorrell  v.  Home  Life  Ins.  Co.,  63 
Fed.  371,  11  C.  C.  A.  240.  The  court 
here  said:  "The  contract  before 
us — the  note  in  suit — is  complete  in 
its  terms.  It  contains  an  absolute 
promise  to  pay  on  demand  a  stated 
sum,  and  the  consent  of  the  maker 
is  expressed  that  several  commis- 
sions accruing  to  his  account  may 
be  retained  by  the  company  and  ap- 
plied in  liquidation  of  the  obliga- 
tion. The  rule  that  where  an  oral 
agreement  has  been  but  partially  re- 
duced to  writing  the  whole  agree- 
ment is  open  to  proof  is  not  appli- 
cable. The  proof  proposed  here  was 
of  an  agreement  inconsistent  with 
the  writing,  which  in  itself  is  com- 
plete and   unambiguous.     The  writ- 

""  Odiorne  v.  Sargent,  6  N.  H.  401. 


§    334]  EFFECT    OF    CONDITIOXS    OR   AGREEMENTS.  434 

notes  held  by  the  maker  against  the  payee,"'  or  by  any  legal  claim 
which  the  maker  might  obtain  against  the  payee.^*^  Where,  however,, 
the  agreement  and  note  are  mutual  and  dependent  and  are  to  be  con- 
strued as  one  contract  such  a  defense  is  held  to  be  available  as  against 
an  indorsee  of  an  overdue  note  who  does  not  occupy  the  position  of  a 
lona  -fide  holder,"^  or  against  the  payee.^^**  And  an  agreement  made 
at  the  maturity  of  a  note  may  be  available  as  a  defense  where  made 
upon  a  sufficient  consideration.^^^ 

§  334.  Same  subject — Continued. — Such  an  agreement  with  the  at- 
torney of  the  payee  by  which  the  maker  was  to  perform  certain  serv- 
ices for  the  attorney  and  the  money  due  therefor  was  to  be  applied  in 
payment  and  discharge  of  the  note  cannot  be  set  up  in  defense  to  an 
action  thereon.^^^  Nor  can  the  maker  defeat  recovery  on  a  note  by 
proof  that  it  was  given  in  payment  for  stock  of  a  corporation  and  that 
it  was  to  be  paid  out  of  dividends  on  such  stock  and  that  no  dividends 
had  ever  been  declared  or  paid.^^^  Nor  can  it  be  shown  that  the  note 
in  suit  was  to  be  paid  in  trade,  the  payee  to  have  the  privilege  of  hir- 
ing or  otherwise  using  the  horses  and  carriages  belonging  to  the  maker 
and  of  not  paying  cash  for  such  use,  but  the  price  therefor  to  be  charged 
up  against  the  payee  from  time  to  time  until  the  full  amount  of  the 
note  was  paid.^^*    Again,  the  non-performance  of  a  contemporaneous 

ten  promise  to  pay  is  absolute.     By  ^"  Gleason  v.  Saunders,  121  Mass. 

the    proposed    proof    that    promise  436. 

would  have  been  nullified,  and  the  "=  Pioneer    Press   Co.   v.    Gossage, 

note    converted    into   an    agreement  13  S.  D.  624,  84  N.  W.  195. 

that  the  sum  named  should  be  paid  "=  Fuller  v.  Law,  207  Pa.  St.  101, 

out  of  accruing  commisions  and  not  56  Atl.  333. 

otherwise."     Per  Woods,  C.  J.  ^"Zinsser  v.  Columbia  Cab  Co.,  66 

But   see    Saffer    v.    Lambert,    111  App.    Div.    (N.    Y.)    514,    73    N.    Y. 

111.  App.  410.  Supp.  287.     In  this  case  the  court 

'"Sawyer  v.  Hill,  12  Ala.  575.  said:     "If  there  is  ahything  left  of 

"^Goldthwait  v.  Bradford,  36  Ind.  the    rule    that    a    contemporaneous 

149.  verbal     agreement,     which     contra- 

""  Hill  v.  Huntress,  43  N.  H.  480.  diets  in  terms  a  written  obligation 

''"State  Bank  of  Indiana  v.  Cook  sought  to  "be  enforced,  is  not  valid 

125  Iowa  111,  100  N.  W.  72,  holding  as  a  defense  to  an  action  to  enforce 

that  in  such  an  action  evidence  is  the  obligation,   it  would  seem  that 

admissible    of    a    contemporaneous  this  ruling  of  the  court  below  was 

written    agreement   that    the    notes  correct.    By  it  the  defendant  agreed 

were  to  be  paid  by  dividends  from  to  pay  so  many  dollars  at  a  time  and 

the    stocks    for    which    they    were  place  specified.    The  obligation  is  in 

given.  writing   signed   and    delivered,   and 


435  NOTE  TO  ADMINISTRATOR.         [§§  335,  336 

parol  agreement,  made  at  the  time  of  the  execution  of  a  note,  given 
for  the  amount  of  a  mortgage,  to  secure  the  reduction  of  interest  there- 
on, whereby  the  payee  agreed  to  deliver  the  bond  and  mortgage  to  the 
maker  upon  payment  by  the  latter  of  the  note  has  been  held  no  de- 
fense to  an  action  on  the  note  where  it  did  not  appear  that  there  had 
been  a  tender  of  the  money  due  thereon  and  a  demand  for  the  assign- 
ment according  to  the  agreement.^^^  And  in  an  action  on  a  note  which 
is  absolute  in  its  terms,  evidence  is  not  admissible,  to  bind  the  plain- 
tiff, to  an  agreement,  signed  by  special  agents  of  his  in  their  individual 
capacity,  and  which  does  not  purport  to  bind  him,  that  if  the  maker 
is  unable  to  pay  the  note  at  maturity  he  may  surrender  a  life  insurance 
policy  for  the  premium  of  which  the  note  was  given  and  thus  cancel 
the  latter  obligation.^^°  And  it  has  been  held  that  an  action  by  an  in- 
dorsee after  maturity  cannot  be  defeated  by  showing  that  the  note 
was  a  voluntary  subscription  to  a  college  and  was  to  be  paid  only  as 
his  daughter  should  obtain  the  worth  of  it  by  way  of  yearly  tuition.^ ^^ 

§'335,  Same  subject — Note  to  administrator. — An  administrator 
at  a  sale  made  by  bin]  of  property  belonging  to  the  estate  can  make  no 
terms  with  a  purchaser  which  the  orders  of  the  court  or  the  laws  of 
the  land  do  not  warrant,  and  an  unauthorized  condition  made  by  hini 
as  to  the  mode  in  which  a  note  given  by  a  purchaser  at  such  a  sale  shall 
be  paid  will  be  no  defense  to  an  action  thereon.^'^^ 

§  336.  Executed  agreement  as  a  defense. — A  distinction  is  made 
between  those  cases  where  there  is  a  merely  executory  agreement  that 

the  making,  execution,  and  delivery  ant  the   full   amount  of  this   note, 

of  this  obligation  is  admitted.     The  promised  when  the  note  was  given 

contemporaneous     oral     agreement  that   it   should   not  be   payable   ac- 

sought  to  be  proved  contradicts  this  cording  to  its  tenor.     But  this  oral 

written   obligation.     By    it   the   de-  agreement  was  entirely  without  con- 

fendant  was  not  to  pay  this  sum  of  sideration.     *     *     *     There      seems 

money  at  the  time  and  place  speci-  to  me  to  be  no  doubt  but  that  such 

fied,  but  was   to   pay   it   by   hiring  an   agreement  was   entirely   insuffi- 

horses   and   carriages   to  the  plain-  cient  as  a  defense  to  an  action  upon 

tiff     and     applying     the     amounts  the  note."     Per  Ingraham,  J. 

charged  therefor  to  the  payment  of  "=*  Story  v.   Kinzler,  73  App.   Div. 

the     note.     *     *     *     There     is     no  (N.  Y.)  372,  77  N.  Y.  Supp.  64. 

question  as   to   the  liability   of  the  ^^'' Thomas   v.    Bagley   &    Co.,    119 

defendant  to  pay  the  plaintiff  this  Ga.  778,  47  S.  E.  177. 

sum  of  money,  but  it  is  alleged  that  ^"  Jewett  v.  Salisbury,  16  Ind.  370. 

the   plaintiff,    who    was    concededly  "'  Hamilton  v.  Pleasants,  31  Tex. 

entitled  to  recover  from  the  defend-  638,  98  Am.  Dec.  551. 


§  336]        EFFECT  OF  COXDITIOXS  OR  AGEEEilENTS.  436 

the  note  may  be  discharged  in  a  manner  other  than  by  the  payment  of 
money  as  specified  in  the  instrument/^°  and  those  where  such  an  agree- 
ment has  been  executed.  In  this  hitter  chiss  of  cases  it  is  a  general  rule 
that  where  there  is  a  contemporaneous  oral  agreement  that  a  bill  or 
note  is  to  be  discharged  by  the  doing  of  something  other  than  the  pay- 
ment of  money  and  it  appears  that  such  agreement  has  been  performed 
it  will  operate  as  a  discharge  of  the  written  obligation  and  as  a  de- 
fense to  an  action  by  the  payee  or  holder  with  notice  to  recover  the 
money.  It  is  a  payment  not  in  money  but  in  something  which  has 
been  received  as  substitute  therefor.^****  So  where  a  note  was  given  in 
satisfaction  of  an  injury  done  to  the  plaintiff  by  the  circulation  of  in- 
jurious reports,  supposedly  by  the  defendant,  in  reference  to  the  plain- 
tiff's wife,  it  was  held  that  the  defendant  might  show  by  parol  that  at 
the  time  he  gave  the  note  it  was  agreed  between  him  and  the  payee 
that  the  latter  would  give  up  the  note  to  the  former  if  he  would  satisfy 
the  payee  that  he  did  not  originate  such  reports  and  that  he  had  satis- 
fied the  plaintiff  in  accordance  with  such  agreement.^*'^  And  where  de- 
fendant, having  subscribed  for  certain  stock,  deposited  some  cash  and 
gave  his  note  for  the  balance,  it  was  held  in  an  action  against  him  on 
the  note  that  he  might  show,  except  as  against  a  hona  fide  holder,  that 
there  was  an  agreement  that  he  might  within  one  year  forfeit  the  cash 

^^'  Such    an    agreement   is   no    de-  not   originate,    as    was    alleged,   re- 

fense.     See  §§  333-335  herein.  ports  injurious  to  the  character  of 

'""Patrick   v.    Petty,    83    Ala.    420,  the  plaintiff's  wife,  he,  the  plaintiff, 

3   So.   779;    Bradley  v.  Marshall,   54  would  give  up  said  note  to  the  de- 

111.  173;    Saunders  v.  Richardson,  2  fendant,    was    legally    and    properly 

Sm.   &   M.    (Miss.)    90;    Juilliard  v.  admitted.     And,  as  it  was  proved  to 

Chaffee,  92  N.  Y.  529;   Gilson  v.  Gil-  the  jury  that  the  plaintiff  was  satis- 

son,  16  Vt.  464;  Stevens  v.  Thacker,  fied  that  the  defendant  did  not  origi- 

1  Peake's  Gas.  187.     See  Mitchell  v.  nate    such    reports,    the    defendant 

Sullivan,  5  Md.  376.  was    clearly    entitled   to    a   verdict, 

A  defense  of  this  kind  is  frequent-  which    ought   not   to    be    disturbed, 

ly  spoken  of  as  an  accord  and  satis-  The  evidence  did  not  at  all  contra- 

faction.     Patrick  v.   Petty,   83   Ala.  diet   the  note   but  proved   that  the 

420,  3  So.  779.  parties   had   agreed   on   a  mode   by 

"*  Sanders   v.    Howe,    1    D.    Chip,  which  the  defendant  might  satisfy 

(Vt.)   363,  in  which  the  court  said:  the  note  by  the  performance  of  a 

^'The  evidence  admitted  by  the  judge,  future  act;   and  when  that  act  was 

to  prove  the  contract  made  at  the  performed    by    the    defendant    the 

time  the  note  was  executed,  that  in  note  was  as  clearly  paid  and  satis- 

case  the   defendant  would  make   it  fied    as    though    the    defendant   had 

appear    to    the    satisfaction    of    the  paid  the  amount  in  money." 
plaintiff,  that  he,  the  defendant,  did 


437  AGREEMENTS    XOT   TO    SUE.  [§    337 

paid  and  the  shares  of  stock  and  be  discharged  of  all  liability  on  the 
note  if  be  so  elected,  and  that  notice  of  said  right  to  elect  a  forfeiture 
had  been  duly  given.^*^^  So  it  may  be  shown  that  the  note  sued  upon 
was  given  to  secure  the  performance  of  an  agreement  to  support  and 
take  care  of  another  in  consideration  of  the  conveyance  of  certain  prop- 
erty, and  that  such  agreement  has  been  performed  by  the  maker,^*^^  or 
that  merchandise  was  to  be  accepted  in  payment  of  the  note  and  that 
it  has  been  so  paid,^*''*  or  that  the  defendant  was  to  dispose  of  certain 
property  held  by  him  and  that  upon  the  payment  of  the  avails  thereof 
to  the  payee  the  note  would  be  satisfied  and  discharged  and  that  the 
defendant  has  performed  such  contract.^''^  And  in  an  action  against 
the  maker  of  a  note,  payable  on  the  death  of  a  widow,  brought  by  the 
administrator  of  the  promisee,  evidence  was  held  admissible  of  an 
agreement  between  the  latter  and  the  defendant  that  the  note  was  to 
be  void  if  an  estimated  value  of  one-third  of  the  land  of  which  the 
widow  was  dowerable  was  expended  by  defendant  in  her  support,  and 
that  such  amount  had  been  expended.^'^''  Again  it  has  been  held  that 
it  may  be  shown  in  an  action  by  the  payee  of  a  note  against  the  maker 
that  the  note  was  to  be  paid  by  the  application,  in  satisfaction  of  the 
note,  of  the  first  money  the  maker  should  earn  as  agent  of  the  payee 
and  that  sufficient  has  been  earned  by  the  former  but  has  not  been  ap- 
plied according  to  such  agreement.^*' ^  The  fact,  however,  that  there 
has  been  a  part  performance  of  an  agreement  will  not  be  a  bar  to  a  re- 
covery on  the  instrument  though  a  party  may  be  entitled  to  an  allow- 
ance therefor  in  some  cases,  as  where  the  maker  bound  himself,  his 
heirs,  executors  and  assigns,  to  make  certain  quarterly  payments 
amounting  in  all  to  the  amount  of  the  note,  in  which  event  the  note 
should  be  cancelled,  and  he  made  such  payments  up  to  the  time  of  his 
death  and  none  were  afterward  made,  in  which  case  it  was  held  the 
note  was  a  valid  obligation  against  his  estate,  but  that  such  payments 
as  had  been  made  might  be  deducted  on  account  of  the  debt.^°^ 

§  337.     Agreements  not  to  sue. — It  may  be  shown  in  defense  to  an 
action  on  a  note  against  a  maker  or  indorser  that  the  plaintiff  had  en- 

"'  Lancaster  v.  Collins,  7  Fed.  338.  '''■•'  Crosman    v.    Fuller,    17    Pick. 

"'Howard  v.  Stratton,  64  Cal.  487,  (Mass.)   171. 

2  Pac.  263.  ^"  New     York     Life     Ins.     Co.     v. 

'"Buchanan  v.  Adams,  49  N.  J.  L.  Smucker  (Mo.  App.  1904),  SO  S.  W. 

636,  10  Atl.  662,  60  Am.  Rep.  666.  278. 

'"^  Carpenter    v.    McClure,    37    Vt.  '*='  Blake  v.  Blake,  110  Mass.  202. 
127. 


§   338]  EFFECT   OF   CONDITIONS  OR  AGREEMENTS.  438 

tered  into  an  agreement  with  the  defendant  that  he  would  never  sue 
him.^^^  And  it  has  been  decided  that  it  may  be  shown  in  defense  to  an 
action  on  a  note  that  tlie  plaintiff  had  agreed  not  to  sue  the  defendant 
except  on  future  contracts,  where  it  appears  that  the  note  was  indorsed 
prior  to  such  agreement  but  not  taken  up  by  the  plaintiff  until  after 
such  time.""  But  a  covenant  by  an  indorsee  with  one  maker  never  to 
sue  the  latter,  with  a  reservation  of  all  rights  as  to  other  parties,  has 
been  held  no  defense  to  an  action  against  such  parties,"^  nor  will  a 
covenant  by  one  joint  holder  not  to  sue  a  party  on  a  debt  due  him  be 
a  release  in  bar  of  an  action  by  such  holder  and  another  for  a  debt  due 
them  jointly. ^^^ 

§  338.  Same  subject — Where  simultaneous  or  subsequent  and  for 
a  limited  time. — An  agreement  entered  into  without  consideration  at 
the  time  of  the  execution  of  a  note  or  subsequent  thereto  by  which  the 
payee  or  holder  agrees  not  to  sue  on  the  instrument  until  a  time  subse- 
quent to  its  maturity  is  to  be  regarded  as  a  collateral  and  merely  execu- 
tory agreement  which  will  be  no  defense  to  an  action  on  the  paper. "^ 
So  in  an  action  where  the  defendant  set  up  in  defense  a  covenant  not 
to  sue  for  a  limited  time  after  the  maturity  of  the  note  the  court  said : 
"This  covenant,  to  be  a  bar  to  the  action,  must  be  construed  to  be  in 
the  nature  of  a  release.  But  it  will  not  bear  that  construction.  If  it 
were  a  covenant  never  to  sue  the  defendant  on  the  two  notes  it  would 
have  the  effect  of  a  release  on  the  principle  of  avoiding  a  multiplicity 

^''^Clopper  V.  Union  Bank,  7  Har.  Maryland.— Clo-pv^r       v.       Union 

&   J.    (Md.)    92,    16    Am.    Dec.    294;  Bank,  7  Har.  &  J.  (Md.)  92. 

Simmons  v.  Thompson,  29  App.  Div.  Massachusetts. — Allen  v.  Kimball, 

(N.  Y.)    559,  51  N.  Y.   Supp.   1018;  23    Pick.     (Mass.)    473;    Walker    v. 

Pike  V.  Street,  Moody  &  M.  226.  Russell,  17  Pick.    (Mass.)   280;   Per- 

""Cuyler  v.  Cuyler,  2  Johns.    (N.  kins  v.  Oilman,  8  Pick.  (Mass.)  229. 

Y.)   186.  Mississippi. — Herndon  v.  Hender- 

"1  Kenworthy      v.      Sawyer,      125  son,  41  Miss.  584. 

Mass.  28.  Missouri.' — Bridge  v.    Tiernan,   36 

"-Walmseley  v.   Cooper,   11  Adol.  Mo.    439;    Atwood   v.   Lewis,   6    Mo. 

&  E.  216.  392. 

''^  Illinois.— urn  v.  Enders,  19  111.  New  YorA-.— Peabody  v.  King,  12 

163.  Johns.  (N.  Y.)  426. 

JncZiana.— Williams    v.    Scott,    83  English.— Thimhledy  v.  Barron,  3 

Ind.    405;    Murphy    v.    Robbins,    17  Mees.  &  W.  210. 

Ind.  422;    Smith  v.  Grabill,  15  Ind.  Compare     Hutchins     v.     Nichols, 

267;  Lowe  v.  Blair,  6  Blackf.  (Ind.)  10    Cush.     (Mass.)     299;     Brick    v. 

282.  Campbell,   50   N.  J.  L.   282,  13  Atl. 

255. 


439  AS   TO    TIME   OF    PAYMENT.  [§    339 

of  suits.^^"*  It  is  not,  however,  a  covenant  of  that  description.  It  is 
only  an  agreement  not  to  sue  for  a  limited  time ;  and  the  law  is  settled 
that  such  an  agreement  is  no  bar  to  an  action  brought  before  the  ex- 
piration of  the  time  given.  Damages  may  be  recovered  for  a  breach  in 
such  case  but  the  covenant  cannot  have  the  effect  of  a  release."^"^  So 
"where,  at  the  maturity  of  a  note,  a  bank  indorsed  thereon  the  words 
"renewed  for  three  months"  and  no  new  note  was  given  it  was  held 
that  the  bank  was  not  thereby  prevented  from  suing  on  the  note  prior 
to  the  expiration  of  the  three  months.^ '°  But  where  the  holder  of  an 
overdue  note  agrees  for  a  valid  consideration  not  to  sue  thereon  for  a 
specified  time  it  is  held  that  such  agi'eement  will  be"  a  defense  to  an 
action  brought  within  such  time."^ 

§'  339.  As  to  time  of  payment. — Wliere  a  bill  or  note  is  payable  un- 
conditionally and  at  a  time  certain  parol  evidence  is  not  admissible  to 
prove  that  the  plaintiff  entered  into  an  agreement  contemporaneous 
with  or  antecedent  to  the  execution  of  the  instrument,  stipulating  that 
it  might  be  paid  at  a  time  later  than  that  specified  therein.^''®  So 
where  a  note  is  payable  on  demand  it  cannot  be  varied  by  evidence  of 
an  agreement  entered  into  contemporaneous  with  its  execution  that  the 
money  shall  not  be  demandable  at  the  time  the  note  purports.^'^^    And 

"*  Citing  5   Bac.  Abr.  683;    Berry  Massachusetts. — Dow  v.  Tuttle,  4 

V.    Bates,    2    Blackf.    (Ind.)    118;    2  Mass.  414,  3  Am.  Dec.  226. 

Wms.  Saund.  48,  note.  Missouri. — Blackburn  v.  Harrison, 

'■=  Mendenhall       v.       Lenwell,       5  39  Mo.  303;  Bond  v.  Worley,  26  Mo. 

Blackf.  (Ind.)  125,  33  Am.  Dec.  458,  253;  Atwood  v.  Lewis,  6  Mo.  391. 

per  Blackford,  J.  Nebraska. — Van  Etten  v.   Howell, 

""  Central    Bank    v.     Willard,    17  40  Neb.  850,  59  N.  W.  389. 

Pick.   (Mass.)   150,  28  Am.  Dec.  284.  New  Yorfc.— Skiller  v.  Richmond, 

'"Pearl  v.  Wells,  6  Wend.'  (N.  Y.)  48  Barb.  (N.  Y.)  428;  Fleury  v.  Ro- 

291,  21  Am.  Dec.  328.  get,  5  Sandf.  (N.  Y.)  646. 

"'  Federal. — Kessler  &  Co.  v.  Peril-  Pennsylvania. — Clark  v.  Allen,  132 

loux,  132  Fed.  903.  Pa.  St.  40,  18  Atl.  1071. 

Alabama. — Doss    v.    Peterson,    82  Tennessee. — Ellis  v.  Hamilton,  36 

Ala.  253.  2  So.  644.  Tenn.  512;   Campbell  v.  Upshaw,  26 

Arkansas. — Borden     v.     Peay,     20  Tenn.  184,  46  Am.  Dec.  75. 

Ark.  293.  Wisco7isin. — Union  National  Bank 

Illinois.— Davison   v.   Bank,   5   111.  v.  Cross,  100  Wis.  174,  75  N.  W.  992. 

56.  English. — Webb  v.  Salmon,  19  L. 

Indiana. — Trentman    v.    Fletcher,  J.  Q.  B.  N.  S.  34;   McQueen  v.  Mc- 

100  Ind.   105;    Irons  v.  Woodfill,  32  Queen,  9  Up.  Can.  Q.  B.  536. 

Ind.  40.  ^'°  Sice    v.    Cunningham,    1    Cow. 

Maine.— Ockington  v.  Law,  66  Me.  (N.  Y.)   397;   Mosely  v.  Hanford,  10 

551;  Eaton  v.  Emerson,  14  Me.  335.  Barn.  &  Cr.  729. 


§  339]        EFFECT  OF  COXDITIOXS  OR  AGREEMENTS.  440 

where  no  time  of  payment  is  specified  in  a  note  it  is  held  the  law 
judges  it  payable  immediately  and  parol  evidence  is  not  admissible  to 
show  a  different  time.^^''  So  it  is  no  defense  to  an  action  by  a  subse- 
quent indorsee  that  there  was  an  agreement  between  the  maker  and 
the  payee  that  the  note  should  be  renewed.  ^^^  And  evidence  is  not  ad- 
missible of  an  alleged  contemporaneous  agreement  that  a  note  may  be 
paid  by  the  payee  before  maturity.^ ^-  It  has,  however,  been  deter- 
mined that  the  time  when  a  bill  or  note  is  payable  may  be  controlled 
as  between  the  parties  by  the  terms  of  a  contemporaneous  agreement 
which  is  to  be  construed  with  the  former  instrument  as  a  part  of  the 
same  eontract.^*^ '  So  where  a  party  sent  to  his  creditor  a  note  in  set- 
tlement of  his  indebtedness  but  blank  as  to  time  of  payment,  and  the 
latter  sent  it  back  with  a  request  that  the  time  for  payment  be  speci- 
fied therein  by  the  debtor,  who  again  returned  it  blank  but  accompanied 
by  a  letter  stating  that  he  would  pay  it  as  soon  as  able,  it  was  held  that 
the  letter  and  note  were  to  be  construed  together  and  that  the  obliga- 
tion was  one  to  pay  when  he  was  able.^^*  And  where,  by  a  contempo- 
raneous agreement,  the  payee  may  enforce  the  note  if  another  note  is 
not  paid  by  a  certain  day,  payment  of  the  latter  note  on  or  before  the 
date  specified  is  a  condition  precedent  to  the  right  of  the  maker  to  de- 

iso  Thompson  v.  Ketcham,  8  Johns,  fendants     have     signed.      Such    an 

(N.  Y.)  190,  5  Am.  Dec.  332.  agreement   rests    in    confidence    and 

"1  Hoare  v.  Graham,  3  Camp.  57.  honor  only,  and  is  not  an  obligation 
Lord  Ellenborough  here  said:  "I  of  law.  There  may,  after  a  bill  is 
don't  think  I  can  admit  evidence  drawn,  be  a  binding  promise  for  a 
of  this  sort.  What  is  to  become  of  valuable  consideration  to  renew  it 
bills  of  exchange  and  promissory  when  due,  but  if  the  promise  is  con- 
notes if  they  may  be  cut  down  by  temporaneous  with  the  drawing  of 
a  secret  agreement  that  they  shall  the  bill  the  law  will  not  enforce  it. 
not  be  put  in  suit?  The  parol  con-  This  would  be  incorporating  with  a 
dition  is  quite  inconsistent  with  the  written-  contract  an  incongruous 
written  instrument.  This  purports  parol  condition — which  is  contrary 
to  be  a  promissory  note  payable  two  to  just  principles." 
months  after  date.  You  say  it  w^as  '"  Strachan  v.  Muxlow,  24  Wis.  21. 
not  payable  at  the  end  of  that  time,  '*'  Duvall  v.  Farmers'  Bank  of 
and  that  when  the  two  months  had  Maryland,  9  Gill  &  J.  (Md.)  31; 
expired  the  payees,  instead  of  the  Jacob  v.  Mitchell,  46  Ohio  St.  601, 
money,  were  to  have  another  prom-  22  N.  E.  768. 

issory  note.     I  will  receive  evidence  Compare   Robinson    v.    Smith,    14 

that  the  note  was   indorsed   to  the  Cal.  94. 

plaintiffs  as  a  trust;  but  the  condi-  ^^  Glass  v.  Adone   (Tex.  Civ.  App. 

tion  for  a  renewal  entirely  contra-  1905),  86  S.  W.  798. 
■  diets  the  instrument  which  the  de- 


441 


SUBSEQUENT   AGREEMENTS   EXTENDING    TIME. 


[§   340 


feat  recovery  on  the  former  by  setting  up  such  condition.^ ^^  And  it 
has  been  decided  that  in  an  action  against  sureties  on  notes  and  to  fore- 
close a  mortgage  that  evidence  is  admissible  of  a  contemporaneous 
agreement,  between  the  plaintiff  and  the  principal  as  a  part  of  the  con- 
sideration of  the  mortgage  sought  to  be  foreclosed,  extending  the  time 
of  the  payment  of  said  notes.^®^ 

§  340.  Subsequent  agreements  extending  time. — A  valid  agree- 
ment subsequent  to  the  execution  of  a  note  or  after  its  maturity  by 
which  an  extension  of  time  for  its  payment  is  given  to  one  party  to 
the  instrument  may  operate  as  a  discharge  of  other  parties  whose  sig- 
natures have  been  affixed  thereto  in  reliance  upon  the  terms  and  condi- 
tions as  expressed  in  the  original  contract  and  they  may  avail  them- 
selves of  such  an  agreement  in  an  action  against  them.  In  the  appli- 
cation of  this  rule  it  has  been  decided  that  a  drawer  of  a  bill  may  set 
up  in  defense  to  an  action  against  him  an  extension  of  time  so  given  to 
the  acceptor, ^^'^  or  to  the  maker,^^^  or  a  surety  an  extension  to  the  prin- 
cipal debtor  ;^®^  or  an  accommodation  maker  an  extension  to  the  ac- 


1"  Tufts  v,  Kidder,  8  Pick.  (Mass.) 
537. 

'^Moroney  v.  Coombes  (Tex.  Civ. 
App.  1905),  88  S.  W.  430.  The 
court  declared  in  this  case:  "We 
think  there  was  no  error  in  the  ad- 
mission of  this  testimony.  It  is 
settled  law  that  the  liability  of  a 
surety  or  guarantor  is  limited  to 
and  controlled  by  the  very  terms  of 
the  contract  out  of  which  his  obli- 
gation arises.  If  the  contract  be 
materially  changed  by  the  princi- 
pals thereto  without  his  consent,  he 
will  be  released,  without  regard  to 
whether  he  has  been  benefited  or 
prejudiced  by  such  change,  and  it 
follows  that  parol  evidence  is  ad- 
missible under  proper  pleadings  to 
show  such  change.  *  *  *  Fall- 
ing within  the  above  rule  is  a  con- 
tract by  the  principal  obligor  in  a 
promissory  note  extending  the  time 
of  payment  of  such  note  upon  a 
valuable  consideration,  without  the 
consent  of  the  surety  sought  to  be 


held.  Such  an  extension  creates  a 
new  and  binding  contract,  and  is 
such  an  alteration  of  the  old  con- 
tract as  will  release  a  surety  there- 
on if  made  without  his  consent." 
Per  Talbot,  J. 

^"High  V.  Cox,  55. Ga.  662. 

^^'  Nightingale  v.  Meginnis,  34  N. 
J.  L.  461;  Gould  v.  Rolson,  8  East 
576. 

^'^  Georgia. — Parmelee  v.  Williams, 
72  Ga.  42. 

Idaho. — Maydole  v.  Peterson,  7 
Idaho  502,  63  Pac.  1048. 

Indiana. — Starrett  v.  Burkhalter, 
86  Ind.  439. 

Louisiana. — Adle  v.  Metoyer,  1 
La.  Ann.  254. 

Missouri. — St.  Joseph  Fire  &  M. 
I.  Co.  V.  Hauck,  71  Mo.  465. 

l^eio  Hampshire. — Bailey  v.  Ad- 
ams, 10  N.  H.  162. 

IVett?  YorTi. — Hubbard  v.  Gurney, 
64  N.  Y.  457. 

Washington. — Nelson  v.  Flagg,  18 
Wash.  39,  50  Pac.  571. 


§  341] 


EFFECT    OF    COXDITIOXS    OR   AGREEMENTS. 


442 


commodation  payee  by  a  holder  with  knowledge  of  the  accommoda- 
tion;^^*' or  an  accommodation  acceptor  an  extension  to  the  drawer  who 
is  the  principal  debtor.^^^  An  extension  of  time,  however,  to  an  ac- 
■commodation  payee  will  be  no  defense  to  an  action  against  the  accom- 
modation maker  where  he  was  not  known  to  have  signed  as  such.^^- 
And  it  is  held  that  an  extension  of  time  to  a  surety  will  be  no  defense 
to  an  action  against  the  principal  brought  before  the  expiration  of  the 
period  allowed/'*^  Nor  will  the  fact  that  time  has  been  so  given  to  one 
of  several  joint  makers  discharge  the  others,  though  the  latter  are,  in 
fact,  sureties,  where  the  party  granting  it  had  no  knowledge  thereof.  ^^* 

§  341,  Same  subject — ^What  essential  to  render  such  an  agreement 
a  defense. — In  order  that  an  agreement  for  an  extension  of  time  to 
one  party  may  operate  as  a  discharge  of  another  and  therefore  be  a  de- 
fense to  an  action  against  the  Mter,  it  is  essential  that  it  should  be 
based  on  some  consideration  and  be  a  valid  binding  one ;  that  is,  such 
as  will  preclude  the  party  granting  the  extension  from  enforcing  the 
obligation  prior  to  the  expiration  of  the  extended  period.  It  must  have 
the  effect  of  disabling  him  from  suing.^^^     So  in  order  that  a  surety 


Federal. — Vary  v.  Norton,  6  Fed. 
808. 

English. — Pooley  v.  Harradine,  7 
El.  &  Bl.  430. 

^^  Taylor  v.  Burgess,  5  Hurl.  & 
N.  1. 

Compare  Bank  of  Montgomery 
Co.  v.  Walker,  9  Serg.  &  R.  (Pa.) 
229,  11  Am.  Dec.  709. 

"^Davies  v.  Stainbank,  6  DeGex, 
M.  &  G.  679;  Laxton  v.  Reat,  2 
Camp.  185,  holding  that  if  an  in- 
dorsee of  a  bill  of  exchange  having 
notice  it  was  accepted  without  con- 
sideration, receives  part  payment 
from  the  drawer  and  gives  him  to 
pay  the  residue  he  thereby  dis- 
charges the  acceptor. 

See  Bank  of  Upper  Canada  v. 
Jardine,  9  Up.  Can.  C.  P.  332. 

^"^Hoge  v.  Lansing,  35  N.  Y.  136, 
holding  that  a  l)ona  fide  holder  tak- 
ing paper  with  no  other  knowledge 
than  it  furnishes  has  the  right  to 
treat  the  parties  thereto  in  the  same 


order  and  to   same  extent  as  they 
appear  on  the  paper. 

See  Pinney  v.  Kimpton,  46  Vt. 
80. 

"^  Williams  v.  Scott,  83  Ind.  405. 

^''^  Mullendore  v.  Wertz,  75  Ind. 
431,  39  Am.  Rep.  155;  Nichols  v.  Par- 
sons, 6  N.  H.  30,  23  Am.  Dec.  706. 
See  Anthony  v.  Fritts,  45  N.  J.  L. 
1,  holding  it  is  no  defense  even  in 
action  by  payee  with  knowledge. 
Pintard  v.  Davis,  20  N.  J.  L.  205; 
Davidson  v.  Bartlett,  1  Up.  Can.  Q. 
B.  50. 

^''^  Arkansas. — Key  v.  Fielding,  32 
Ark.  56. 

Connecticut. — Boardman  v.  Larra- 
bee,  51  Conn.  39;  Continental  Life 
Ins.  Co.  V.  Barber,  50  Conn.  569. 

Florida. — Fridenberg  v.  Robinson, 
14  Fla.  130. 

Illinois.— Payne  v.  Weible,  30  111.- 
166. 

Indiana. — Davis  v.  Stout,  126  Ind. 
12,  25  N.  E.  862,  22  Am.  St.  R.  865;. 


I 


443 


SUBSEQUENT   AGREEMENTS    EXTENDING    TIME. 


[§ 


341 


may  be  released  by  an  extension  of  the  time  of  payment  it  is  declared 
that  there  must  be  an  agreement  between  the  payee  or  holder  of  the 
instrument  and  the  principal  maker  for  a  definite  and  fixed  time  of  ex- 
tension, made  without  the  knowledge  or  consent  of  the  surety,  founded 
upon  a  new  consideration  and  with  a  knowledge  of  the  suretyship  on 
the  part  of  such  payee  or  holder.^^*'  So  an  indorser  or  surety  will  not 
be  discharged  by  an  agreement  which  has  no  consideration  to  support 
it,^^^  or  which  is  based  upon  a  consideration  which  is  not  good.^°*  Such 
an  agreement,  however,  to  operate  as  a  defense,  need  not  be  in  express 
words,  it  being  sufficient  if  tliere  is  a  mutual  understanding  and  in- 
tention to  the  effect  that  the  claim  is  not  to  be  enforced  for  a  definite, 
certain  and  specific  time  and  is  based  upon  a  valuable  consideration,^®^ 
But  a  mere  forbearance  or  indulgence  which  does  not  amount  to  such 
an  agreement  will  be  no  defense.-'^'^   As  is  said  in  one  case  of  such  a 


Nelson  v.  White,  61  Ind.  139;  New- 
kirk  V.  Neild,  19  Ind.  194,  81  Am. 
Dec.  383. 

Massachusetts. — Central  Bank  v. 
Willard,  17  Pick.  (Mass.)  150,  28 
Am.  Dec.  284;  Hunt  v.  Bridgham, 
2  Pick.  (Mass.)  581,  13  Am.  Dec. 
458. 

Michigan. — Ferris  v.  Johnson 
(Mich.  1904),  98  N.  W.  1014. 

Missouri. — Warrenburg  Co-Opera- 
tive  Bldg.  Assn.  v.  Zoll,  83  Mo.  94. 

New  Hampshire. — Bailey  v.  Ad- 
ams, 10  N.  H.  162. 

Neto  York. — Kellogg  v.  Olmsted, 
28  Barb.  (N.  Y.)  96;  Myers  v. 
"Welles,  5  Hill  (N.  Y.)  463;  Curry  v. 
Van  Wagner,  32  Hun  (N.  Y.)  453; 
Miller  v.  Holbrook,  1  Wend.  (N.  Y.) 
317. 

Ohio. — Holzworth  v.  Koch,  26 
Ohio  St.  33. 

Pennsylvania. — H  umberger  v. 
Golden,  99  Pa.  St.  34;  Ashton  v. 
Sproule,  35  Pa.  St.  492;  Dundas  v. 
Sterling,  4  Pa.  St.  73. 

Rhode  Island. — Thurston  v.  James, 

6  R.  I.  103. 

Tennessee. — Robertson  v.  Allen,  3 
Baxt.  (Tenn.)  233;  Cherry  v.  Miller, 

7  Lea  (Tenn.)  305. 


English. — McManus  v.  Bark,  L.  R. 
5  Exch.  65;  Hewett  v.  Goodrick, 
2  Car.  &  P.  468;  Margesson  v.  Goble, 
2  Chit.  364;  Orme  v.  Young,  1  Holt's 
N.  P.  87;  Price  v.  Edmunds,  10 
Barn.  &  Cr.  578;  Thompson  v.  Mc- 
Donald, 17  Up.  Can.  Q.  B.  304;  Shaw 
V.  Crawford,  16  Up.  Can.  Q.  B.  101. 
See  Zobel  v.  Bauersachs,  55  Neb.  20, 
75  N.  W.  43;  Britton  v.  Fisher,  26 
Up.  Can.  Q.  B.  338. 

An  agreement  to  give  time  made 
between  the  holder  and  one  not  a 
party  to  the  instrument  will  not 
operate  as  a  release  of  other  par- 
ties. Frazer  v.  Jordan,  8  El.  &  B. 
303. 

See  also  Low  v.  Warden,  77  Cal. 
94,  19  Pac.  235. 

""  Starrett  v.  Burkhalter,  86  Ind. 
439,  441,  per  Zollars,  J. 

^"  Tuskaloosa  Cotton  Seed  Oil  Co. 
v.  Perry,  85  Ala.  158,  4  So.  635; 
Ives  V.  Bbsley,  35  Md.  262;  Russ  v. 
Hobbs,  61  N.  H.  93.  See  Howard  v. 
Fletcher,  59  N.  H.  151. 

'"^Jennings  v.  Chase,  10  Allen 
(Mass.)   526. 

"» Brooks  V.  Wright,  13  Allen 
(Mass.)    72. 

-'^  Massachusetts.    —    Haydenville 


§    342]  EFFECT   OF    CONDITIONS    OR   AGREEMENTS.  444 

plea :  "It  states  only  that  the  holder  of  the  note  has  given  time  to  the 
principal  debtor,  not  that  he  has  by  any  agreement  bound  himself  to 
do  so.  What  is  set  np  is  a  mere  forbearance  or  indulgence  shewn  to 
the  principal  debtor,  and  this  alone  has  never  been  held  to  discharge 
the  surety."-"^  Again  it  has  been  decided  that  the  fact  that  previous 
obligors  are  released  will  not  release  one  who  signs  an  existing  note  in 
consideration  of  an  extension  of  payment,  the  latter  being  bound  as 
on  a  new  contract. ^*^^ 

§  342.  Agreement  to  release  from  or  limit  liability. — Parol  evi- 
dence is  not  admissible,  in  an  action  on  a  bill  or  note  by  a  bona  fide 
holder  against  a  maker,  indorser,  or  suret}^  of  any  declaration  or  inde- 
]3endent  collateral  agreement  which  is  inconsistent  with  the  terms  of 
the  instrument.  This  rule  is  founded  upon  the  principle  that  the  writ- 
ing is  presumed,  when  complete,  to  embody  therein  the  agreement  of 
the  parties  and  that  resort  can  only  be  had  to  the  instrument  itself  to 
determine  the  rights  and  liabilities  of  the  parties.^°^  So  a  mere  agree- 
ment between  an  indorser  and  indorsee  that  the  words  "without  re- 
course" shall  be  written  over  the  signature  of  the  former,  will  be  no  de- 
fense to  an  action  by  one  who  is  an  indorsee  of  the  paper  for  value  and. 
without  notice.-"*    And  where  a  note  was  given  to  a  director  of  a  bank 

Savings  Bank  v.  Parsons,  138  Mass.  North  Carolina. — Hill  v.   Shields, 

53;     Hunt    v.     Bridgham,     2     Pick.  81  N.  C.  250,  31  Am.  Rep.  499. 

(Mass.)  581,  13  Am.  Dec.  458.  Pennsylvania. — Lindsey  v.  Cassel- 

Missouri. — Benson  v.  Harrison,  39  berry,  3  Wkly.  Notes  Cas.   (Pa.)   42. 

Mo.  303.  Tennessee. — Rice    v.    Ragland,    10 

Nexo      York. — Atlantic      National  Humph.    (Tenn.)    545,  53   Am.  Dec. 

Bank  v.  Franklin,  55  N.  Y.  235.  737. 

Ohio. — Ward  v.  Wick,  17  Ohio  St.  Texas. — Dwiggins    v.     Merchants' 

159.  National  Bank   (Tex.  Civ.  App.),  27 

United  States. — McLemore  v.  Pow-  S.  W.  171. 

ell,  12  Wheat.   (U.  S.)  554.  Wisconsin.— Bavey    v.    Kelly,    66 

Federal— AUen    v.    O'Donald,    28  Wis.  452,  29  N.  W.  232. 

Fed.  17.  Federal. — Union  Bank  v.  Crine,  33 

^"^  Thompson  v.  McDonald,  17  Up.  Fed.  809. 

Can.  Q.  B.  304.  '"'  Lewis   v.    Dunlap,    72    Mo.    174. 

=''-Rumley  Co.  v.  Wilcher,  23  Ky.  See  §  348  herein. 

Law  Rep.  1745,  66  S.  W.  7.  But  where  it  was  agreed  that  an 

-^^  Missouri. — Ewing  v.  Clark,  8  indorsement  should  be  without  re- 
Mo.  App.  570.  course  it  was  held  that  it  might  be 

New    York. — Mayer    v.    Mode,    14  shown,    in    an    action    by   a   holder 

Hun    (N.  Y.)    155;   Bruce  v.  Carter,  with    notice,    that   the    indorsement 

7  Daly  (N.  Y.)  37.  was   by  ^mistake   written    "with   re- 


445 


TO    RELEASE    OR   LIMIT   LIABILITY. 


[§   3-13 


it  was  decided,  in  an  action  thereon  by  the  receiver  of  the  bank,  which 
was  owner  of  the  note,  that  evidence  was  not  admissible  of  a  parol 
agreement  between  the  defendant  and  such  director  that  the  former 
was  not  to  be  held  liable  thereon.-"^  And  the  fact  that  there  was  such 
an  agreement  is  held  to  be  no  defense  to  an  action  by  an  indorsee  with 
knowledge  thereof;-^''  or  by  an  assignee  after  maturity,^"''  and  this  is 
also  the  generally  accepted  rule  in  action  by  a  payee  of  a  note  or  bill.^°* 
The  words  of  the  court  in  a  leading  case  in  New  Jersey,  in  which  such 
a  defense  was  set  up,  are  pertinent  in  this  connection  as  showing  the 
principle  underlying  this  class  of  cases.  It  was  there  said :  "There  is 
no  rule  better  settled  than  that  evidence  of  contemporaneous  parol 
declarations  is  inadmissible  to  vary  the  terms  of  a  written  contract. 
In  the  enforcement  of  this  rule  there  is  often  a  strong  tendency  to  dis- 


course" instead  of  without  recourse 
as  was  intended.  Johnson  v.  Wil- 
liard,  83  Wis.  420,  53  N.  W.  776. 

^°^  Western  Carolina  Bank  v. 
Moore  (N.  C.  1905),  51  S.  E.  79. 

-^  Pennsylvania  Safe  Dep.  &  T. 
Co.  v.  Kennedy,  175  Pa.  St.  160,  34 
Atl.  659,  38  Wkly.  Notes  Cas.  177. 
Compare  Shufeldt  v.  Gillilan,  124 
111.  460,  16  N.  E.  879. 

20' Jewett  v.  Salisbury,  16  Ind.  370. 

But  see  Bircleback  v.  Wilkins,  22 
Pa.  St.  26,  holding  that  such  a  de- 
fense may  be  set  up  to  an  action 
on  a  non-negotiable  note  by  an  in- 
dorsee. 

-'^Illinois. — Weaver  v.  Fries,  85 
111.  356. 

Indiana. — Moore  v.  Beem,  83  Ind. 
219. 

Kentucky. — Deposit  Bank  v.  Peak, 
23  Ky.  Law  Rep.  19,  62  S.  W.  268. 

Massachusetts. — Smith  v.  Barthol- 
omew, 1  Mete.  (Mass.)  276,  25  Am. 
Dec.  365. 

Missouri. — Ewing  v.  Clark,  76  Mo. 
545;  Reed  v.  Nijcholson,  37  Mo.  App. 
646;  Frissell  v.  Mayer,  13  Mo.  App. 
331. 

New  York. — Mead  v.  Pawling  Na- 
tional Bank,  89  Hun  (N.  Y.)  102,  34 


N.  Y.  Supp.  1054;  Cowles  v.  Gridley. 
24  Barb.  (N.  Y.)  301. 

Texas. — Todd  v.  Roberts,  1  Tex. 
Civ.  App.  8,  20  S.  W.  722. 

Vermont. — Gillett  v.  Ballou,  3 
Williams  (Vt.)  296. 

But  see  Barber  v.  Gordon,  2  Root 
(Conn.)  95,  holding  a  covenant 
never  to  demand  or  to  deliver  up 
a  note  to  the  promissor  is  a  good 
bar  to  an  action  on  the  note. 
Porter  v.  Webb,  22  Ky.  Law  R. 
917,  59  S.  W.  1,  holding,  where  a 
note  was  given  to  a  wife  for  money 
borrowed  which  was  in  fact  the 
property  of  the  husband,  that  in  an 
action  by  the  wife  against  the 
maker  he  might  show  an  agreement 
between  him  and  the  husband  that 
he  would  look  to  a  third  party  for 
payment. 

So  it  has  been  held  no  defense 
that  the  note  and  a  mortgage  were 
executed  on  the  understanding  that 
the  money  was  not  to  be  collected 
as  long  as  certain  dues  mentioned 
in  two  policies  of  insurance  and 
the  interest  on  the  loan  were  paid, 
such  an  agreement  being  incon- 
sistent with  the  written  conti'act. 
Allen  V.  Thompson,  23  Ky.  I-^w 
Rep.  164,  56  S.  W.  823. 


§  342]        EFFECT  OP  CONDITIONS  OR  AGREEMENTS.  446 

regard  its  effect  induced  by  a  feeling  of  the  inequity  of  holding  a  party 
to  the  strict  performance  of  an  agreement  into  which  he  has  entered, 
upon  assurance  that  it  would  not  be  enforced  according  to  its  terms. 
This  feeling  has  led  the  courts  sometimes  to  recognize  the  parol  decla- 
ration, upon  the  ground  that  it  amounted  to  an  equitable  estoppel.^*'^ 
But  the  rule  of  evidence  that  when  the  contract  is  reduced  to  writing, 
the  writing  is  the  only  evidence  of  the  contract,  excludes  any  evidence 
of  the  parol  declarations.  The  rule  is  recognized  as  a  wholesme  doc- 
trine by  which  men  are  enabled  to  place  their  agreements  in  shape  un- 
disturbable  by  the  uncertainty  of  oral  testimony.  The  weight  of  au- 
thority is  overwhelming  in  favor  of  holding,  in  the  language  of  the 
American  editors  of  the  Duchess  of  Kingston's  case  that  'a  person  who 
is  so  ill  advised  as  to  execute  a  written  contract  in  reliance  upon  an  as- 
surance that  it  shall  not  be  literally  enforced,  must  submit  to  the  loss 
if  he  is  deceived,  and  cannot  ask  that  a  principle  of  great  moment  to 
the  community  shall  be  made  to  yield  for  the  sake  of  relieving  him 
from  the  consequences  of  his  indiscretion.'  "-^°  In  an  action,  however, 
by  the  payee  of  a  note  with  notice  against  an  accommodation  maker  or 
indorser,  it  is  decided  that  it  may  be  shown  in  defense  thereto  that 
there  was  no  consideration  for  the  note  and  that  it  was  agreed  between 
the  parties  that  the  defendant  should  not  be  held  liable.-^ ^  And  where 
a  surety  on  an  accommodation  note  expresses  a  willingness  to  pay  the 
same  after  maturity,  if  he  is  to  be  held  liable,  as  he  can  at  the  time 
get  security  therefor  from  the  maker,  he  may  show  in  defense  to  a  sub- 
sequent action  by  the  payee  that  the  latter  stated  at  such  time  that  he 
would  exonerate  the  defendant  and  look  to  the  principal.^^-  Again 
where  a  maker  may  be  discharged  from  liability  by  electing  to  do  some 
act  it  is  decided  that  he  must  make  such  election  prior  to  the  maturity 
of  the  note.^^^ 

=°'' Notes  to  Duchess  of  Kingston's  holding  that   in   an   action   against 

Case,  3  Smith's  Lead.  Cas.  729.  an  accommodation  indorser  on  the 

■^°  Per  Reed,  J,,  in  Wright  v.  Rem-  firm  the  statement  of  one  member 

ington,  41  N.  J.  L.   48,  54,  32  Am.  of  a  firm  that  he  had  the  means  to 

Rep.  180.  pay  the  note  and  would  pay  it  and 

^1  Higgins  V.  Ridgway,  153  N.  Y.  release   the    plaintiff,    was    not   the 

130,  47  N.  E.  32;   Garfield  National  statement  of  the  firm,  and  would  be 

Bank   v.    Colwell,   57    Hun    (N.   Y.)  no  defense  to  the  action. 

169;    Brenerman  v.  Furniss,  90  Pa.  ="  Harris     v.     Brooks,     21     Pick. 

St.  186,  35  Am.  Rep.  651;  First  Na-  (Mass.)   195,  32  Am.  Dec.  254. 

tional    Bank   v.    Cleaver,   Fed.    Cas.  ""Draper    v.    Fletcher,    26    Mich. 

No.  4800.  154.     See  Upham  v.  Smith,  7  Mass. 

But    compare    Webber    v.    Alder-  265. 
man,  102   Mich.   638,   61   N.  W.   57, 


447 


COXDITIOXS    IX    NOTE. 


[§  343 


§343.  Effect  of  conditions  in  note. — Where  conditions  are  ex- 
pressed in  a  note  the  promises  therein  are  mutual  and  dependent  and 
should  be  construed  as  a  whole.-^*  Though  it  may  be  payable  at  a  speci- 
fied time  yet  if  it  contains  a  condition  that  it  is  not  to  take  effect  as 
a  binding  obligation  except  upon  the  happening  of  a  certain  contin- 
gency, it  will  be  a  defense  to  an  action  on  the  instrument  that  such 
contingency  has  never  happened,  such  condition  being  in  the  nature  of 
a  condition  precedent. ^^^  So  though  the  first  part  of  a  note  may  by  it- 
self show  a  promise  to  pay  in  a  specified  time,  yet  if  added  stipulations 
or  conditions  clearly  manifest  the  intention  that  the  note  is  an  instal- 
ment note  payable  monthly,  the  time  of  payment  will  be  controlled  by 
such  provisions.^^''  And  a  note  may  by  its  terms  be  payable  upon  a 
certain  contingency  and  it  may  be  shown  in  defense  to  an  action  there- 
on that  such  contingency  has  never  hapjDcned.^^'^     So  where  a  con- 


^*  Lasher  v.  Union  Central  L.  I. 
Co.,  115  Iowa  231,  88  N.  W.  375; 
Costelo  V.  Crowell,  134  Mass.  280. 

-^^  Indiana. — McComas  v.  Haas,  107 
Ind.  512,  8  N.  B.  579. 

loiva. — Clark  v.  Ross  (Iowa),  60 
N.  W.  627;  Thompson  v.  Oliver,  18 
Iowa  417. 

Kentucky. — Hodges  v.  Coleman,  2 
Dana  (Ky.)  396. 

Massachusetts. — Gleason  v.  Saun- 
ders, 121  Mass.  436. 

Nebraska. — Grimison  v.  Russell, 
20  Neb.  337,  30  N.  W.  249. 

New  York. — Gildersleeve  v.  Pel- 
ham  R.  Co.,  11  Daly  (N.  Y.).  257. 

Pennsylvania. — B  enninger  v. 
Hawkes,  61  Pa.  St.  343. 

Application  of  rule.  It  may  be 
shown  that  there  has  been  no  per- 
formance of  a  condition  that  cer- 
tain services  should  be  rendered. 
Taylor  v.  Rhea,  Minor  (Ala.)  414; 
or  that  a  certain  title  should  be 
confirmed.  Sanders  v.  Whitesides, 
10  Cal.  89;  or  certain  incumbrances 
removed.  Williams  v.  Benton,  10 
La.  Ann.  158;  or  a  certain  note  paid. 
Henry  v.  Coleman,  5  Vt.  402;  or 
that  the  payee  should  assist  in  a 
.  criminal  prosecution.  Drawer  v. 
Cherry,  14  La.  Ann.  694. 


•Such  a  note  is  non-negotiable  and 
an  equitable  assignee  takes  it  sub- 
ject to  defenses  existing  between  the 
original  parties,  and  it  may  be 
shown  in  an  action  by  him  that  such 
a  contingency  has  not  happened  un- 
less he  has  made  inquiry  of  the 
debtor  and  the  latter  is  estopped 
from  setting  up  such  defense.  Faull 
V.  Tinsman,  36  Pa.  St.  108. 

See  also  McComas  v.  Haas,  107 
Ind.  512,  8  N.  E.  579;  Brooks  v. 
Whitson,  7  Sm.  &  M.   (Miss.)   513. 

^^' Crowe  V.  Beem  (Ind.  App. 
1905),  75  N.  E.  302. 

^"  Hempler  v.  Schneider,  17  Mo. 
258. 

A  plaintiff  cannot  recover  on  such 
an  instrument  in  the  absence  of 
proof  that  the  event  referred  to 
has  occurred.  Quinn  v.  Aldrich,  70 
Hun  (N.  Y.)  205,  24  N.  Y.  Supp. 
33.  See  McComas  v.  Haas,  107  Ind. 
512,  8  N.  E.  579. 

Such  a  provision  is  binding  on 
the  maker  and  upon  the  happen- 
ing of  the  contingency  referred 
to  he  will  be  bound.  So  where 
a  purchaser  of  belting  was  dissat- 
isfied with  the  same  and  the  seller 
gave  him  a  note  in  compromise 
of  his  claim  with  a  condition  there- 


§  343]       EFFECT  OF  COXDITIOXS  OR  AGREEMENTS.  448 

tractor  who  was  erecting  a  building  gave  an  order  for  the  payment  of 
a  certain  sum  of  money  providing  that  said  sum  was  due  when  the 
house  was  plastered  and  referred  to  a  building  contract  which  provided 
for  the  making  of  the  second  payment  at  such  time  it  was  decided  that 
the  order  was  to  be  construed  as  payable  when  the  amount  of  the  sec- 
ond payment  on  the  contract  became  due  as  specified  therein  and  that 
such  payment  was  never  earned,  never  became  due,  and  the  order  never 
became  payable.^^^  And  the  rule  has  been  applied  in  the  case  of  a  due 
bill  which  states  that  the  amount  specified  is  to  be  paid  on  the  "final 
settlement"  of  a  certain  transaction  between  the  parties.-^^  Where, 
however,  the  happening  of  a  contingency  referred  to  in  a  note  has  been 
prevented  by  the  agency  of  the  defendant  he  cannot  avail  himself  of 
the  fact  that  it  has  not  happened  as  a  defense.--^  If  the  instrument 
contains  a  condition  that  a  certain  act  is  to  be  done,  the  condition 
should  be  construed  with  reference  to  the  facts  existing  at  the  date  of 
the  note  and  a  fact  based  upon  a  change  of  circumstances  cannot  be  set 
up  to  defeat  an  action  on  the  note.^^^  Nor  can  a  condition  be  extended 
by  implication  so  as  to  include  matters  which  are  not  clearly  within 
the  contract.^^^  And  a  condition  in  the  body  of  a  check  to  which  the 
payee  is  not  a  party  will  not  be  binding  on  him.^^^ 

in   that   if   he   should    decide   after  by  the  payee  where  the  work  was 

three   years'   use   that   he    was   not  finished    by    another   to   whom    the 

satisfied    with   it   the   note    was    to  building  was  sold  by  the  defendant. 

be  payable  on  demand,  it  was  held  =='' Rhodes  v.  Pray,  36  Minn.   392, 

that,   in   the  absence   of  fraud,   the  32  N.  W.  86. 

maker    was    bound    thereby.     Ten-  "-"Vandemal     v.     Dougherty,     17 

nessee  Mfg.  Co.  v.  Haines,  16  R.  I.  Mo.  277. 

204,  14  Atl.  853.  --^  Davenport  R.  Co.  v.  Rogers,  39 

="  Fuller  v.  Wilde,  151  Mass.  412,  Iowa  298,  so  declaring  where  a  note 

24,  N.  E.  209.     See  Glidden  v.  Mas-  was  payable  on  the  condition  "that 

sachusetts    Hospital    L,    I.    Co.,    187  a  depot  be  established  within  eighty 

Mass.  538,  73  N.  E.  538.  rods  of  present  town  of  Wheatland" 

Compare  Robbins  v.  Blodgett,  124  and  the  limits  of  the  town  were  sub- 
Mass.  279,  holding  that  where  an  sequently  extended,  it  being  held 
order  given  by  a  contractor  pro-  that  the  contract  was  to  be  governed 
vides  for  payment  when  certain  by  the  recorded  plat  at  the  tinie  of 
work  is  finished  and  the  owner  ac-  the  execution  of  the  note, 
cepts  the  order  without  qualiflca.-  ^"Blackman  v.  Dowllng,  63  Ala. 
tion,  he  cannot  set  up  in  defense  to  304. 

an   action   thereon   that  such   work  ^Citizens'  Bank  of  Louisiana  v. 

was  not  finished  by  the  contractor  Grand,  33  La.  Ann.  976. 
and  that  there  may  be  a  recovery 


449  COXDITIOXS   IX    XOTE.  [§    344 

§  344.  Same  subject — Continued. — Where  a  note  contains  a  condi- 
tion that  it  may.be  paid  or  satisfied  otlier  than  by  the  payment  of 
money,  the  maker  is  obligated  to  do  the  act  which  will  exonerate  him 
if  he  desires  to  avail  himself  of  the  benefit  of  such  condition.  There 
must  either  be  a  performance  by  him  or  a  sufficient  tender  and  a  fail- 
ure to  make  a  demand  will  not  release  him  therefrom.'"*  If  there  is  a 
provision  in  a  note  that  if  it  is  not  paid  at  maturity  certain  collateral 
shall  be  forfeited  or  the  payee  may  at  his  option  return  the  collateral 
to  the  maker  and  sue  him,  it  has  been  decided  that  the  return  of  the 
collateral  is  not  a  condition  precedent  to  the  right  to  sue.^^^  Again 
where  a  note  provides  that  it  is  to  be  paid  out  of  the  proceeds  of  the 
sale  of  certain  property,  such  provision  is  held  not  to  be  such  an  appro- 
priation as  will  create  a  lien  thereon  and  it  is  no  defense  to  an  action 
by  an  indorsee  against  the  payee  that  the  property  was  removed  after 
the  maturity  of  the  notes  and  the  maker  subsequently  became  insolv- 
ent."*^ 

§  345.     Same  subject — Substantial  performance  of  condition. — A 

substantial  compliance  with  the  condition  on  a  note  may  in  some  cases 
be  sufficient  to  enable  a  payee  to  recover  thereon.--^  So  where  the  lia- 
bility of  the  makers  of  a  note  was  dependent  upon  a  condition  that  the 
payees  should  sustain  their  case  against  certain  persons  and  should 
find  such  persons  indebted  to  them  to  the  amount  of  the  note,  it  was 
decided  that  the  condition  was  .sufficiently  fulfilled  if  the  case  was 
legally  sustained,  though  certain  formalities  were  not  complied  with, 

-^^'Biscoe  V.  Moore,  12  Ark.  77,  so  v.  Clausen,  85  Cal.  322,  24  Pac.  636; 

liolding   where   there    was   a   stipu-  Bellows  v.  Folsom,  2  Rob.    (N.  Y.) 

lation    that    a    note    might    be    dis-  138. 

charged  in  Arkansas  bank  paper  at        This  principle  has  been  most  fre- 

its  value.     Borah  v.   Curry,   12   111.  quently  applied  in  the  case  of  notes 

66,  so  holding  where  note  could  be  which    have   been   given    to    aid   in 

discharged  by  payment  in  personal  the   construction   of   railroads.     See 

property.     Dumas  v.   Hardwick,   19  Fraser  v.  Stuart,  46  Iowa  15;  Gard- 

Tex.  238,  so  holding  where  a  note  ner    v.    Burch,    101    Mich.    261,    59 

could  be  discharged  in  groceries  at  N.   W.    613;    Gardner   v.   Walsh,   95 

cash  prices.     But  see  as  to  making  Mich.  505;   Toledo  &  Ann  Arbor  R. 

demand.    Smith    v.    Corn,    3    Head  R.    Co.    v.    Johnson,    55    Mich.    456. 

(Tenn.)   116.  Compare    Jefferson    v.    Hewitt,    103 

-^  Knipper  v.  Chase,  7  Iowa  145.  Cal.  624,  37  Pac.  638. 

--"Franklin     v.     Browning     (Ind.         In   this   class   of   cases,   however, 

Terr.  1901),  64  S.  W.  563.  each  case  must  be  determined  from 

--'  Stowell    V.    Stowell,    45    Mich,  its  own  particular  facts.     Fraser.  v. 

364,  8   N.  W.   70.     See  McLaughlin  Stuart,  46  Iowa  15. 
Joyce  Defenses — 29. 


SS  346,  34:71       effect  of  coxditioxs  oe  agreements.  450 

as  where  the  judgment  and  decree  was  rendered  on  an  agreed  state- 
ment of  facts.'^* 

§  346.  Same  subject — Condition  that  contract  be  completed  to  ac- 
ceptance of  agent. — If  a  note  is  conditioned  upon  the  completion  of  a 
contract  to  the  acceptance  of  an  agent  it  will  be  no  defense  to  an  action 
thereon  that  it  was  not  completed  in  strict  compliance  with  the  terms 
of  the  contract,  where  the  agent  has  accepted  performance  and  there 
was  no  fraud  on  the  part  of  the  plaintiff.--^* 

§'347.  Conditional  acceptance. — One  who  accepts  an  instrument 
conditionally  may,  in  an  action  against  him,  show  a  non-performance 
of  the  condition  or  non-occurrence  of  the  contingency  upon  which  his 
liability  was  dependent,  provided  the  condition  upon  which  he  ac- 
cepted constitutes  a  part  of  the  contract  either  by  reason  of  express 
words  in  the  instrument  or  by  a  contemporaneous  agreement  which  is 
to  be  construed  as  a  part  thereof."^  In  such  a  case  the  performance  of 
the  condition  or  the  Iv^ppening  of  the  event  is  generally  regarded  as  a 
condition  precedent  to  the  liability  of  the  acceptor.-^"  So  where  an 
acceptance  was  conditioned  to  be  paid  out  of  money  coming  into  the 
hands  of  the  acceptor  as  assignee  it  was  held  that  plaintiff  must  show 
that  funds  had  been  received  and  were  sulDJect  to  the  claim  of  the 
drawer."^^  An  acceptor  cannot,  however,  set  up  such  a  defense  where 
it  appears  that  the  performance  of  the  condition  or  the  happening  of 
the  contingency  has  been  prevented  by  him.-^- 

-"-^  Sawyer  v.  Child,  68  Vt.  360,  35  S'ansas.— Liggett  v.  Weed,  7  Kan. 

Atl.  84.  273. 

-^*  Shed  V.  Miller,  12  Me.  318.  Mississippi. — Shackleford  v.  Hook- 

^  Crowell    V.    Plant,    53    Mo.    145  er,  54  Miss.  716. 

(holding  that  where  one  accepts  an  Missouri. — Ford  y.   Angelrodt,   37 

instrument  stating  it  is  payable  out  Mo.  50,  88  Am.  Dec.  174. 

of  a  certain  fund  he  may  show  that  Federal.— Rea.d    v.    Wilkinson,    2 

such  fund  never  became  due).     See  Wash.    C.    C.    514,    Fed.    Cas.    No. 

Lindon  v.  Beach,  6  Hun  (N.  Y.)  200.  11611.     See  also  Rice  v.  Porter,  16 

An  acceptance  which  is  upon  its  N.  J.  L.  440;   Lamon  v.  French,  25 

face  absolute  cannot  be  shown  to  be  Wis.  37. 

conditional      by      parol      evidence.  =^  Cummings   v.    Hummer,   61   111. 

Haines  v.   Nance,   52   111.  App.  406;  App.  393. 

Heaverin   v.    Donnell,   7    Sm.   &   M.  =^Herter  v.  Goss  &  Edsall  Co.,  57 

(Miss.)  244,  45  Am.  Dec.  302.  N.   J.  L.  42,  30  Atl.   252;    Risley  v. 

'^"Illinois. — Cummings     v.     Hum-  Smith,  64  N.  Y.  576. 
mer,  61  111.  App.  393. 


451 


CONDITIONAL    OR   RESTRICTED   IXDORSEIMEXT. 


[§  348 


§  348.  Conditional  or  restricted  indorsement. — A  conditional  or  re- 
stricted indorsement  operates  as  a  notice,  to  a  subsequent  holder,  of 
such  condition.^^^  And  an  indorsement  that  the  instrument  will  be 
payable  on  a  contingency  is  held  not  to  affect  the  negotiation  of  the  pa- 
per but  to  operate  as  a  notice  to  subsequent  parties  of  such  fact.^^* 
In  this  class  of  cases  parol  evidence  is  not  admissible  to  charge  the  or- 
dinary and  popular  meaning  of  the  term  or  words  used,^^^  though 
where  a  restrictive  indorsement  is  ambiguous  it  may  be  shown  by 
parol,  as  between  the  parties,  what  their  intent  was.^^*^  In  the  appli- 
cation of  the  general  rule  it  has  been  decided  that  where  the  indorse- 
ment provides  that  the  indorser  is  in  no  way  liable  as  such,  the  indorsee 
takes  it  subject  to  any  legal  defense  against  the  indorser,^^'^  And  this 
is  also  the  rule  in  case  of  an  indorsement  to  the  payee's  own  use,^*^  or  to 
another  for  the  "account  of"  the  payee,^^^  or  to  the  holder  "for  collec- 
tion."-**' And  an  acceptor  who  pays  the  drawer  in  disregard  of  the 
condition  imposed  by  the  payee  when  indorsing  the.  instrument  before 
acceptance  may  be  liable  to  also  pay  the  payee.^*^  The  fact,  however, 
that  one  indorses  a  note  without  recourse  will  not  be  a  complete  de- 
fense to  an  action  on  a  note  as  even  in  such  case  he  is  held  to  warrant 
that  the  instrument  is  the  valid  legal  obligation  of  those  whose  signa- 
tures appear  on  the  paper.-*^    The  right,  however,  of  a  bona  fide  holder 


"^Leary  v.  Blanchard,  48  Me.  269; 
Tappan  v.  Ely,  15  Wend.  (N,  Y.) 
362;  Sigourney  v.  Lloyd,  8  Barn.  & 
Cr.  622. 

See  in  this  connection  Neg.  Instr. 
Law,  §  69  in  appendix. 

^*  Tappan  v.  Ely,  15  Wend.  (N. 
Y.)  362. 

Compare  Aniba  v.  Yeomans,  39 
Mich.  171,  holding  that  the  nego- 
tiable character  of  a  note  is  de- 
stroyed by  an  indorsement  by  the 
payee  transferring  only  "his  right, 
title  and  interest"  in  it  to  another, 
and  the  indorsee  is  not  a  hona  fide 
holder  without  notice  of  the  de- 
fenses thereto. 

=''^Leary  v.  Blanchard,  48  Me.  269. 

^^^^  United  States  Bank  v.  Geer,  53 
Neb.  67,  73  N.  W.  266. 

="Ayer  v.  Hutchins,  4  Mass.  370. 
But  see  Russell  v.  Ball,  2  Johns.  (N. 
Y.)  50. 

=^' Wilson  v.  Holmes,  5  Mass.  543; 
Sigourney  v.  Lloyd,  8  Barn.  &  Cr. 
622. 


'»»Leary  v.  Blanchard,  48  Me.  269. 
See  Treutel  v.  Barandon,  8  Taunt. 
100.  Compare  U.  S.  Nat.  Bank  v. 
Geer,  55  Neb.  462,  75  N.  W.  1088,  70 
Am.  St.  Rep.  390. 

^^"  Barker  v.  Prentiss,  6  Mass.  430. 

As  to  an  indorsement  by  the 
payee  "for  collection"  it  is  said  in 
a  recent  case  that  it  "is  not  strictly 
•a  contract  of  indorsement,  but 
rather  the  creation  of  a  power, 
the  indorsee  being  the  mere  agent 
of  the  indorser  to  receive  and  en- 
force payment  for  his  use."  Smith 
V.  Boyer  (Greg.  1905),  79  Pac.  497, 
498,  per  Bean,  J. 

^^  Robertson  v.  Kensington,  4 
Taunt.  30. 

"^  Illinois. — Drennan  v.  Burne,  124 
111.  184,  16  N.  E.  100. 

loioa. — Watson  v.  Cheshire,  18 
Iowa  202,  87  Am.  Dec.  382. 

A'a??sas. — Challis  v.  McCrum,  22 
Kan.  157,  31  Am.  Rep.  181. 


§  349] 


EFFECT    OF    COXDITIOXS    OR   AGREE:MEXTS. 


452 


cannot  be  affected  hj  any  secret  agreements  or  undisclosed  restrictions 
between  the  parties.^*^  So  where  a  note  is  indorsed  in  blank  for  col- 
lection, the  want  of  ownership  of  the  indorsee  cannot  be  shown  against 
such  a  holder.-**  ISTor  is  evidence  admissible  of  a  i>arol  agreement  to 
show  that  the  indorsement  was  to  be  without  recourse.^*^  Nor  can  an 
indorser  who,  by  his  own  unauthorized  act,  has  prevented  the  perform- 
ance of  the  condition  or  the  happening  of  the  contingenc)''  upon  which 
the  taking  effect  of  the  instrument  was  conditioned  avail  himself  of 
such  a  defense.^*^ 

§  349.     Indorsement  of  condition  to  enforce  which  would  be  illegal. 

Where  an  indorsement  is  made  uj^ou  a  note  of  a  condition  to  enforce 
which  would  be  in  violation  of  the  law,  the  fact  that  such  condition  has 
not  been  complied  with  will  be  no  defense  to  an  action  against  the 
maker.  So  in  an  action  by  a  receiver  of  an  insurance  company  to  en- 
force a  capital  stock  note,  declared  to  be  such  on  its  face  and  providing 
that  "payment  thereof  is  subject  to  the  conditions  and  obligations  of 
the  insurance  law  of  the  state  of  J^ew  York"  which  law  was  specifically 
referred  to  by  designation  of  the  particular  statute,  it  was  held  that 
the  maker  could  not  set  up  in  defense  thereto  the  breach  of  a  condition 
indorsed  on  the  back  of  the  note,  that  unless  his  property  should  be 
kept  insured  for  five  years  the  note  should  be  null  and  void.-*^ 


Vermont. — Hannum  v.  Richard- 
son, 48  Vt.  508,  21  Am.  Rep.  152. 

Federal. — Seeley  v.  Reed,  28  Fed. 
164.  SEE  Collier  v.  Mahan,  21  Ind. 
110;  Fitchburg  Bank  v.  Greenwood, 
2  Allen  (Mass.)   434. 

^  Fawcett  v.  Insurance  Co.,  97 
111.  11. 

^Coors  V.  Bank,  14  Colo.  202,  23 
Pac.  328. 

=^=  Skinner  v.  Church,  36  Iowa  91; 
Lewis  V.  Dunlap,  72  Mo.  174;  Hill 
V.  Shields,  81  N.  C.  250.  See  Sec- 
ond National  Bank  v.  Woodruff,  113 
111.  App.  6;  Smith  v.  Boyer  (Oreg. 
1905),  79  Pac.  497. 

^'  United  States  "Wind  Engine  &c. 
Co.  V.  Simonton,  84  Wis.  545,  54  N. 
W.  1021. 

^'  Regener  v.  Warner,  56  N.  Y. 
Supp.  310.     The  court  said,  per  Mc- 


Adam,  J.:  "To  sustain  such  a  con- 
tention would  be  to  sanction  a  fraud 
upon  the  insurance  laws  of  the 
state,  as  well  as  the  creditors  whom 
such  notes  were  intended  to  secure. 
The  representatives  of  the  corpora- 
tion, as  special  agents  thereof,  could 
not  by  any  act  of  theirs  assent  that 
any  condition  be  attached  to  the 
capital  stock  notes  which  would  con- 
travene the  operation  of  the  laws 
of  the  state,  and  the  defendant  must 
have  known  this  as  well  as  the  of- 
ficers of  the  company.  Capital  stock 
notes  given  under  the  insurance 
laws  cannot  have  strings  to  pull 
them  back  from  creditors  when 
seeking  their  lawful  remedy  upon 
them,  and  the  legerdemain  condi- 
tions indorsed  upon  the  back  of  the 
note  herein  must  be  regarded  as  in- 


453 


WAIVER   OF    COXDITIOXS. 


[§   350 


§  350.  Waiver  of  conditions. — One  who  is  to  receive  the  benefit  of 
a  valid  and  enforceable  condition  or  agreement  attending  the  execu- 
tion, delivery  or  terms  of  a  note  may  waive  the  same  and  in  case  of  a 
waiver  by  him  he  cannot  avail  himself  of  the  non-performance  of  such 
agreement  or  condition  as  a  defense  to  a  subsequent  action  on  the  in- 
strument.-*^ But  where  a  person  signs  a  note  conditionally  there  is 
held  to  be  no  waiver  of  his  right  to  avail  himself  of  a  breach  of  such 
condition  as  a  defense  by  the  fact  that  he  had  an  agency  or  was  active 
in  getting  a  payment  indorsed  thereon.^'*'*  And  it  has  been  decided 
that  the  fact  that  one  who  promised  to  accept  an  instrument  condi- 
tionally has  received  and  retained  a  sum  raised  thereon,  which  is  less 
than  its  amount  will  not  operate  as  a  waiver  of  his  right  to  refuse  to  ac- 
cept the  same  because  of  a  non-compliance  with  the  condition.-^*^ 


effectual  against  creditors  and  the 
receiver  who  represents  them,  be- 
cause contrary  to  the  policy  and  the 
spirit  of  the  legislative  enactment, 
whose  benefits  the  defendant  in- 
volved when  he  made  the  obligation. 
There  is  no  merit  in  the  defense, 
and  nothing  to  commend  it  to  ju- 
dicial favor." 

'^^  Federal. — First  National  Bank 
V.  Portland  &  0.  R.  Co.,  2  Fed.  831. 

California. — Witmer  Bros.  v.  Weid, 
108  Cal.  569,  41  Pac.  491. 


Illinois. — Iglehart  v.  Gibson,  56 
111.  81. 

Louisiana. — Wimbish  v.  Wade,  21 
La.  Ann.  180. 

Minnesota. — Stout  v.  Watson,  45 
Minn.  454,  48  N.  W.  195. 

Missouri. — Whittemore  v.  Ohear, 
58  Mo.  280. 

Nebraska. — Westheimer  v.  Phil- 
lips, 11  Neb.  54,  7  N.  W.  525. 

^"Miller  v.  Gamble,  4  Barb.  (N. 
Y.)  146. 

*="  Lewis  V.  Kramer,  3  Md.  265. 


CHAPTEE  XV. 


COLLATERAL  SECURITY. 


Sec. 

351.  Original  parties. 

352.  Surety — Guaranty — Indemnity. 

353.  Accommodation     paper — Maimer 

— Bona  fide  holder. 

354.  Accommodation       p  a  p  e  r — In- 

dorser — Bona  fide  holder. 

355.  Bills — Accommodation  acceptor. 

356.  Form  of  assignment,  when  im- 

material— Bona  fide  holder. 

357.  When    note    not    collateral    se- 

curity but  independent  obli- 
gation. 

358.  Note  payable  to  order,  assigned 

but  not  indorsed. 

359.  Contemporaneous      or      future 

loans — Advances — Bona     fide 
holder. 

360.  Same  subject — Instances. 

361.  Agreements  and  conditions. 

362.  Same  subject. 

363.  Security    for   the   performance 

of  illegal  contract. 

364.  Note    secured    by    mortgage — 

Mortgagee    against    maker — 
Surety. 

365.  Note   secured   by   mortgage   or 

other   instrument — Bona  fide 
holder — Pledgee. 

366.  Same  subject. 


Sec. 

367.  Same    subject — Knowledge    or 

notice. 

368.  Transferee  of   note   and   mort- 

gage— Payment  of  or  col- 
lateral security  for  pre-exist- 
ing debt. 

369.  Receiving  or  surrendering  col- 

lateral— Exhausting  collat- 
eral. 

370.  Paper    given    or    indorsed    for 

specific  purpose — Principal 
and  agent. 

371.  Defense  subsequent  to  indorse- 

ment— Bona  fide  holders. 

372.  Transferee     after     maturity — 

Pledgee. 

373.  Pledgor    and    pledgee — Laches, 

negligence  or  tortious  acts — 
Statute  of  limitations. 

374.  Priority  of  transfer — Different 

notes. 

375.  Renewals — Continuance    of    se- 

curity —  Extinguishment  of 
debt. 

376.  Extent  of  recovery — Bona  fide 

holders. 

377.  Same     subject — Collateral     for 

pre-existing  debt. 

378.  Same    subject — Accommodation 

paper. 


§  351.  Original  parties.^ — Upon  the  principle  that  any  instrument, 
though  absolute  upon  its  face,  may  be  shown  by  parol  to  be  a  security 
only,  it  is  competent,  in  an  action  by  an  indorsee  from  the  payee  of 
the  note  as  collateral  security,  to  show  that  the  payee  had  himself 

^As  to  collateral  security  for  pre-    existing    debt — bona    fide    holders, 

see  §§  246-249  herein. 
454 


455 


SURETY — GUARAXTT — INDEMNITY. 


[§  352 


taken  the  note  as  collateral  security  merely  for  the  repayment  of  a 
loan  or  advances,  and  the  plaintiffs  having  taken  the  note  after  ma- 
turity and  as  collateral  for  a  prior  indebtedness  they  had  no  better 
rights  than  the  payee  and  were  subject  to  the  defenses  of  the  maker 
against  the  payee,  so  that  their  recovery  was  limited  to  the  payee's 
interest.^  So  it  may  be  shown  that  as  between  the  original  parties  the 
note  was  given  to  be  used  as  collateral.^  But  it  is  also  decided  that  in 
an  action  by  the  payee  against  the  maker  a  plea  which  sets  up  the 
execution  and  delivery  of  the  notes  as  collateral  security  is  subject 
to  demurrer.*  Again,  notes  may  be  validly  transferred  as  security 
for  indorsements  previously  rnade.^ 

§  352.  Surety — Guaranty — Indemnity. — If  the  indorsee  of  a  prom- 
issory note  receives  it  without  notice  of  equities,  before  maturity  as  col- 
lateral security  in  consideration  of  his  becoming  surety  for  another 
note,  which  he  afterward  was  compelled  to  pay,  he  is  a  holder  for  a 
valuable  consideration  in  the  ordinary  course  of  business  and  is  dis- 
charged from  such  equities.^    And  where  a  note  and  mortgage  are  as- 


As  to  payment  of  pre-existing 
debt,  see  §§  241,  242,  243,  287  herein. 

^  Kelly  V.  Ferguson,  46  How.  Pr. 
(N.  Y.)  411. 

^McCrady  v.  Jones,  36  S.  C.  136, 
15  S.  E.  430. 

*  Moore  v.  Prussig,  165  111.  319, 
322,  46  N.  E.  184.  The  court,  per 
Phillips,  J.,  said:  "The  second  plea 
attempted  to  set  up  that  the  execu- 
tion and  delivery  of  the  notes  were 
as  collateral  security  merely,  and 
set  up  substantially  the  same  facts 
as  pleaded  in  the  plea  failure  of 
consideration.  Whilst  a  person 
signing  a  note  has  a  right  to  prove 
by  parol  the  capacity  in  which  he 
signs  the  paper,  and  such  proof  is 
not  an  attempt  to  vary  the  terms 
of  the  written  instrument,  yet 
where  the  note  is  accepted  as  a 
separate  and  independent  contract 
an  attempt  to  vary  the  terms  oLthe 
contract  by  parol  is  not  admissible. 


and  the  plea  attempting  to  set  up 
that  the  note  signed  was  accepted 
as  collateral  security  could  not 
change  the  legal  effect  of  the  instru- 
ment, as  a  liability  would  exist  ac- 
cording to  the  terms  of  the  con- 
tract, and  the  attempt  to  set  up 
such  an  agreement  constituted  no 
defense.  As  the  sole  makers  of  the 
note,  defendants  cannot  show  that 
they  only  signed  as  sureties.  To 
permit  proof  of  that  fact  would  be 
to  vary  by  parol  the  contract  itself 
and  contradict  its  terms.  Harris  v. 
Galbraith,  43  111.  309;  Miller  v. 
Wells,  46  111.  46." 

"^Noyes  v.  Landon,  59  Vt.  569,  10 
Atl.  342. 

As  to  becoming  absolute  owner  of 
accommodation  note  pledged  as  col- 
lateral, see  Beacon  Trust  Co.  v.  Rob- 
bins,  173  Mass.  261,  53  N.  E.  868. 

"  Stotts  V.  Byers,  17  Iowa  303. 

See  Winship  v.  Bank,  42  Ark.  24; 


353] 


COLLATERAL   SECURITY. 


456 


signed  to  a  person  as  indemnity  for  performing  an  act,  as  in  case  of 
indemnifying  sureties  in  a  recognizance  of  bail,  it  may  be  shown  that 
the  liability  of  the  sureties  has  been  discharged  without  their  being 
indemnified,  and  the  assignee  in  such  case  is  a  bona  fide  holder  for 
the  purpose  of  indemnity  only,  and  neither  he  nor  his  assignee  after 
maturity  can  recover.'^  But  a  negotiable  instrument  received  from  the 
payee,  before  maturity,  as  an  indemnity  against  future  losses  on  a 
suretyship  then  existing  on  the  part  of  the  holder  for  the  payee,  is 
not  a  transfer  in  the  usual  course  of  trade  so  as  to  preclude  the  maker 
from  availing  himself  of  a  latent  equity  between  him  and  the  payee.^ 

§353.  Accommodation  paper — Maker — Bona  fide  holder.^ — If  a 
note  is  made  merely  for  the  accommodation  of  a  person  for  the  purpose  ■ 
of  giving  him  credit  and  such  note  is  transferred  as  collateral  security 
and  upon  its  faith  a  large  discount  is  obtained,  the  transfer  being 
made  before  maturity  of  the  note,  the  transferee  becomes  the  holder  in 
good  faith,  for  value.^"    But  while  want  of  consideration  is  not  a  de- 


Trustees  V.  Hill,  12' Iowa.  462;  Rox- 
borough  V.  Meesick,  6  Ohio  St.  448. 

But  examine  Bertrand  v.  Bertram, 
13  Ark.  150;  Ruddick  v.  Lloyd,  15 
Iowa  441. 

'Coleman  v.  Post,  10  Mich.  422, 
82  Am.  Dec.  49. 

*Bank  of  Mobile,  Hallett  v.  Hall, 
6  Ala.  639,  41  Am.  Dec.  72. 

» See  §§  883-391  herein. 

"  Louisiana. — President,  etc.,  of 
Louisiana  State  Bk.  v.  Gaiennie,  21 
La.  Ann.  555  (holding  also  that 
the  pledgee  of  a  promissory  note, 
payable  to  the  drawer's  own  order 
and  by  him  indorsed  in  blank,  may 
sue  and  recover  on  the  note  without 
the  indorsement  of  the  pledgor). 

Maryland. — Maitland  v.  Citizens' 
Nat.  Bank,  40  Md.  540,  17  Am.  Rep. 
629  (an  agreement  between  maker 
and  indorser  that  note  is  not  to  be 
used  for  precedent  debts,  but  only 
to  secure  future  discounts,  and  the 
rule  does  not  apply  unless  the  in- 
dorsee has  knowledge  of  the  infirmi- 
ties or  invalidating  facts). 


Neio  York. — Schepp  v.  Carpenter, 
51  N.  Y.  602,  affirming  49  Barb.  542; 
Grocers'  Bank  v.  Penfield,  7  Hun 
(N.  Y.)  279,  affirmed,  69  N.  Y.  502 
(if  accommodation  paper  is  divert- 
ed to  another  purpose,  the  holder 
must  show  that  it  was  taken  in 
good  faith,  and  for  value.  But  if 
the  paper  is  used  for  a  purpose  con- 
sistent with  the  object  for  which 
it  was  executed,  an  action  lies  by 
the  holder  even  though  it  is  based 
on  no  new  consideration  and  is  held 
only  as  collateral  security) ;  Atlan- 
tic National  Bank  v.  Franklin,  64 
Barb.  (N.  Y.)  449,  453;  in  this  case 
the  court,  per  Fancher,  J.,  said: 
"Conceding  that  the  notes  in  ques- 
tion are  accommodation  paper, 
loaned  by  the  defendant  to  Van 
Suan  &  Co.,  in  the  absence  of  evi- 
dence showing  a  restriction  as  to 
the  mode  of  using  them,  it  was  com- 
petent for  that  firm  to  pledge  them 
as  security  for  their  debt,  and  in 
such  case  the  maker  of  the  notes 
has   no   defense   against   their  pay- 


457 


ACCOililODATIOX   PAPER — BONA   FIDE    HOLDER. 


[§ 


553 


ment.  The  plaintiff  is  a  tona  fide 
holder  for  value,  sufficient  to  en- 
able the  plaintiff  to  recover  on  the 
notes.  Schepp  v.  Carpenter,  49 
Barb.  (N.  Y.)  542;  Cole  v.  Saul- 
paugh,  48  Barb.  (N.  Y.)  104;  1 
Pars,  on  Bills,  226;  Rutland  Bank 
V.  Buck,  5  Wend.  (N.  Y.)  66;  Grand- 
in  V.  LeRoy,  2  Paige  (N.  Y.)  509; 
Lathrop  v.  Morris,  5  Sand.  (N.  Y.) 
7;  Mohawk  Bank  v.  Corey,  1  Hill 
(N.  Y.)  513;  Boyd  v.  Cummings,  17 
N.  Y.  101;  De  Zeng  v.  Fyfe,  1  Bosw. 
(N.  Y.)  335;  Lord  v.  Ocean  Bank, 
2  Penn.  384.  In  the  latter  case  it 
was  held  that  the  maker  of  an  ac- 
commodation note  cannot  set  up  the 
want  of  consideration  as  a  defense 
against  it  in  the  hands  of  a  third 
person,  though  it  be  there  as  col- 
lateral security  merely");  Cole  v. 
Saulpaugh,  48  Barb.  (N.  Y.)  104 
(where  there  is  no  limitation  or  re- 
striction the  rule  applies) ;  East 
River  Bank  v.  Butterworth,  45 
Barb.  (N.  Y.)  476,  30  How.  Prac. 
(N.  Y.)  44,  affirmed,  51  N.  Y.  637 
(rule  applied  where  no  restric- 
tion); DeZeng  v.  Fyfe,  1  Bosw.  (N. 
Y.)  335  (rule  applied  in  cases  ex- 
empt from  fraud) ;  Mechanics'  & 
Traders'  Bank  v.  Livingston,  6 
Misc.  Rep.  81,  26  N.  Y.  Supp.  25, 
aff'g  4  Misc.  Rep.  255,  23  N.  Y.  Supp. 
814;  Continental  Nat.  Bank  v.  Cros- 
by, 1  N.  Y.  Supp.  256,  48  Hun  (N. 
Y.)  621;  Moyer  v.  Urtel,  9  N.  Y.  St. 
Rep.  667;  Wallach  v.  Bader,  7  N. 
Y.  St.  Rep.  375;  Inglis  v.  Kennedy, 
6  Abb.  Prac.  32.  See  Brewster  v. 
Shrader,  57  N.  Y.  Supp.  606,  609, 
26  Misc.  403,  where  the  changes  in 
the  New  York  law  and  the  prior  rule 
are  considered. 

Pennsylvania. — Second  Nat.  Bank 
v.  Dunn,  151  Pa.  St.  228,  25  Atl.  80, 
31  Wkly.  Notes  Cas.  112   (as  to  ac- 


commodation judgment  note,  it  may 
be  taken  as  collateral  for  precedent 
debt  in  the  absence  of  restrictions; 
otherwise  where  there  are  restric- 
tions, as  in  such  latter  case  any  de- 
fense except  want  of  consideration 
is  available  as  to  original  party) ; 
National  Union  Bank  v.  Todd,  132 
Pa.  St.  312,  19  Atl.  218;  Hart  v,  U. 
S.  Trust  Co.,  118  Pa.  St.  565,  12 
Atl.  561  (agreement  here  not  per- 
formed; plaintiff  had  no  notice 
thereof;  there  was  no  such  fraudu- 
lent diversion  as  to  constitute  a  de- 
fense, and  recovery  was  allowed) ; 
Lord  v.  Ocean  Bank,  20  Pa.  St.  384, 
59  Am.  Dec.  728  (also  deciding  that 
it  constitutes  no  defense  that  holder 
had  other  collateral  securities  for 
same  debt,  but  from  which  the  debt 
had  not  been  realized) ;  Beckhaus  v. 
Commercial  Nat.  Bank  (Pa.  1888), 
12  Atl.  72,  22  Wkly.  Notes  Cas.  53. 

Yerinont. — Pinney  v.  Kimpton,  46 
Vt.  80. 

But  see  Bramhall  v.  Beckett,  31 
Me.  205;  Royer  v.  Keystone  Nat. 
Bank,  82  Pa.  St.  248  (diversion  of 
note;  the  intervention  of  fraud  in 
procurement  or  use,  precludes 
pledgee  from  holding  as  security 
for  antecedent  debt,  from  sustain- 
ing claim  that  he  is  holder  for  value, 
nor  can  recovery  be  had  on  renewal 
note). 

Pledgee  as  garnishee  cannot  de- 
fend although  drawer  might  where 
accommodation  paper  pledged  for 
specific  purposes.  Kirkpatrick  v. 
Oldham,  38  La.  Ann.  553. 

Note  not  strictly  accommodation 
paper,  maker  is  precluded  from  de- 
fense where  paper  is  based  on  valu- 
able consideration,  even  though 
given  as  security  for  a  pre-existing 
debt.  Barker  v.  International  Bank 
of  Chicago,  80  111.  96. 


I 


353] 


COLLATERAL    SECURITY. 


458 


fense  in  such  case,"  and,  although  the  payment  of  a  security  debt  is 
held  a  sufficient  consideration  for  the  transfer  of  an  accommodation 
note  where  no  consideration  had  passed  between  the  payee  and  the 
makers,  still  a  bona  fide  indorsee  for  value  may  recover  thereon.^-  It 
is  also  decided,  however,  that  some  consideration  must  have  passed 
from  the  holder.^^  Again,  where  there  are  no  restrictions  as  to  a  note 
for  the  indorser's  accommodation,  such  note  may  be  used  by  him  for 
accommodation,  and  a  recovery  may  be  had  upon  it  by  the  holder  to 
any  amount  to  which  he  holds  it  as  security,  not  exceeding  the  sum 
named  in  the  note,  even  though  he  knew  its  origin,^*  But  it  is  also 
determined  that  one  who  receives  such  a  note  is  not  a  bona  fide  holder 


"  Schepp  V.  Carpenter,  51  N.  Y. 
602,  aff'g  49  Barb.  (N.  Y.)  542; 
Smith  V.  Hine,  179  Pa.  St.  260,  36 
Atl.  221  (where  an  accommodation 
note  is  held  by  a  third  party  as  col- 
lateral for  a  precedent  indebtedness, 
want  of  consideration  is  not  avail- 
able as  a  defense;  but  the  maker  or 
indorser  of  such  paper  may  avail 
himself  of  fraud  in  the  procuring 
or  use  of  the  note,  since  in  this  re- 
spect the  rules  are  applicable  that 
apply  to  commercial  paper  general- 
ly, but  the  latter  parties  cannot  set 
up  as  a  defense  that  the  note  was 
given  without  consideration  and 
pledged  for  a  pre-existing  debt) ; 
Carpenter  v.  Bank,  106  Pa.  St.  170; 
"Work  V.  Kase,  34  Pa.  St.  138. 

"Bondurant  v.  Bladen,  19  Ind. 
160.  In  this  case  the  maker  and  in- 
dorser were  defendants. 

i^Bank  v.  Vanderhorst,  1  Rob.  (N. 
Y.)  211,  216  (declaring  that  the  law 
of  New  York  is  settled  that  a  prom- 
issory note,  taken  in  payment  of  an 
antecedent  debt,  and  the  prior  in- 
debtedness extinguished  is  deemed 
to  be  taken  for  value  so  as  to  con- 
stitute it  a  valid  security  in  the 
hands  of  the  holder.  The  court  also 
said  the  principle  is,  that  if  the 
holder  parts  with  something  at  the 
time  he  receives  the  note,  it  affords 


a  sufficient  consideration  to  make 
his  holding  hona  fide.  If,  therefore, 
he  extinguishes  the  prior  debt,  or 
surrenders  the  prior  security,  or  ad- 
vances money  upon  the  credit  of 
the  new,  it  will  constitute  him  a 
holder  for  value.  But  it  does  not  ap- 
pear that  merely  receiving  a  promis- 
sory note  or  bill  of  exchange  of  a 
third  person,  as  security  for  a  prece- 
dent debt,  without  extinguishing 
the  prior  debt,  or  parting  with  any 
money  or  security  at  the  time,  is 
sufficient  to  constitute  a  holding  for 
value) ;  Grocers'  Bank  v.  Penfield,  7 
Hun  (N.  Y.)  279,  aff'd,  69  N.  Y.  502 
(the  holder  would  have  no  greater 
rights  than  the  payee,  in  the  ab- 
sence of  a  consideration,  and  a  bank 
which  has  surrendered  nothing  of 
value,  nor  parted  with  money  or 
property  for  such  notes,  nor  sus- 
pended its  remedy  for  the  debt  se- 
cured thereby,  cannot  recover  there- 
on; an  implied  agreement,  however, 
for  the  extension  of  time  of  credit 
of  an  existing  debt  is  a  sufficient 
consideration). 

See  Atkinson  v.  Brooks,  26  Vt. 
569,  575,  584,  62  Am.  Dec.  592. 

"East  River  Bank  v.  Butter- 
worth,  46  Barb.  (N.  Y.)  476,  30 
How.  Pr.  444,  aff'd,  51  N.  Y.  637. 


■I 


459 


ACCOMMODATIOlSr  PAPEK — ^INDORSEE. 


[§   354 


for  value,  and  that  fraud  may  be  availed  of  to  impeach  the  paper. ^^ 
And  if,  after  maturity  of  an  accommodation  note,  a  new  note  is  given 
as  independent  security  therefor,  the  claim  against  the  maker  of  the 
latter  note  is  not  affected,  except  there  be  a  payment  or  release  between 
the  accommodation  indorser  and  the  original  maker,  and  it  is  no  de- 
fense thereto  that  a  mortgage  was  given  to  the  indorser  as  security 
therefor.^^ 

§  354.    Accommodation  paper — Indorser — ^Bona  fide  holder. — If  a 

note  indorsed  for  accommodation  of  the  maker  is  transferred  as  col- 
lateral to  secure  a  pre-existing  debt,  an  indorser  cannot  defend  against 
a  bona  fide  holder  on  that  ground,  there  being  neither  fraud  or  diver- 
sion in  such  transfer,  and  no  restriction;^'^  and  the  rule  has  been  ap- 


"Cummings  v.  Boyd,  83  Pa.  St. 
372;  Royer  v.  Keystone  Nat.  Bank, 
83  Pa.  St.  248. 

"Mosser  v.  Criswell,  150  Pa.  St. 
409,  24  Atl.  618. 

"  Connecticut. — Bridgeport  City 
Bank  v.  "Welch,  29  Conn.  475. 

New  York. — Boyd  v.  Cummings, 
17  N.  Y.  101;  Weaver  v.  Farrington, 
7  Misc.  405,  27  N.  Y.  Supp.  971,  aff'g 
6  Misc.  Rep.  54,  26  N.  Y.  Supp.  78. 

Ohio. — Pitts  V.  Foglesong,  37  Ohio 
St.  676,  41  Am.  Rep.  540. 

Pennsylvania. — Newbold  v.  Boraef, 
155  Pa.  St.  227,  26  Atl.  305. 

United  States. — Molson  v.  Haw- 
ley,  1  Blatchf.  (U.  S.  C.  C.)  409, 
Fed.  Cas.  No.  9702. 

See  German-American  Savings  Bk. 
of  Burlington  v.  Hanna,  124  Iowa 
374,  100  N.  W,  56,  59,  relying 
upon  Iowa  State  Bank  v.  Mason 
Hand  Lathe  Co.  (Iowa),  90  N.  W. 
612. 

But  examine  First  National  Bank 
V.  Schnur,  57  Mo.  App.  176  (where 
the  maker's  notes  are  held  by  the 
payee  for  the  amount  of  his  indebt- 
edness and  are  not  surrendered  and 
no  other  consideration  exists  for  the 


new  notes,  an  accommodation  in- 
dorser is  not  obligated  thereby); 
Prentiss  v.  Graves,  33  Barb.  (N.  Y.) 
621  (where  a  draft  was  due  and  un- 
paid, and  in  order  to  take  it  up  the 
drawer  procured  an  indorsement  of 
a  note  for  accommodation  to  the 
holders  of  the  draft,  but  it  was  ac- 
cepted merely  as  collateral  security 
and  not  as  payment,  and  there  was 
no  new  consideration,  nor  any 
agreement  to  extend  the  draft,  but 
the  drawer  was  still  held  liable  to 
its  prosecution,  it  was  decided  that 
they  were  not  holders  for  value); 
Cummings  v.  Boyd,  83  Pa.  St.  372 
(a  holder  of  accommodation  paper 
pledged  as  collateral  security  for  an 
antecedent  debt  without  restriction 
is  not  a  holder  for  value,  and  is  sub- 
ject to  defenses  for  fraud  in  its  mak- 
ing or  procurement.  But  the  proposi- 
tion that  accommodation  paper  may 
be  pledged  as  collateral  security  for 
an  antecedent  debt  where  the  paper 
contains  no  restrictions  as  to  the 
manner  of  its  use,  was  admitted  by 
the  court).  Examine  also  §§  383- 
391  herein. 


§    355]  COLLATERAL    SECURITY.  460 

plied,  even  though  knowledge  of  the  circumstances^®  or  notice  of  the 
character  of  the  indorsement  exists  on  the  part  of  the  transferee.^^ 
And  a  creditor  holding  the  paper  for  value  is  entitled  to  recover  from 
the  indorser,  notwithstanding  an  agreement  not  to  negotiate  the  note, 
where  he  is  not  chargeable  with  notice  of  said  agreement.-*'  Again, 
where  one  of  two  joint  accommodation  indorsers  has  satisfied  a  judg- 
ment on  a  note  so  indorsed,  in  a  suit  for  contribution  it  is  no  defense 
that  there  was  an  independent  agreement  as  to  collateral  security 
whereby  a  discount  was  enabled  to  be  obtained  upon  a  note  by  the 
party  for  whose  accommodation  the  paper  was  made.-^  And  where 
negotiable  notes  are  indorsed  over  as  collateral  security  for  other  notes 
then  and  there  discounted  by  the  indorsee  for  the  indorser  on  the  faith 
and  credit  of  the  notes  indorsed  as  collateral  the  indorsee  of  such  notes- 
is  to  be  regarded  as  a  purchaser  for  value ;  therefore  no  prior  indorser, 
as  against  such  indorsee,  can  avail  himself  of  the  fact  that  he  is  an 
accommodation  indorser  only.  If  a  suit  is  brought  by  such  indorsee 
against  such  prior  indorser,  the  defendant  can  introduce  no  evidence 
which  does  not  prove  or  tend  to  prove  actual  payment  of  the  notes  to 
the  indorsee.  ^- 

§  355.  Bills — Acconmiodation  acceptor. — Where  a  bill  is  drawn  for 
the  accommodation  of  the  drawee  for  the  special  and  sole  purpose  of 
sustaining  his  professional  business  and  financial  credit,  and  of  aiding 
him  in  his  operations  connected  therewith,  the  legal  consequences  of 
such  facts  is  that  such  paper  is  not  enforceable  as  between  drawer  and 
drawee ;  nor  as  between  drawer  and  payee  unless  the  latter  purchased 
it  bona  fide  for  a  valuable  consideration  and  without  notice  of  the  pur- 
pose for  which  it  was  drawn.  A  payment  of  a  pre-existing  debt  being 
inconsistent  with  the  vital  spirit  of  the  drawer's  sole  object,  a  pawnee 
who  receives  such  bill  as  collateral  security  for  a  debt  is  not  a  bona 
fide  holder.^^  Again,  it  is  decided  that  where  a  note  or  bill  is  taken  in 

^^  Varnum   v.   Bellamy,  4   McLean  =-  Miller  v.  Pollock,  99  Pa.  St.  202. 

(U.    S.    C.    C.)     87,    Fed.    Cas.    No.  ==  Thompson  v.  Poston,  1  Duv.  (62 

16886.  Ky.)  389,  392. 

''^Bonsall  v.  Bauer,  2  Wkly.  Notes  That  transferee  is  not  holder  for 

Cas.    (Pa.)    298;    Molson  v.  Hawley,  value  in  Kentucky,  where  he  takes 

1  Blatchf.  (U.  S.  C.  C.)  409,  Fed.  Cas.  it  before  maturity  as  collateral  se- 

No.  9702.  curity  for  an  antecedent  debt,  see 

^"Boyd    V.    Cummings,    17    N.    Y.  Alexander  &  Co.  v.  Springfield  Bk., 

101.  2  Mete.  (59  Ky.)  534;  Lee  v.  Smead, 

='Newcomb   v.    Gibson,   127    Mass.  1    Mete.     (58    Ky.)     628.      Examine 

396.  Kentucky    Nat.    Bk.    v.    Martin,    15 


461  for:\i  of  assigx^iext.  [§§  356-358 

due  course  of  business  as  collateral  security  for  a  pre-existing  debt  by 
the  indorsee,  he  is  prima  facie  a  holder  for  value  and  may  recover 
against  an  accommodation  acceptor,  whom  he  did  not  know  was  such 
acceptor  when  the  bill  was  taken  by  him.--*  And  where  plaintiffs  had 
received  a  draft  as  collateral  security  for  a  pre-existing  debt  and  it 
was  accepted  for  their  own  accommodation,  upon  an  agreement  that 
they  should  protect  it,  it  was  determined  that  in  an  action  against  the 
acceptor  that  all  equities  between  the  maker  and  acceptor  were  avail- 
able and  precluded  a  recovery.-^ 

§  356.     Form  of  assignment,  when  immaterial — Bona  fide  holder. — 

Under  the  law  of  Texas  it  matters  not  how  a  negotiable  note  has  been 
assigned.  Though  the  transfer  be  not  evidenced  by  a  writing  it  is 
placed  upon  the  same  footing  as  a  transfer  by  indorsement.  If  trans- 
ferred without  notice  of  any  defenses  as  against  the  transferor  it  is 
subject  to  none,  and  this  applies  to  the  holder  of  such  a  note  trans- 
ferred or  deposited  with  him  as  collateral  security  for  a  loan  to  the 
payee. -^ 

§  357.  When  note  not  collateral  security  but  independent  obliga- 
tion.— A  note  is  not  collateral  security  but  an  independent  obligation, 
and  is  a  promise  in  writing  to  pay  the  debt  of  another,  where  it  is 
given  to  release  a  levy  upon  chattels  under  execution,  issued  in  an 
action  to  which  the  maker  of  the  note  was  not  a  party,  said  note  being 
given  upon  the  understanding  that  it  should  be  paid  at  maturity  and 
the  exeeiition  held  in  the  meantime ;  not  that  the  execution  would  bo 
paid  and  the  note  held  as  security.  In  such  case  the  note  is  the  pri- 
mary obligation  and  the  execution  the  secondary.^" 

§  358.  Note  payable  to  order,  assigned  but  not  indorsed. — Where  a 
promissory  note,  payaljie  to  order  of  a  named  payee  and  not  indorsed 
or  otherwise  assigned  in  Avriting  so  as  to  vest  the  legal  title  in  the  per- 
son to  whom  the  same  is  delivered  as  collateral,  is,  by  the  payee,  be- 
fore its  maturity,  delivered  to  another  who  takes  the  same  bona  fide, 
either  as  a  purchaser  or  for  the  purpose  of  holding  it  as  collateral  se- 
curity, but  by  mistake  or  inadvertence,  the  note  is  not  indorsed  or 

Ky.  L.  Rep.  646,  24  S.  W.  1067.    See  =»  National    Bk.    of    Commerce    v. 

further  §§  246-249,  383-391  herein.  Kenney,  98  Tex.  293,  83  S.  W.  368, 

^Atkinson  v.  Brooks,  26  Vt.  569,  rev'g  80  S.  W.  585. 

62  Am.  Dec.  592.  ^  So  held  in   Lockner  v.  Holland 

^Fale  v.  Dart,  19  N.  Y.  Supp.  389.  (County  Court),  81  N.  Y.  Supp.  730. 


§  358] 


COLLATERAL   SECURITY. 


463 


otherwise  transferred  in  writing,  tlie  liolder  takes  it  subject  to  all  the 
equities  between  the  original  parties  to  the  note  existing  at  the  time 
of  such  delivery  and  which  arose  out  of  the  transaction  upon  which 
the  note  was  given.  This  is  true,  although  at  the  trial  the  note  was 
transferred  in  writing  by  the  original  payee  to  the  usee.^^ 


^  Benson  v.  Abbott,  95  Ga.  69,  75- 
78,  22  S.  E.  127.  The  court  said: 
"It  has  been  for  a  long  time  well- 
settled  law  that  one  who,  without 
indorsement,  though  for  value  and 
without  notice,  takes  a  note  payable 
to  order,  takes  it  subject  to  all  de- 
fenses which  would  have  prevailed 
against  the  original  payee.  It  will 
be  observed  that  the  rule  under  con- 
sideration, and  which  protects  the 
holder  against  such  equities,  applies 
only  to  commercial  paper  which  is 
negotiable.  Unless  a  promissory 
note  is  made  payable  to  bearer,  it  is 
not  propria  vigore  negotiable  in  the 
strict  legal  sense;  it  is  wanting  in 
the  final  requisite,  which  imparts  to 
it  the  quality  of  negotiability,  name- 
ly, indorsement.  By  this  act  alone 
can  it  become  negotiable;  and  there- 
fore it  follows  that  he  who  receives 
it  before  indorsement  does  not  take 
it  as  a  negotiable  paper,  and  not  be- 
ing thus  negotiable,  he  takes  subject 
to  the  equities  between  the  parties. 
Except  in  case  of  negotiable  securi- 
ties, the  law  indulges  no  presump- 
tions in  favor  of  the  holder;  he  is 
not  presumed  to  be  such  either 
'b07ia  fide  or  for  value;  but,  on  the 
contrary,  it  charges  him  with  no- 
tice of,  and  he  takes  subject  to,  all 
defenses  which,  originating  in  the 
contract,  might  be  set  up  by  the 
maker.  Not  only  is  this  true  where 
the  purpose  is  to  invest  the  holder 
with  the  absolute  unqualified  title 
to  the  paper,  but  it  is  likewise  true 
where  it  is  intended  only  to  pledge 
it  as  collateral  to  another  liability. 
In  either  case  the  negotiability  of 


the  paper  is  the  very  essence  of  the 
holder's  claim  to  protection  against 
equities.  *  *  *  The  code,  §  2138, 
declares  that  promissory  notes  and 
other  evidences  of  indebtedness 
may  be  delivered  in  pledge;  and 
§  2139  declares  the  receiver  in 
pledge  of  promissory  notes  is  such  a 
bona  fide  holder  as  will  protect  him 
under  the  same  circumstances  as  a 
purchaser,  from  equities  between 
the  parties.  Section  2788  declares 
that  the  holder  of  a  note  as  collat- 
eral security  for  a  debt  stands  upon 
the  same  footing  as  a  purchaser. 
He  is  thus  placed  upon  the  same 
plane  as  a  purchaser.  The  right  of 
a  purchaser  for  value  is  to  be  pro- 
tected against  equities  only  when, 
by  indorsement,  the  paper  is  ren- 
dered negotiable,  and  he  is  invested 
with  the  legal  title.  So  with  a 
pledgee.  So  with  the  person  who 
holds  the  paper  as  collateral  secur- 
ity;— they  all  stand  upon  the  same 
footing.  In  each  case  indorsement 
is  the  condition  of  absolution.  It  is 
true  that  notes  of  the  character  now 
under  consideration  may  be  pledged 
as  collateral  security  by  manual  tra- 
dition only,  but  for  such  delivery  to 
be  effective  as  against  pre-existing 
equities  it  must  be  accompanied 
with  the  legal  requisites  to  trans- 
mission of  title.  The  pledgee  must 
be  a  holder,  a  bona  fide  holder  in 
due  course  of  trade;  and  a  regular 
indorsement  by  the  payee  is  neces- 
sary to  constitute  him  such.  Our 
attention  is  directed  to  the  case  of 
Smith  et  al.  v.  Jennings,  reported 
in  74  Georgia  Reports,  page  551,  as 


I 


463 


CONTEilPORANEOUS  OR  FUTURE  LOANS — ADVANCES.   [§  359 


§  359.  Contemporaneous  or  future  loans — Advances— Bona  fide 
holder. — It  is  held  in  certain  jurisdictions  that  one  who  accepts  a  ne- 
gotiable note  without  notice  of  defense  as  collateral  security  for  a  pre- 
existing debt  in  excess  of  the  note  is  a  hona  fide  holder  for  value  f^ 
and  also  that  an  indorsee  is  a  purchaser  for  value  of  a  note  where  he 
holds  the  same  as  collateral  to  secure  a  debt,  where  he  has  no  notice 


bearing  upon  and  ruling  a  principle 
otherwise  than  is  herein  expressed. 
In  that  case  the  proceeding  was  in 
equity  to  enforce  the  alleged  lien  of 
a  judgment  against  certain  land,  a 
deed  to  which,  together  with  a 
promissory  note  for  the  purchase 
money  thereof,  had  been  delivered 
in  pledge.  Whether  or  not  the  deed 
alone  could  have  been  delivered  in 
pledge  so  as  to  vest  an  interest  in 
the  pledgee  is  not  material.  When 
accompanied,  however,  by  the  note 
for  the  purchase  money,  its  delivery 
had  the  effect  to  vest  in  him  an 
equity,  and  in  a  contest  between  this 
judgment  creditor  and  the  pledgee, 
the  latter  was  entitled,  under  the 
rule  that  he  who  seeks  the  aid  of  a 
court  of  equity  in  vindication  of  a 
supposed  equitable  right,  must  do 
equity  to  have  his  debt  first  paid 
before  the  thing  pledged  could  be 
appropriated  to  the  payment  of 
other  debts  of  the  pledgor.  As  be- 
tween the  judgment  creditor  and 
the  pledgee,  the  equity  of  the  latter 
was  superior.  His  interest  in  the 
thing  pledged  had  vested  prior  to 
the  rendition  of  the  judgment.  The 
lien  of  the  judgment,  assuming  that 
it  could  attach  at  all,  would  attach 
only  to  the  interest  of  the  defendant 
in  execution  in  the  thing  bailed,  and 
that  interest  was  an  equity  of  re- 
demption. In  that  case  the  equities 
of  the  judgment  creditor  arose  out- 
side the  contract.  In  this  the  equity 
of  the  surety  inheres  in  the  contract 
itself.     In  that  case  notice  or  want 


of  notice  could  not  affect  the  lien  of. 
the  judgment.  In  this  case  notice 
or  want  of  notice  is  the  one  poten- 
tial circumstance  to  charge  the 
holder  of  this  paper  with,  or  ab- 
solve him  from,  the  equities  between 
the  parties.  In  that  case  the  right 
of  the  maker  to  make  his  defenses 
to  an  unindorsed  promissory  note 
was  not  called  in  question.  Here  it 
is  the  direct  issue  between  the  par- 
ties. So  it  appears  that  there  is  no 
conflict  between  the  principle  there 
declared  and  that  here  ruled.  In- 
deed, it  is  apparent  that  the  two 
cases  involve  the  application  of  dis- 
tinct principles,  each  equally  well 
established.  The  views  herein  ex- 
pressed, defining  the  rights  of  the 
holder  of  an  unindorsed  promissory 
note  made  payable  to  order,  are  in 
perfect  harmony  with  the  great  cur- 
rent of  approved  authority;  and  we 
are  thus  led  to  conclude  that  in  the 
case  now  under  review,  the  paper  in 
question  having  gone  into  the  hands 
of  the  usee  without  indorsement  or 
assignment  (whether  this  occurred 
through  inadvertence  or  otherwise 
is  immaterial),  they  took  it  charged 
with  notice  of,  and  subject  to,  the 
pre-existing  equities,  and  though  an 
assignment  was  in  fact  executed  at 
the  trial,  this  could  not  avail  as 
against  equities  in  favor  of  the 
maker  which  sprang  out  of  and  in- 
hered in  the  contract  itself." 

=»Lashmet   v.   Prall    (Neb.    1902), 
96  N.  W.  152,  153. 


§  359] 


COLLATERAL   SECURITY. 


464 


of  any  fraud  or  misrepresentation  inducing  the  execution  of  the  note, 
or  that  the  consideration  had  f  ailed.^*^  In  other  jurisdictions,  however, 
the  contrary  rule  prevails.^^  It  is  also  decided  that  persons  are  not 
indorsees  in  due  course  for  value  of  a  note  taken  for  a  pre-existing 
debt  where  they  assume  no  new  obligation,  duty  or  responsibility  and 
part  with  no  value  when  taking  the  note,  and  the  debt  very  largely 
exceeds  the  amount  of  the  note,  and  the  latter  is  not  an  immediate  ob- 
ligation and  the  payee  has  indorsed  the  note  by  a  written  guaranty 
of  payment  before  maturity.^-  But  notwithstanding  those  decisions 
which  hold  that  indorsees  who  take  a  note  as  collateral  security  for 
a  pre-existing  debt  are  not  bona  fide  holders,  it  is. a  conceded  rule  that  a 
transferee  is  a  holder  for  value  where  the  negotiable  paper  is  received 
as  collateral  security  for  a  present  or  contemporaneous  loan  or  for 
fresh  advances  or  upon  a  new  consideration  afterwards,  in  due  course, 
without  notice  and  in  good  faith.^^     Or,  to  state  the  rule  in  other 


="  Watzlavick  v.  D.  &  A.  Oppen- 
heimer  (Tex.  Civ.  App.  1905),  85  S. 
W.  855.    See  §§  246-249  herein. 

''  See  §§  246-249  herein. 

"Porter  v.  Andrus,  10  N.  D.  558, 
88  N.  W.  567.    See  §§  246-249  herein. 

^Arkansas. — Estes  v.  German  Na- 
tional Bank,  62  Ark.  7,  34  S.  W.  85 
(where  there  is  a  sale  of  land  the 
lien  of  the  purchase  money  passes 
with  the  notes  as  collateral  secur- 
ity) ;  Brown  v.  Callaway,  41  Ark. 
418  (holding  also  that  when  there 
are  defenses  to  the  note  as  against 
the  transferer,  the  holder  can  re- 
cover on  it  not  exceeding  the 
amount  of  his  loan  note.  The  court, 
per  Eakins,  J.,  said:  "Such  a  bona 
fide  holder  of  paper  taken  as  col- 
lateral at  the  time  of  the  loan,  or 
upon  a  new  consideration  afterward, 
is,  by  all  the  authorities,  held  en- 
.  titled  to  the  protection  of  an  in- 
dorsee. The  only  conflict  of  author- 
ity, and  that  is  very  great,  arises  in 
cases  of  paper  taken  as  additional 
security  for  a  pre-existing  debt 
without  new  consideration.  In  this 
case  the  collateral  was  taken  at  the 
time  of  the  loan"). 


Georgia. — Partridge  v.  William's 
Sons,  72  Ga.  807;  Exchange  Bank  v. 
Butner  &  Edgeworth,  60  Ga.  654; 
Code,  §  2788.  (Indorsee  of  note  be- 
fore due,  as  collateral  security  for 
money  loaned,  is  bona  fide  holder, 
and  not  subject  to  plea  of  failure  of 
consideration  as  a  defense) ;  Bonaud 
V.  Genesi,  42  Ga.  639. 

Illinois. — Humble  v.  Curtis,  160 
111.  193,  43  N.  E.  740  (party  is  also 
no  less  a  bona  fide  holder  because 
note  secured  by  mortgage  or  deed  of 
trust). 

Indiana. — Valette  v.  Mason,  1  Ind. 
288. 

Iowa. — Wendlebone  v.  Parks,  18 
Iowa  546  (a  case  of  transfer  of  old 
securities). 

^a?7,sas.— Best  v.  Crall,  23  Kan. 
482,  33  Am.  Dec.  185;  State  Sav. 
Assoc,  v.  Hunt,  17  Kan.  532. 

Louisiana. — Louisiana  State  Bank 
V.  Gaiennie,  21  La.  Ann.  555;  King 
V.  Gayoso,  8  Mart.  N.  S.  (La.)  370. 

Maryland. — Gwynn  v.  Lee,  9  Gill 
(Md.)  137. 

Missouri.— L>ee  v.  Turner,  89  Mo. 
489,  14  S.  W.  505  (transferee  from 
apparent  owner  will  be  protected) ; 


4G5 


CONTEMPORANEOUS  OR  FUTURE  LOANS — ADVANCES.   [§  359 


words,  when  the  note  of  a  third  person  is  transferred  hona  fide  before 
due  as  collateral  security  and  for  value,  such  as  a  loan  or  further  ad- 
vancement, or  a  stipulation,  express  or  implied,  of  further  time  to  pay 


Deere  v.  Marsden,  88  Mo.  512,  514 
(the  court,  per  Black,  J.,  said: 
"One  who  takes  a  note  as  collateral 
security  for  a  debt  then  created  is 
a  holder  for  value.  Logan  v.  Smith, 
62  Mo.  455.  As  to  a  pre-existing 
debt,  if  there  is  an  express  agree- 
ment on  the  part  of  the  creditor  to 
forbear  suit  until  the  collateral  shall 
mature,  the  agreement  to  delay  con- 
stitutes the  transferee  a  holder  for 
value.  Dan.  Neg.  Inst.  (3  Ed.), 
§  829;  Gates  v.  National  Bank,  100 
U.  S.  247.  The  extension  of  time 
for  the  payment  of  the  past  indebt- 
edness, if  for  a  day  only,  constitutes 
a  new  and  sufficient  consideration. 
Smith  v.  Worman,  19  Ohio  St.  148. 
The  agreed  facts  in  this  case  are  far 
from  being  clear,  but  taking  them 
in  connection  with  the  pleadings, 
we  conclude  some  time  was  given 
Jones  by  the  note  taken  from  him 
by  Marsden  for  the  past  indebted- 
ness. This  being  so,  Marsden  was 
clearly  a  purchaser  for  value.  Good- 
man V.  Simonds,  19  Mo.  107,  only 
holds  that  one  who  takes  a  bill 
merely  as  a  collateral  security  for 
a  pre-existing  debt,  having  given  no 
value  or  consideration  for  it,  holds 
it  liable  to  the  equities  of  the  orig- 
inal parties").  Logan  v.  Smith,  62 
Mo.  455. 

Nebraska. — Connecticut  Trust  & 
Safe  Deposit  Co.  v.  Trumbo  (Neb. 
1902),  90  N.  W.  216  (contemporane- 
ous loan);  Connecticut  Trust  & 
Safe  Deposit  Co.  v.  Fletcher,  61  Neb. 
166,  172,  85  N.  W.  59;  Hayden  v. 
Lincoln  City  Elec.  Ry.  Co.,  43  Neb. 
680,  62  N.  W.  73;  Helmer  v.  Com- 
mercial Bank,  28  Neb.  474,  44  N.  W. 
482. 

Joyce  Defenses — 30. 


NeiD  Hampshire. — National  State 
Capitol  Bank  v.  Noyes,  62  N.  H.  35. 

Neio  York. — American  Exchange 
Nat.  Bank  v.  New  York  Belting  & 
Packing  Co.,  148  N.  Y.  698,  43  N.  E. 
168  (in  substitution  for  other  notes 
is  holder  for  value  of  substituted 
notes);  Brookman  v.  Metcalf,  32  N. 
Y.  591;  aff'g  5  Bosw.  (N.  Y.)  429; 
Bank  v.  Vanderhorst,  32  N.  Y.  553, 
aff'g  1  Rob.  (N.  Y.)  211;  Atlantic 
National  Bank  v.  Franklin,  64  Barb. 
(N.  Y.)  449,  453;  Crook  v.  Mali,  11 
Barb.  (N.  Y.)  205;  Williams  v. 
Smith,  2  Hill  (N.  Y.)  301  (future 
indebtedness) ;  Scott  v.  Johnson,  5 
Bosw.  (N.  Y.)  213;  Ogden  v.  Andre, 
4  Bosw.  (N.  Y.)  583;  Watson  v. 
Cabot  Bank,  5  Sandf.  (N.  Y.)  423; 
Pearce  &  Miller  Eng.  Co.  v.  Brouer, 
10  Misc.  (N.  Y.)  502,  31  N.  Y.  Supp. 
195  (bona  fide  holder  to  extent  of 
loan);  Irving  Nat.  Bank  v.  Duryea, 
1  City  Ct.  R.  (N.  Y.)  317. 

Pennsylvania. — Miller  v.  Pollock, 
99  Pa.  St.  202  (holding  that  where 
negotiable  notes  are  indorsed  over 
as  collateral  security  for  other 
notes  then  and  there  discounted  by 
the  indorsee  for  the  indorser,  on  the 
faith  and  credit  of  the  notes  in- 
dorsed as  collateral,  the  indorsee  of 
said  notes  is  to  be  regarded  as  a 
purchaser  for  value) ;  Smith  v. 
Hogeland,  78  Pa,  St.  252;  Housum 
V.  Rogers,  40  Pa.  St.  190;  Work  v. 
Kase,  34  Pa.  St.  138;  Munn  v.  Mc- 
Donald, 10  Watts  (Pa.)  270. 

Rhode  Island. — Trafford  v.  Hall, 
7  R.  I.  104,  82  Am.  Dec.  580. 

South  Carolina. — M  c  C  r  a  d  y  v. 
Jones,  36  S.  C.  136,  15  S.  E.  430. 

Tennessee. — Memphis  Bethel  v. 
Bank,  101  Tenn.  130,  45  S.  W.  1072; 


560] 


COLLATERAL    SECURITY. 


46S 


a  pre-existing  debt,  or  a  further  credit,  or  a  change  of  securities  of  a 
pre-existing  debt,  or  the  like,  the  assignee  of  such  collateral  will  be 
protected  from  infirmities  affecting  the  instrument  before  it  was  trans- 
ferred.^* So  it  is  declared  in  an  Alabama  case  that  "where  one  hon- 
estly receives  a  negotiable  bill  or  note  before  maturity  as  collateral 
security  for  a  debt  contracted  simultaneously  or  in  pursuance  of  a 
previous  agreement  made  at  the  time  the  debt  was  contracted,  it  is 
quite  well  settled  that  he  is  entitled  to  protection  against  secret  equities 
or  defects  of  which  he  had  no  notice. "^^ 

§  360.  Same  Subject — Instances. — When  a  bank  in  good  faith  and 
before  maturity  advances  money  upon  municipal  coupon  bonds,  and 
their  negotiability  is  not  rescinded  and  there  are  no  circumstances 
necessitating  inquiry,  such  pledgee  may  assert  a  special  property  there- 
in to  the  extent  that  they  stand  as  security  for  the  moneys  loaned. ^^ 
So  where  a  bank  has  been  accustomed  to  make  loans  to  a  customer  and 
to  take  promissory  notes  as  collateral  security,  the  fact  that  it  has 
permitted  him  to  draw  upon  moneys  paid  in  upon  maturing  collater- 
ally upon  depositing  other  collaterals  to  take  their  place,  is  no  proof 
that  the  bank  is  not  the  bona  fide  holder  of  a  collateral  note  so  taken 


Gosling  V.  Griffin,  1  Pick.  (Tenn.) 
737,  3  S.  W.  642;  First  National 
Bank  v.  Stockell,  1  Pick.  (Tenn.) 
252,  21  S.  W.  523. 

Texas. — Kauffman  &  Runge  v. 
Robey,  60  Tex.  308,  48  Am.  Rep.  261 
(case  of  money  advanced  in  addi- 
tion to  pre-existing  debt). 

Vermont. — Tarbell  v.  Sturtevant, 
26  Vt.  513. 

Washington. — Peters  v.  Gay,  9 
Wash.  383,  37  Pac.  325. 

Wisconsin. — Curtis  v.  Mohr,  18 
Wis.  615;  Lyon  v.  Ewings,  17  Wis. 
61;  Crosley  v.  Roub,  16  Wis.  616; 
Bond  v.  Wiltse,  12  Wis.  611. 

United  States. — Black  v.  Reno,  59 
Fed.  917;  Doane  v.  King,  30  Fed. 
106. 

England. — Foster  v.  Pearson,  1 
Cromp.  M.  &  R.  849,  5  Tyrw.  255. 
See: 

Louisiana. — McPherson  v.  Boud- 
reau,  48  La.  Ann.  431,  19  So.  550. 


North  Dakota. — Security  Bank  v. 
Kingsland,  5  N.  D.  263,  65  N.  W.  697 
(sub-pledgee). 

Vermont. — Pinney  v.  Kimpton,  46 
Vt.  80. 

Contra,  see  Williams  v.  Little,  11 
N.  H.  66. 

As  to  illegality  being  defense  to  a 
note  so  taken,  see  Caswell  v.  Rail- 
road Co.,  50  Ga.  70. 

^  Roxborough  v.  Messick,  6  Ohio 
St.  448,  453,  67  Am.  Dec.  346,  per 
Swan,  J. 

=^  Miller  &  Co.  v.  Boykin,  70  Ala. 
469,  477,  citing  1  Parsons'  Bills  & 
Notes,  219;  Watts  v.  Burnett,  56 
Ala.  340;  Coleman  v.  Smith,  55  Ala. 
368. 

'^Manhattan  Sav.  Inst.  v.  New 
York  Nat'l  Exch.  Bk.,  170  N.  Y.  58. 
88  Am.  St.  Rep.  147,  59  N.  Y.  Supp. 
51,  aff'g  53  App.  Div.  635. 


i 


467  AGREEMENTS   AND   CONDITIONS.  [§    361 

before  maturity ;  although  such  may  not  be  the  bank's  method  of  doing 
business  with  its  other  customers. ^^  And  where  one  of  the  notes  of 
defendant  was  pledged  by  his  bank  with  a  clearing  house  committee 
to  secure  the  daily  balance,  and  the  bank  failed,  the  committee  was 
held  to  be  holder  of  the  note  for  value  and  that  he  could  apply  it  in 
payment  of  additional  loans.^^  So  an  agreement  to  forbear  action  on 
a  pre-existing  indebtedness  founded  on  a  consideration  of  a  delivery 
of  the  security  makes  the  holder  a  bona  fide  holder  for  value.^** 

§  361.  Agreements  and  conditions. — A  holder  and  a  party  to  a  note 
cannot  defend  upon  the  ground  that  the  note  was  payable,  under  a 
contemporaneous  parol  agreement,  out  of  a  surplus  of  certain  assets 
from  goods  pledged  to  secure  the  payor,  it  appearing  that  the  assets 
were  less  than  the  debt.***  And  where  a  note  with  others  has  been  de- 
livered to  secure  plaintiff  as  to  the  payee's  indebtedness,  the  writing 
evidencing  such  fact  cannot  be  varied  by  parol  proof  of  different  con- 
ditions.*^ It  is  also  decided,  in  an  action  by  the  payee  against  the 
maker,  that  it  cannot  be  shown  by  parol  that  the  note  was  conditional 
or  delivered  as  a  pledge  or  collateral  security  for  the  performance  of  a 
parol  agreement.'*-  But  if  a  note  is  given  as  collateral  security  for  a 
certain  agreement,  after  the  expiration  of  the  time  in  which  the  note 
is  payable,  and  after  its  breach  by  the  maker,  he  is  liable  thereon,  he 
having  received  advances  for  the  amount  of  the  paper. '^^  Where,  how- 
ever, a  note  is  deposited  by  one  party  in  the  hands  of  a  third  person 
as  collateral  security  on  a  contract  to  secure  its  fulfillment,  the  other 
party  to  the  contract  has  no  right  to  bring  suit  upon  such  note  merely 
for  his  fulfillment  of  th^  contract  so  long  as  it  is  not  agreed  that  the 
note  shall  be  liquidated  damages  for  non-performance,  and  the  dam- 
ages have  not  been  determined  in  a  suit  on  the  contract.''*  And  where 
a  contract  between  the  transferor  and  transferee  of  a  demand  note 
does  not  show  that  the  note  was  held  as  collateral  security  but  appears 
to  be  an  absolute  transfer  with  a  conditional  guaranty,  the  transferee 
is  not  subject  to  the  defense  of  failure  of  consideration.*^ 

^'  Mahaska  Bank  v.  Crist,  87  Iowa  '''  Hardie  v.   Wright,   83   Tex.   345, 

415,  54  N.  W.  450.  18  S.  W.  615. 

'^Philler  v.  Jewett  &  Co.,  166  Pa.  ^=  Walker  v.  Crawford,  56  111.  444. 

St.  456,  31  Atl.  204.  ■*■  Costelo    v.    Crowell,    134    Mass. 

"'Milins   v.   Kauffmann,   104    App.  280. 

Div.  442,  93  N.  Y.  Supp.  669.  "  Rumney  v.  Coville,  51  Mich.  186, 

"Guy  v.  Bibend,  41  Cal.  322.  16  N.  W.  372. 

«  Sawyer  v.  Phaley,  33  Vt.  69. 


§§  362,  363] 


COLLATERAL    SECURITY. 


468 


§  362.  Same  subject. — Although  the  pledgor  fraudulently  sup- 
presses certain  facts  as  a  means  to  obtain  the  indorsement,  and  the  in- 
dorsee or  pledgee  had  no  knowledge  thereof,  he  can  recover  notwith- 
standing he  failed  to  make  inquiries.*®  And  even  though  a  note  is 
entrusted  to  one  upon  condition  and  in  violation  thereof  and  without 
authority  he  transfers  it  to  another  in  payment  or  as  security  for  a , 
debt,  the  transferee  without  notice  is  protected  as  a  bona  fide  holder  for 
value.*^  Again,  under  a  "syndicate"  and  '^bondholder's"  agreement  a 
certain  amount  was  agreed  to  be  loaned  as  specified,  secured  by  notes. 
The  terms  of  the  notes  were  to  control  the  times  of  payment  subject 
to  certain  contingencies,  certain  bonds  were  attached  as  collateral,  but 
the  notes  were  the  principal  obligations  and  the  bonds  merely  incidents 
in  the  nature  of  security  for  their  payments.  The  defendant  had  the 
privilege  of  substituting  as  collateral  for  the  notes  a  certain  new  and 
contemplated  issue  of  bonds ;  such  new  bonds,  however,  were  not  issued 
so  that  any  covenant  of  the  syndicate  concerning  them  ever  became  the 
subject  of  default  on  the  part  of  the  plaintiffs.  There  was  therefore 
no  breach  of  condition  or  duty  by  the  plaintiffs  and  no  default  by  them 
which  precluded  enforcing  the  obligations  owned  by  them  and  no  rea- 
son why  they  should  be  held  liable  to  defendants.  Under  a  clause  in 
the  "syndicate"  agreement  in  the  event  of  the  non-purchase  of  a  cer- 
tain waterworks  system  and  non-payment  of  defendant's  note  then 
the  syndicate  was  to  act  as  a  unit  for  their  miitual  interests.  The  pur- 
chase not  being  made,  the  defendants  urged  that  the  loans  could  be 
enforced  by  the  syndicate  only  after  all  the  members  thereof  had  voted 
to  enforce  them.  It  was  held  that  the  syndicate  agreement  was  no 
bar  to  the  action  on  the  notes  and  was  immaterial  as  a  matter  of  de- 
fense.*^ 

§  363.     Security  for  the  performance  of  illegal  contract. — It  is  a 

good  defense  to  an  action  by  an  indorsee  against  the  indorser  of  a  note, 
indorsed  for  the  accommodation  of  the  maker,  that  the  indorsee  re- 
ceived the  note  as  security  for  the  performance  of  an  illegal  contract 
between  him  and  the  maker.*'' 


^»Lee  V.  Whitney,  149  Mass.  447, 
21  N.  E.  948. 

"  National  Bank  of  St.  Joseph  v. 
Dakin,  54  Kan.  656,  45  Am.  St.  Rep. 
299,  39  Pac.  180. 

*'  CofSn  V.  President  &c.  of  Grand 


Rapids  Hydraulic  Co.,  18  N.  Y. 
Supp.  783,  aff'd.  136  N.  Y.  655,  32  N. 
E.  1076. 

*"  Dunscombe  v.  Bunker,  2  Mete. 
(Mass.)  8;  Weimer  v.  Shelton,  7 
Mo.  237. 


469  NOTE    SECURED   BY    MORTGAGE,  [§§    3G4,    365 

§  364.  ITote  secured  by  mortgage — Mortgagee  against  maker — 
Surety. — Where  ordinarily  a  mortgagee  cannot  sue  and  obtain  judg- 
ment on  a  note  secured  by  collateral  mortgage,  except  by  foreclosure 
of  the  mortgage,  if  he,  by  his  own  act  or  neglect,  deprives  himself  of 
the  right  to  foreclose  the  mortgage,  he  at  the  same  time  precludes  him- 
self from  a  right  of  action  upon  the  note.  He  will  not  be  permitted, 
without  the  consent  of  the  mortgagor,  to  release  the  mortgage  in  order 
to  sue  upon  the  note^.  He  cannot  waive  the  security  and  bring  an  action 
on  the  indebtedness.^*'  In  another  case  a  mortgagee  consented  to  the 
sale  of  the  mortgaged  property  by  the  mortgagor,  with  the  understand- 
ing between  the  mortgagee  and  the  mortgagor  and  the  purchaser  that 
the  purchaser  should  give  his  note  to  the  mortgagor,  with  a  given 
person  thereon  as  surety  for  the  purchase  price  of  the  property ;  that 
the  mortgagor  should  indorse  the  note  to  the  mortgagee,  and  that  upon 
its  payment  it  should  be  credited  on  the  mortgage;  and  the  sale  was 
made,  the  note  given  and  indorsed  by  the  mortgagor  to  the  mortgagee, 
in  pursuance  of  such  arrangement,  the  mortgagee  taking  the  note  be- 
fore maturity  and  without  notice  of  any  defects  in  the  property  sold, 
it  was  held  that  in  suit  brought  by  the  mortgagee  on  the  note  against 
the  maker  and  the  surety,  a  failure  of  consideration  could  not  be  set 
up  as  a  defense.^ ^ 

§  365.  Note  secured  by  mortgage  or  other  instrument — ^Bona  fide 
holder — Pledgee. — It  is  held  that  the  assignee  of  mortgages  or  other 
securities  collateral  to  negotiable  paper  takes  the  collateral  subject  to 
defenses*  in  a  court  of  equity,  although  the  paper  secured  is  not  sub- 
ject to  defenses  at  law.^^     And  as  against  a  purchaser  of  a  non-ne- 

"^"Hibernia  Sav.  &  Loan  Soc.  v.  him);  Bryant  v.  Vix,  83  111.  11  (ex- 
Thornton,  109  Cal.  427,  50  Am.  St.  emption  as  to  innocent  holder  does 
Rep.  52  and  note,  42  Pac.  447.  not  attach  to  mortgage  given  to  se- 

Examine    Savings    Bank    of    San  cure  payment  of  note) ;    Haskell  v. 

Diego  County  v.  Central  Market  Co.,  Brown,  65  111.  29;  White  v.  Suther- 

122  Cal.  28,  35,  54  Pac.  273;  Donald-  land,  64  111.  181;  Olds  v.  Cummings, 

son  V.  Grant,  15  Utah  231,  241,  49  31  111.  188. 

Pac.  779.  Louisiana. — Securities  Co.  v.  Tal- 

"  Graham  v.  Cambell,  105  Ga.  839,  bert,  49  La.  Ann.  1393,  22  So.  762; 

32  S.  E.  118.  Butler  v.  Slocomb,  33  La.  Ann.  170; 

'^■Illinois. — Towner  v.  McClelland,  Rouligny    v.    Fortier,    17    La.    Ann. 

110  111.   542;    Miller  v.   Larned,   103  121. 

111.  562  (holding  also  that  rule  does  Massachusetts. — Bacon   v.   Abbott, 

not  apply  to  one  pledging  a  note  se-  137  Mass.  397. 
cured   by   mortgage  not  payable  to 


§  366]  COLLATERAL  SECURITY.  470 

gotiable  note  and  mortgage  the  equities  of  the  maker  against  the  payee 
are  available  against  such  purehaser.^^  It  is  also  held  to  be  no  defense 
to  an  action  on  a  note  by  the  payee  that  the  defendant  delivered  to  a 
third  person  with  the  plaintiff's  authority  another  note  secured  by 
chattel  mortgage  as  security  for  the  note  in  suit,  and  that  such  third 
person  collected  the  collateral  note  by  foreclosure  where  he  had  no  au- 
thority from  plaintiff  to  collect  it.^*  And  it  has  been  decided  that  in 
this  respect  there  is  no  distinction  between  mortgages  on  realty  and 
those  on  personal  property,  as  the  privileged  character  of  negotiable 
paper  does  not  extend  to  the  mortgage  by  which  it  is  secured,^ ^  al- 
though, it  is  held  that  the  purchaser  of  negotiable  notes  secured  by 
chattel  mortgage  may  take  free  of  defenses.^^ 

§366.  Same  subject. — In  Wisconsin  it  is  held  that  an  ordinary 
promissory  note  secured  by  a  real  estate  mortgage  is  negotiable,  al- 
though it  provides  that  on  default  in  the  payment  of  interest  or  on 
non-compliance  with  the  conditions  of  the  mortgage  the  whole  prin- 
cipal shall,  at  the  mortgagee's  option,  become  due  and  payable.  Such 
note  and  mortgage  each  relates  to  its  ovm.  subject-matter  and  does  not 
interfere  with  the  other,  even  though  they  form  parts  of  the  same 
transaction,  and  covenants  and  conditions  in  the  mortgage  are  simply 
agreements  for  the  preservation  of  the  security  and  are  not  intended 
to  qualify  or  affect,  and  do  not  enter  into  the  promises  of  the  note 
or  change  it,  or  affect  its  negotiability,  so  that  a  transferee,  by  in- 
dorsement before  maturity,  takes  the  note  free  from  all  equities.^^ 

Ohio. — Bailey  v.    Smith,   14    Ohio  "Walker  v.  Thompson,  108  Mich. 

St.  396.  686,  2  Det.  L.  N.  987,  66  N.  W.  584. 

South       Carolina. — Dearman       v.  "St.  Paul  Co.  v.  Rudd,  102  Iowa 

Trimmier,  26  S.  C.  506,  2  S.  E.  501.  748,  71  N.  W.  417.   When  no  defense 

That    the    real    assignee    fraudu-  generally,    see    also    W^endlebone   v. 

lently  managed  sale  of  property  is  Parks,  18  Iowa  546. 

a    defense    on    a    note    secured    by  "  Oster  v.  Mickley,  35  Minn.  245, 

mortgage.   Howard  v.  Ames,  3  Mete.  28  N.  W.  710. 

(44  Mass.)  308.  "Myers  v.  Hazard,  50  Fed.  156. 

Assignee     when     not     bona     fide  ^  Thorp    v.    Mindeman,    123    Wis. 

holder— mortgage.     Nashville   Trust  149,  101  N.  W.  417,  68  L.  R.  A.  146. 

Co.  V.  Smythe,  94  Tenn.  513,  29  S.  The  court,  at  pp.  160-162,  per  Wins- 

W.  903,  27  L.  R.  A.  663.  low,  J.,  says:    "While  we  have  con- 
Where  note  secured  by  mortgage  sidered  this  question  as  absolutely 

■or  deed   of   trust,  purchaser   not   a  settled    "Sy    the    negotiable    instru- 

iona  fide  holder.   Humble  v.  Curtis,  ments  law,  it  must  not  be  supposed 

160  111.  193,  43  N.  E.  749.  that  we  have  failed  to  examine  and 


471 


NOTE   SECURED   BY    MORTGAGE. 


[§   366 


But  while  the  assignee  of  a  note  secured  by  mortgage  may  hold  un- 


carefully  consider  the  numerous 
cases  cited  by  the  appellants,  mostly 
from  western  courts,  as  having  some 
bearing  upon  this  question.  We 
have  been  unable  to  find  that  any 
of  these  cases  really  conflict  with 
the  general  proposition  laid  down 
in  the  beginning,  namely,  the  prop- 
osition that  the  ordinary  provisions 
of  a  real  estate  mortgage  requiring 
payment  of  taxes  and  other  acts  by 
the  mortgagor  for  the  preservation 
of  the  mortgaged  property  are  not 
imported  into  the  accompanying 
note  simply  because  the  papers  are 
simultaneously  executed  as  a  part 
of  the  same  transaction.  A  number 
of  them  are  cases  decided  by  the 
Kansas  court  of  appeals,  and  are, 
in  substance,  to  the  effect  that, 
where  a  bond  or  note  in  terms  re- 
fers to  the  mortgage,  and  declares 
it  to  be  'a  part  of  this  contract,' 
and  the  mortgage  contains  cove- 
nants to  pay  taxes,  insure,  keep 
buildings  in  repair,  and  the  like, 
and  that  the  entire  sum  shall  be- 
come due  in  case  of  default  in  any 
of  such  agreements,  this  renders  the 
bond  or  note  non-negotiable.  Such 
are  the  cases  of  Lockrow  v.  Cline,  4 
Kan.  App.  716,  46  Pac.  720;  Chap- 
man v.  Steiner,  5  Kan.  App.  326,  48 
Pac.  607,  and  Wistrand  v.  Parker, 
7  Kan.  App.  562,  52  Pac.  59.  It  goes 
without  saying  that  such  cases  have 
no  bearing  on  the  present  case,  be- 
cause here  there  is  no  clause  in  the 
note  making  the  mortgage  a  part 
thereof,  or  adopting  its  provisions, 
except  the  provision  authorizing  the 
whole  amount  to  be  declared  due 
upon  certain  contingencies.  An- 
other line  of  cases  from  Nebraska 
holds  that  where  a  mortgage   pro- 


vides that  the  mortgagor  shall  pay 
the  taxes  levied  on  the  mortgagee 
for  or  on  account  of  the  mortgage, 
this  agreement  destroys  the  nego- 
tiability of  the  note,  because  it  ren- 
ders the  amount  uncertain.  Garnett 
V.  Meyers  (Neb.),  94  N.  W.  803; 
Consterdine  v.  Moore  (Neb.),  96  N. 
W.  1021;  Allen  v.  Dunn  (Neb.),  99 
N.  W.  680.  Such  seems  also  to  be 
the  effect  of  the  case  of  Brooks  v. 
Struthers,  110  Mich.  562,  68  N.  W. 
272.  Without  stopping  to  consider 
whether  these  decisions  should  be 
approved  or  not,  it  is  enough  to  say 
that  they  are  not  at  all  in  conflict 
with  the  present  decision.  The 
agreement  to  pay  taxes  was  to  pay 
taxes  which  might  be  levied  on  the 
mortgagee,  not  the  taxes  on  the 
mortgaged  property;  hence  the 
agreement  had  no  connection  with 
the  preservation  of  the  security,  and 
was  construed  by  the  courts  as  an 
agreement  to  pay  an  indefinite  sum 
as  a  part  of  the  note.  In  the  cases 
of  Donaldson  v.  Grant,  15  Utah  231, 
49  Pac.  779,  and  Gilbert  v.  Nelson, 
5  Kan.  App.  528,  48  Pac.  207,  notes 
containing  stipulations  very  similar 
to  those  found  in  the  present  case 
are  pronounced  negotiable  upon 
what  seems  to  us  very  unsatisfac- 
tory reasoning,  which  we  feel  no 
inclination  to  follow,  especially  in 
view  of  the  positive  provisions  of 
our  Negotiable  Instruments  Law  be- 
fore cited.  The  cases  of  Dilley  v. 
Van  Vie,  6  Wis.  209,  and  Elmore  v. 
Hoffman,  6  Wis.  68,  are  also  cited 
as  sustaining  appellants'  contention, 
but  it  is  evident  that  they  do  not. 
In  the  Dilley  case  the  note  con- 
tained an  express  clause  subjecting 
it    to    the    provisions    of    another 


I 


§  366] 


COLLATERAL   SECUEITY. 


47^ 


affected  by  equities,^^  yet  he  is  not  a  bona  fide  holder,  as  between  him- 
self and  a  prior  assignee,  where  he  became  the  purchaser  of  one  or- 
more  of  a  series  of  mortgage  notes  transferred  with  a  preference  lien 
contract.^®  Where,  however,  a  bank  in  good  faith  takes  a  transfer  of 
a  certificate  as  security  for  money  loaned  at  the  time  it  acquires  a 
title  to  the  certificate  as  against  the  plaintiff  as  security  for  the  money 
so  loaned  upon  repayment  of  the  money  and  interest,  the  bank  would 
be  obligated  to  return  the  certificate  to  the  party  entitled.  The  doc- 
trine of  estoppel  also  applies  to  preclude  the  real  owner  from  asserting 
his  title  against  a  bona  fide  purchaser  from  one  upon  whom  the  plain- 
tiff has  conferred  apparent  ownership  of  a  non-negotiable  chose  in 
action  and  apparent  absolute  authority  to  convey.'''^  Again,  it  is  con- 
sidered in  certain  jurisdictions  that  the  collateral  is  not  only  negoti- 
able but  is  free  from  equities  existing  in  behalf  of  the  mortgagor.®^ 


agreement,  made  on  the  same  day, 
by  which,  it  appeared  that  the  pay- 
ment was  subject  to  certain  equi- 
ties between  the  parties.  The  clause 
was  rightly  held  to  deprive  the  pa- 
per of  its  negotiable  character.  In 
the  Elmore  case  it  was  held  that  a 
collateral  agreement  made  between 
the  parties  contemporaneously  v/ith 
a  note,  by  which  the  payee  agreed 
to  give  day  of  payment  on  the  note 
till  the  happening  of  a  certain 
named  contingency,  was  admissible 
In  evidence  to  defeat  an  action  on 
the  note  in  the  hands  of  one  who 
purchased  the  note  with  notice  of 
the  contemporaneous  agreement. 
We  hold,  therefore,  that  under  the 
present  Negotiable  Instruments  Law 
the  note  in  the  present  case  is  ne- 
gotiable, and  in  so  holding  it  is  evi- 
dent that  the  cases  of  Continental 
Nat.  Bank  v.  McGeoch,  73  Wis.  332, 
41  N.  W.  409,  and  W.  W.  Kimball 
Co.  V.  Mellow,  80  Wis.  133,  48  N.  W. 
1100,  are  overruled  so  far,  at  least, 
as  they  hold  that  such  agreements 
create  an  uncertainty  in  the  time 
of  payment." 

Examine  §  368  herein. 

^  When  one  is  a  bona  fide  holder 


of  negotiable  note  secured  by  mort- 
gage, see  Humble  v.  Curtis,  160  111. 
193,  43  N.  E.  749;  Christianson  v. 
Farmers'  Warehouse  Assn.,  5  N.  D. 
438,  32  L.  R.  A.  730,  67  N.  W.  300. 

>>' Nashville  Trust  Co.  v.  Smythe, 
10  Pick.  (94  Tenn.)  513,  29  S.  W. 
903. 

°°  Moore  v.  Metropolitan  Nat. 
Bank,  55  N.  Y.  41,  44-46. 

"^  Alabama. — Thompson  v.  Mad- 
dux, —  Ala.  — ,  23  So.  157;  Hart  v. 
Adler,  109  Ala.  467,  19  So.  894; 
Spence  v.  Railway  Co.,  79  Ala.  576. 

Indiatia. — Gabbert  v.  Schwartz, 
69  Ind.  450. 

Michigan. — Cox  v.  Cayan  (Mich.), 
76  N.  W.  96;  Barnum  v.  Phenix,  60 
Mich.  388,  27  N.  W.  577;  Helmer  v. 
Krolick,  36  Mich.  371. 

Missouri. — Borgess  Inv.  Co.  v. 
Vette,  142  Mo.  560,  44  S.  W.  754; 
First  Nat.  Bank  of  Mauch  Chunk 
V.  Rohrer,  138  Mo.  369,  39  S.  W. 
1047;  Maj^es  v.  Robinson,  93  Mo.  114, 
5  S.  W.  611;  Hagerman  v.  Sutton, 
91  Mo.  519,  4  S.  W.  73. 

New  York. — Gould  v.  March,  1 
Hun  (N.  Y.)  566. 

United  States. — Carpenter  v.  Long- 
an,  16  Wall    (U.  S.)   271;   Swett  v. 


473 


NOTE   SECURED  BY   MORTGAGE. 


[§  367 


So  the  terms  of  a  contract  or  agreement  may  be  such  that  the  holder  in 
pledge  of  a  note  and  mortgage  will  be  a  bona  fide  holder  for  value  with 
the  rights  and  privileges  thereof. ''^ 

§  367.  Same  subject — Knowledge  or  notice. — In  a  Nebraska  case 
it  is  decided  that  while  a  note  otherwise  negotialjle  is  not  rendered 
non-negotiable  merely  by  a  provision  for  or  reference  to  collateral  se- 
curity, still  when  executed  together  and  as  part  of  one  transaction,  a 
note  and  a  mortgage  securing  it  are  to  he  construed  together,  and  as 
one  instrument ;  so  that  provisions  as  to  the  terms  and  manner  of  pay- 
ment contained  in  the  iportgage  may  be  such  as  to  make  the  note  non- 
negotiable  as  to  all  persons  chargeable  with  notice  thereof;  and,  al- 
though the  note  does  not  refer  to  the  mortgage,  indorsees  who  take 
with  notice  of  its  provisions  are  bound  thereby,  as  where  the  plaintiff 
obtained  the  mortgage  at  the  same  time  he  acquired  the  note.*^^     So 


Stark,  31  Fed.  858  (declining  to  fol- 
low the  rule  of  the  state  courts  in 
an  Illinois  case). 

"Connecticut  Trust  &  Safe  De- 
posit Co.  v.  Fletcher,  61  Neb.  166, 
172,  85  N.  W.  59,  Nerval,  C.  J.,  said: 
"The  contract  between  the  loan 
company  and  the  trust  company, 
•  *  *  made  the  trust  company 
the  holder  for  the  mortgage  and 
note  in  trust  as  security  for  the 
payment  of  the  debenture  bonds  of 
the  loan  company.  The  note  and 
mortgage  being  held  in  pledge,  that 
fact  entitled  the  holder,  the  trust 
company,  to  all  rights  and  privi- 
leges of  a  holder  for  value  before 
maturity.  Koehler  v.  Dodge,  31 
Neb.  328.  It  is  also  doubtless  true 
that  a  transfer  of  collateral  security 
may  be  made  to  a  third  party  as 
trustee  by  agreement.  City  Bank 
V.  Perkins,  29  N.  Y.  554.  But  it  is 
claimed  by  defendant  that  because 
the  agreement  between  the  two  com- 
panies obligated  the  loan  company, 
if  the  note  and  mortgage  were  not 
paid  at  maturity,  to  take  them  up 
and  substitute  others  in  their  place, 
the   transfer    was    conditional,    and 


for  that  reason  it  could  not  be  con- 
sidered a  holder  for  value.  We  can- 
not so  conclude  from  that  fact.  The 
condition  was  not  complied  with 
and  the  trust  company  was  entitled 
to  hold  the  papers  and  to  proceed 
to  collect  the  debt  from  the  mort- 
gagor, exactly  as  it  would  have  been 
entitled  to  collect  any  note  held  as 
collateral  security,  if  the  loan  se- 
cured by  them  was  not  paid.  Hence 
we  cannot  reach  the  conclusion  that 
the  condition  was  such  as  to  make 
the  trust  company  any  less  a  holder 
for  value  than  would  be  the  holder 
of  any  paper  held  as  collateral  se- 
curity. The  evidence  fails  to  show 
any  act  or  agreement  on  the  part 
of  the  trust  company  from  which  a 
legal  conclusion  can  be  reached,  that 
either  the  loan  company  or  Foss 
was  its  agent  to  collect  the  principal 
of  this  note.  The  prior  foreclosure 
was  not  a  bar  to  this  suit.  Todd  v. 
Cromer,  36  Neb.  430." 

"^  Roblee  V.  Union  Stockyards  Nat. 
Bk.  (Neb.,  1903),  95  N.  W.  61,  citing 
on  the  first  point,  Fleckner  v. 
United  States  Bk.,  8  Wheat.  (21  U. 
S.)    338,  5   L.  Ed.   631;    Knipper  v. 


368] 


COLLATERAL    SECURITY. 


474 


under  another  decision  in  that  state  a  note  and  a  mortgage  executed 
at  the  same  time  and  as  part  of  the  same  transaction  will  be  con- 
strued together  and  the  purchaser  of  the  note  and  the  mortgage  will 
he  charged  with  knowledge  of  the  contents  of  the  mortgage,  and  such 
a  note  being  non-negotiable  the  holder  or  transferee  is  in  no  better 
position  than  the  payee  in  the  note.®*  But  where  a  note  and  mortgage 
were  deposited  as  collateral  security  for  an  indorsee's  debt,  said  in- 
dorsee being  the  husband  of  the  maker,  the  fact  that  the  pledgee  had 
knowledge  of  the  character  of  the  note  as  accommodation  paper  and 
that  the  indorsement  was  without  consideration,  will  not  help  a  de- 
fendant who  had  also  indorsed  said  note  for  accommodation.®^ 

§  368.  Transferee  of  note  and  mortgage — Payment  of  or  collateral 
security  for  pre-existing  debt. — It  is  held  that  a  transferee  of  a  note 
and  mortgage  in  payment  of  pre-existing  debt  takes  free  of  defenses,®" 
and  of  collateral  vendor's  liens.® '^  It  is  also  declared  that  "the  ques- 
tion whether  a  mortgagee,  in  a  mortgage  given  for  the  security  of  a 
pre-existing  debt,  is  to  be  regarded  as  a  purchaser  for  a  valuable  con- 
sideration, has  been  decided  differently  by  different  courts."®^  But 
where  a  note  and  mortgage  given  to  secure  a  payment  of  part  of  the 


Chase,  7  Iowa  145;  Towne  v.  Rice, 
122  Mass.  67;  Blumenthal  v.  Jassoy, 
29  Minn.  177,  12  N.  W.  517;  Stark 
V.  Olsen,  44  Neb.  646,  63  N.  W.  37; 
Dobbins  v.  Oberman,  17  Neb.  163, 
22  N.  W.  356;  Heard  v.  Dubuque 
County  Bk.,  8  Neb.  10,  30  Am.  Rep. 
811.  Citing  to  the  second  point, 
Lincoln  Nat.  Bk.  v.  Perry,  66  Fed. 
887,  14  C.  C.  A.  273;  Phelps  v.  May- 
ers, 126  Cal.  549,  58  Pac.  1048; 
Wood  V.  Ridgeville  College,  114  Ind. 
320,  16  N.  E.  619;  Muzzy  v.  Knight, 
8  Kan.  456;  Cabbell  y.  Knote,  2  Kan. 
App.  68,  43  Pac.  309;  American 
Exch.  Bk.  v.  Blanchard,  7  Allen  (89 
Mass.)  333;  Goodenow  v.  Curtis,  18 
Mich.  298;  Brownlee  v.  Arnold,  60 
Mo.  79;  Edling  v.  Bradford,  30  Neb. 
593,  46  N.  W.  836;  Hill  v.  Huntress, 
43  N.  H.  480;  Berry  v.  Wisdom,  3 
Ohio  St.  241;  Continental  Nat.  Bk. 
v.  Wells,  73  Wis.  332,  41  N.  W.  409. 


See  also  Garnett  v.  Myers  (Neb., 
1903),  94  N.  W.  803,  rev'g  91  N.  W. 
400. 

Where  note  transferred  as  inde- 
pendent instrument,  purchaser  is  put 
on  guard.  Haskell  v.  Brown,  65  111. 
29. 

•^  Allen  V.  Dunn  (Neb.,  1904),  99 
N.  W.  680. 

'^  German  American  Saving  Bank 
V.  Burlington  &  Hanna  (Iowa,  1904), 
100  N.  W.  56,  59,  relying  upon  Iowa 
State  Bank  v.  Mason  Hand  Lathe 
Co.,  —  Iowa  — ■,  90  N.  W.  612. 

«» Bailey  v.  Seymour,  42  S.  C.  322. 
20  S.  E.  62  (the  question  was  as  to 
estoppel  by  recital  in  a  collateral 
mortgage). 

•"Pullen  v.  Ward,  60  Ark.  90,  28 
S.  W.  1084. 

«*Work  v.  Brayton,  5  Ind.  396, 
quoted  in  Straughan  v.  Fairchild,  80 
Ind.  598,  600. 


I 


475  RECEIVIXG  OR  SURRENDERING  COLLATERAL.       [§  369 

purchase  price  of  a  tract  of  land,  are  assigned  as  collateral  security 
for  a  lesser  debt,  without  notice  to  the  assignees  of  a  guaranty  by  the 
mortgagee  that  the  land  will  cut  a  certain  amount  of  timber,  and  of 
his  agreement  to  refund  a  thousand  feet  for  all  shortage,  the  assignees 
will  be  protected  as  hona  fide  holders  of  the  securities  as  against  any 
claim  under  the  guaranty  to  the  amount  of  their  debt  only.''^ 

§  369.  Receiving  or  surrendering  collateral — Exhausting  collat- 
eral.— It  is  decided  that  the  fact,  that  as  appears  on  the  face  of  a  note, 
collateral  security  was  given  for  its  payment,  does  not  destroy  negotia- 
bility. The  giving  of  such  collateral  in  no  wise  interferes  with  the 
necessary  characteristics  of  the  instrument  as  a  promissory  note.  The 
promise  to  pay  is  still  certain  and  for  a  certain  amount.'^"  Nor  are  the 
rights  of  the  holder  of  a  negotiable  note,  taken  in  the  usual  course  of 
business,  before  it  was  due,  impaired  by  his  holding  collateral  security 
for  its  payment.'^^  And  the  holder  who  transfers  the  note  will  not  be 
discharged,  although  the  indorsee  takes  security  from  the  maker,  and 
afterward  surrenders  it.^^  So  if  two  partners  give  a  joint  bill  of  ex- 
change for  a  partnership  demand  and  when  the  bill  becomes  due,  the 
holder  takes  the  separate  bill  of  the  one,  the  other  is  discharged.'^^  Nor 
is  it  any  defense  to  a  suit  on  a  promissory  note  that  the  plaintiif  holds 
the  note  of  a  third  party  as  collateral  security  for  the  note  sued  on, 
and  that  the  maker  of  the  collateral  note  is  solvent  and  the  collateral 
of  greater  value  than  the  amount  due  on  the  note  in  suit.  Such  a 
creditor  cannot  be  compelled  to  exhaust  the  collateral  security  as  a 
condition  precedent  to  suing  the  debtor  on  his  note.'^'*  Again,  if  land 
is  conveyed  to  the  payee  to  secure  a  note,  and  he  gives  his  bond  pro- 
viding for  a  reconveyance  upon  payment  of  the  note,  and  the  payee 
devised  the  land  without  specifying  that  the  note  was  to  be  discharged 
thereby  and  the  intent  to  have  such  devise  operate  as  a  release  or  ex- 
tinguishment of  the  debt  was  not  apparent  from  the  words  of  the  will, 
still  extrinsic  evidence  to  show  such  intent  was  admitted  in  connec- 
tion with  the  surrounding:  circumstances  and  it  was  held  that  the  debt 


"Anderson  v.  Bank,  98  Mich.  543,         "Pitts  v.  Congdon,  2  N.  Y.  352. 
57  N.  W.  808.  "  Evans  v.  Drummond,  4  Esp.  89, 

'"  Mumford  V.  Tolman,  54  111.  App.     91. 
471,  478.  '*  Carson  v.  Buckstaff,  57  Neb.  262. 

See  §  366  herein.  77  N.  W.  670,  16  Bkg.  L.  J.  103. 

"Bank  of  Woodstock  v.  Kent,  15 
N.  H.  579. 


I 


369] 


COLLATERAL   SECURITY. 


47& 


I 


was  discharged.'^^  So  where  shares  of  stock  are  given  as  collateral  se- 
curity, and  there  is  no  request  by  defendant  that  they  should  be  sold, 
the  plaintiff  is  not  obligated  to  sell,  even  though,  if  sold  within  a 
reasonable  time  after  maturity  of  the  note,  they  would  have  been  suffi- 
cient to  pay  the  note,  and  such  non-sale  does  not  preclude  a  recovery.''' 
And  in  equity  if  the  holder  surrenders  collateral  to  the  principal  .debtor 
it  will  discharge  the  surety  to  the  amount  of  property  surrendered, 
where  such  property  given  as  pledge  or  security  for  the  debt  is  parted 
with  against  the  will  of  the  surety  or  without  his  knowledge.'''^  It  may 
also  operate  to  discharge  the  indorser  of  another  collateral  note,  whose 
indorsement  was  obtained  by  fraudJ^ 


^Holmes  v.  Holmes,  36  Vt.  525. 

"Wood  Sons  Co.  v.  Schaefer,  173 
Mass.  443,  445,  53  N.  E.  881. 

"  Kirkpatrick  v.  Howk,  80  111.  122. 

^'Haas  V.  Bank,  41  Neb.  754,  60 
N.  W.  85.  In  this  case  the  Bank  of 
O.  Indorsed  to  the  Bank  of  C.  cer- 
tain promissory"  notes  as  collateral 
security  for  an  indebtedness  in- 
curred in  favor  of  the  Bank  of  C. 
Among  these  was  a  note  of  H.,  upon 
which  suit  was  brought.  H.  claimed 
that  the  note  had  been  procured 
from  him  by  the  Bank  of  O.  by 
fraud,  and  the  evidence  tended  to 
prove  that  fact.  It  was  decided: 
(1)  That  In  the  action  upon  the 
note  H.  could  not  require  the  Bank 
of  C.  to  first  exhaust  its  other  col- 
lateral; (2)  that  the  fraud  being 
established,  the  Bank  of  C.  was  only 
entitled  to  recover  to  the  extent  of 
the  unpaid  portion  of  the  indebted- 
ness for  which  the  note  was 
pledged;  (3)  the  Bank  of  C,  having 
surrendered  one  of  the  collateral 
notes  and  taken  in  exchange  other 
notes,  secured  by  mortgage,  drawn 
to  the  order  of  itself,  it  was  bound 
to  account  as  if  the  original  note 
had  been  paid  in  full.  The  court, 
per  Irvine,  C,  said:  That  it  was 
"well  established  that  a  creditor 
holding  two  or  more  securities  for 


the  same  debt  may  proceed  to  en- 
force either  or  all  of  them,  and  will 
not,  as  a  general  proposition,  be  re- 
quired to  proceed  in  any  particular 
order.  *  *  *  'a  surety  cannot 
compel  the  holder  to  proceed  against 
others  before  proceeding  against 
himself,  and  exhaust  such  other 
remedies  as  he  may  have  (quot- 
ing from  Proul  v.  Dorner,  79  111. 
331).  *  *  *  There  is  very  re- 
spectable authority  to  the  effect 
that  It  is  no  defense  to  a  note  that 
it  had  been  pledged  with  other  se- 
curities equal  in  amount,  which  se- 
curities had  been,  by  the  pledgee, 
exchanged  and  ultimately  found 
worthless,  unless  it  were  also  shown 
that  the  exchange  caused  a  loss  to 
the  owner  of  the  collateral  (Girard 
Fire  and  Marine  Ins,  Co.  v.  Marr, 
46  Pa.  St.  504);  but  we  think  that 
the  weight  of  authority  is  to  the 
effect  that  if  a  pledgee,  without  the 
consent  of  the  debtor,  renews  or  ex- 
tends a  note  pledged  as  collateral, 
or  surrenders  such  note  and  takes 
new  security,  he  must  account  to 
his  debtor  as  if  he  had  collected  it 
in  full  (Gage  v.  Punchard,  6  Daly 
[N.  Y.]  229;  Nexsen  v.  Lyell,  5  Hill 
[N.  Y.]  466;  South  wick  v.  Sax,  9 
Wend.  [N.  Y.]  122;  Depuy  v.  Clark, 
12  Ind.  427).     It  is  quite  well  set- 


n 


477 


PAPER  GIVEX  OR  INDORSED  FOR  SPECIFIC  PURPOSE.   [§  370 


§  370.  Paper  given  or  indorsed  for  specific  purpose — ^Principal  and 
agent. — Although  a  principal  may,  under  certain  circumstances,  be- 
come liable  on  negotiable  paper  where  his  agent  has  exceeded  his  au- 
thority, yet  the  rule  has  no  application  when  the  circumstances  are 
such  as  necessarily  j)ut  the  holder  upon  inquiry;  as  where  the  note 
was  taken  as  security  for  a  pre-existing  debt  and  the  holder  knew  that 
the  principal  had  assigned  all  his  property  for  the  benefit  of  creditors 
and  also  that  the  note  showed  that  it  was  issued  Ijy  the  agent  to  him- 
self that  it  was  used  for  his  personal  benefit,  and  in  such  case  the 
holder  being  put  upon  inquiry  was  chargeable  with  the  equities  at- 
tached to  the  note.'^^    Again,  if  the  maker  who  was  also  the  payee  and 


tied  that  where  a  note  is  valid  as 
between  the  original  parties,  the 
pledgee  may  recover  the  whole 
amount  of  the  note,  retaining  any 
surplus  as  trustee  for  the  party  ben- 
eficially entitled;  but  where  the  note 
is  invalid  as  between  the  original 
parties,  the  pledgee  may  recover 
only  the  amount  of  his  advances, 
provided  there  be  no  other  party  in 
interest  (Wiffen  v.  Roberts,  1  Esp. 
[Eng.]  261;  Allaire  v.  Hartshorne, 
21  N.  J,  Law  665;  Chicopee  Bank 
v.  Chapin,  49  Mass.  40;  Union  Nat. 
Bank  v.  Roberts,  45  Wis.  373)." 

"  Randall  v.  Rhode  Island  Lum- 
ber Co.,  20  R.  I.  625,  40  Atl.  763,  the 
court  (at  p.  628),  per  Stiness,  J., 
said:  "The  plaintiff  knew  that, 
both  at  the  date  of  the  note  and  at 
the  time  of  the  transfer  to  him,  all 
of  the  property  of  the  company  was 
in  the  hands  of  an  assignee  for  the 
benefit  of  creditors.  It  could  not 
have  had  assets  in  its  hands  with 
which  to  make  payment,  and  the 
testimony  shows  that  it  did  not  have 
any.  The  plaintiff,  as  a  business 
man  engaged  in  banking,  must  have 
known  that  under  such  circum- 
stances negotiable  paper  could  not 
be  issued  in  the  ordinary  course  of 
business.  The  company  was  not  in 
condition   to   do  ordinary   business. 


The  plaintiff  testified  that  he  knew 
the  business  of  the  company  had 
stopped;  but  it  appears  that  in  Feb- 
ruary, 1894,  without  assets,  stock 
or  supplies,  except  what  was  in  the 
hands  of  the  assignee,  business  had 
been  resumed,  in  a  small  way,  in 
the  company's  name.  The  fact,  how- 
ever, that  the  plaintiff  knew  that 
all  the  assets  of  the  company  were 
in  the  hands  of  an  assignee  was  suf- 
ficient to  put  him  upon  inquiry. 
Moreover,  the  note  showed  that  it 
was  issued  by  the  treasurer  to  him- 
self, which  has  been  held  to  be 
enough  to  put  a  holder  upon  inquiry 
as  to  the  authority  to  issue  it,  when 
it  is  used  for  the  personal  benefit 
of  the  agent.  Chemical  Bank  v. 
Wagner,  93  Ky.  525;  West  Bank  v. 
Shawnee  Bank,  95  U.  S.  557;  Wilson 
V.  Metropolitan  R.  R.  Co.,  120  N.  Y. 
145;  Claflin  v.  Farmers  Bank,  25 
N.  Y.  293.  The  principle  of  these 
cases,  and  many  others  which  might 
be  cited  to  the  same  effect,  is  that 
the  paper  shows  upon  its  face  that 
the  agent,  in  making  it,  is  dealing 
with  himself,  and  the  holder  knows 
that  the  agent  is  not  using  the  pa- 
per in  the  ordinary  course  of  busi- 
ness to  pay  a  debt  of  the  principal, 
but  for  the  agent's  own  debt,  and 
hence  that  the  holder  is  bound  to 


§§    371-373]  COLLATERAL    SECURITY.  478 

pledgor  of  certain  notes  secured  to  the  pledgee  by  a  deed  of  trust  is 
entrusted  with  such  notes  for  a  specific  purpose,  but  violates  the  con- 
fidence imposed  and  assigns  said  notes  before  maturity  as  collateral 
security  for  a  bona  fide  debt,  the  latter  transferree  holds  bona  fide  as 
against  secret  equities  of  the  pledgee.^"  So  where  an  indorsee  receives 
notes  as  collateral  for  money  due  and  some  of  the  notes  are  past  due 
when  taken  by  said  holder,  the  defense  is  available  as  to  the  payee  and 
the  first  indorser  that  such  notes  were  indorsed  in  blank  for  collection 
only  and  delivered  to  the  indorsee  without  authority  to  otherwise  use 
them.^^  This  subject  is,  however,  more  fully  considered  in  another 
chapter.^^ 

§  371.    Defenses  subsequent  to  indorsement — Bona  fide  holders. 

Equities  existing  between  the  original  parties  to  a  promissory  note, 
which  originated  subsequent  to  the  indorsement  thereof  to  the  holder 
as  collateral  security,  are  not  available  by  the  maker  in  an  action  by 
the  indorsee  on  the  note.^^ 

§  372.  Transferee  after  maturity — Pledgee. — The  rule  that  the 
transferee  of  negotiable  paper  after  maturity  acquires  nothing  but  the 
actual  right  and  title  of  the  transferor  and  takes  the  paper  subject  to 
equities  between  the  maker  and  the  payee  has  no  application  to  an  in- 
dorsee who  takes  the  paper  from  the  pledgee  after  it  is  due,  without 
actual  notice  of  equities  or  that  the  note  was  held  merely  as  collateral 
between  the  payee  and  his  pledgee.^*  And  if  a  note  is  indorsed  as  col- 
lateral security  for  a  precedent  indebtedness  by  the  payee  to  the  in- 
dorsee after  maturity,  it  is  not  subject  to  the  plea  of  failure  of  con- 
sideration in  favor  of  the  maker. ^^ 

§  373.  Pledgor  and  pledgee — ^Laches,  negligence  or  tortious  acts — 
Statute  limitations. — That  a  pledgee  may  become  liable  through  his 
gross  negligence  or  by  his  tortious  dealings  with  the  pledge  where 
the  pledgor  is  injured  thereby  and  that  the  pledgee  of  negotiable  paper 

inquire   into   the   agent's   authority.  "See  Chap.  XVI,  §§  379-392  here- 

This  is  a  sound  and  necessary  prin-  in. 

clple."  "  Becker  v.  Sandusky  City  Bank, 

»" First  Nat.  Bk.  of  Joliet  v.  Adam,  1  Minn.  311   (Gil.  243). 

138  111.  483,  28  N.  E.  955.  ^'  Young     Men's     Christian     Ass'n 

"  Mayfield  Grocer  Co.   v.   Andrew  Gymnasium    Co.    v.    Rockford    Nat. 

Price  &  Co.    (Tex.  Civ.  App.,  1906),  Bank,  179  111.  599,  54  N.  E.  297. 

95  S.  W.  31.  ^^'Rohde  v.  Lodge,  15  Tex.  446. 


479  PKIORITY   OF   TRANSFER — RENEWALS.         [§§    374,    375 

as  collateral  security  is  bound  to  use  ordinary  diligence  in  preserv- 
ing the  legal  validity  of  the  pledge,  and  is  answerable  for  a  loss 
through  a  corresponding  degree  of  negligence  to  the  extent  of  such 
loss,  are  propositions  well  established.'^'^  It  has  been  held  also  that 
where,  by  the  negligence  of  the  pledgee,  the  collection  of  collateral  se- 
curities has  been  lost  by  operation  of  the  statute  of  limitations,  and 
such  statutory  defense  has  become  perfect,  the  pledgor  may,  by  a  coun- 
terclaim, recover  .the  value  of  his  collateral,  even  though  it  be  not 
known  that  his  debtor  will,  when  sued  on  such  collateral,  plead  the 
statute  in  defense.  ^^ 

§  374.  Priority  of  transfer ;  different  notes. — If  a  creditor,  holding 
his  debtor's  note  and  also  the  note  of  another  person  as  collateral, 
transfers  them  to  different  persons,  after  the  notes  are  due,  the  rights 
of  the  transferees  will  depend  on  the  priority  of  the  transfers.  A  first 
transfer  of  the  collateral  operates  to  extinguish  the  original  debt  fro 
tanto,  and  the  party  taking  a  subsequent  transfer  of  the  original  note 
takes  it  subject  to  a  credit  pro  tanto.  But,  if  the  original  note  is  first 
transferred,  the  collateral  will  follow  it  into  whomsoever  hands  it 
passes,  being  subject  in  them  to  any  defense  the  maker  might  have 
made  in  first  hands.^^ 

§  375.     Renewals — Continuance   of   security — Extinguishment    of 

debt. — Where  collateral  to  secure  a  note  is  placed  in  the  hands  of  the 
creditor  and  the  note  is  renewed  at  the  same  rate  of  interest  with  the 
same  parties,  the  debt  is  the  same  and  the  collateral  security  remains 
as  securing  it.^^  So  it  is  said  in  a  Maryland  decision  that :  "Wherever 
collateral  security  is  given  for  the  payment  of  a  debt,  the  collateral 
will  continue  as  a  security  until  the  debt  is  satisfied,  unless  both  the 
parties  to  the  original  contract  agree  to  its  surrender  or  the  pledgee  in 
some  other  way  discharges  or  releases  it.    If  the  debt  be  evidenced  by 

«» Citing    Coleb.    Coll.    Sec,    §    114  377,  51  N.  W.  162,  35  Am.  St.  Rep. 

and   notes;    Lamberton  v.   Windom,  313;    McQueen's  Appeal,  104  Pa.  St. 

12  Minn.  232  (Gil.  151),  90  Am.  Dec.  595,    49    Am.    Rep.    592;     Miller    v. 

301;  Jemison  v.  Parker,  7  Mich.  355;  Bank,  8  Watts  192,  34  Am.  Dec.  451, 

Griggs  V.  Day,  136  N.  Y.  152,  32  N.  note. 

E.    612,   extended   note,    32   Am.    St.  '^'Ware  v.  Russeli,  57  Ala.  43,  29 

Rep.  718;  Cal.  Civ.  Code,  §  1714.  Am.  Rep.  710. 

"Hawley  Bros.   Hardware  Co.  v.  ""Partridge    v.    Williams,    72    Ga. 

Brownstone  (Cal.  1899),  56  Pac.  468,  807. 
citing  Bank  v.   O'Connell,   84    Iowa 


§  375]  COLLATERAL  SECURITY.  480 

a  promissory  note  and  upon  the  maturity  of  that  note  the  parties  in- 
tend by  a  renewal  merely  to  extend  the  time  for  payment  and  nothing 
more,  then  a  simple  renewal  so  made  will  not  extinguish  the  original 
debt.^°  The  same  debt  will  still  remain.  Consequently,  the  collateral 
pledged  for  it  in  the  first  instance  will  not  be  released  where  the  re- 
newal transaction  is,  and  was  meant  by  both  parties  to  be,  a  mere  ex- 
tension of  the  time  for  payment.^ ^  It  equally  follows  that  the  ex  parte 
unexpressed  intention  of  the  pledgor  that  the  collateral  shall  not  apply 
to  and  secure  a  renewal  which  is,  in  fact,  a  mere  extension  of  the 
time  for  payment,  and  not  an  extinguishment  of  the  original  debt, 
cannot  defeat  the  right  acquired  by  the  pledgee  under  the  contract 
made  by  both  of  them  when  the  debt  was  created.  The  right  so  ac- 
quired is  the  right  of  a  Ijona  fide  holder  for  value. ^-  And  it  is  a  right 
to  retain  the  collateral  until  the  debt  shall  be  paid  or  extinguished.'"'^ 
And  in  a  Wisconsin  case  a  note  was  indorsed  in  blank  and  had  been  de- 
posited with  a  person  for  safe  keeping  and  he  gave  plaintiff  the  note 
as  collateral  security  for  borrowed  money  such  pledgee  receiving  the 
same  in  good  faith  without  knowledge  of  defects  in  the  title  of  the 
pledgor.  "When  the  note  became  due  the  other  collaterals  in  the 
pledgee's  hands  were  of  sufficient  value  to  discharge  the  indebtedness 
but  it  was  not  discharged.  Thereafter  the  pledgor  obtained  other  loans 
from  the  pledgee  agreeing  that  all  collaterals  in  the  latter's  hands 
should  remain  as  security  for  the  last  as  well  as  for  the  preceding 
loans.  Subsequently  the  makers  paid  the  pledgor  the  amount  of  the 
note  and  took  his  receipt  upon  his  claim  that  the  note  had  been  mis- 
laid and  that  he  would  send  it  wdien  found.  The  pledgor  became  in- 
solvent and  the  collaterals  were  insufficient  to  satisfy  his  indebtedness 
to  the  pledgee.  It  was  decided  that  the  latter  might  apply  the  other 
collaterals  •  to  the  payment  of  the  second  loan  and  Tiold  the  note  in 
question  to  secure  the  first  for  which  it  was  pledged  before  its  ma- 
turity.®* Under  a  Maine  decision  the  defendant  signed  his  name  on 
the  back  of  a  note  at  its  inception  and  before  its  negotiation  by  the 
payee,  and  his  signature  was  above  the  indorsement  of  the  payee,  and 
the  note  was  discounted  by  the  plaintiff  in  the  regular  course  of  busi- 
ness for  its  customer,  the  payee,  and  without  knowledge  that  the  true 

'"Citing  Flanagan   v.   Hambleton,        "Williams   v.    National    Bank   of 
54  Md.  222.  Baltimore,  72  Md.  441,  20  Atl.  191. 

"  Citing  3  Rand.  Com.  Pa.,  §  1371.        "*  Strong  v.   Bowes,   102  Wis.  542, 
'^^  Citing  1  Danl.  Neg.  Inst.,  §  824.     78  N.  W.  921,  a  question  of  applica- 
tion of  payments. 


481 


EXTENT    OF   RECOVERY — BONA    FIDE    HOLDER. 


[§   376 


facts  and  relations  of  the  parties  were  othcnvisc  than  as  disclosed  hy 
the  note  itself.  This  note  was  a  second  renewal  of  a  note  of  like  tenor,  • 
by  the  same  parties  and  in  the  same  order.  Upon  its  maturity  a  re- 
newal note  was  executed  except  that  it  did  not  bear  the  name  thereon 
of  the  defendant  and  the  holder  was  requested  to  continue  to  hold  the 
note  as  collateral  security  for  the  new  note  and  it  was  held  that  the 
plaintiff  could  do  this  without  thereby  releasing  the  defendant  from 
the  liability  which  it  had  assumed  as  indicated  by  the  note.^^ 

§  376.  Extent  of  recovery — ^Bona  fide  holder. — Upon  the  question 
of  the  extent  of  recovery  by  a  bona  fide  holder  upon  a  note  held  by  him 
as  collateral  security  the  general  rule  seems  to  be  that  his  recovery  is 
limited  to  the  extent  of  the  amount  due  on  the  debt,  claim,  advances, 
payments  or  loan  made,  and  which  it  was  intended  to  secure  by  such 
collateral.®''    So  a  party  receiving  negotiable  paper  as  collateral  secur- 


°=  Merchants'  Co.  v.  Jones,  95  Me. 
335,  50  Atl.  48. 

""  Arkansas. — Brown  v.  Callaway, 
41  Ark.  418  (may  recover  not  ex- 
ceeding amount). 

Georgia. — Laster  v.  Stewart,  89 
Ga.  181,  15  S.  E.  42;  Partridge  v. 
Williams,  72  Ga.  807;  Exchange 
Bank  v.  Butner  &  Edgeworth,  60  Ga. 
654  (bona  fide  holder  to  extent  of 
money  loaned);  Bealle  v.  Bank,  57 
Ga.  274. 

Illinois. — Lull  v.  Stone,  37  111. 
224. 

Indiana. — Valette  v.  Mason,  1  Ind. 
288  (can  only  recover  debt  actually 
due). 

Iowa. — First  National  Bank  v. 
Werst,  52  Iowa  684,  3  N.  W.  711  (but 
this  was  an  accommodation  note  in- 
dorsed after  maturity). 

Louisiana. — Gardner  v.  Maxwell, 
27  La.  Ann.  561. 

Maine. — Smith  v.  Hiscock,  14  Me. 
449. 

Massachusetts. — Stoddard  v.  Kim- 
ball, 6  Cush.  (Mass.)  409;  Chicopee 
Bank  v.  Chapin,  8  Mete.  (Mass.)  40. 

Missouri. — International    Bank   v. 

Joyce   Defenses — 31. 


German  Bank,  71  Mo.  183,  36  Am. 
Rep.  408. 

Montana. — Yellowstone  Nat.  Bank 
of  Billings  v.  Gagnon,  19  Mont.  402, 
48  Pac.  762. 

Nebraska. — Barmby  v.  Wolfe,  44 
Neb.  77,  62  N.  W.  318. 

Nevada. — Haydon  v.  Nicoletti,  18 
Nev.  290,  3  Pac.  473. 

New  York. — Manhattan  Sav.  Inst, 
v.  New  York  Nat.  Exch.  Bank,  170 
N.  Y.  58,  88  Am.  St.  Rep.  147,  59  N. 
Y.  Supp.  51,  aff'g  53  App.  Div.  635 
(to  extent  of  security  for  advance) ; 
Mechanics',  etc..  Bank  v.  Livings- 
ton, 4  Misc.  (N.  Y.)  257,  23  N.  Y. 
Supp.  813  (but  note  was  for  accom- 
modation). 

North  Carolina. — Kerr  v.  Cowen, 
17  N.  C.   (2  Dev.  Eq.  356)  356. 

Ohio. — Sutton  v.  Kautzman,  6 
Ohio  Dec.  910. 

Tennessee. — Memphis  Bethel  v. 
Bank,  101  Tenn.  130,  45  S.  W.  1072 
(to  extent  of  amount  justly  due  on 
debt  secured). 

Texas. — Wright  v.  Hardie.  88  Tex. 
653,  32  S.  W.  885;  Texas  Banking  & 
Insurance  Co.  v.  Turnley,  61  Tex. 
365. 


376] 


COLLATERAL    SECURITY. 


482 


ity  is  entitled  to  be  protected  as  a  hona  fide  holder  to  the  same  extent 
as  one  who  becomes  an  absolute  owner  and  may  sue  in  his  own  name 
as  the  real  party  in  interest.  The  only  difference  between  the  rights 
of  an  absolute  bona  fide  owner  for  value  and  a  bona  fide  holder  as  col- 
lateral security,  as  against  the  maker,  is  that  the  former  may  recover 
in  full,  and  the  latter,  if  there  be  equities,  is  restricted  to  the  extent 
of  his  advances. ^^  Again  the  extent  of  recovery  is  held  to  be  the 
amount  of  the  original  pledgee's  debt  to  his  transferee ;  not  otherwise 
paid  or  realized  from  other  securities  f^  or  an  amount  only  which  is  not 
beyond  what  will  cover  indorsements  to  be  made  and  against  which  it 
was  designed  as  security.^  ^  So  the  balance  actually  due  from  the  payee 
to  creditors,  where  he  holds  as  collateral  in  trust  for  the  payment  of 
said  debts,  is  the  limit  of  recovery.  1°''  Eecovery  is  also  limited  to  the 
extent  of  the  advances  made,  coupled  with  interest,  also  with  costs  of 
suit  where  there  is  a  judgment  in  case  of  a  pledge  by  the  payee  of  ac- 
commodation paper  as  collateral.  And  as  against  an  assignee  pur- 
chaser, of  a  judgment  recovered'  by  the  pledgee  defenses  and  equities 
are  available  to  limit  a  recovery  to  an  amount  not  greater  than  as  above 
stated."^    It  is  further  determined  that  a  pledgee  in  good  faith  and 


Wisconsin. — Union  Nat.  Bank  v. 
Roberts,  45  Wis.  373;  Stevens  v. 
Campbell,  13  Wis.  375;  Bond  v. 
Wiltse,  12  Wis.  611. 

Examine  Steere  v.  Benson,  2  111. 
App.  560. 

lovxi. — Mahaska  County  State  Bk. 
V.  Crist,  87  Iowa  415,  420,  54  N.  W. 
450. 

Kansas. — Claflin  v.  Rowlinson,  2 
Kan.  App.  82,  43  Pac.  304. 

Louisiana. — Mechanics'  Building 
Assn.  V.  Ferguson,  29  La.  Ann.  548; 
Citizens'  Bank  v.  Payne,  18  La'.  Ann. 
222,  89  Am.  Dec.  650. 

Nebraska. — Holmer  v.  Commercial 
Bank,  28  Neb.  474,  44  N.  W.  482. 

New  Jersey. — Allaire  v.  Hart- 
shorne,  21  N.  J.  Law  665,  47  Am. 
Dec.  175. 

New  York. — Fourth  Nat.  Bank  v. 
Snow,  3  Daly  (N.  Y.)  167;  Pearce 
&  Miller  Eng.  Co.  v.  Broner,  10  Misc. 
(N.  Y.)  502,  31  N.  Y.  Supp.  195. 

Wisconsin. — Curtis    v.    Mohr,    18 


Wis.  615;  Watson  v.  Russell,  3  Best 
&  S.  34;  Wiffen  v.  Roberts,  1  Esp. 
261. 

""  Hayden  v.  Nicoletti,  18  Neb.  290, 
295,  per  Leonard,  J. 

"s  Kinney  v.  Kruse,  28  Wis.  183 
(note  here  was  put  into  circulation 
by  fraud). 

"^  Williams  v.  Smith,  2  Hill  (N. 
Y.)  301. 

^'>'>  California.— Bell  v.  Bean,  75 
Cal.  86;  Vauliew  v.  Mason,  1  Cart. 
(Ind.)  288;  Valette  v.  Mason,  1 
Smith   (Ind.)  89. 

Massachusetts. — Williams  v.  Che- 
ney, 3  Gray  (Mass.)  215. 

Minnesota. — St.  Paul  Nat.  Bank  v. 
Cannon,  46  Minn.  95.  48  N.  W.  526. 

Missouri. — Crawford  v.  Spencer, 
92  Mo.  498,  4  S.  W.  713. 

Texas.— Wright  v.  Hardie,  88  Tex. 
653,  32  S.  W.  885. 

"» Blydenburgh  v.  Thayer,  3 
Keyes  (N.  Y.)  293,  1  Abb.  Dec.  (N. 
Y.)    156,   1   Transcr.   App.    (N.   Y.) 


483  EXTENT    OF   RECOVERY — BONA   FIDE    HOLDER.  [§    370 

for  value  of  promissory  notes  transferred  to  him  before  maturity  can 
prove  them  for  their  full  amount  against  the  assets  in  bankruptcy  of 
the  promisors,  whatever  may  have  been  the  equities  between  the  prom- 
isors and  the  pledgor,  but  if  there  are  such  equities  which  would  pre- 
vent the  pledgor  from  proving,  then  the  pledgee  can  receive  in  divi- 
dends only  the  amount  for  which  he  holds  the  notes  in  pledge,  and 
where  such  a  pledgee,  after  the  bankruptcy  of  the  promisors,  settled 
with  the  pledgor  who  was  insolvent,  and  in  the  arrangement  took  the 
notes  as  payment  for  a  certain  sum  and  the  arrangement  appeared  to 
have  been  made  in  good  faith,  it  was  held  that  he  might  still  prove  for 
the  face  of  the  notes  and  receive  dividends  to  the  extent  of  the  sum 
paid  for  them.^°^  A  hona  fide  holder  for  value  may,  however,  recover 
at  least  the  amount  actually  paid  or  credited  on  the  faith  of  the  paper, 
although  bad  faith  existed  in  obtaining  the  paper. ^°^  So  the  entire 
amount  is  recoverable  when  the  note  is  pledged  as  security  on  an  ad- 
vance of  money  equal  thereto.  ^*'^*  Money  overdrawn  upon  the  pledge 
should,  however,  be  excluded.^'**  Notwithstanding  the  first  stated 
rule  it  is  also  decided  that  as  between  the  maker  and  the  transferee 
from  the  payee  the  amount  due  when  the  note  was  given  cannot  be  in- 
quired into.^"^  And  if  a  negotiable  note  has  been  indorsed  and  trans- 
ferred, hona  fld&  before  its  maturity,  as  collateral  security  for  a  de- 
mand short  of  its  nominal  value,  payment  afterward  by  the  maker  to 
the  payee  cannot  be  given  in  evidence  in  an  action  thereon  against  the 
maker  by  the  indorsee  to  reduce  the  amount  of  the  judgment  to  the 
sum  then  actually  due  to  him.^°^  Under  other  decisions  the  whole 
sum  due  on  the  note,  even  though  it  is  in  excess  of  the  demand  or  face 

221,  34  How.   Pr.    (N.   Y.)    88.    See  »<»  Mechanics'  &  Traders'  Bank  v. 

Mechanics'  &  Traders'  Banlc  v.  Bar-  Barnett,  27  La.  Ann.  177. 

nett,  27  La.  Ann.  177;  Mechanics'  &  ""  McCrady  v.  Jones,  36  S.  C.  136, 

Traders'  Banli  v.  Livingston,  4  Misc.  15  S.  E.   430    (the  syllabus   in   this 

Rep.  257,  23  N.  Y.  Supp.  813;   Hole-  case  is:     "Where  A  holds  the  legal 

man  v.  Hobson,  8  Humph.    (Tenn.)  title  to  land  which  is  a  security  for 

127;  Wiffen  v.  Roberts,  1  Esp.  261.  all  indebtedness  of  B  to  him,  and  B 

But  see  Fowler  v.  Strickland,  107  gives  his  note  for  an  amount  due, 

Mass.  552.  and  this  note  is  transferred  by  A  to 

^'"Ex  parte  Kelly,   1   Low    (U.   S.  C,  in  action  which  involves  a  specific 

Dist.  Mass.)  394,  Fed.  Cas.  No.  7,681.  performance  between  A  and  B,  no 

•"'Beckhaus    v.    Commercial    Nat.  inquiry    should    be    allowed    as    be- 

Bank,  —  Pa.  — ,  12  Atl.  72.  tween  B  and  C  of  the  real  amount 

"*'*  Crooke  &   Fowkes  v.   Mali,  11  due  when  such  note  was  given"). 

Barb.  (N.  Y.)   205.  '"« Gowen    v.    Wentworth,    5    Shep. 

(17  Me.)  66. 


§  376]  COLLATEEAL  SECURITY.  484 

of  the  note,  may  be  recovered.^"'^  If,  however,  such  recovery  is  had  of 
the  whole  amount  the  surplus  over  and  above  the  claim  or  amount  due 
is,  it  is  decided,  held  in  trust  for  the  parties  entitled.  ^°^  In  Nebraska 
it  is  determined  that  if  notes,  accompanied  by  real  estate  mortgages 
by  which  the  payments  of  the  notes  are  secured,  are  pledged  as  col- 
lateral security  for  the  payment  of  a  debt  and  the  mortgages  are  fore- 
closed by  the  pledgee,  in  actions  to  which  the  pledgor  is  not  made  a 
party,  and  the  pledgee  at  the  foreclosure  sales  purchases  the  properties, 
if  it  appear  that  such  action  was  with  the  intent  to  acquire  complete 
titles  thereto,  the  pledgor  may  affirm  the  sales  and  demand  credit  on 
the  principal  debt  for  the  amounts  bid  and  expenses  of  the  fore- 
closures, and  if  said  sums  in  the  aggregate  exceed  the  debt  may  re- 
cover the  excess."^  Again,  if  a  person  holding  a  note  as  collateral  to 
a  debt  due  him  transfers  it  so  that  in  legal  presumption  he  receives 
a  benefit  therefrom,  then,  unless  he  regains  it  and  has  it  ready  to  de- 
liver to  the  defendant,  his  recovery  will  be  limited  or  defeated  accord- 
ing as  the  paper  transferred  may  be  for  a  less  or  greater  sum  than  the 
debt  intended  to  be  secured ;  as  the  creditor  who  receives  a  note  as  col- 
lateral security  and  transfers  it  to  another  must  be  understood  to  have 
elected  that  mode  of  payment  and  have  made  the  security  a  substitute 
for  the  debt.^^**  So  a  note  which  is  taken  when  overdue  as  collateral 
security  for  a  smaller  debt  may  be  reduced  by  the  amount  of  any  pay- 
ment specially  proven  to  have  been  made  to  the  assignor  or  by  the 
amount  of  a  payment  where  the  assignor  had  declared  that  the  note 

^"Tooke  V.  Newman,  75  111.  215;  bers,  11  Rich.  Law  (S.  C.)  657  (may 
Smith  V.  Isaacs,  23  La.  Ann.  454  recover  amount  of  note  against  par- 
(may  recover  the  whole  amount,  ties  liable  when  note  taken,  even 
notwithstanding  equities  between  though  he  has  not  yet  sustained 
maker  and  payee  collateral  security  actual  loss  nor  given  credit  to  his 
holder  stands  the  same  as  any  inno-  immediate  debtor), 
cent  third  party  holding  negotiable  "^  Exchange  Bank  v.  Butner  & 
paper);  Gowen  v.  Wentworth,  5  Edgeworth,  60  Ga.  654;  Tarbell  v. 
Shep.  (17  Me.  66,  69)  (notwith-  Sturtevant,  26  Vt.  513  (may  recover 
standing  the  note  pledged  as  col-  whole  amount,  but  holds  the  surplus 
lateral  security  was  of  greater  value  after  payment  of  his  claim  as  trustee 
than  the  amount  of  the  liability  first  of  the  payee  or  his  assignee).  Saw- 
assumed  the  plaintiff  has  a  right  to  yer  v.  Cutting,  23  Vt.  486  (may  re- 
recover  and  receive  in  his  own  name  cover  full  amount,  although  note 
the  amount  of  the  note  (Story  on  was  collateral  security  for  payment 
Bailments,    §    321)    and    he    is    not  of  less  sum). 

limited  to  the  sum  for  which  it  was  ""  Ross  v.  Barker,  58  Neb.  402,  78 

pledged");  Berenbroick  v.  Stephens,  N.  W.  730. 

8  Daly  (N.  Y.)   249;  Bank  v.  Cham-  ^i"  Cocke  v.  Chaney,  14  Ala.  65,  67. 


485 


COLLATERAL    SECURITY    EOR   PRE-EXISTING   DEBT. 


[§   37^ 


was  paid.^^^  Under  a  Yermont  decision  if  the  payee  himself  paid 
the  debt  secured  and  received  the  note  he  cannot  recover  thereon,  for 
his  own  benefit,  no  consideration  having  passed  between  said  payee 
and  the  defendant,  where  they  had  consented  to  its  transfer  to  a  third 
person  as  collateral  security.^^^  And  a  second  assignee,  to  whom  the 
note  and  mortgage  are  assigned  by  the  mortgagee  with  notice  of  the 
guaranty  has  the  right  to  pay  the  balance  due  the  first  assignees,  and, 
on  receiving  an  assignment  from  them  and  their  securities,  will  be 
subrogated  to  their  rights  as  a  bona  fide  holder  to  the  amount  paid,  but 
no  further.^  ^^ 

§  377.  Same  subject — Collateral  security  for  pre-existing-  debt. — 
The  extent  to  which  a  recovery  may  be  had  upon  a  note  taken  as  col- 
lateral security  for  a  pre-existing  debt  must  necessarily  rest  largely 
upon  the  validity  of  such  contract  as  against  defenses  and  equities.^^* 
It  is  held,  however,  that  paper  so  taken  is  valid  in  the  bona  fide  in- 
dorsee's hands  to  the  extent  of  his  claim.^^^ 


'"Bound  v.  Fitzpatrick,  8  Gray 
(74  Mass.)  536.  See  First  National 
Bank  v.  Werst,  52  Iowa  684,  3  N.  W. 
711  (purchaser  can  recover  only  so 
much  of  the  debt  as  was  unpaid). 

'^Sargeant  v.  Sargeant,  18  Vt. 
371. 

"'Anderson  v.  Bank,  98  Mich.  543, 
57  N.  W.  808. 

"*See  §§  246-249,  353-355  herein. 

"°  Yellowstone  Bank  v.  Gagnon, 
19  Mont.  402,  405-407,  48  Pac.  762,  61 
Am.  St.  Rep.  520,  44  L.  R.  A.  243.  In 
this  case  the  court,  per  Hunt,  J., 
quotes  from  and  considers  certain 
text-books  as  follows:  "Daniel  on 
Negotiable  Instruments  (§  832a)  ex- 
presses the  rule  in  this  language: 
'When  it  appears  that  the  bill  or 
note  was  acquired  by  the  holder  as 
collateral  security  for  a  debt,  and  he 
is  deemed  entitled  to  recover  upon 
it,  he  is  still  limited  to  the  amount 
of  the  debt  which  it  secures,  if  there 
be  a  valid  defense  against  his  trans- 
feror being  regarded  as,  at  all 
events,  a  bona  fide  holder,  and  en- 


titled to  stand  upon  a  better  footing 
only  pro  tanto.  Thus,  such  a  holder 
could  recover  against  an  accommo- 
dation party  no  more  than  the  con- 
sideration actually  advanced,  but,  in 
the  absence  of  proof,  he  will  be 
deemed  to  have  advanced  the  full 
amount  of  the  paper.'  *  *  *  Cole- 
brooke  on  Collateral  Securities  (sec- 
tion 92)  cites  several  *  *  *  cases 
*  *  *  *  and  deduces  the  following 
text  from  them:  'Where  negotiable 
promissory  notes,  without  consider- 
ation or  subject  to  an  equitable  set- 
off, or,  in  cases  of  misappi-opriation, 
as  between  the  makers  and  payees 
and  indorsers  thereof,  and  the  col- 
lateral securities  are  of  greater 
amount  than  the  loan  represented  by 
the  principal  evidence  of  indebted- 
ness, the  recovery  of  the  pledgee 
against  the  makers  upon  an  action 
thereon  is  limited  to  the  amount 
of  his  advances.  The  pledgee  in  such 
cases  of  fraud  is  a  holder  for  value 
of  the  collateral  notes  as  against 
the  makers  of  such  paper,  to  the  ex- 


§  378] 


COLLATERAL   SECURITY. 


486 


§  378.  Same  subject — Accommodation  paper. — In  case  a  promis- 
sory note  is  executed  without  any  consideration  actually  passing  from' 
the  maker  to  the  payee,  and  as  an  accommodation  to  the  payee  for  the 
express  purpose  of  enabling  the  latter  to  pledge  the  same  as  collateral 
security  for  an  anticipated  indebtedness  to  a  third  person  in  pursu- 
ance of  an  agreement  to  that  effect,  the  same  in  the  hands  of  the  latter 
can  be  realized  upon  against  the  maker  to  the  extent  of  the  secured 
indebtedness  of  the  payee  and  pledgor  and  no  further. ^^®    So  an  ac- 


tent  only  of  his  interest  at  the  time 
he  acquires  the  title  or  has  notice  of 
the  defenses  to  it.'  This  doctrine  is 
also  followed  in  Bank  v.  Barnett,  27 
La.  Ann.  177.  *  *  *  Tiedeman  on 
Commercial  Paper  (section  304) 
states  that  where  a  pledge  of  a  ne- 
gotiable note  is  made  for  the  pur- 
pose of  securing  the  payment  of  a 
debt,  the  better  rule  is  that  the 
pledgee  can  recover  the  whole  of  the 
face  value  of  the  note,  and  hold  the 
balance  over  and  above  the  amount 
of  his  own  claim  as  a  trustee  for  the 
pledgor.  It  would  seem,  therefore,  as 
if  he  took  a  different  view  of  the 
law  from  that  taken  by  Daniel,  al- 
though he  expressly  states  in  a  sub- 
sequent part  of  his  text  that  the 
pledgee  in  such  a  case  is  a  bona  fide 
holder  only  in  respect  to  the  amount 
of  his  claim  against  the  pledgor; 
and,  if  there  be  a  good  defense  to 
an  action  on  the  collateral  by  the 
pledgor,  the  recovery  of  the  pledgee 
is  limited  to  the  amount  of  his  claim 
against  the  pledgor.  But  we  think 
that  if  the  pledgee  is  to  be  regarded 
in  such  a  case  (as  he  undoubtedly 
should  be)  as  a  bona  fide  holder  only 
to  the  amount  of  his  claim  against 
the  pledgor,  and  if  he  be  limited  in 
his  recovery  to  the  amount  of  his 
claim,  it  is  most  reasonable  that  the 
controversy  over  the  balance  be  liti- 
gated by  those  directly  interested, 
and  that  ordinarily  the  pledgee  is 
not  to  be  held  as  a  trustee  for  the 


pledgor.  We  are  aware  that  there  is 
a  contradiction  of  opinion  as  to  the 
attitude  of  the  pledgee  who  seeks  to 
recover  the  full  amount  of  the  col- 
lateral where  such  amount  is  in  ex- 
cess of  the  debt  secured  to  him;  but 
we  are  content  to  adopt  the  rule 
sustained  by  the  decisions  already 
cited,  which  limit  his  recovery  to 
the  amount  due  to  him.  In  addition 
to  the  cases  above  cited,  we  may  in- 
clude Steere  v.  Benson,  2  111.  App. 
560,  and  Second  Nat.  Bank  of  Cin- 
cinnati V.  Hemingway,  34  Ohio  St. 
381."  The  court  also  cites  Valette 
V.  Mason,  1  Smith  (Ind.)  89  (which 
limits  the  recovery  to  the  debt  ac- 
tually due,  if  payment  had  been  pre- 
viously made  to  the  payee) ;  Farm- 
ers' State  Bank  v.  Blevins,  46  Kan. 
536,  26  Pac.  1044  (holding  that  re- 
covery is  limited  to  the  amount  of 
the  pre-existing  debt  where  there 
are  equitable  defenses  against  the 
transferor) ;  Mechanics'  &  Traders' 
Bank  v.  Barnett,  27  La.  Ann.  177 
(which  was  an  accommodation 
note) ;  Maitland  v.  Citizens'  National 
Bank  of  Baltimore,  40  Md.  540  (re- 
covery is  amount  due  on  debts) ; 
Fisher  v.  Fisher,  98  Mass.  303; 
Stoddard  v.  Kimball,  6  Cush.  (60 
Mass.)  469;  Duncan  v.  Gilbert,  29 
N.  J.  L.  521;  Huff  v.  Wagner,  63 
Barb.  (N.  Y.)  215;  Williams  v. 
Smith,  2  Hill  (N.  Y.)  301. 

"'Forstall  v.  Fussell,  50  La.  Ann. 
249.  23  So.  273. 


487  COLLATERAL    SECURITY    FOR    PRE-EXISTING   DEBT.  [§    378 

commodation  party  is  held  liable  to  an  accommodation  holder  to  the 
same  extent  as  if  that  value  were  personally  advanced  to  himself, 
and  he  cannot  resist  payment  to  a  pledgee  where  the  holder  had  been 
authorized  to  sell,"^  Again,  where  an  accommodation  note,  held  as 
collateral,  is  sold  for  the  amount  of  the  debt  secured  by  it,  the  pur- 
chaser is  limited  to  a  recovery  from  the  maker  to  the  amount  paid.^^* 

'"Matthews  v.   Rutherford,  7  La.        "*  First    Nat.   Bank   v.   Werst,   52 
Ann.  225.  Iowa  684,  3  N.  W.  711. 


CHAPTER  XVI. 


DIVERSION"   AND   FRAUDULENT   TRANSFER. 


Sec. 

379.  As  a  defense  generally. 

380.  Where  paper  is  taken  in  ordi- 

nary    course     of     business — 
Bona  fide  holders. 

381.  Same     subject — Evidence — Bur- 

den of  proof. 

382.  Same  subject — Transfer  in  vio- 

lation of  statute. 

383.  Accommodation     paper  —  Bona 

fide  holders. 

384.  Same  subject  continued. 

385.  Accommodation    paper  —  Other 

holders. 

386.  Accommodation     paper — Where 

purpose  substantially  effected 
or  no  restrictions  imposed. 


Sec. 

387.  Negotiation   of   accommodation 

paper   to   party   not   contem- 
plated. 

388.  Same  subject — Paper  to  be  dis- 

counted at  a  particular  bank. 

389.  Paper  to  be  discounted  at  par- 

ticular bank  continued — Rule 
illustrated. 

390.  Where  transferred  or  applied  as 

security    for    an    antecedent 
debt. 

391.  Same  subject  continued. 

392.  Diversion  of  proceeds  of  paper. 

393.  Effect  of  waiver. 


§  379.  As  a  defense  generally. — A  fraudulent  transfer  or  diver- 
sion of  negotiable  paper  will,  as  a  general  rule,  be  a  good  defense  to 
an  action  thereon  between  the  parties  or  by  a  holder  with  notice.^  So 
where  one  with  whom  a  bill  or  note  is  deposited,  to  be  kept  for  the 
depositor,  fraudulently  transfers  the  same,  such  fact  may  be  shown  as 
a  defense  to  an  action  by  one  with  notice  thereof.-  And  a  fraudulent 
diversion  of  negotiable  paper  by  the  principal  will  operate  as  a  dis- 
charge of  a  surety  where  done  without  his  knowledge. or  consent.^ 
Such  a  defense  may  also  be  available  against  an  assignee  of  non-nego- 
tiable paper.*  So  where  a  note  not  negotiable  but  designed  for  procur- 
ing a  loan  of  money  of  the  payee  was  signed  by  one  as  surety  under  an 

'  See   subsequent   sections   in   this  And    compare    Smith    v.    First    Na- 

chapter.  tional  Bank,  21  Ky.  Law  Rep.  953, 

=  Marston  v.  Allen,  8  Mees.  &  W.  53  S.  W.  648. 
494.  "  Rawlings  v.  Fisher,   24  Ind.  52; 

^  Johnston    v.    May,    76    Ind.    293.  Weyman  v.  Perry,  42  S.  C.  415,  20  S. 

See  Hidden  v.   Bishop,   5  R.   I.   29.  E.  287. 

488 


i 


489      PAPER  TAKEN  IN  ORDINARY  COURSE  OF  BUSINESS.   [§  380 

agreement  that  a  certain  sum  of  the  amount  raised  on  the  note  should 
be  applied  by  the  maker  in  payment  of  a  debt  he  owed  the  surety  and 
the  payee  refused  to  discount  the  note,  and  the  maker  then  let  a  third 
party  have  it  under  an  agreement  that  he  should  indorse  it  and  get 
it  discounted,  and  apply  the  money  so  obtained  upon  a  debt  due  him 
from  the  maker,  and  such  third  party,  who  took  the  note  in  ignorance 
of  the  agreement  between  the  surety  and  maker,  paid  the  note  when 
protested  against  him,  it  was  decided  that  he  could  not  maintain  an 
action  against  the  surety  in  the  name  of  the  payee.^  An  intention 
merely  on  the  part  of  the  payee  to  convert  to  his  own  use  a  note  given 
to  him  for  the  benefit  of  another  will,  however,  be  no  defense  to  an 
action  against  the  maker,  it  appearing  that  the  note  was,  in  fact,  not 
diverted,  but  used  in  accordance  with  the  maker's  intentions.®  Again, 
where  a  fraudulent  diversion  of  an  instrument  is  relied  on  as  a  defense 
the  facts  constituting  the  alleged  fraud  should  be  pleaded,  and  an 
allegation  that  the  instrument  was  wrongfully  converted  by  a  third 
person,  with  whom  it  was  deposited,  and  fraudulently  delivered  to 
the  plaintiff  without  the  knowledge  or  assent  of  the  defendants,  states 
a  mere  conclusion  of  law  and  is  demurrable.'^ 

§  380.  Where  paper  is  taken  in  ordinary  course  of  business — ^Bona 
fide  holders. — Where  the  maker  or  owner  of  negotiable  paper  entrusts 
it  to  another  and  puts  it  in  the  power  of  the  latter  to  deceive  a  third 

^  Farmers'  &  Mechanics'  Bank  v.  sideration  advanced  in  good  faith  at 
Hathaway,  36  Vt.  539.  The  court  the  time  he  took  the  note,  nor  in  our 
said:  "It  is  impossible  for  us  to  apprehension  should  he  be  regarded 
see  upon  what  principle,  either  of  as  a  holder  unaffected  with  notice, 
law  of  equity,  Adams  can  be  held  — for,  as  before  said,  the  note  im- 
to  have  immunity  by  virtue  of  re-  ported  that  it  was  designed  to  be 
ceiving  that  note  in  that  manner,  used  for  obtaining  a  loan  of  money, 
against  the  real  transaction  and  When  therefore  he  took  it  of  the 
agreement  between  the  defendant  principal  maker  to  apply  on  an  old 
and  Osgood  in  and  in  pursuance  of  debt,  we  think  he  should  be  re- 
which  the  defendant  signed  the  not©  garded  as  assuming  the  peril  of  the 
as  surety.  Certainly  no  principle  of  perversion  of  the  note  from  the  pur- 
commercial  or  mercantile  law  can  pose  of  it  as  shown  by  the  instru- 
be  invoked  for  such  a  purpose,  for  ment  itself."  Per  Barrett,  J. 
the  transaction  did  not  place  Adams  "  Elias  v.  Finnegan,  37  Minn.  144, 
in  the  character  and  position,  under  33  N.  W.  330. 

that  law,  which  would  protect  him  ^Rogers   v.    Morton    (N.   Y.    Sup. 

against    equitable    defenses   by   the  Ct.,   Special  Term,  1905),  95  N.  Y. 

surety.    He  was  not  payee,  nor  in-  Supp.  49. 
dorser,  nor  was  he  holder  for  a  con- 


§  380] 


DIVERSION    AND   FRAUDULENT   TRANSFER. 


490 


person  he  must  bear  the  loss  of  any  deception  resulting  from  the  power 
so  conferred.  This  rule  is  based  upon  the  principle  that  where  one  of 
two  innocent  persons  must  bear  a  loss  he  must  bear  it  who  has  by  his 
own  act  rendered  such  loss  possible.  Therefore,  where  negotiable 
paper  comes  into  the  hands  of  a  person  in  the  ordinary  course  of  busi- 
ness, for  a  valuable  consideration  and  without  notice,  he  will  be  re- 
garded as  a  bona  fide  holder,  and  an  action  by  him  on  the  paper  will 
not  be  subject  to  the  defense  that  it  was  fraudulently  transferred  or 
diverted  by  the  one  to  whom  it  was  entrusted  or  delivered.^  Thus 
such  a  defense  is  not  available  in  the  case  of  an  instrument  indorsed 
in  blank  which  comes  into  the  possession  of  one  in  the  ordinary  course 


^Indiana. — Stoner  v.  Brown,  18 
Ind.  464. 

loiva. — Laub  v.  Rudd,  37  Iowa  617. 

Kansas. — National  Bank  v.  Dakin, 
54  Kan.  656,  39  Pac.  180,  45  Am.  St. 
R.  299. 

Kentucky. — Barry  v.  Holderman,  6 
J.  J.  Marsh.  (Ky.)  471. 

Louisiana. — Cochrane  v.  Dicken- 
son, 40  La.  Ann.  127,  3  So.  841. 

Maine. — Nutter  v.  Stover,  48  Me. 
163. 

Massachusetts. — Scollans  v.  Rob- 
bins,  179  Mass.  346,  60  N.  E.  983; 
White  V.  Duggan,  140  Mass.  18,  20, 
2  N.  E.  110;  Sweetser  v.  French,  2 
Cush.  (Mass.)  309,  48  Am.  Dec.  666. 

Michigan. — Birch  v.  Fisher,  51 
Mich.  36,  16  N.  W.  220. 

Minnesota. — Pence  v.  Arbuckle,  22 
Minn.  417. 

Missouri. — American  National  Bk. 
V.  Harrison  Wire  Co.,  11  Mo.  App. 
446. 

New  Hampshire.  —  Clement  v. 
Leverett,  12  N.  H.  317. 

New  Jersey. — Halsted  v.  Colvin,  51 
N.  J.  Eq.  387,  26  Atl.  928. 

New  York. — Benjamin  v.  Rogers, 
126  N.  Y.  60;  Wilson  v.  Roche,  58  N. 
Y.  642;  McNeil  v.  Bank,  46  N.  Y. 
325,  7  Am.  Rep.  341;  Park  Bank  v. 
Watson,  42  N.  Y.  490,  1  Am.  Rep. 


573;  Woodhull  v.  Holmes,  10  Johns. 
(N.  Y.)  231. 

Pennsylvania.  —  Burton's  Appeal, 
93  Pa.  St.  214;  Bardsley  v.  Delp,  88 
Pa.  St.  420;  Long  v.  Rawn,  75  Pa. 
St.  128. 

Tennessee. — Merritt  t.  Duncan,  7 
Heisk.  (Tenn.)  156,  19  Am.  Rep.  612. 

Texas.  —  Whittle  v.  Hide  & 
Leather  Bank,  7  Tex.  Civ.  App.  616, 
26  S.  W.  1011. 

Washington. — Peters  v.  Gay,  9 
Wash.  383,  37  Pac.  325. 

Wisconsin. — Kinney  v.  Kruse,  28 
Wis.  183. 

Federal.— Svfitt  v.  Smith,  102  U. 
S.  442,  26  L.  Ed.  193. 

The  words  of  the  court  in  an  Eng- 
lish case  are  pertinent  in  this  con- 
nection: "Whilst  courts  of  justice 
ought  to  repress  all  such  dealings 
with  bills  as  amount  to  mere  swin- 
dling, the  importance  to  a  commer- 
cial country  of  a  free  circulation  of 
bills  ought  not  to  be  forgotten.  A 
man  who  takes  a  bill  cannot  ascer- 
tain the  intention  of  previous  par- 
ties whose  names  appear  on  the 
bill."  Per  Pollock,  C.  B.,  in  Barker 
V.  Richards,  20  Law  J.  Exch.  135, 
136. 

In  case  of  stock  certificates,  see 
Trust  Co.  V.  Gray,  12  App.  D.  C.  276, 
287. 


491      PAPER  TAKEN  IN"  ORDINARY  COURSE  OF  BUSINESS.   [§  380 

of  business  with  no  notice  or  knowledge  of  any  fact  to  put  him  upon 
inquiry  or  excite  his  suspicion.  As  is  said  in  a  case  where  this  ques- 
tion arose :  "All  know  that  bank  bills,  treasury  warrants,  notes  paya- 
ble to  bearer,  and  bills  and  notes  indorsed  in  blank,  pass  by  mere 
delivery.  Nor,  when  such  paper  is  offered  for  payment  or  for  sale,  is 
the  person  receiving  or  purchasing  it  required  to  inquire  as  to  the 
title  of  the  holder  unless  he  has  notice  or  is  put  on  inquiry.  If  he 
purchases  in  good  faith  the  law  will  protect  him.  With  all  such 
paper  possession  is  evidence  of  ownership,  and  the  commercial  value 
of  such  paper  would  be  greatly  impaired  and  its  negotiability  would 
be  destroyed  if  the  taker  was  required  to  investigate  the  title  and  to 
seek  for  latent  equities  before  receiving  it.  But  the  law  has  imposed 
no  such  burden  upon  him  until  he  has  notice,  or  knowledge  of  facts 
which  on  inquiry  would  lead  to  notice."^  So  where  a  note  is  indorsed 
with  recourse  by  an  agent  of  the  payee  and  with  the  knowledge  of  the 
latter  is  left  in  the  possession  of  the  indorsee,  who  transfers  it  to  a 
bona  fide  purchaser,  the  right  of  the  purchaser  to  recover  in  an  action 
against  the  payee  cannot  be  defeated  by  such  a  defense.^"  And  this  has 
also  been  declared  to  be  the  rule  in  the  case  of  a  non-negotiable  note, 
upon  the  ground  that,  though  the  assignee  of  a  chose  in  action  can 
take  no  better  title  than  that  of  his  assignor,  yet  such  doctrine  is  to 
be  taken  in  connection  with  another,  which  is  that  the  original  owner 

'  Per  Mr.  Chief  Justice  Walker  in  went  to  the  holder  of  the  paper  and 

Morris  v.  Preston,  93   111.   215,  221.  had  some  conversation  with  him,  in 

See   also   National   Bank   v.   Dakin,  which  it  appears  it  was  admitted  a 

54  Kan.  656,  39  Pac.  180,  45  Am.  St.  mistake  had   been  made  and  there 

R.  299.  was  something  said  about  correcting 

"Andrews  v.  Butler,  46  III.  App.  it,  but  it  was  not  done,  and  the  note 
183,  wherein  it  was  said  by  the  in  this  condition  was  permitted  to 
court:  "It  appears  the  indorsement  remain  in  the  hands  of  the  pur- 
was  actually  written  by  one  Hicks,  chaser,  who  soon  after  traded  it  to 
who  was  the  agent  of  Andrews  for  another,  and  he  in  turn  traded  it  to 
collecting  notes  and  claims  due  him.  Butler.  Butler  bought  on  the 
It  may  be  admitted  that  Hicks  had  strength  of  Andrew's  indorsement, 
no  specific  authority  to  make  this  knowing  the  maker  was  not  good, 
indorsement,  yet  we  are  inclined  to  and  gave  value  for  it  in  trade.  An- 
think  that  Andrews,  by  his  conduct  drews,  by  his  own  act,  after  he  knew 
after  learning  of  the  indorsement,  the  character  of  the  indorsement, 
has  estopped  himself  from  making  suffered  the  note  to  remain  in  that 
the  defense.  He  insisted  that  the  in-  condition  until  it  passed  to  a  bona 
dorsement  should  have  been  without  fide  holder.  He  should  not  be  al- 
recourse,  and  after  hearing  that  it  lowed  to  deny  the  indorsement." 
had  been  indorsed  with  recourse  he  Per  Wall,  J. 


§    381]  DIVERSION   AND  FRAUDULENT   TRANSFER.  493 

may  so  act  as  to  estop  himself  from  asserting  his  rights.^^  Where, 
however,  it  appears  that,  though  a  person  may  be  a  hona  fide  holder, 
he  has  not  paid  full  value  therefor,  it  has  been  decided  that  the  re- 
covery will  be  limited  to  the  amount  which  he  has  actually  paid  with 
interest. ^^  And  if  a  transferee,  at  the  time  of  taking  such  paper,  had 
knowledge  or  reasonable  ground  of  suspicion  to  believe  that  the  per- 
sons from  whom  he  received  the  instrument  had  limited  authority  and 
had  acted  in  fraud  of  the  actual  owner  or  diverted  the  paper  from  the 
purpose  for  which  it  was  given,  he  will  not  be  regarded  as  a  bona  fide 
holder.  ^^  Nor  will  one  be  regarded  as  such  a  holder  where  he  takes 
the  paper  without  valuable  consideration.^* 

§381.  Same  subject — Evidence — Burden  of  proof. — Where  in  an 
action  upon  a  bill  or  note  against  the  maker  or  indorser  it  is  shown 
that  the  paper  has  been  diverted  from  the  purpose  for  which  it  was 
given  the  burden  is  then  cast  upon  the  plaintiff  of  showing  that  he  is  a 
hona  fide  holder  or  has  succeeded  to  the  rights  of  such  a  holder.^^ 
Thus  in  a  case  in  West  Virginia  it  is  declared  that :  "It  is  the  settled 
rule  of  commercial  law  that  where  a  negotiable  note  is  given  for  a 
specific  purpose,  is  indorsed  and  used  by  the  payee  for  an  entirely  dif- 
ferent purpose,  without  the  knowledge  or  consent  of  the  maker,  the 
burden  of  proof  is  on  the  holder  of  such  note  to  show  that  he  received 
it  in  the  ordinary  course  of  business  before  maturity  for  a  valuable 
consideration,  and  without  notice  of  its  misuse  by  the  payee,  before  he 
can  recover  from  the  maker."^^  So  in  an  action  upon  a  promissory 
note  it  has  been  held  error  to  sustain  an  objection  to  the  admission  of 
evidence  showing  that  the  note  was  executed  by  the  defendants  as 
makers  without  any  consideration  and  for  the  purpose  of  taking  up 
another  note  given  as  collateral  security  for  the  benefit  of  the  payee, 

"  Combes  v.  Chandler,  33  Ohio  St.  "^  Farmers'    &    Citizens'    Bank    v. 

178.    But  see  preceding  section.  Noxon,  45  N.  Y.  762,  765;  American 

1     "Faulkner  v.  White,  33  Neb.  199,  Exchange  Nat.   Bank  v.  New  York 

49  N.  W.  1122;  First  National  Bank  Belting  &  P.   Co.,   74  Hun    (N.   Y.) 

v.  Haulenbeck,  65  Hun    (N.  Y.)    54,  446,  6  N.  Y.  Supp.  822,  aff'd,  148  N. 

19  N.  Y.  Supp.  567.  Y.   698;    Davis  v.   Bartlett,   12  Ohio 

"Haynes  v.  Foster,  2  Cromp.  &  M.  St.  584,  80  Am.  Dec.  375;    Smith  v. 

237.  Popular  Loan  &  Bldg.  Ass'n,  93  Pa. 

'     "  Theurer  v.  Schmidt,  10  La.  Ann.  St.  19. 

293;    Lincoln  v.  Fitch,  42  Me.   456;  ^«  Union  Trust  Co.  v.  McClellan,  40 

Victor  V.  Bauer,  11  N.  Y.  St.  R.  531;  W.  Va.  405,  411,  21  S.  E.  1025.    Per 

Carpenter  v.  National  Bank  of  the  Dent,  J. 
Republic,  106  Pa.  St.  170. 


493         ACCOMMODATION    PAPER — BONA    FIDE    HOLDER.  [§§    383,    383 

and  that  he  did  not  take  up  such  note,  the  ground  of  the  objection  be- 
ing that  it  had  not  been  shown  that  plaintiffs  were  not  innocent  holders 
for  value,  it  being  declared  that  if  the  offered  proof  had  been  made 
the  burden  would  then  rest  on  the  plaintiffs  to  show  that  they  were 
bona  fide  holders  for  value. ^^ 

§  382.  Same  subject — Transfer  in  violation  of  statute. — Where  a 
note,  deposited  as  collateral  security  with  a  person,  has  been  trans- 
ferred by  him  to  an  innocent  holder,  an  action  by  the  latter  against  the 
maker  or  indorser  cannot  be  defeated  by  the  fact  that  such  transfer 
was  in  violation  of  a  statute  making  it  a  criminal  offense  to  dispose 
of  collateral  security  before  the  maturity  of  the  debt  secured,  where 
there  is  nothing  in  the  statute  providing  that  the  title  of  an  innocent 
holder  in  such  a  case  shall  be  affected  by  the  fraudulent  transfer.^^ 

§  383.  Accommodation  paper — Bona  fide  holder. — It  is  no  defense 
to  an  action  by  a  bona  fide  holder  that  there  has  been  a  misappropria- 
tion or  fraudulent  diversion  or  transfer  of  accommodation  paper.^® 


"  Nickerson  v.  Ruger,  76  N.  Y. 
279. 

"Gardner  v.  Gager,  1  Allen 
(Mass.)  502.  The  statute  in  this 
case  provided  that  if  any  person 
who  shall  hold,  any  collateral  se- 
curity, deposited  with  him  for  the 
payment  of  any  debt  which  may  be 
due  to  him,  shall,  before  such  debt 
shall  have  become  due  and  payable, 
and  without  the  authority  of  the 
party  who  shall  have  deposited  with 
him  such  collateral  security,  sell, 
pledge,  loan,  or  in  any  way  dispose 
of  the  same,  he  shall  be  deemed  to 
be  guilty  of  a  criminal  offense  and 
shall  be  punished  by  fine  or  im- 
prisonment.  Mass.  St.  1855.  c.  213. 

^^  Alabama. — Bunzel  v.  Maas,  116 
Ala.  68,  22  So.  568. 

Connecticut. — Brush  v.  Scribner, 
11  Conn.  388,  29  Am.  Dec.  303. 

Illinois. — Miller  v.  Larned,  103  111. 
570. 

Iowa. — Tomblin  v.  Callen,  69  Iowa 
229,  28  N.  W.  573;  Winters  v.  Home 


Ins.  Co.,  30  Iowa  172;  Iowa  College 
Trustees  v.  Hill,  12  Iowa  462. 

Kentucky. — Frank  v.  Quast,  8  Ky. 
Law  Rep.  780. 

Louisiana. — Hutchinson  v.  Mitch- 
ell, 15  La.  Ann.  326. 

Maine. — Breckenridge  v.  Lewis,  84 
Me.  349,  24  Atl.  864;  Nutter  v.  Sto- 
ver, 48  Me.  163. 

Maryland. — Maitland  v.  Citizens' 
National  Bank,  40  Md.  540,  17  Am. 
Rep.  620. 

Massachusetts. — Woodruff  v.  Hill, 
116  Mass.  310;  Clark  v.  Thayer,  105 
Mass.  216,  7  Am.  Rep.  511;  Sweetser 
V.  French,  14  Mete.  (Mass.)  262; 
Wareham  Bank  v.  Lincoln,  3  Allen 
(Mass.)  192. 

Nebraska. — Faulkner  v.  White,  33 
Neb.  199,  49  N.  W.  1122. 

New  York. — Merchants'  National 
Bank  v.  Comstock,  S5  N.  Y.  24; 
Bank  of  New  York  v.  Vanderhorst, 
32  N.  Y.  553;  Blair  v.  Hagemeyer,  2G 
App.  Div.  (N.  Y.)  219,  49  N.  Y.  Supp. 
965;  Brooks  v.  Hey,  23  Hun  (N.  Y.) 


§    384]  DIVERSION   AND   FRAUDULENT   TRANSFER.  494 

Thus  in  an  early  case  it  is  said :  "When  negotiable  paper  is  made  for 
a  particular  object,  as  when  it  is  indorsed  for  a  specific  purpose,  the 
indorser  lending  his  name  to  accommodate  the  maker,  as  to  renew 
another  note,  and  the  maker  applies  it  to  a  different  purpose,  to  the 
prejudice  of  the  indorser,  and  this  is  known  to  the  person  receiving  it, 
he  shall  stand  upon  no  better  ground  than  the  fraudulent  assignor. 
But  if  the  assignment  of  such  note  or  bill  is  a  fraud  upon  the  indorser, 
yet  a  horuf,  fide  holder  for  a  valuable  consideration,  without  notice,  to 
whom  such  note  or  bill  has  been  transferred,  will  be  protected  in  re- 
ceiving such  paper  in  the  usual  course  of  business."^"  And  in  a  case 
in  New  York,  where  the  defendant  sought  to  avail  himself  of  such  a' 
defense,  the  court  declared  that:  "The  fact  that  the  note  in  suit,  of 
which  the  defendant  was  an  accommodation  indorser  as  the  surety  for 
the  makers,  was  diverted  from  the  purpose  for  which  it  was  made  and 
indorsed,  to  the  prejudice  of  the  indorser,  is  fully  met  and  overcome 
as  a  defense  by  the  fact,  also  proved,  that  the  plaintiff  became  the 
holder  and  owner  of  the  note  before  its  maturity  for  value  actually 
paid,  and  without  notice  of  any  defense  to  the  note,  or  defect  in  the 
title  of  its  immediate  indorser."-^ 

§  384.  Same  subject  continued. — In  an  action  by  an  indorsee 
against  the  indorsers  of  negotiable  promissory  notes,  where  the  defense 
relied  on  by  the  defendants  was  that  they  were  accommodation  in- 
dorsers and  that  the  indorsements  were  made  upon  the  promise  of 
the  maker  of  said  notes  that,  by  the  use  of  said  indorsements,  he  would 
pay  off  an  indebtedness  for  which  collaterals  were  pledged,  and  de- 
liver such  collaterals  to  the  defendants  together  with  a  written  guaranty 
of  a  certain  firm  as  further  security,  and  that  the  maker  had  fraudu- 
lently diverted  the  indorsements  and  failed  to  keep  said  promises,  it  was 
decided  that  the  jury  should  be  instructed  that  the  plaintiff  was  entitled 

372;  Tinsdale  v.  Murray,  9  Daly  (N.  Virginia. — Etheridge  v.  Parker,  76 

Y.)  446.  Va.  247. 

North  Carolina. — Ray  v.  Banks,  6  Washington. — Peters     v.     Gay,     9 

Jones  L.  (N.  C.)  118.  Wash.  383,  37  Pac.  325. 

South    Carolina. — Witte    v.    Wil-  Federal. — Gillespie  v.  Campbell,  39 

liams,  8  S.  C.  290.  Fed.  724. 

Texas. — Brown    v.    Thompson,    79  ="  Brush  v.  Scribner,  11  Conn.  388, 

Tex.  58,  15  S.  W.  168.  390,  29  Am.  Dec.  303,  per  Williams, 

Vermont. — Quinn  v.  Hard,  43  Vt.  C.  J. 

375 ;  Farmers'  &  Mechanics'  Bank  v.  ^  Merchants'     National     Bank    v. 

Humphrey,  36  Vt.  554.  Comstock,  55  N.  Y.   24,   26,  per  Al- 
len, J. 


495  accOjVIMOdatiox  paper — other  holders.  [§  385 

to  recover  if  the  jury  believe  from  the  evidence  that  he  purchased 
the  notes  before  maturity  in  good  faith,  without  notice  that  the  in- 
dorsements were  without  consideration  or  had  been  procured  by  fraud, 
or  that  the  notes  or  the  proceeds  thereof  had  been  misapplied  or 
dealt  with  in  any  manner  which  would  impeach  their  validity. ^^  It  is, 
however,  decided  that,  under  some  circumstances,  a  bona  fide  holder 
in  good  faith  will  be  limited  in  his  recovery  to  the  amount  which  he 
has  actually  paid  for  the  same.^^  In  such  a  case,  however,  upon  proof 
of  the  fact  that  there  has  been  a  diversion  of  negotiable  paper  the  bur- 
den is  then  held  to  rest  upon  the  holder  to  show  that  he  is  a  bona  fide 
holder.^* 

§385.  Accommodation  paper — Other  holders. — The  maker  of,  or 
surety  on,  an  accommodation  note  has  the  right  to  determine  what 
use  shall  be  made  of  the  same  and  may  impose  material  or  immaterial 
conditions  or  terms  in  regard  to  its  use,  and  one  who  takes  the  paper 
with  knowledge  of  the  terms  and  conditions  imposed  will  be  subject 
to  the  defense  that  there  has  been  a  diversion  of  the  instrument  from 
the  use  contemplated.^^  Thus  it  is  said  that :  "If  accommodation  paper 
is  given  for  a  particular  purpose,  and  that  purpose  is  known  to  the 
holder  at  the  time  it  is  taken,  a  diversion  of  the  paper  from  that  pur- 
pose or  misappropriation  of  it  will  release  the  party  giving  the  accom- 
modation from  all  responsibility."^**  And  such  a  defense  is,  as  a  gen- 
eral rule,  available  against  all  parties  except  one  who  occupies  the 
position  of  a  bona  fide  holder.-^   So  where  defendant  signed  a  note  and 

=*Bunzel  v.  Maas,  116  Ala.  68,  22  lor,  23  Barb.    (N.  Y.)    18.    Compare 

So.  568.  Ransom  v.  Turley,  50  Ind.  273. 

^Chicopee     Bank     v.     Chapin,     8  ="  Per  Barbour,  J.,  in  Olds  Wagon 

Mete.   (Mass.)  40;   Stoddard  v.  Kim-  Works  v.  Bank  of  Louisville,  10  Ky. 

ball,  6  Cush.  (Mass.)  469;  Faulkner  Law  Rep.  235. 

v.  White,  33  Neb.  199,  49  N.  W.  1122;  =^ /ndiana.— Johnston    v.    May,    76 

Brown    v.    Mott,    7    Johns.    (N.    Y.)  Ind.  293. 

361;  First  National  Bank  v.  Fowler,  Kentucky. — Thompson   v.    Boston, 

36  Ohio  St.  524,  38  Am.  Rep.  610.  1  Duv.  (Ky.)  389. 

'Mves  v.  Jacobs,  21  Abb.  N.  C.  (N.  Neio    York.— Brown    v.    Taber,    5 

Y.)  151.  Wend.  (N.  Y.)  566;  Tinsdale  v.  Mur- 

==  Brush  v.  Scribner,  11  Conn.  388,  ray,   9   Daly    (N.   Y.)    446;    Garfield 

390,  29   Am.   Dec.   303;    Maitland   v.  National   Bank   v.   Colwell,   57    Hun 

Citizens'  Nat.  Bank.  40  Md.  540,  17  (N.  Y.)  169,  10  N.  Y.  Supp.  864. 

Am.  Rep.  620;   Benjamin  v.  Rogers,  Pennsylvania. — Cozen    v.    Middle- 

126  N.  Y.  60;    McAdam  v.  Cooke,  6  ton,  118  Pa.  St.  622,  12  Atl.  566. 
Daly  (N.  Y.)  101;  Rochester  v.  Tay- 


§    386]  DIVERSION    AND   FRAUDULENT   TRANSFER.  49G 

put  it  into  the  hands  of  the  plaintiff  for  the  purpose  of  having  it  in- 
dorsed by  the  promisee  and  then  paying  with  it  a  debt  due  from  the 
promisee  to  a  stranger,  on  the  condition,  however,  that  the  plaintiff 
should  procure  a  certain  chattel  of  the  promisee  and  hold  it  for 
the  defendant's  use,  but  the  plaintiff  paid  the  debt  with  his  own  funds 
and  took  the  note  himself  as  indorsee  and  procured  the  chattel  of  the 
promisee,  but  afterwards  restored  it  to  him,  it  was  held  that  such  facts 
constituted  a  good  defense.-^  In  this  class  of  cases  the  question  whether 
the  plaintiff  had  such  knowledge  or  not  is  one  of  fact  for  the  jury.^'' 

§  386.  Acconiinodation  paper — Where  purpose  substantially  ef- 
fected or  no  restrictions  imposed. — Where  a  person  affixes  his  name  to 
accommodation  paper  either  as  maker  or  indorser,  and  has  no  interest 
in  the  way  in  which  such  paper  or  the  proceeds  therefrom  are  to  be 
used,  it  will  be  no  defense  to  an  action  against  such  party  that  it  has 
been  diverted  from  the  precise  use  contemplated  where  the  purpose 
for  which  the  accommodation  was  given  has  been  substantially  ef- 
fected.^** So  where  one  accepted  a  bill  of  exchange  under  an  agreement 
that  it  should  be  used  to  raise  money  and  to  pay  an  indebtedness  to 
the  plaintiff,  and  instead  of  using  it  in  the  manner  designated  it  was 
transferred  to  the  plaintiff  in  payment  of  such  indebtedness  and  in 
consideration  of  further  advances  and  of  forbearance,  it  was  decided 

Tennessee. — Jordan  v.  Jordan,  10  v.  Armstrong,  39  N.  H.  583;    Cross 

Lea  (Tenn.)  124.  v.  Rowe,  22  N.  H.  77. 

Wisconsin. — Bowman  v.  Van   Ku-  Islew  Jersey. — Jackson  v.  Bank,  42 

ren,  29  Wis.  209.  N.   J.  L.   177;    Rogers  v.   Sipley,   35 

Federal. — Quebec    Bank    v.    Hell-  N.  J.  L.  86;  Duncan,  Sherman  &  Co. 

man,  110  U.  S.  178,  4  Sup.  Ct.  76.  v.  Gilbert,  29  N.  J.  L.  521. 

=»Boutelle    v.    Wheaton,    13    Pick.  New    York. — Hay    v.    Jaeckle,    90 

(Mass.)  499.  Hun    (N.   Y.)    114,   35   N.    Y.    Supp. 

=^Maitland  v.  Citizens'  Nat.  Bank,  650;   New  Central  Coal  Co.  v.  Cum- 

40  Md.  540,  17  Am.  Rep.  620.  ings,  66  Hun    (N.  Y.)    626,  21  N.  Y. 

""District  of  Columbia. — Leach  v.  Supp.  17;  Wheeler  v.  Allen,  59  How. 

Lewis,  1  MacArthur    (D.  C.)    112.  Prac.    (N.  Y.)    118;    Corbitt  v.   Mil- 

/ncZiana.— Fetters  v.  Bank,  34  Ind.  ler,  43  Barb.    (N.  Y.)    305;   Ward  ell 

251,  7  Am.  Rep.  225.  v.    Howell,    9    Wend.    (N.    Y.)    170; 

Maryland. — Maitland    v.    Citizens'  Bank  of  Rutland  v.  Buck,  5  Wend. 

National  Bank,  40  Md.  540,  17  Am.  (N.  Y.)  66. 

Rep.  620.  Texas. — First    National    Bank    v. 

Nebraska.— Morris   v.    Morton,   14  Wood,  8  Tex.  Civ.  App.  554,  28  S.  W. 

Neb.  358,  15  N.  W.  725.  384. 

New  Hampshire. — Trask   v.    Win-  Compare    Wisconsin. — Thomas    v. 

gate,  63  N.  H.  474,  3  Atl.  926;  Perry  Watkins,  16  Wis.  549. 


497  NEGOTIATION    OF   ACCOMMODATION    PAPER   NOT    CONTEMPLATE 

that  the  plaintiff  might  recover  thereon. ^^  And  where  a  note  was  in- 
dorsed to  be  "used"  only  at  a  certain  bank,  and  it  was  deposited  with 
such  bank  as  collateral  security  for  advances,  it  was  held  that  the  bank 
might  recover  on  the  instrument.^-  And  where  an  accommodation 
note  was  given  upon  the  understanding  that  it  was  to  be  deposited 
temporarily  as  collateral  for  a  loan,  to  be  made  to  the  payee,  and  the 
latter  instead  of  obtaining  a  new  loan  and  depositing  the  note  with  the 
lender  as  collateral,  deposited  it  with  a  bank  as  security  for  money 
which  he  already  owed  that  institution,  it  was  decided  that  such  use 
did  not  constitute  a  misappropriation,  though  it  was  not  the  precise 
use  contemplated,  since  the  substantial  purpose  for  which  the  note  was 
given  was  effected.^^  The  court  said :  "In  the  present  case  it  is  difficult 
to  see  how  the  defendant  has  been  injured  by  the  particular  use  that 
has  been  made  of  this  note.  It  was  given  for  the  general  purpose  of 
accommodating  the  payee,  and  the  particular  mode  in  which  it  was  to 
subserve  that  end  was  of  no  account  to  the  maker ;  whether  such  payee 
raised  the  money  upon  it,  which  was  the  use  indicated  at  the  time, 
and  with  that  money  paid  off  an  old  debt,  or,  without  the  security  of  a 
new  loan  applied  the  note  directly  to  the  satisfaction  or  security  of 
such  old  debt,  could  be  of  no  consequence  to, the  defendant.  He  lost  no 
right  by  such  a  diversion  of  the  paper,  nor  was  he  subjected  to  any 
additional  risk."^* 

§  387.  Negotiation  of  accommodation  paper  to  party  not  contem- 
plated.— Though  a  party  affixes  his  name  to  accommodation  paper 
with  an  understanding  that  it  is  to  be  negotiated  to  a  particular  party, 
it  will  be  no  defense  to  an  action  thereon  by  a  bona  fide  holder  that  it 
was  negotiated  to  another  party  than  the  one  contemplated.^^ 

=' Leach  V.  Lewis,  1  MacArthur  (D.  (Ky.)    13;    Whitaker  v.  Crutcher,  5 

C.)   112;   Corbitt  v.  Miller,  43  Barb.  Bush   (Ky.)    621. 

(N.  Y.)  305.  Mississippi. — Commercial  Bank  v. 

''^  Proctor  V.  Whitcomb,  137  Mass.  Claiborne,  5  How.   (Miss.)   301. 

303.  New     Hampshire. — Hunt     v.     Al- 

''  Jackson  v.  First  National  Bank,  drich,  27  N.  H.  31. 

42  N.  J.  L.  177.  New   Jersey. — Duncan   v.   Gilbert, 

**  Per  Beasley,  C.  J.  29  N.  J.  L.  521. 

^''Indiana. — Reed  v.  Trentman,  53  New  York. — Mitchell  v.  Oakley,  7 

Ind.  438.  Paige  (N.  Y.)  68;  Wardell  v.  Hughes, 

Kentucky.— Ward      v.      Northern  3  Wend.  (N.  Y.)  418. 

Bank  of  Kentucky,  14  B.  Mon.  (Ky.)  North    Carolina. — Parker    v.    Sut- 

351;    Browning  v.  Fountain,  1  Duv.  ton,  103   N.  C.  191,  9  S.  E.   283,  14 

Joyce    Defenses — 32 


§    388]  DIVERSION    AND    FKAUDULENT    TRANSFER.  498 

§  388.     Same  subject — Paper  to  be  discounted  at  a  particular  bank. 

The  fact  that  a  bill  or  note  was  to  be  discounted  at  a  particular  bank, 
but  was  negotiated  in  a  manner  other  than  was  intended,  will  be  no 
defense  to  an  action  thereon  by  one  who  is  a  bona  fide  holder.^®  So 
recovery  on  a  note  cannot  be  defeated  by  the  fact  that  it  was  discounted 
by  another  bank  or  party  than  the  one  contemplated,^^  nor  by  the  fact 
that  such  bank  did  not  discount  the  note  where  it  appears  that  money 
was  drawn  at  different  times  from  the  l^ank  on  the  credit  of  the  paper 
which  was  retained  as  collateral.^*  And  this  has  been  held  to  be  true  in 
the  case  of  one  who  purchases  such  a  note,  though  he  had  knowledge 
of  the  restriction  upon  its  negotiation  at  the  time  of  purchase.  So  it 
was  declared  in  a  case  where  this  question  was  raised :  "The  note  sued 
upon  was  plainly  a  negotiable  instrument,  and  might,  by  indorsement 
of  the  payee  thereof,  be  put  upon  the  market  and  bought  and  sold 
indefinitely.  The  original  parties  to  it  treated  it  as  'accommodation 
jjaper,'  and  the  facts  show  that  the  chief  and  material  part  of  their 
purpose  was  to  enable  the  maker  thereof  to  borrow  money  upon  it.  It 
was  expected  that  he  would  get  the  money  from  one  of  the  banks  in 
Fayetteville,  but  not  necessarily  from  a  bank  or  in  that  town.  If  it 
had  been  so  intended  some  particular  restriction  in  this  respect  would 
have  been  set  forth  in  or  about  the  note,  but  it  was  left  at  large — en- 
Am.  St.  R.  795;  Parker  v.  McDowell,  New  Jersey. — Duncan,  Sherman  & 
95  N.  C.  219,  59  Am.  Rep.  235.  Co.  v.  Gilbert,  29  N.  J.  L.  521. 

Vermont. — Bank  of  Newberry  v.  2^w  York. — Hay  v.  Jaeckle,  90 
Richards,  35  Vt.  281.  Hun  (N.  Y.)  114,  35  N.  Y.  Supp.  650. 

Virginia. — Robertson  v.  Williams,  North  Carolina. — Parker  v.  Mc- 
5  Munf.  (Va.)  381.  Dowell,  95   N.   C.   219,  59  Am.  Rep. 

'"'Thompson  v.  Armstrong,  5  Ala.  235;  Sutherland  v.  Whitaker,  50  N. 
383;  First  National  Bank  v.  Wood,  8  C.  5;  Dewey  v.  Cochran,  49  N.  C.  184. 
Tex.  Civ.  App.  554,  28  S.  W.  384.  Ohio.— Knox      County     Bank      V 

"  ETeniMcfct/.— Frank   v.    Quast,   86     Lloyd,  18  Ohio  St.  353. 
Ky.  649,  6  S.  W.  909;   Browning  v.         Vermont. — Briggs  v.  Boyd,  37  Vt. 
Fountain,  1  Duv.  (Ky.)  13.  534;    Bank  of   Middlebury  v.   Bing- 

Maine.—Dunn  v.   Weston,   71   Me.     ham,  33  Vt.  621. 
270,    36    Am.    Rep.    310;     Chase    v.         Compare  Rogge  v.  Cassidy,  10  Ky. 
Hathorn,  61  Me.  505;   Granite  Bank     Law  Rep.  396. 
V.  Ellis,  43  Me.  367.  '"  Proctor  v.  Whitcomb,  137  Mass. 

Missouri. — Mastin  Bank  v.  •  Ham-  303.  See  Piatt  v.  Beebe,  57  N.  Y.  339 
merslough,  72  Mo.  274.  holding    that    where    money    is    so 

Nebraska. — Morris  v.  Morton,  14  drawn  it  is  in  effect  a  discount  of 
Neb.  358,  15  N.  W.  725.  the  note  for  such  amount. 

New  Hampshire. — Elliott  v.  Abbot, 
12  N.  H.  549. 


499       PAPEE  TO  BE  DISCOUXTED  AT  PARTICULAR  BAXK.    [§  389 

tirely  without  such  restriction — to  be  sold  to  any  person  who  might 
buy  it.  If  a  bank  had  purchased  it  it  could  at  once  have  sold  it 
to  the  intestate  of  the  plaintiff  or  any  other  person  in  the  course  of 
business.  There  was  nothing  in  its  nature,  or  in  the  purpose  of  the 
parties  in  connection  with  it,  that  rendered  the  sale  of  it  to  a  bank 
necessary  or  at  all  material  to  its  sufficiency  or  efficiency  as  a  negotia- 
ble instrument;  nor  would  the  sale  of  it  to  a  bank  have  given  the 
payee,  who  indorsed  it,  any  material  legal  advantage.  There  was  no 
reason — certainly  none  appears — why  the  intestate  of  the  plaintiff 
should  not  have  bought  it  on  the  same  footing  as  a  bank  or  any  other 
person  might  have  done.  The  simple  fact  that  he  had  knowledge  of 
the  'understanding,'  that  the  money  was  to  be  obtained  from  a  bank 
in  the  town  mentioned,  did  not  render  it  in  any  sense  fraudulent  on  his 
part  to  buy  it."^** 

§  389.  Paper  to  be  discounted  at  particular  bank,  continued — Rule 
illustrated. — Where  a  note  which  was  payable  to  the  plaintiff  bank 
was  handed  to  the  president,  who  received  it  individually,  and  ad- 
vanced money  thereon  for  the  amount  of  the  note,  paying  therewith 
certain  claims  which  he  held  as  a  lawyer  against  the  principal,  and 
he  intended  to  discount  it  immediately,  but  forgot  to  do  so  until 
about  two  years  later,  when  he  discounted  it  with  the  bank,  it  was 
decided  that  the  bank  was  a  bona  fide  holder  and  that  the  delay  did  not 
vitiate  the  note.*"  So  if  a  note  be  made  and  signed  by  sureties  to 
enable  tlie  principal  to  raise  money  of  a  bank,  and  made  payable  to  a 
bank  or  order,  and  not  discounted,  yet  if  an  individual  advance  money 
upon  the  note  the  sureties  will  be  bound  to  the  holder  of  the  note  for 
its  payment.*^    Where,  however,  it  is  agreed  that  the  paper  shall  be 

^^  Parker  v.  Sutton,  103  N.  C.  191,  of  Kentucky,  to  whom  the  note  was 

193,  9  S.  E.  283,  14  Am.  St.  R.  795,  made  payable,  this  expectation  was 

per  Merrimon,  J.  founded  upon  the  idea  that  it  was 

*«  Farmers'  Bank  v.  Couch,  118  N.  the  proper  business  and  interest  of 

C.  436,  24  S.  E.  737.  the  bank  to  discount  notes  and  thus 

"Ward  v.  Northern  Bank  of  Ken-  employ  its  capital;   but  it  does  not 

tucky,  14  B.   Mon.    (Ky.)    351.    The  follow  that  because  it  was  expected 

court  said:    "The  main  purpose  for  or  designed  to  have  the  paper  dis- 

which  they  signed  the  note  was  to  counted  by  the  bank,  that  the  au- 

give  it  credit,  and  to  enable  John-  thority  to  the  principal  was  neces- 

son  to  realize  the  money  by  its  sale,  sarily  so   restricted  and  limited  as 

and,  although  the  defendants  doubt-  that  it  might  not  be  purchased,  and 

less  expected  that  the  money  would  the  money  paid  upon  it  by  any  in- 

be  procured  from  the  Northern  Bank  dividual  who  should  give  credit  to 


§  389] 


DIVERSION   AND   FRAUDULENT   TRANSFER. 


500 


returned  in  case  a  certain  bank  refuses  to  discount  the  same,  it  may 
be  shown,  in  an  action  thereon,  that  such  bank  refused  to  discount 
the  note  and  that  it  was  not  returned,  but  was  transferred  to  the 
plaintiff,  who  took  it  with  notice  of  the  condition  imposed.*^  And 
where  a  depositor  took  a  note  executed  by  himself  and  another  as 


the  paper  on  account  of  the  signa- 
tures to  it.  *  *  *  To  raise  money 
was  the  most  important  object,  and 
the  bank  was  named  as  the  payee 
because  it  was  supposed  the  money 
could  be  most  readily  and  speedily 
pi'ocured  from  that  quarter,  and  not 
because  it  could  be  considered  a  mat- 
ter of  controlling  importance  that 
the  bank  only  should  become  the 
creditor  in  the  transaction.  *  *  * 
The  defendants  cannot  escape  re- 
sponsibility upon  such  unsubstantial 
and  flimsy  pretext;  they  gave  it 
credit  by  signing  their  names  to  the 
paper,  and  put  it  in  Johnson's  pos- 
session to  raise  money  upon  it.  It 
was  intended  for  circulation,  as  is 
manifest  from  its  face,  being  nego- 
tiable and  payable  to  the  bank  or 
order.  It  was  within  the  knowledge 
of  the  defendants  that  the  note  was 
transferable  by  law,  and  that  it 
was  liable,  by  successive  assign- 
ment, to  pass  through  hundreds  of 
hands.  They  knew  that  by  making 
the  note  payable  to  the  bank  that 
they  had  not  and  could  not  have 
been  secured  thereby  against  subse- 
quent transfers  of  the  paper,  or 
have  prevented  other  persons,  as  as- 
signees, from  becoming  their  cred- 
itors."   Per  Hise,  C.  J. 

*"  Hickerson  v.  Raignel,  2  Heisk. 
(Tenn.)  329.  This  case  was  an  ac- 
tion to  enjoin  the  execution  of  a 
judgment  which  had  been  recovered 
by  default  against  the  indorser  who 
alleged  that  he  signed  it  on  the  con- 
dition stated.  The  court  said:  "The 
proof  shows  that  when  complainant 
indorsed  the  bill,  he  did  so  upon  the 


express  condition  that  if  the  Plant- 
ers' Bank  did  not  discount  the  bill 
on  that  day,  his  liability  as  indorser 
was  to  cease,  and  the  bill  was  either 
to  be  returned  or  destroyed.  It  is 
wholly  immaterial  whether  com- 
plainant knew  the  use  which  Sheid 
proposed  to  make  of  the  money,  or 
not.  He  was  indorsing  without  con- 
sideration, and  for  the  accommoda- 
tion of  Sheid,  and  had  the  right  to 
annex  such  terms  and  conditions  to 
his  liability  as  he  saw  proper.  Per- 
kins V.  Anent,  2  Head  110;  Bank  of 
Tennessee  v.  Johnson,  1  Swan  217. 
It  is  clear  that  when  the  Planters' 
Bank  refused  to  discount  the  bill, 
and  the  day  had  expired,  during 
which  it  was  to  be  presented,  the 
liability  of  the  complainant  was  ter- 
minated. The  only  liability  which 
could  then  be  created  must  have 
arisen,  from  the  transfer  of  the  bill, 
in  the  due  course  of  trade,  to  some 
innocent  purchaser,  for  value.  But 
the  proof  shows  that  when  Sheid 
offered  to  transfer  the  bill  to  Clem- 
ments,  *  *  *  he  informed  him  of 
the  terms  and  conditions  which  com- 
plainant had  annexed  to  his  indorse- 
ment. It  follows  that  Clemments 
took  the  bill  with  full  notice  that 
Sheid  had  no  authority  to  use  it  for 
any  purpose  and  in  any  way.  As 
Clemments  was  acting  as  the  agent 
of  Raignel  &  Co.,  they  would  be  af- 
fected with  the  notice  which  their 
agent  had."  Per  Nicholson,  C.  J.  See 
Adams  Bank  v.  Jones,  16  Pick. 
(Mass.)  574;  Williams  v.  Bosson,  11 
Ohio  62. 


J 


501  TRANSFERRED   AS    SECURITY    FOR   ANTECEDENT   DEBT.      [§    390 

surety  to  a  bank  to  be  discounted  and  the  bank  refused,  wliereupon 
the  maker  left  it  in  his  private  pocketbook  in  the  bank  vault,  and,  on 
his  insolvency,  the  cashier,  without  the  former's  knowledge,  took  it  out 
and  discounted  it  and  credited  the  proceeds  to  his  account  against 
an  overdraft  at  the  bank  by  him,  it  was  held  that  the  surety  was  re- 
leased.*^ Again,  where  a  note  was  to  be  discounted  at  a  particular 
bank  to  take  up  a  matured  note  by  the  same  maker  to  the  same 
payee,  and  the  latter  instead  of  using  it  in  the  manner  agreed  re- 
tained possession  of  it,  there  was  held  to  be  a  diversion  of  the  paper 
which  would  defeat  an  action  by  him.** 

§  390.  Where  transferred  or  applied  as  security  for  an  antecedent 
debt. — The  question  as  to  the  rights  and  liabilities  of  the  parties  where 
paper  has  been  transferred  as  security  for  an  antecedent  debt  has  been 
the  subject  of  much  discussion.*^  The  question  has  frequently  arisen 
where  a  note  is  made  or  indorsed  merely  for  accommodation  without 
any  restriction  as  to  its  use  and  is  so  transferred.  In  such  cases  it  is  a 
general  rule  that  the  one  to  whom  it  is  transferred  may  recover 
thereon.*^    And  where  paper  is  entrusted  or  delivered  to  one  for  a 


*^St.  Louis  National  Banlt  v.  Flan- 
agan, 129  Mo.  178,  31  S.  W.  773. 

"  Armstrong  v.  Cook,  30  Ind.  22. 

*=See  §§  246-249,  353-355  herein, 
where  this  question  is  considered. 

"Upon  the  question  of  the  rights 
of  holders  of  negotiable  paper  taken 
in  due  course  before  maturity  as  col- 
lateral security  for  a  pre-existing 
debt,  there  is  a  radical  conflict  of 
authority.  The  courts  sustaining  the 
right  of  the  holders  to  recover  in 
such  cases  as  against  equities  or  de- 
fenses in  favor  of  the  holders,  do  so, 
generally,  upon  the  ground  that,  by 
becoming  holders  of  such  negotiable 
paper  through  indorsement,  they  be- 
come parties  to  it,  and  as  such  as- 
sume obligations  in  reference  to  the 
enforcement  of  the  same.  *  *  * 
Those  courts  denying  the  rights  of 
such  holders  to  recover  as  against 
defenses  in  favor  of  the  makers  do 
so  upon  the  ground  that  the  holders 
parted  with  nothing  in  the  nature 


of  a  new  consideration  when  they 
acquired  such  note  or  other  negoti- 
able paper;  that  merely  accepting 
the  note  as  collateral  security  for  a 
pre-existing  debt,  without  any  agree- 
ment for  extension  of  time  or  for- 
bearance of  some  kind,  and  without 
making  any  new  promise,  so  far  as 
the  original  debt  is  concerned,  or 
any  new  obligation,  is  not  receiving 
the  collateral  for  anything  of  value, 
within  the  meaning  of  that  term  as 
laid  down  in  the  statute  or  the  law 
merchant."  Porter  v.  Andrus,  10  N. 
D.  558,  562,  88  N.  W.  567,  per  Mor- 
gan, J. 

*"  Georgia. — Davis  v.  Bank,  60  Ga. 
651. 

Indiana. — Fetters  v.  Bank,  34  Ind. 
251,  7  Am.  Rep.  225. 

Maryland. — Maitland  v.  Citizens' 
National  Bank,  40  Md.  540,  17  Am. 
Rep.  620. 

Neio  York. — Farmers'  &  Citizens' 


390] 


DIVERSION   AND   FRAUDULENT   TRANSFER. 


502 


specified  purpose  or  use  and  is  not  used  in  the  manner  designated, 
but  is,  instead,  transferred  to  a  creditor  of  the  holder  as  security  for 
an  antecedent  debt,  the  weight  of  authority  supports  the  rule  that 
one  who  takes  the  paper  under  such  circumstances,  before  maturity 
and  without  notice  of  the  particular  iise  contemplated  will  be  regarded 


Bank  v.  Nixon,  45  N.  Y.  762;  Grand- 
in  V.  Le  Roy,  2  Paige  (N.  Y.)  509. 

Tennessee. — Kimbro  v.  Little,  10 
Yerg.  (Tenn.)  417,  31  Am.  Dec.  585. 

Vermont. — Bank  of  Montpelier  v. 
Joyner,  33  Vt.  481. 

England. — Collins  v.  Martin,  1 
Bos.  &  P.  648. 

In  a  recent  case  where  it  appeared 
that  notes  were  given  by  the  defend- 
ant to  a  company  for  its  accommo- 
dation and  were  indorsed  by  the  lat- 
ter as  collateral  security  for  its  in- 
debtedness to  the  plaintiff  under  a 
contract  between  them  the  court 
said:  "We  do  not  doubt  that  if  the 
jury  believed  the  testimony  put  in 
at  the  trial  they  would  have  been 
required  to  find  a  verdict  for  the 
plaintiff.  The  fact  that  the  plain- 
tiff held  other  security  from  the 
Quimby  Company  would  not  pre- 
vent it  from  enforcing  this  secur- 
ity for  its  protection.  Creditors 
have  a  right  to  hold  and  enforce 
all  their  security  until  they  shall 
have  been  paid  in  full.  New  Bed- 
ford Savings  Bank  v.  Union  Mill 
Co.,  128  Mass.  27;  Lincoln  v.  Bassett, 
23  Pick.  (Mass.)  154;  Lee  v.  Butler, 
167  Mass.  427,  46  N.  E.  52,  57  Am.  St. 
R.  466;  Allen  v.  Woodard,  125  Mass. 
400,  28  Am.  Rep.  250;  Crocker  v.  Gil- 
bert, 9  Cush.  (Mass.)  131;  Commer- 
cial Bank  v.  Clarke,  180  Mass.  249, 
62  N.  E.  670.  But  while  this  is  so, 
it  yet  remains  true  that  this  is  a 
question  of  consideration  and  must 
be  passed  upon  by  the  jury.  The  bur- 
den was  on  the  plaintiff  to  show 
that  it  was  a  holder  for  value."  Mer- 
cantile    Guaranty     Co.     v.     Hilton 


(Mass.  1906),  77  N.  E.  312,  per  Shel- 
don, J. 

There  are,  however,  several  de- 
cisions which  sustain  the  proposi- 
tion that  where  a  restriction  is  im- 
posed upon  the  use  to  be  made  of  a 
bill  or  note  the  one  who  takes  such 
paper  as  security  for  a  pre-existing 
debt  is  not  a  bona  fide  holder. 
United  States  Nat.  Bank  v.  Ewing, 
131  N.  Y.  506,  30  N.  E.  501,  27  Am. 
St.  R.  615;  Grocers'  Bank  v.  Pen- 
field,  69  N.  Y.  502,  25  Am.  R.  231; 
New  York  National  Bank  v.  Coyden- 
dall,  58  Hun  (N.  Y.)  205,  12  N.  Y. 
Supp.  334;  Ayers  v.  Doying,  42  Hun 
(N.  Y.)  630;  Duncan  v.  Gosche,  8 
Bosw.  (N.  Y.)  243,  21  How.  Prac. 
344;  Tinsdale  v.  Murray,  9  Daly  (N. 
Y.)  449;  Union  Trust  Co.  v.  McClel- 
lan,  40  W.  Va.  405,  21  S.  E.  1025. 

In  North  Dakota  it  has  been  de- 
cided that  one  who  takes  a  note  with 
a  written  guaranty  of  payment  in- 
dorsed thereon  by  the  payee  as  col- 
lateral security  for  the  payment  of 
a  pre-existing  debt  is  not  a  holder  in 
due  course  within  the  meaning  of 
the  §  4884,  of  the  Rev.  Codes,  which 
defines  an  indorsee  in  due  course  as 
"one  who  in  good  faith,  in  the  ordi- 
nary course  of  business  and  for 
value  before  its  apparent  maturity 
or  presumptive  dishonor  and  with- 
out knowledge  of  its  actual  dishonor, 
acquires  a  negotiable  instrument 
duly  indorsed  to  him  or  indorsed 
generally,  or  payable  to  the  bearer 
or  one  other  than  the  payee  who  ac- 
quires such  an  instrument  of  such 
indorsee  thereof."  Porter  v.  Andrus, 
10  N.  D.  558,  88  N.  W.  567. 


503  TRANSFERRED   AS    SECURITY   FOR   AXTECEDEXT   DEBT.      [§    391" 

as  a  holder  for  value,  and  the  fact  that  it  has  been  so  used  will  he  no 
defense  to  an  action  thereon  by  him.*^ 

§  391.  ■  Same  subject  continued. — This  question  as  to  the  right  of  a 
holder  of  negotiable  paper,  indorsed  to  him  as  security  for  an  antece- 
dent debt,  to  recover  thereon  is  considered  at  length  by  the  United 
.States  Supreme  Court,'*'^  which  says:  "Our  conclusion,  therefore,  is, 
that  the  transfer,  before  maturity,  of  negotiable  paper  as  security  for 
an  antecedent  debt  merely,  without  other  circumstances,  if  the  paper 
be  so  indorsed  that  the  holder  becomes  a  party  to  the  instrument,  al- 
though the  transfer  is  without  express  agreement  by  the  creditor  for 
indulgence,  is  not  an  improper  use  of  such  paper  and  is  as  much  in 
the  usual  course  of  such  commercial  business  as  its  transfer  in  pay- 
ment of  such  debt.  In  either  case  the  hona  fide  holder  is  unaffected  by 
equities  or  defenses  between  prior  parties  of  which  he  had  no  notice. 
This  conclusion  is  abundantly  sustained  by  authority.  A  different  de- 
termination by  this  court  would,  we  apprehend,  greatly  surprise  both 
the  legal  profession  and  the  commercial  world."  So  where  a  note 
indorsed  in  blank  was  delivered  to  a  person  for  discount  such  fact 
was  held  to  be  no  defense  to  an  action  by  one  to  whom  it  was 
transferred  as  payment  for  an  antecedent  debt,  the  latter  having 
no  knowledge  of  the  restriction.^^  And  thus  it  has  been  held  no 
defense  to  an  action  by  one  who  took  paper  as  security  for  an  an- 
tecedent debt  that  it  was  given  for  the  purpose  of  having  it  discounted 

"  Illinois. — Morris   v.    Preston,    93  "  Burch  v.  Scribner,  11  Conn.  388, 

111.  215.  29  Am.  Dec.  303. 

Iowa. — Tomblin  v.  Callen,  69  Iowa  See   Mechanics'   Bank  v.   Charda- 

229,  28  N.  W.  573.  voyne,  69  N.  J.  L.  256,  where  it  is 

Kansas. — National  Bank  of  St.  Jo-  said  that  "one  who  indorses  a  prom- 

seph  v.  Dakin,  54  Kans.  656,  39  Pac.  issory  note  in  blank  and  entrusts  it 

180,  45  Am.  St.  R.  299.  to  another  to  fill  it  up  and  have  it 

New      Hampshire. — Clement       v.  discounted  for  his  (the  indorser's) 

Leverett,  12  N.  H.  317.  benefit,  is  liable  upon  it  to  a  bona 

Ohio. — First     National     Bank     v.  fide  holder  for  value,  who  receives  it 

Fowler,  36  Ohio  St.  524,  38  Am.  Rep.  before  maturity,  in  the  usual  course 

610.  of    business,    from    the    person    to 

Pennsylvania. — Bardsley   v.    Delp,  whom    it    was    entrusted,    notwith- 

88  Pa.  St.  420.  standing  that  the  latter  has  filled  it 

^'  Brooklyn  City  &  Newtown  R.  R.  up  for  and  fraudulently  converted  it 

Co.  V.  National  Bank  of  the  Repub-  to  a  purpose  entirely  different  from 

lie,  102  U.  S.  14,  26  L.  Ed.  61,  per  that  for  which  he  was  authorized  to 

Mr.  Justice  Harlan.  use  it."   Per  Gummere,  C.  J. 


§  391] 


DIVERSION    AND    FRAUDULENT    TRANSFER. 


504 


at  a  particular  bank  and  that  it  was  transferred  to  the  holder  in  vio- 
lation of  such  purpose,  where  the  holder  took  it  in  good  faith  and 
without  knowledge  of  the  restriction.^'*  And  in  a  recent  ease  in  New 
York  it  was  decided  that  one  who  takes  an  accommodation  note  as  se- 
curity for  an  antecedent  debt  is,  under  the  Negotiable  Instruments 
Law,  to  be  regarded  as  a  holder  for  value.^^  So  where  the  maker  of  a 
note  delivers  it  to  the  payee,  to  be  used  by  the  latter  as  collateral  for  a 
particular  indebtedness,  and  instead  of  using  it  as  designated  the  payee 


™  Evans  v.  Hardware  Co.,  65  Ark. 
204,  45  S.  W.  370;  Dawson  v.  Good- 
year, 43  Conn.  548;  Duncan  v.  Gil- 
bert, 29  N.  J.  L.  521;  Wheeler  v. 
Allen,  59  How.  Pr.  (N.  Y.)  118;  Mc- 
Guire  v.  Sinclair,  47  How.  Pr.  (N. 
Y.)  360. 

But  see  Smith  v.  Willing  (Wis. 
1904),  101  N.  W.  692,  wherein  it  is 
held  that,  where  a  note  was  given 
by  a  father  to  a  son,  who  was  presi- 
dent of  a  corporation,  to  be  dis- 
counted at  a  particular  bank  for  a 
specified  purpose,  namely  to  buy  out 
the  interest  of  his  partner  with 
whom  he  was  associated  as  a  cor- 
poration, such  fact  might  be  shown 
as  a  defense  to  an  action  to  enforce 
the  note  as  security  for  antecedent 
debts  of  such  corporation  after  it  be- 
came insolvent.  (Two  judges  dis- 
senting.) 

"  Milius  v.  Kauffman,  104  App. 
Div.  (N.  Y.)  442,  93  N.  Y.  Supp.  669; 
see  Neg.  Inst.  Law,  §  51,  Laws  of 
1897,  chap.  612.  In  this  case  it  ap- 
peared that  one  Manheim  had  given 
his  notes  to  Kauffman  as  an  accom- 
modation for  both  parties.  There 
was  a  written  agreement  which  re- 
cited the  giving  of  the  notes  and 
stated  that  they  were  given  under 
the  condition  that  the  said  Kauff- 
man should  discount  them  and  pay 
to  Manheim  forty  per  cent,  of  the 
proceeds,  the  balance  of  sixty  per 
cent,  to  be  retained  by  Kauffman, 
who  was  to  give  his  own  therefor  to 


Manheim.    The  agreement  also  pro- 
vided that  each  party  was  then  to 
take  prompt  care  of  his  own  notes 
at  maturity.    In  an   action  by  one 
to  whom  one  of  the  notes  had  been 
indorsed,  against  Kauffman,  the  lat- 
ter  contended   that  the   note   could 
not  have  been  enforced  by  Manheim 
as  he  had  defaulted  in  the  payment 
of   his  note  given  in  pursuance  of 
the  agreement,  and  that  as  the  plain- 
tiff had  taken  the  note  as  security 
for  an  antecedent  debt  he  was  not  a 
J)ona  fide  holder  and  that  the  note 
in  his  hands  was  subject  to  any  de- 
fense that  existed  against  its  collec- 
tion by  Manheim.    The  court  said: 
"The  note  not  having  been  diverted, 
but  being  unrestricted  as  to  its  use, 
would   not   be   subject  in   plaintiff's 
hands  to  the  defense  of  want  or  fail- 
ure of  consideration,  or  that  Man- 
heim had  subsequently  failed  to  per- 
form   his   obligation   of   paying  his 
own  note,  and  the  plaintiff  having 
taken  it  as  security  for  an  antece- 
dent debt  is  regarded  as  a  holder  for 
value."   Per  Laughlin,  J.,  citing  Neg. 
Inst.  Law  [Laws  1897,  ch.  612],  §  51; 
First  Nat.  Bank  v.  Wood,  128  N.  Y. 
35;   McSpedon  v.  Troy  City  Bank,  2 
Keyes    (N.   Y.)    35;    Grandin  v.   Le 
Roy,  2  Paige  (N.  Y.)  509;  Tinsdale 
V.  Murray,  9  Daly  (N.  Y.)  446;  Fur- 
niss  V.   Gilchrist,  1  Sandf.    (N.  Y.) 
53;    Grocers'    Bank    v.    Penfield,    69 
N.  Y.  502;  Continental  Nat.  Bank  v. 
Townsend,  87  N.  Y.  8. 


505.  DIVERSION    OF    PROCEEDS    OF    PAPER.  [§    392 

transfers  it  as  collateral  for  another  indebtedness,  it  has  been  decided 
that  the  indorsee,  if  he  takes  it  without  notice  or  knowledge  of  such 
restrictions,  may  recover  thereon.^-  But  where  a  bill  is  indorsed  for 
discount  it  has  been  decided  that  the  indorsee  cannot  misappropriate  it 
as  collateral  for  a  debt  due  to  him  and  recover  thereon  against  the 
acceptor.^^ 

§  392.  Diversion  of  proceeds  of  paper. — In  an  action  by  a  bona  fide 
purchaser  of  commercial  paper  against  a  maker,  drawer  or  indorser 
thereof,  it  will  be  no  defense  that  the  proceeds  therefrom  were  to  be 
applied  to  a  particular  purpose  by  the  one  negotiating  it  and  that  they 
have  not  been  applied  in  the  manner  contemplated,  but  have  been  di- 
verted to  another  and  different  purpose.^*  So  in  an  action  against  the 
maker  of  a  note  it  is  no  defense  that  the  agent  of  the  maker,  who  nego- 
tiated the  note,  was  to  use  tlie  proceeds  in  purchasing  United  States 
bonds  to  be  used  in  organizing  a  bank  in  which  the  defendant  was  inter- 
ested and  that  they  were  not  so  applied.^ ^  And  an  accommodation 
maker  cannot  defeat  recover  by  a  bona  fide  holder  by  showing  that  the 
proceeds  were  diverted  by  his  co-maker  from  the  purpose  intended. ^^ 
And  where  a  bank  advanced  money  in  good  faith  on  corporate  notes 
without  any  knowledge  or  reason  to  believe  that  the  proceeds  would 
be  used  by  an  officer  of  the  corporation  for  other  than  the  legitimate 
purposes  of  the  maker,  it  was  decided  that  in  an  action  by  the  bank 
on  such  notes  the  corporation  could  not  defeat  a  recovery  on  the 
ground  that  the  proceeds  had  in  fact  been  used  in  an  improper  man- 
ner.^^    Again,  where  a  bank  discounted  an  accommodation  bill  of  ex- 

'*=Maitland    v.    Citizens'    Bank,    40  Hey,  23  Hun   (N.  Y.)   372;   Mohawk 

Md.  540,  17  Am.  Rep.  620.  Bank  v.  Corey,  1  Hill  (N.  Y.)  513. 

"Delauney  v.  Mitchell,  1   Starkie        Pennsylvania. — Garden    City    Na- 

439.  tional    Bank   v.    Fitler,    155    Pa.    St. 

"  AZa&ama.— Clapp  v.  Mock,  8  Ala.  210,  26  Atl.  372;  Lingg  v.  Blummer, 

122.  88  Pa.  St.  518. 

Illinois. — Mclntire    v.    Yates,    104         Yirginia. — Clifton  Forge  v.  Bank, 

111.  491.  92  Va.  283,  23  S.  E.  284. 

Kentucky. — Moreland    v.    Citizens'         Federal. — Germania    Bank    v.    La 

Savings  Bank,  97  Ky.  211,  30  S.  W.  Follette,  72  Fed.  145. 
637;  Olds  Wagon  Works  v.  Bank  of        '^^  Arman  v.   First  National  Bank, 

Louisville,  10  Ky.  Law  Rep.  235.  36  Fla.  398,  18  So.  786. 

Massachusetts. — Wood  v.  Boylston        '^'' Evans    v.    Speer   Hardware    Co., 

National    Bank,    129    Mass.    358,    37  65  Ark.  204,  45  S.  W.  370. 
Am.  Rep.  366.  "Reagan  v.  First  National  Bank, 

New  Yorfc.— Parker  v.  McLean,  134  157  Ind.  623,  62  N.  E.  701. 
N.  Y.   255,   32   N.   E.   78;    Brooks  v. 


§    393]  DIVEKSIOX    AND   FRAUDULENT   TRANSFER.  506 

change  and  the  payee  was  induced  by  its  cashier,  who  knew  of  the  use 
contemplated  by  the  accommodation  maker,  to  apply  the  proceeds  in 
payment  of  an  insurance  premium  to  a  company  in  which  the  cashier 
was  interested  as  agent,  it  was  held  that  the  bank  might  recover 
thereon,  as  it  was  a  bona  fide  holder,  not  being  affected  by  the  act  of 
its  officer,  whose  agency  for  the  bank  ceased  when  the  bill  of  exchange 
was  purchased  by  it.^^  But  where  several  notes  are  executed  to  a  bank 
by  the  same  party,  and  there  is  an  agreement  that  upon  the  sale  of 
collateral  held  by  the  payee,  the  proceeds  are  to  be  applied  to  a  certain 
note  upon  which  a  person's  name  appears  as  surety,  such  person  has 
the  right  to  have  the  proceeds  applied  according  to  the  agreement,  and 
in  an  action  against  him  it  may  be  shown  that  they  were  not  so  ap- 
plied.^» 

§  393.  Effect  of  waiver. — Where  a  note  is  given  for  the  accommo- 
dation of  another,  to  be  used  in  a  particular  manner,  the  defense  that 
it  was  not  used  in  the  manner  contemplated  may  be  expressly  waived 
by  the  maker  or  indorser,  or  such  a  party  may  be  estopped  by  his  acts 
and  conduct,  after  knowledge  of  the  use  of  the  paper,  from  insisting 
upon  such  defense.^" 

^'  Moreland    v.    Citizens'    Savings  makes  no  great  difference.    Still  we 

Bank,  97  Ky.  211.  30  S.  W.  637.  think  he   had  the   right  to  have  it 

^^  Brown  v.  First  National  Bank,  applied  according  to  the  agreement. 
112  Fed.  901,  50  C.  C.  A.  602.  The  But  especially  as  to  the  other  de- 
court  said:  "The  proceeds  of  the  fendants  who  signed  as  surety  to 
judgment  should  have  been  applied  Brown,  they  had  the  right  beyond 
according  to  the  agreement  of  the  all  question  to  have  the  money  ap- 
parties,  and  not  otherwise.  It  is  plied  upon  the  note  in  suit,  if  that 
true  it  was  applied  upon  another  was  the  agreement."  Per  Bunn,  D.  J. 
note  of  Brown  which  the  bank  held,  ""^  Mastin  Bank  v.  Hammerslough, 
and  so  far  as  he  was  concerned  it  72  Mo.  274. 


i 


CHAPTER  XVII. 


LOST    OR   STOLEN    INSTRUMENTS. 


Sec.  Sec. 

394.  Lost    or    stolen    instruments —     398. 

General  rules  and  principles.       399. 

395.  Same     subject — Application     of 

rule.  400. 

396.  Statutory  provision  as  to  holder 

in  due  course  construed.  401. 

397.  Non-negotiable  paper. 


Bank  and  treasury  notes. 

City    or    county    certificates — 

Stolen  after  cancellation. 
Action  under  statute  by  owner 

of  lost  instruments. 
Evidence — Burden  of  proof. 


§  394.     Lost  or  stolen  instruments — General  rules  and  principles. 

— Though  it  was  a  rule  established  by  the  early  common,  law  that  one 
could  not,  except  by  a  sale  in  market  overt,  give  a  better  title  to  per- 
sonal property  than  he  had  himself,  an  exception  has  generally  been  rec- 
ognized in  the  case  of  securities  transferrable  by  delivery.^   In  the  case 


^Murray  v.  Lardner,  2  Wall.  (U. 
S.)  110,  118,  wherein  it  is  said:  "The 
general  rule  of  the  common  law  is, 
that,  except  by  a  sale  in  market 
overt,  no  one  can  give  a  better  title 
to  personal  property  than  he  has 
himself.  The  exemption  from  this 
principle  of  securities,  transferable 
by  delivery,  was  established  at  an 
early  period.  It  is  founded  upon 
principles  of  commercial  policy,  and 
is  now  as  firmly  fixed  as  the  rule  to 
which  it  is  an  exception.  It  was  ap- 
plied by  Lord  Holt  to  a  bank  bill  in 
Anon,  1st  Salkeld,  126.  This  is  the 
earliest  reported  case  upon  the  sub- 
ject. He  held  that  the  action  must 
fail  'by  reason  of  the  course  of 
trade,  which  creates  a  property  in 
the  assignee  or  bearer.'  The  leading 
case  upon  the  subject  is  Miller  v. 
Race,  1  Burrow  452,  decided  by  Lord 


Mansfield.  The  question  in  that  case 
also  related  to  a  bank  note.  The 
right  of  a  bona  fide  holder  for  a  valu- 
able consideration  was  held  to  be 
paramount  against  the  loser.  He 
put  the  decision  upon  the  grounds 
of  the  course  of  business,  the  inter- 
ests of  trade,  and  especially  that 
bank  notes  pass  from  hand  to  hand, 
in  all  respects,  like  coin.  The  same 
principle  was  applied  by  that  dis- 
tinguished judge  in  Grant  v. 
Vaughan,  3  Burrow  1516,  to  a  mer- 
chant's draft  upon  his  banker.  He 
there  said:  In  'Miller  v.  Race,  31st 
Geo.  II,  B.  R.,  the  holder  of  a  bank 
note  recovered  against  the  cashier 
of  a  bank,  though  the  mail  had  been 
robbed  of  it,  and  payment  had  been 
stopped,  it  appearing  that  he  came 
by  it  fairly  and  bona  fide,  and  upon 
a  valuable  consideration,  and  there 


507 


394] 


LOST   OR    STOLEN    INSTRUMENTS. 


508 


of  negotiable  paper  of  such  a  character,  as  where  it  is  indorsed  in  blank 
or  payable  to  bearer,  one  who  has  taken  it  in  the  usual  course  of  business 
and  occupies  the  position  of  a  bona  fide  holder,  is  not  subject  to  the 
defense  that  it  has  been  lost  or  stolen,  nor,  where  he  has  collected  the 
amount  due  thereon,  can  the  owner  recover  such  amount  from  him.^ 
"The  law  in  regard  to  bills  of  exchange  and  promissory  notes  is  so 
framed  as  to  give  confidence  and  security  to  those  who  receive  them, 
for  valuable  consideration,  in  the  ordinary  course  of  business,  when 
payable  to  bearer  or  indorsed  in  blank  so  as  to  be  transferable  by 
delivery;  and  in  general  a  jjarty  taking  such  a  bill  under  such  cir- 
cumstances has  only  to  look  to  the  credit  of  the  parties  to  itj  and  the ' 
regularity  and  genuineness  of  the  signatures  and  indorsements.    So 


is  no  distinction  between  a  bank 
note  and  such  a  note  as  this.'  In 
Peacock  v.  Rhodes,  2  Douglas  633, 
he  said:  'The  law  is  settled  that  a 
holder  coming  fairly  by  a  bill  or 
note  has  nothing  to  do  with  the 
transaction  between  the  original  par- 
ties, unless,  perhaps,  in  the  single 
case,  which  is  a  hard  one,  but  has 
been  determined,  of  a  note  for 
money  won  at  play.'  The  question 
has  since  been  considered  no  longer 
an  open  one  in  the  English  law,  as 
to  any  class  of  securities  within  the 
category  mentioned."  Per  Mr.  Jus- 
tice Swayne. 

-  Illinois. — Mann  v.  Merchants' 
Loan  &  T.  Co.,  100  111.  App.  224. 

Louisiana. — Consolidated  Associa- 
tion of  Planters  v.  Avegno,  23  La. 
Ann.  552. 

Massachusetts. — Wheeler  v.  Guild, 
20  Pick.  (Mass.)  545,  32  Am.  Dec. 
231. 

New  York. — Seybel  v.  National 
Currency  Bank,  54  N.  Y.  288,  13  Am. 
Rep.  283;  Nolan  v.  Bank  of  New 
York,  67  Barb.  (N.  Y.)  24. 

Pennsylvania. — Kuhns  v.  Gettys- 
burg National  Bank,  68  Pa.  St.  445. 

Tennessee. — Whiteside  v.  First  Na- 
tional Bank  (Tenn.  Ch.  App.  1898), 
47  S.  W.  1108. 


Texas. — Greneaux  v.  Wheeler,  6 
Tex.  515;  First  National  Bank  v. 
Beck,  2  Tex.  App.  Civ.  Cas.,  §  832. 

English. — Peacock  v.  Rhodes,  2 
Doug.  611.  See  Garvin  v.  Wiswell, 
83  111.  215;  Merriam  v.  Granite  Bank, 
8  Gray  (Mass.)  254;  Franklin  Sav. 
Inst.  V.  Heinsman,  1  Mo.  App.  336; 
Morris  Canal  &  Banking  Co.  v. 
Fisher,  9  N.  J.  Eq.  667;  Miller  v. 
Race,  1  Burrows  452. 

Effect  of  blank  indorsement.  One 
of  the  consequences  resulting  from 
the  power  to  pass  a  bill  or  note  with 
a  blank  indorsement  by  mei-e  deliv- 
ery is  "that  if  such  a  bill  or  note  be 
lost  or  stolen  or  fraudulently  mis- 
applied any  person  who  may  become 
the  holder  of  it  in  good  faith  for 
value  and  without  notice,  is  entitled 
to  recover  the  amount  thereof  and 
hold  the  same  against  the  rights  of 
the  true  owner  at  the  time  of  the 
loss  or  theft,"  per  Stites,  J.,  in  Ca- 
ruth  V.  Thompson,  16  B.  Mon.  (Ky.) 
572,  63  Am.  Dec.  559. 

In  the  case  of  an  assigned  note 
whether  it  is  indorsed  by  the  owner 
or  not  it  has  been  held  that  he  may 
recover  it  even  of  a  purchaser  in 
good  faith.  Prather  v.  Weissiger,  10 
Bush   (Ky.)   117. 


509  APPLICATIOX  OF  RULES.  [§  395 

that  if  such  a  bill  or  note  he  made  without  consideration,  or  be  lost  or 
stolen,  and  afterwards  be  negotiated  to  one  haying  no  knowledge  of 
these  facts  for  a  valuable  consideration  and  in  the  usual  course  of 
business,  his  title  is  good  and  he  shall  be  entitled  to  receive  the 
amount."^  And  in  this  connection  it  was  said  in  a  case  in  the  United 
States  Supreme  Court,  in  which  this  question  arose  in  an  action  on 
bonds  payable  to  bearer :  "We  are  well  aware  of  the  principle  involved 
in  this  inquiry.  These  securities  are  found  in  the  channels  of  commerce 
everywhere,  and  their  volume  is  constantly  increasing.  They  represent 
a  large  part  of  the  wealth  of  the  commercial  world.  The  interest 
of  the  community  at  large  in  the  subject  is  deep  rooted  and  wide 
branching.  It  ramifies  in  every  direction,  and  its  fruits  enter  daily 
into  the  affairs  of  persons  in  all  conditions  of  life.  While  courts  should 
be  careful  not  so  to  shape  or  apply  the  rule  as  to  invite  aggression  or 
give  an  easy  triumph  to  fraud,  they  should  not  forget  the  considerations 
of  equal  importance  which  lie  in  the  other  direction."*  And  where 
bonds  payable  to  bearer  are  offered  to  one  for  purchase  he  is  held  to 
be  under  no  obligation  to  make  any  inquiry  of  the  persons  offering 
them  as  to  their  right  or  title  thereto  or  to  take  any  special  precau- 
tionary measures  in  the  purchase  of  such  securities  by  which  the  in- 
terest of  other  parties  would  be  protected.^  And  it  has  also  been  de- 
cided that  one  is  not  deprived  of  his  character  as  a  bona  fide  holder 
of  such  bonds  by  an  omission  on  his  part  to  examine  and  regard  notices 
of  their  theft  which  have  been  left  at  his  place  of  business,  in  the  ab- 
sence of  actual  knowledge  or  notice  of  the  fact  that  they  have  been 
lost  or  stolen.®  A  bona  fide  holder  does  not,  however,  acquire  such  an 
absolute  property  in  negotiable  paper  which  has  been  stolen  that  he 
can  transmit  it  to  a  purchaser,  who  takes  it  with  knowledge  of  the  fact 
that  it  has  been  stolen. '^  And  where  such  paper  has  never  taken  effect 
as  a  binding  obligation  on  account  of  a  want  of  delivery,  the  fact  that 
it  was  stolen  may  be  a  good  defense  to  an  action  thereon.^ 

§  395.     Same  subject — Application  of  rule. — In  the  application  of 
the  general  rule  it  is  decided  that  recovery  by  a  bona  fide  holder  cf  a 

'Wheeler  V.  Guild,  20  Pick. (Mass.)  "  Seybel  v.  National  Currency  Bk., 

545,  551,  32  Am.  Dec.  231.  54  N.  Y.  288,  13  Am.  Rep.  583. 

*  Murray  v.   Lardner,  2  Wall.    (U.  '' Olmstead    v.    Winsted    Bank,    32 

S.)  110,  122.  Per  Mr.  Justice  Swayne.  Conn.  278,  85  Am.  Dec.  260. 

^  Seybel  v.  National  Currency  Bk.,  ^  Salley  v.  Terrill,  95  Me.  553,  50 

54  N.  Y.  288,  13  Am.  Rep.  583,  per  Atl.  896,  55  L.  R.  A.  730,  85  Am.  St. 

Lett,  Ch.  C.  R.  433;  Hall  v.  Wilson,  16  Barb.  (N. 

Y.)  548. 


§§    39G,    397]  LOST    OR   STOLEN   INSTRUMENTS.  510 

note  indorsed  in  blank  cannot  be  defeated  by  the  fact  that  it  was 
stolen.^  And  where  a  person  drew  a  check  to  his  own  order,  indorsed  it 
in  blank  and  had  it  certified,  and  it  was  subsequently  stolen  from  him 
and  came  into  the  possession  of  one  who  was  a  bona  fide  holder,  it  was 
held  that  the  fact  that  the  check  had  been  stolen  was  no  defense  to 
an  action  by  such  holder.^"  So  where  a  check  payable  to  bearer  was 
received  during  banking  hours  of  the  day  on  which  it  was  drawn,  in 
the  usual  course  of  business,  under  circumstances  not  calculated  to  ex- 
cite suspicion,  and  no  negligence  was  shown  from  which  bad  faith 
could  be  inferred,  it  was  decided  that  the  holder  could  recover  the 
amount  thereof  against  the  drawer,  though  it  was  lost  or  stolen  from 
the  real  owner.^^  And  where  a  bill  was  indorsed  in  blank,  the  fact  that 
it  was  lost  and  its  loss  advertised  in  a  newspaper,  was  no  defense  to 
an  action  thereon  against  the  maker  by  one  who  discounted  it  for  the 
finder  in  good  faith  and  without  notice. ^^  So  coupon  bonds  payable  to 
bearer  pass  by  delivery,  and  where  such  bonds  were  stolen  from  the  safe 
of  the  owner  and  negotiated  to  a  bona  fide  holder  it  was  decided  that 
the  latter  obtained  a  good  title  thereto  and  could  maintain  an  action 
on  the  same.^^* 

§  396.     Statutory  provision  as  to  holder  in  due  course  construed. — 

Under  a  provision  of  statute  that  "where  the  instrument  is  in  the 
hands  of  a  holder  in  due  course,  a  valid  delivery  thereof  by  all 
the  parties  prior  to  him,  so  as  to  make  them  liable  to  him,  is  con- 
clusively presumed,"  it  is  decided  that  such  presumption  exists  as  well 
when  a  note  is  taken  from  a  thief  as  in  any  other  case,  where  it  is  a 
complete  negotiable  promissory  note,  palyable  to  bearer .^^ 

§397.  Non-negotiable  paper. — The  rule,  as  to  the  rights  of  a  bona 
fide  holder  in  respect  to  paper  which  has  been  lost  or  stolen  does  not 
extend  to  cases  where  the  paper  is  non-negotiable.  So  it  has  been  de- 
cided that  a  certificate  of  stock  is  not  negotiable  and  that  a  purchaser  of 
such  a  certificate  acquires  no  rights  thereto  where  it  was  stolen  without 

•Mann  v.  Merchants'   Loan  &  T.  S.)    110.    See  Consolidated  Associa- 

Cc,  100  111.  App.  224.  tion  of  Planters  v.  Avegno,  28  La. 

^°  Nolan  V.  Bank  of  New  York,  67  Ann.  552. 

Barb.  (N.  Y.)  24.  '=  Massachusetts  National  Bank  v. 

•^  Marsh  v.  Small,  3  La.  Ann.  402,  Snow  (Mass.  1905),  72  N.  E.  959,  de- 

48  Am.  Dec.  452.  cided   under  §  33  of  Negotiable  In- 

^^  Lawson  v.  Weston,  4  Esp.  56.  struments    Act,    embodied    in    Rev. 

"*  Murray  v.  Lardner,  2  Wall.  (U.  Laws,  c.  73,  §§  18-212,  inclusive. 


»11 


BAXK  AND  TREASURY  XOTES. 


[§   398 


tlic  fault  or  negligence  of  the  owner  though  it  was  regularly  in- 
dorsed.^* And  where  tax  bills  indorsed  in  blank  were  stolen  and  trans- 
ferred to  another  it  has  been  decided  that  the  latter  acquires  no  better 
title  than  the  thief.i^ 

§398.  Bank  and  treasury  notes. — Bank  notes,  though  stolen  or 
otherwise  fraudulently  put  into  circulation,  become  the  property  of  one 
who  gives  a  valuable  consideration  therefor,  having  no  notice  or  knowl- 
edge of  the  robbery.^®  So  in  the  case  of  a  stolen  bank  bill  a  bona  fide 
holder  may  recover  thereon  against  the  bank  from  which  it  was 
stolen.^''  But  where  the  holder  of  a  United  States  treasury  note  exer- 
cises an  option  given  to  him  of  having  it  converted  into  government 
bonds  and  indorses  it  in  blank  for  that  purpose  and  forwards  it  by  an 
express  company,  from  which  it  is  stolen,  the  indorsement  erased  and 
the  note  negotiated,  it  has  been  decided  in  an  action  for  the  conversion 
of  the  note  that  its  negotiability  was  destroyed  by  the  acts  of  the  owner 
and  that  a  purchaser  acquired  no  title  thereto. ^^ 


"  Barstow  v.  Mining  Co.,  64  Cal. 
388,  1  Pac.  349,  49  Am.  Rep.  705. 
See  Sherwood  v.  Meadow  Valley- 
Mining  Co.,  50  Cal.  412. 

The  words  of  the  court  in  Ban- 
gor Electric  Light  &  Power  Co.  v. 
Robinson,  52  Fed.  520,  523,  are  per- 
tinent in  this  connection.  It  is  there 
said:  "Certificates  of  stock  indorsed 
in  blank  are  so  far  of  a  negotiable 
character  that  they  ordinarily  pass 
from  hand  to  hand,  that  they  are 
subject  to  lis  pendens,  and  that  in 
order  to  effectuate  the  ends  of  jus- 
tice and  the  intention  of  the  parties, 
the  courts  ordinarily  decree  a  better 
title  to  the  transferee  than  actually 
existed  in  the  transferor.  Neverthe- 
less we  do  not  find  that  any  court 
of  authority  has  ever  gone  so  far 
as  to  hold  that  the  holder  of  them 
may  lose  the  title  to  such  as  may  be 
stolen  from  him,  as  he  may  of  ne- 
gotiable promissory  notes,  bills, 
scrip,  or  bonds,  payable  to  bearer  or 
indorsed  in  blank.     *     *     *     At  first 


it  occurred  to  the  court  that,  inas- 
much as  Robinson  had  seen  fit  to 
leave  this  certificate  in  such  condi- 
tion as  to  indicate  that  somebody 
was  authorized  to  acquire  it  and  fill 
in  the  indorsement,  he  was  barred; 
but  the  court  is  unable  to  find  any 
authorities  sustaining  this  sugges- 
tion, and  is  compelled  to  treat  this 
certificate,  indorsed  in  blank  and 
stolen,  as  it  would  any  other  stolen 
property,  aside  from  strictly  negotia- 
ble  securities."    Per   Putnam,   C.   J. 

^^  Young  V.  Brewster,  62  Mo.  App. 
628,  1  Mo.  App.  Repr.  577. 

'"  Robinson  v.  Bank  of  Darien,  18 
Ga.  65;  Sinclair  v.  Piercy,  5  J.  J. 
Marsh.  (Ky.)  63;  United  States  v. 
Read,  Fed.  Cas.  No.  16125,  2  Cranch 
C.  C.  159;  Miller  v.  Race,  1  Burr. 
452. 

"Olmstead  v.  Winsted  Bank,  32 
Conn.  278,  85  Am.  Dec.  260. 

"Dinsmore  v.  Ducan,  57  N.  Y.  573, 
15  Am.  Rep.  534. 


§    o99]  LOST    OR   STOLEN    INSTRUMENTS.  512 

§  399.     City   or  county  certificates — Stolen   after   cancellation. — 

Where  certificates  which  are  issued  by  a  city  or  county  for  tlie  pay- 
ment of  legitimate  obligations  and  which  acquire  no  validity  unless 
issued  for  the  purpose  authorized  by  law,  and  which  do  not  possess 
the  character  of  commercial  paper  so  as  to  render  them  good  in  the 
hands  of  a  purchaser  for  value  and  without  notice,  without  regard  to 
fraud  in  their  issuance,  are  lawfully  cancelled,  it  may  be  shown  in  de- 
fense to  an  action  by  such  a  purchaser  that  they  were  subsequently 
stolen,  the  marks  of  cancellation  erased,  and  that  they  were  then 
put  into  circulation.  Thus  it  was  so  held  in  an  action  against  the  Dis- 
trict of  Columbia  on  certificates  of  indebtedness  called  sewer  certifi- 
cates which  had  been  redeemed  according  to  law  and  cancelled  by 
stamping  across  their  face  the  words  "cancelled  by  the  Board  of 
Audit."  These  certificates  were  then  inclosed  in  bundles,  filed  away 
and  the  fact  of  redemption  entered  in  the  proper  books.  Subse- 
quently they  were  stolen,  the  marks  of  cancellation  erased,  and  were 
sold  to  a  purchaser  for  value,  in  good  faith  without  notice,  who  brought 
an  action  thereon.  The  court  said  in  this  case:  "When  the  maker 
of  a  negotiable  instrument  lawfully  cancels  it  before  maturity,  his 
liability  upon  it  is  extinguished,  and  cannot  be  revived  without  his 
consent.  It  is  immaterial  whether  the  cancellation  is  by  destroying 
the  instrument,  or  by  writing  or  stamping  words  or  lines  in  ink 
upon  its  face,  provided  the  instrument,  in  the  condition  in  which  he 
puts  it,  unequivocally  shows  that  it  has  been  cancelled.  *  *  *  These 
certificates  having  been  lawfully  extinguished  by  stamping  across 
their  face  marks  of  cancellation  as  clear  and  permanent  as  the  orig- 
inal signatures,  the  liability  of  the  District  upon  them  as  negotiable 
paper  could  not  be  revived  by  its  omission  to  take  additional  precau- 
tions against  their  being  stolen  and  fraudulently  restored  to  their 
original  condition  by  such  means  as  ingenious  wickedness  might  de- 
vise. *  *  *  Considering  the  nature  of  these  certificates,  the  method 
in  which  they  had  been  cancelled,  and  the  means  by  which  they  were 
afterwards  put  in  circulation,  we  are  of  opinion  that  there  is  no 
ground  for  holding  the  District  of  Columbia  liable  to  this  claimant."^* 

§  400.  Action  under  statute  by  owner  of  lost  instruments. — Where 
a  statute  permits  an  action  on  an  instrument  which  has  been  lost  by 
the  owner,2°  the  establishment  of  a  lost  note  under  such  a  statute  is  no 

^'  District  of  Columbia  v.  Cornell,  ""  A  loss  by  theft  is  a  loss  by  acci- 
130  U.  S.  655,  9  Sup.  Ct.  694,  32  L.  dent  within  the  meaning  of  a  stat- 
Ed.  1041.    Per  Mr.  Justice  Gray.  ute  authorizing  a  suit  to  be  brought 


513 


EVIDENCE BURDEN    OF   PROOF. 


[§  401 


bar  to  any  defense  that  might  be  set  up  to  the  original  note.-^  So  in 
an  action  upon  a  copy  of  a  promissory  note,  regularly  established  in 
lieu  of  the  lost  original  as  provided  by  statute,  a  payment  of  the  orig- 
inal note  prior  to  the  judgment  establishing  the  copy  may  be  pleaded.-^ 
The  rule  that  upon  a  plea  of  payment  the  burden  of  proof  is  upon  the 
defendant  is  not  altered  by  the  fact  that  the  note  was  lost  after  suit.^^ 

§  401.  Evidence — Burden  of  proof. — In  an  action  on  negotiable 
paper  which  is  shown  to  have  been  lost  or  stolen  the  burden  rests  on 
the  plaintiff  to  show  that  he  is  a  hona  fide  holder.^*    And  in  such  a 


upon  a  bond,  note,  bill  of  exchange 
or  other  mercantile  instrument 
which  has  been  lost  or  destroyed  by 
accident.  Mobile  County  v.  Sand,  127 
Ala.  493,  29  So.  26,  construing  Ala. 
Code,  §  31. 

Pleading  in  action  on  lost  instru- 
ment. In  an  action  by  the  payee  on 
a  note  which  has  been  lost  it  is  only 
necessary  to  allege  the  execution  of 
the  note  to  the  plaintiff.  It  need  not 
be  alleged  that  he  is  the  owner,  as 
such  fact  will  be  presumed  until  the 
contrary  is  shown.  Embree  v.  Em- 
merson  (Ind.  App.  1905),  74  N.  E. 
44. 

Where  a  note  is  sued  on  as  a  lost 
instrument  and  is  accurately  de- 
scribed in  the  declaration,  and  the 
execution  is  not  specially  denied, 
and  it  appears  from  the  evidence 
that  the  note  was  payable  to  bearer, 
had  been  acquired  by  plaintiff  before 
maturity  and  lost  after  maturity,  it 
is  held  that  a  case  is  made  out  en- 
titling the  plaintiff  to  have  the 
merits  of  the  controversy  submitted 
to  the  jury.  Champenois  v.  Collins 
(Miss.  1904),  36  S.  E.  72. 

Injunction  to  restrain  mainte- 
nance of  action.  A  provision  of  a 
negotiable  instruments  law  that  an 
action  at  law  may  be  brought  upon 
any  negotiable  instrument  which  is 
lost,   "but   any   court   of   law   shall 


give  judgment  in  the  same  manner 
as  if  such  note  was  not  lost,"  has 
been  held  to  leave  it  questionable 
whether  it  was  the  intention  of  the 
legislature  to  have  the  act  apply  to 
any  negotiable  instrument  other 
than  a  note.  Where,  however,  the 
act  contains  a  further  provision  that 
any  court  of  law  may  make  the  same 
order  as  a  court  of  equity  would  to 
indemnify  the  party  charged  against 
the  repayment  thereof,  a  court  of 
equity  is  not  thereby  deprived  of  its 
original  jurisdiction  in  such  matters 
and  may  enjoin  the  maintenance  of 
an  action  at  law  by  the  payee  upon 
certain  cashier's  checks  which  have 
been  lost  where  there  has  been  an 
offer  to  pay  the  same  upon  the  giv- 
ing of  the  indemnity  which  would 
be  required  in  any  court  of  law  or 
equity.  Clinton  National  Bank  v. 
Stiger,  67  N.  J.  Eq.  522,  58  Atl. 
1055,  construing  N.  J.  Gen.  St.,  p. 
2605,  §  7. 

"Prescott  V.  Johnson,  8  Fla.  391; 
Jenkins  v.  Forbes  (Ga.  1904),  49  S. 
E.  284. 

"Jenkins  v.  Forbes  (Ga.  1904),  49 
S.  E.  284. 

==  Walston  V.  Davis  (Ala.  1906),  40 
So.  1017. 

='  Nolan  V.  Bank  of  New  York,  67 
Barb.  (N.  Y.)  24;  Kuhns  v.  Gettys- 
burg National  Bank,  68  Pa.  St.  445. 


Joyce  Defenses — 33. 


g    -iOl]  LOST    OR    STOLEN    INSTKUilENTS.  .  511 

ease,  unless  the  one  who  has  obtained  tlie  money  on  the  paper  can  show 
that  he  was  a  holder  for  value,  he  will  be  liable  to  the  real  owner  in 
an  action  for  money  had  and  received.-^  But  under  a  code  provision 
authorizing  the  bringing  of  a  suit  on  lost  commercial  paper  and  pro- 
viding that  where  an  affidavit  is  made  by  the  plaintiff  of  such  loss  and 
of  the  contents  and  that  the  same  has  not  been  paid  or  discharged  and 
such  affidavit  accompanies  the  complaint  it  must  be  received  as  pre- 
sumptive evidence  of  the  facts  stated  unless  the  defendant  by  plea  ac- 
companied by  affidavit  denies  the  execution  of  the  paper,  or  the  in- 
dorsement, acceptance  or  contents,  in  which  case  proof  of  the  fact 
denied  must  be  made  by  the  plaintiff,  a  suit  may  be  brought  without 
affidavit  in  which  case  the  plaintiff  has  the  burden  of  proving  the  loss 
and  contents  but  if  accompanied  by  affidavit  this  burden  is  then  held 
to  shift  onto  the  defendant  who  may,  by  denying  the  execution  by 
verified  plea,  again  shift  such  burden  onto  the  plaintiff.^^  Upon  proof, 
however,  of  the  fact  that  a  note  has  been  lost  a  plaintiff  cannot  be  re- 
quired to  prove  in  whose  possession  it  is.^^  Again  where  the  evidence 
fairly  warrants  the  conclusion  that  a  note  is  lost  and  there  is  no  evi- 
dence to  show  that  it  was  payable  in  a  bank  of  the  state  it  will  not 
be  presumed  that  it  was  so  payable.^^ 

But  see  Murray  v,  Lardner,  2  Wall.  493,  29  So.  26,  construing  Ala.  Code, 
(U.  S.)  110.  §  31. 

^Kuhns  V.  Gettysburg  National  "  Champenois  v.  Collins  (Miss. 
Bank,  68  Pa.  St.  445.  1904),  36  So.  72. 

^  Mobile  County  V.  Sands,  127  Ala.        =^Embree     v.     Emmerson      (Ind. 

App.),  74  N.  E.  44. 


CHAPTEE  XVIII. 


WANT   OF   TITLE   OR   INTEREST. 


Sec. 

402.  Possession  as  evidence  of  title. 

403.  Right    of    holder    or    owner    to 

sue — Real  party  in  interest. 

404.  Right    to    recover    generally — 

Legal  and  equitable  title. 

405.  Payees. 

406.  Indorsee  against  indorser. 

407.  Assignee. 

408.  Agency. 

409.  Recovery  for  benefit  of  holder 

— Beneficial  interest. 


Sec. 

410.  Transfer    of    title    or    interest 

after  suit  commenced. 

411.  Character  of  title  or  interest. 

412.  Void  or  voidable  title  or  trans- 

fer. 

413.  Checks. 

414.  Bill  of  lading. 

415.  To  protect  maker  or  let  in  his 

defense. 

416.  Same  subject. 

417.  Denial  of  ownership  or  title. 

418.  Same  subject. 


§  402.     Possession  as  evidence  of  title. — Possession  of  a  note  is 
prima  facie  evidence  of  title  and  ownership.^     This  rule  has  been  ap- 


^  California. — Bank  of  California 
v.  J.  L.  Mott  Iron  Works,  113  Cal. 
409,  45  Pac.  674. 

Colorado — Gumaer  v.  Sowers,  31 
Colo.  164,  71  Pac.  1103;  Reed  v.  First 
Nat.  Bank,  23  Colo.  380,  48  Pac.  507; 
Perot  v.  Cooper,  17  Colo.  80,  28  Pac. 
391. 

Connecticut. — New  Haven  Mfg. 
Co.  v.  New  Haven  Pulp  &  Board  Co., 
76  Conn.  126,  55  Atl.  604. 

Georgia.  —  Bomar  v.  Equitable 
Mort.  Co.,  Ill  Ga.  143,  36  S.  E.  601. 

Illinois. — Henderson  v.  Davisson, 
157  111.  379,  41  N.  E.  560;  Wellman 
V.  Highland,  87  111.  App.  405. 

Indiana. — Taylor  v.  Hearn,  131 
Ind.  537,  31  N.  E.  201. 

Kansas. — O'Keeffe  v.  Frankfort 
First  Nat.  Bank,  49  Kan.  347,  30 
Pac.  473. 

Massachusetts. — Massachusetts  Na- 


tional Bank  v.  Snow,  187  Mass.  159, 
72  N.  E.  959. 

Minnesota. — Kells  v.  Northwestern 
Live  Stock  Ins.  Co.,  64  Minn.  390,  67 
N.  W.  215,  25  Ins.  L.  J.  627,  64  Minn. 
393,  71  N.  W.  5;  Robinson  v.  Smith, 
62  Minn.  62,  64  N.  W.  90. 

Nebraska. — Ryan  v.  West,  63  Neb. 
894,  89  N.  W.  416;  First  National 
Bank  v.  McKibbin,  50  Neb.  513,  70 
N.  W.  38;  City  National  Bank  v. 
Thomas,  46  Neb.  861,  65  N.  W.  895. 

Neio  York. — Poess  v.  Twelfth 
Ward  Bank,  86  N.  Y.  Supp.  857,  43 
Misc.  45;  Neg.  Inst.  Law,  Laws  1897, 
p.  719,  c.  612. 

North  Dakota. — Brynjolfson  v. 
Osthus   (N.  D.),  96  N.  W.  261. 

Virginia. — Dashiell  v.  Merchants' 
&  P.  Savings  Bank  (Va.),  22  S.  E. 
169. 

Washington. — Citizens'  Nat.  Bk.  v. 

515 


§  402] 


WANT    OF    TITLE   OR   INTEREST. 


516 


plied  to  a  non-indorsed  note,-  payable  to  a  third  person's  order  ;^  a 
note  indorsed  in  blank;*  a  bill  of  exchange  payable  to  drawer  and  in- 
dorsed in  blank  f  in  favor  of  the  bearer  of  a  note  payable  to  bearer ;" 
a  note  indorsed  to  another  when  coupled  with  evidence  of  payment  of 
value  ;'^  a  duly  indorsed  note  in  possession  at  time  of  death  f  and  to  a 
note  in  possession  of  heirs  of  the  holder.*  So  production  of  notes  is 
held  sufficient  without  proof  of  who  are  the  holders/"  and  also  that 


Wintler,  14  Wash.  558,  45  Pac.  38,  4 
Am.  &  Eng.  Corp.  Cas.  N.  S.  146; 
Yakima  Nat.  Bank  v.  Knipe,  6  Wash. 
348,  33  Pac.  834. 

Examine  the  following  cases: 
United    States. — Pana   v.    Bowler, 
107  U.  S.  529,  27  L.  Ed.  424;    New 
Orleans  Canal  &  Bkg.  Co.  v.  Mont- 
gomery, 95  U.  S.  16,  24  L.  Ed.  346. 

Alabama. — Paige  v.  Broadfoot,  100 
Ala.  613,  13  So.  426. 

Kansas. — Cobleskill  First  Nat.  Bk. 
V.  Emmitt,  52  Kan.  603,  35  Pac.  213. 
Kentucky. — Holton  v.  Alley,  15  Ky. 
L.  Rep.  529,  24  S.  W.  113. 

Minnesota. — Huntley  v.  Hutchin- 
son, 91  Minn.  244,  97  N.  W.  971, 
Gen.  Stat.  1894,  §  5751;  Estes  v. 
Lovering  Shoe  Co.,  59  Minn.  504,  61 
N.  W.  674,  12  Bkg.  L.  J.  148;  Bahm- 
sen  V.  Gilbert,  55  Minn.  334,  56  N. 
W.  1117. 

Missouri. — Hair  v.  Edwards,  104 
Mo.  App.  213,  77  S.  W.  1089. 

Nebraska.  —  Gandy  v.  Bissell 
(Neb.),  100  N.  W.  803,  rev'g  5  Neb. 
(unofficial)   184,  97  N.  W.  632. 

Neia  Jersey. — Halstead  v.  Colvin, 
51  N.  J.  Eq.  387,  26  Atl.  928. 

New  York. — People  v.  Bradner,  108 
N.  Y.  659,  15  N.  E.  445,  15  Cent. 
Rep.  474;  Goetting  v.  Day,  87  N.  Y. 
Supp.  510;  Manawaring  v.  Keenan, 
86  N.  Y.  Supp.  262;  Frankenstein  v. 
Levini,  65  N.  Y.  Supp.  562. 

North  Dakota. — Shepard  v.  Han- 
sor,  9  N.  D.  249,  83  N.  W.  20. 

Oklahoma. — Price  v.  Winnebago 
Nat.  Bank,  14  Okla.  268,  79  Pac.  105. 


Rhode  Island.  —  Third  National 
Bank  v.  Angell,  18  R.  I.  1,  29  Atl. 
500. 

South  Dakota. — Heffleman  v.  Pen- 
nington County,  3  S.  D.  162,  52  N. 
W.  851. 

Tennessee.  —  Memphis  v.  Bethel 
(Tenn.),  17  S.  W.  191. 

Utah. — Voorhees  v.  Fisher,  9  Utah 

303,  34  Pac.  64. 

^Dickerson  v.  Cass  County  Bank 
(Iowa),  89  N.  W.  15. 

^  Martin  v.  Martin,  174  111.  371,  51 
N.  E.  691,  aff'g  74  111.  App.  215. 

^Battersbee  v.  Calkins  (Mich.), 
87  N.  W.  760,  8  Det.  Leg.  N.  778; 
Ames  &  F.   Co.  v.  Smith,  65  Minn. 

304,  67  N.  W.  999;  Bank  of  Spencer 
V.  Simmons,  43  W.  Va.  79,  27'  S.  E. 
299. 

=^  Gillespie  v.  Planters'  Oil  Mill 
Mfg.  Co.,  76  Miss.  406,  24  So.  900. 

"Massachusetts  Nat.  Bank  v. 
Snow,  187  Mass.  159,  72  N.  E.  959. 

^  Menzie  v.  Smith,  63  Neb.  666,  88 
N.  W.  855. 

^  Eyermann  v.  Piron,  151  Mo.  107, 
52  S.  W.  229. 

»Magel  V.  Milligan,  150  Ind.  582. 
50  N.  E.  564. 

10  Williams  v.  Holt,  170  Mass.  351, 
49  N.  E.  654. 

Ownership  of  the  notes  sued  on 
may  be  prima  facie  established  in 
the  indorsee's  favor  by  putting  in 
evidence  the  note  with  its  indorse- 
ments thereon.  Murto  v.  Lemon 
(Colo.  App.),  75  Pac.  160. 


517  RIGHT   OF   HOLDER   OR   OWNER   TO    SUE.  [§    403 

a  non-averment  of  ownership  by  the  payee  as  plaintiff  does  not  render 
the  complaint  defective  ;^^  although  it  is  decided  that  the  title  to  a 
note  must  be  sufficiently  shown  by  the  pleadings.^^  But  the  rule  as 
to  possession  is  inapplicable  as  to  paper  indorsed  in  blank  and  non-ne- 
gotiable.^^ And  it  is  held  that  a  party  not  the  payee  will  not  be  pre- 
sumed to  be  the  owner  of  an  unindorsed  note  not  payable  to  bearer, 
merely  because  it  was  found  amongst  his  papers  after  his  decease.^* 

§  403.     Right  of  holder  or  owner  to  sue — Real  party  in  interest. — 

A  statutory  right  to  have  an  action  brought  by  the  real  person  in  in- 
terest is  an  important  factor  in  the  determination  of  the  question  of  the 
right  to  dispute  plaintiff's  title  or  ownership  and  of  the  right  of  the 
defendant  to  protection  against  other  claimants.^^  But  the  holder 
of  commercial  paper  may  sue  in  his  own  name.^*^  And  an  indorsee  in 
possession  can  cancel  an  indorsement  by  him  to  a  bank  for  collection.^'' 
So  the  indorsee  of  a  note  for  collection  may  sue  thereon  in  his  own 
name,  under  a  statute  so  permitting  in  case  of  a  transferee  under  a 
restrictive  indorsement.^^  And  the  owner  of  the  equitable  title  by 
reason  of  payment  made  after  dishonor,  may  maintain  an  action  in  his 
own  name  without  formal  indorsement  back.^^  Nor  will  the  sur- 
render of  a  note  preclude  the  holder  from  recovering  against  the 
maker,  where  the  surrender  was  a  mere  formality  under  an  agreement 
that  the  holder  might  sue.^°  And  an  indorsement  of  paper  payable 
to  bearer  is  unnecessary,  where  the  statute  so  permits,  to  enable  the 
holder  to  sue  thereon  as  he  has  a  prima  facie  right  to  recover.-^  But 
the  holder  of  a  note  indorsed  in  blank,  who  has  not  title  or  interest 
cannot  maintain  an  action  thereon.^^ 

"  Ullery  v.   Brohm,  20  Colo.  App.  "  New  Haven  Mfg.  Co.  v.  New  Ha- 

389,  79  Pac.  180.  ven  Pulp  &  Board  Co.,  76  Conn.  126, 

'-National  Life  &  Trust  Co.  v.  Gif-  55  Atl.  604;  Gen.  Stat.  1902,  §  4218. 

ford,  90  Minn.  358,  96  N.  W.  919.  '« Smith  v.  Bayer  (Oreg.),  79  Pac. 

"Mitchell    V.    St.    Mary,    148    Ind.  497. 

Ill,  47  N.  E.  224.  '» Hartzell  v.  McClurg,  54  Neb.  316, 

"Hair  v.  Edwards,  104  Mo.  App.  74  N.  W.  626. 

213,  77  S.  W.  1089.  =»  Clark  v.  Butts,  73  Minn.  361,  76 

"  Giselman  v.  Starr,  106  Cal.  651,  N.  W.  199. 

657,    40    Pac.     8.      See     §§     415-418  =' Buck  v.   Troy  Aqueduct  Co.,   76 

lierein.  Vt.  75,  56  Atl.  285. 

'"Bomar    v.    Equitable    Mort.    Co.,  "Hart  v.  West,  16  Tex.  Civ.  App. 

Ill  Ga.  143,  36  S.  E.  601;   McDaHiel  395.  41  S.  W.  383,  aff'd  91  Tex.  184, 

V.  Chinski,  23  Tex.  Civ.  App.  504,  5.7  42  S.  W.  544. 
S.  W.  922. 


§    404]  WANT   OF   TITLE   OR   INTEREST.  518 

§  404.  Right  to  recover  generally — Legal  and  equitable  title. — In- 
dorsement or  transfer  are  not  necessary  to  enable  a  purchaser  for  value 
to  recover,^'  and  the  holder  by  delivery  of  a  note  payable  to  a  certain 
person  or  order  and  indorsed  in  blank  has  the  title  thereto.^*  Nor  is  it 
necessary  in  order  to  recover  on  a  note,  transferable  by  delivery  only, 
to  prove  the  transfer.^^  But  title  cannot  rest  upon  proof  of  indorse- 
ment alone  where  the  note  is  returned  by  the  indorser  without  de- 
livery to  the  claimant  and  he  denies  delivery.-®  If,  however,  the  payee 
indorses  a  note,  and  the  indorsee  recovers  judgment  against  the  maker, 
and  upon  a  return  upon  execution  of  "no  property  found"  a  subse- 
quent judgment  against  the  indorser  is  satisfied  by  him,  he  can  trans- 
fer the  claim  against  defendant,  and  an  averment  by  the  transferee 
as  plaintiff  of  these  facts  states  a  good  cause  of  action  and  the  in- 
dorsement or  transfer  can  only  be  denied  by  a  sworn  plea.^^  So  the 
legal  title  of  a  note  being  in  the  plaintiff,  the  fact  that  the  payee  may 
have  been  the  equitable  owner  constitutes  no  defense.^^  Nor  is  it  a 
defense  that  the  note  is  held  as  trustee  for  a  third  party.^®  Again,  in 
an  action  by  an  administrator  on  a  note  given  him  for  land  bought  at 
an  administrator's  sale,  a  plea  that  heirs  at  law  are  alone  interested 
in  the  note  and  that  after  the  sale  they  had  sued  defendant  to  recover 
the  land  for  the  purchase  of  which  the  note  was  given,  and  so  put 
him  to  great  expense,  is  not  good  as  a  defense.^*'  But  a  transferee,  be- 
fore maturity  of  commercial  paper  not  indorsed  at  the  date  of  its 
transfer,  acquires  an  equitable  but  not  a  legal  title,  and  equities  of 
which  the  transferee  had  notice  are  not  excluded  by  a  subsequent  in- 
dorsement before  maturity.^  ^  If,  however,  it  is  intended  by  an  in- 
dorsement to  pass  the  title  to  a  note,  and  it  is  designed  that  it  shall 
circulate  as  negotiable  paper  transferable  by  delivery  as  a  note  payable 
to  order  and  duly  indorsed  by  the  payee,  the  contract  must  take  effect 
according  to  the  intent  of  the  parties,  and  the  indorsee  before  maturity 
without  notice  takes  the  legal  title  for  value  free  from  all  equities  on 
the  part  of  the  payee,  even  though  the  latter  did  not  assume  the  lia- 
bility of  an  indorser  -or  guarantor,  and  even  though  the  indorsement  is 

"•^  Lyman  v.  Warner,  113  Fed.  87.  ='  Smith  v.  Harrison,  33  Ala.  706. 

See  §  413  herein.  ='  Caldwell    v.    Lawrence,    84    111. 

-'  Heard  v.  De  Loach,  105  Ga.  500,  161. 

30  S.  E.  940.  ^  Nicolay  v.  Fritschle,  40  Mo.  67. 

='  Gumaer  v.  Sowers,  31  Colo.  164,  '"  Story  v.  Kemp,  51  Ga.  399. 

71  Pac.  1103.  =1  Pavey  v.   Stauffer,   45   La.   Ann. 

"-'  Moehn  v.  Moehn,  105  Iowa  710,  353,  12  So.  512,  19  L.  R.  A.  716. 
75  N.  W.  521. 


519 


PAYEES. 


[§  405 


on  another  paper  attached  to  and  made  part  of  the  note,  called  an 
allonge.^^  It  is  also  determined  that  the  indorsee  is  not  affected  by  his 
indorser's  want  of  title.^^ 

§  405.  Payees. — The  party  to  whom  a  note  is  made  payable  being 
priina  facie  the  owner,  it  is  held  that  his  right  to  maintain  an  action 
cannot  be  questioned,  except  the  defendant  pleads  payment  or  offset 
against  the  party  who  he  alleges  is  the  true  owner  of  the  note.  So 
it  is  no  defense  to  an  action  on  a  note  that  it  was  given  to  the  payee, 
in  lieu  of  three  other  notes,  given  to  the  husband  of  the  payee.  The 
widow  might  be  acting  as  executrix  in  her  own  wrong,  or  might  be  the 
heir;  in  either  case  the  notes  surrendered  would  be  satisfied.^*  And 
in  an  action  upon  a  promissory  note  made  by  the  defendant,  pay- 
able to  order,  it  is  no  defense  that  the  payee  and  nominal  plaintiff 
pledged  the  note  without  indorsement  to  another  as  collateral  security 
for  a  debt  due  to  the  latter,  and  that  before  the  debt  became  due  the 
payment  of  the  debt  was  tendered  by  such  payee  but  that  the  pledgee  _ 
refused  to  receive  it  or  to  give  up  tlie  note,  and  that  after  its  maturity 
the  pledgee  commenced  the  action  without  the  authority  or  consent  of 


==  Crosby  v.  Roub,  16  Wis.  616,  84 
Am.  Dec.  720. 

'^  Grant  v.  Vaughan,  3  Burrows 
1516  (an  action  where  the  bearer  of 
a  bill  of  exchange,  who  had  come  by 
it  honestly  and  for  value,  was  held 
entitled  to  recover  against  the 
drawer,  even  though  the  note  had 
been  lost  and  the  person  who 
found  it,  or  who  at  least  was  in 
possession  of  it,  had  transferred 
it  to  the  holder,  the  latter  hav- 
ing taken  it  after  inquiry  as  to 
the  standing  of  the  transferor); 
Miller  v.  Race,  1  Burrows  452  (hold- 
ing that  a  bank  note  payable  to  a 
person  named,  or  bearer,  on  demand, 
becomes  the  property  of  him  who 
gives  value  therefor  without  notice 
of  defenses)  ;  Peacock  v.  Rhodes, 
Dougl.  633  (holding  that  an  inno- 
cent indorsee  of  an  inland  bill  of 
exchange  with  a  blank  indorsement 
may  recover  upon  it  against  the 
drawer.   Lord  Mansfield  said:    "The 


holder  of  a  bill  of  exchange  is  not 
to  be  considered  in  the  light  of  an 
assignee  or  payee.  *  *  *  The  law 
is  well  settled  that  a  holder,  coming 
fairly  by  a  bill  or  note,  has  nothing 
to  do  with  the  transactions  between 
the  original  parties.  *  *  *  i  see 
no  difference  between  a  note  in- 
dorsed in  blank  and  one  payable  to 
bearer;  they  both  go  by  delivery, 
and  possession  proves  property  in 
both  cases.  The  question  of  mala 
fides  was  for  the  consideration  of 
the  jury.  The  circumstances  that 
the  buyer  and  also  the  drawers  were 
strangers  to  the  plaintiff,  and  that 
he  took  the  bill  for  goods  on  which 
he  had  a  profit,  were  grounds  of  sus- 
picion very  fit  for  their  considera- 
tion. But  they  have  considered 
them  and  have  found  that  it  was  re- 
ceived in  the  course  of  trade,  and 
therefore  the  case  is  clear"). 

=*  Riley   v.   Loughrey,    22   111.    (12 
Peck)  98. 


§    405]  WANT    OF   TITLE   OR   I^STTSREST.  520 

the  payee;  although  if  the  promisees  came  in  and  disclaimed  it  would 
be  different.^ ^  So  a  plea  that  the  note  has  been  assigned  should  be 
supported  by  proof  that  the  right  to  the  note  is  in  the  assignee.^"  But 
where  a  joint  and  several  promissory  note  was  executed  and  left  in 
the  hands  of  one  of  the  promisors,  for  delivery  to  the  payee,  when 
he  should  demand  it,  in  exchange  for  a  note  of  the  same  amount,  but 
of  a  previous  date,  and  signed  alone  by  such  promisor,  with  whom  said 
note  had  been  left  in  escrow,  and  no  demand  was  made  upon  him,  be- 
fore said  promisor's  death,  by  the  payee ;  it  was  held  that  the  new  note 
did  not  operate  de  facto  as  a  payment  of  the  old  note,  that  the  prop- 
erty of  such  new  note  had  not  vested  in  the  payee,  and  that  he  could 
not  recover  possession  of  it  from  the  administrator  of  the  deceased 
promisor,  it  being  presumed  that  the  accrued  interest  upon  the  old 
note  was  to  be  paid  upon  making  the  exchange. ^^  A  note  discounted 
in  bank,  however,  assumes  the  dignity  of  a  foreign  bill,  and  if  the  note 
was  made  by  the  payor  and  loaned  for  the  accommodation  of  the 
.payee  and  it  has  been  negotiated,  the  bank  alone  can  main-tain  an 
action  against  the  payor,  who  cannot  question  the  consideration ;  but 
upon  a  plea  that  the  note  is  the  property  of  another  than  the  plaintiff 
the  latter  will  be  precluded  from  maintaining  an  action  in  his  own 
name,  and  although  the  holder  who  is  prima  facie  the  owner  may  strike 

^°  Wolcott  v.  Boston  Faucet  Co.,  9  sible  to  consider  Miles  Bartholomew 

Gray  (75  Mass.)  376.  as  the  agent  of  the  plaintiff;  he  was 

^Conant  v.  Wills,  1  McLean    (U.  himself    a    promisor    and    a    party. 

S.  C.  C.)  427,  Fed.  Cas.  No.  3,087.  *    *    *    ^  could  not  have  been  un- 

^^Canfield  v.  Ives,  18  Pick.  (35  derstood  by  the  parties:  that  the 
Mass.)  253,  the  court,  per  Shaw,  C.  new  note  was  to  enure  and  operate 
J.,  said:  "The  single  question  in  de  facto,  as  payment  of  the  old  one; 
this  case  is,  whether  the  property  or  that  the  new  note  was  to  be  left 
in  the  note,  which  is  the  subject  of  with  Miles  Bartholomew  for  any 
the  action  (trover),  had  vested  in  other  purpose  than  to  be  exchanged 
the  plaintiff  at  the  time  of  the  de-  for  the  old  one;  that  is,  to  be  de- 
mand and  refusal.  The  court  are  all  livered  when  the  old  one  should  be 
of  the  opinion  that  it  had  not.  The  given  up.  The  further  considera- 
transaction  was  inchoate  and  in-  tion,  that  the  interest  was  to  be  paid 
complete,  and  until  the  exchange  on  the  old  note,  on  such  exchange, 
M^as  made  pursuant  to  the  agree-  renders  it  quite  clear  that  the  trans- 
ment  the  old  note  was  not  dis-  action  was  not  to  be  understood  as 
charged,  nor  did  the  plaintiff  be-  closed,  so  as  to  vest  the  property  in 
come  entitled  to  the  right  of  prop-  the  new  note  in  the  plaintiff,  until 
erty  in  the  new  one.  It  was  a  prop-  such  exchange,  which  was  never 
osition,  an  executory  agreement,  made," 
never  in  fact  executed.   It  is  impos- 


521  INDORSEE.  AGAIXST  INDOKSER ASSIGNEE.   [§§  40G,  407 

out  the  indorsements  tlie  payor  may,  nevertheless,  show  that  the  note 
is  the  property  of  one  of  the  indorsers.^* 

§406.  Indorsee  against  indorser. — In  an  action  by  the  indorsee 
against  the  indorser  of  a  note  the  relation  between  such  parties  may 
be  shown,  and  the  presence  of  the  defendant's  name  in  blank  upon 
the  back  of  the  note  is  prima  facie  evidence  of  a  contract  of  indorse- 
ment, which  is  not  wholly  overcome  by  showing  that  the  name  was 
previously  written  for  another  purpose.  The  apparent  indorser  should 
not  be  concluded  contrary  to  the  true  meaning  and  intent  of  the 
parties,  and  the  question  is  issuable  and  provable  whether  such  blank 
indorsement  was  made  in  the  usual  course  of  trade  to  transfer  title.^^ 
So,  in  an  action  by  an  indorsee  against  his  immediate  indorser,  a  plea 
that,  before  the  commencement  of  the  suit,  the  plaintiff  transferred 
the  note  to  a  third  person,  who  since  then  had  been  and  continued 
to  be  the  true  and  lawful  owner  and  possessor  of  the  note  is  a  bar 
to  the  recovery.*"  If  tlie  action  is  by  the  third  indorsee  against  the 
second  indorser,  an  affidavit  of  defense  is  sufficient  to  carry  the  cause 
to  the  jury,  where  it  sets  forth  the  ability  to  prove  that  the  suit  is 
brought  for  the  use  and  benefit  of  the  payee  and  first  indorser,  and 
that  he  is  the  real  owner  and  holder  of  the  note  and  that  the  plaintiff 
is  merely  the  nominal  holder;  as  the  payee  and  first  indorser,  being 
responsible  to  every  subsequent  indorser,  the  second  indorser,  upon 
recovery  against  him,  would  have  his  remedy  against  the  preceding 
indorser.*^  But  in  an  action  by  an  indorsee  against  an  indorser,  a 
plea  setting  up  that  defendant  assigned  the  note,  after  maturity,  "for 
the  purpose  of  transferring"  the  same,  "and  for  no  other  purpose"  is 
bad  on  demurrer  since  it  is  only  equivalent  to  an  averment  that  he 
assigned  the  note  not  intending  that  he  should  be  liable  as  an  as- 
signor, such  a  plea  being  a  simple  denial  of  the  legal  import  of  the 
assignment.*^ 

§  407.  Assignee. — Suit  may  be  brought  by  the  legal  assignee ;"  by 
an  assignee  without  indorsement  wlien  he  is  the  real  party  in  inter- 

'» Tuggle  V.  Adams,  3  A.  K.  Marsh.  "  Oberle    v.    Schmidt,    86    Pa.    St. 

10  Ky.)  429.  221. 

™  Hudson  V.  Wolcott,  39  Ohio  St.  *■  Dunn  v.  Ghost,  5  Colo.  134. 

618.  "Gladstone     Baptist     Church     v. 

"Waggoner   v.    Colvin,    11    Wend.  Scott,  25  Ky.  L.  Rep.  237,  74  S.  W. 

(N.  Y.)  27.    See  §§  415-418  herein.  1075. 


§    407]  WANT    OF   TITLE   OR   INTEREST.  522 

est;^*  and  by  an  assignee  of  a  non-negotiable  note.*^  So  an  assignee 
may  sue  in  his  own  name  and  is  subject  to  defenses  against  the  payee.**^ 
A  wife  as  assignee  may  also  maintain  suit  in  her  own  name,  though 
the  assignor  has  an  interest  in  the  note.*^  And  where  a  surety  has  paid 
a  note  and  received  the  assignment  thereof  his  successor  in  interest 
may  recover  thereon  from  the  maker.*^  So  the  maker  may  be  sued  by 
a  surety  who  was  paid  the  note  and  it  is  assigned  to  him.*^  And  so 
where  a  single  bill  is  indorsed  in  blank  and  delivered,  the  transferee 
is  entitled  to  fill  out  the  assignment  to  himself  and  bring  an  action 
against  the  maker  in  his  own  name.^°  Again,  the  written  assignment 
of  a  note  payable  to  the  testator,  made  and  executed  by  the  executors, 
confers  upon  the  assignee  the  title  to  the  note  and  the  right  to  sue 
thereon,  and  constitutes  ample  protection  to  the  defendant  as  maker 
and  debtor  of  the  estate,  and  whatever  equities  may  exist  in  such  case 
between  the  assignors  and  assignee  of  the  note  cannot  interest  the  de- 
fendant nor  defeat  a  recovery,  so  long  as  he  is  protected  from  any 
subsequent  action  by  such  recovery.^ ^  So  an  indorsement  or  transfer 
of  a  negotiable  note  does  not  constitute  an  agency.  It  is  an  assign- 
ment, and  if  the  assignment  is  made  by  its  owner  and  holder,  with  a 
limitation  not  appearing  upon  the  note  itself  it  can  in  no  way  affect 
the  maker  who  has  paid  it  while  he  is  ignorant  thereof  as  such  maker 
is  not  bound  to  understand  an  assignment  limited  by  some  act  of  the 
parties  instead  of  by  virtue  of  some  law  which  he  might  be  presumed 
to  understand.^ ^  And  in  a  suit  on  a  promissory  note,  by  the  assignee 
of  the  payee  against  the  maker,  the  defendant's  plea  that  the  note  was 
assigned  for  collection  only,  the  proceeds  to  be  credited  on  certain  notes 
given  by  the  assignor,  is  insufficient  as  a  defense. ^^   But  the  assignee 

"  Vinson  v.  Palmer,  45  Fla.  630,  34  "  Huck  v.  Kraus,  99  N.  Y.  Supp. 

So.  276.  490.   See  §§  415,  416  herein. 

"Barry  v.  Wachosky,  57  Neb.  534,  °=Lamb  v.  Matthews,  41  Vt.  42,   In 

77  N.  W.  1080.  this  case  a  note  payable  to  bearer 

^  Power   V.    Hambrick,   25   Ky.   L.  was    delivered    by    the    owner    and 

Rep.  30,  74  S.  W.  660.  holder    to    collect    and    to    use    the 

"  Lodge  v.  Lewis,  32  Wash.  191,  72  avails  thereof  as  needed,  and  there 

Pac.  1009.  was    an    express    understanding    at 

^^  Bay  View  Brew.  Co.  v.  Tecklen-  the  time  of  its  delivery  that  if  un- 

berg,  19  Wash.  469,  53  Pac.  724.  collected  it  should,  upon  decease  of 

"  Stratton    v.    Heuser,    19    Ky.    L.  the  person  giving  the  note,  be  sur- 

Rep.  1019,  42  S.  W.  1133,  Ky.  Stat.,  rendered  to  his  executor. 

§§  4665-4667.  ^  "Butler     v.     Sturges,     6     Blackf. 

'"Dickey   v.    Pocomoke    City    Nat.  (Tnd.)   186. 
Bk.,  89  Md.  280,  43  Atl.  33. 


523         AGENCY — RECOVERY    FOR  BENEFIT    OF    HOLDER.         [§§    408,  409 

of  a  sealed  note  is  held  to  be  a  holder  subject  to  the  infirmities  against 
the  original  obligee.^* 

§  408.  Agency. — i\.n  agent,  in  case  of  a  note  indorsed  to  himself, 
may  sue  thereon  in  his  own  name,  even  though  said  note  was  pur- 
chased with  his  principal's  money.^^  But  in  a  suit  between  the  orig- 
inal parties  to  a  due  bill  it  is  held  that  the  maker  may  show  that  the 
apparent  payee  was  the  agent  of  the  real  payee,  or  that  the  person, 
in  favor  of  whom  the  bill  was  indirectly  given  was  his  debtor  and 
that  the  plaintiff's  name  was  a  borrowed  one,  only  where  such  facts 
tend  to  prove  that  there  was  really  no  consideration.^*'  And  where  an 
agent,  having  such  power,  accepts  a  bill  in  the  name  of  his  principal 
the  latter  is  liable  as  acceptor,  and  cannot  escape  liability  on  the 
ground  that  he  had  no  interest  in  the  transaction  in  which  the  bill 
was  given  and  that  he  had  received  no  consideration,  unless  he  proves 
that  his  agent,  to  the  knowledge  of  the  holder  of  the  bill,  had  abused 
his  power  or  the  confidence  reposed,  and  had  availed  himself  of  the 
power  for  his  own  benefit  or  purposes."  But  it  is  also  decided  that 
if  the  transferee  is  to  be  considered  as  the  agent  of  a  foreign  merchant, 
he  cannot  recover  upon  his  title  only,  where  such  title  is  bad.^^  And  in 
an  action  by  the  second  indorsee  against  his  immediate  indorser  de- 
fendant may  prove  that  the  plaintiff  had  given  no  consideration  for 
the  note,  but  held  it  as  the  agent  merely  of  the  payees,  or  first  in- 
dorsers,  to  collect  the  amount  for  them,  and  therefore  had  no  right 
to  bring  the  suit.^'*  So  in  an  action,  brought  since  the  code  in  New 
York,  on  a  note  payable  to  bearer  or  indorsed  in  blank  it  may  be  shown 
that  the  plaintiff  is  not  the  real  owner  of  the  note ;  so  his  want  of  in- 
terest, or  that  he  holds  the  note  merely  as  agent  for  the  payee,  against 
whom  the  maker  has  a  good  defense,  may  be  proven.®*' 

§409.  Recovery  for  benefit  of  holder — Beneficial  interest. — Tlio 
lawful  possessor  of  a  note  may  recover  for  the  benefit  of  the  holder  of 

"  J.  C.  Stevenson  &  Co.  v.  Bethea,  grounds  being  to  enable  the  plain- 

68  S.  C.  246,  47  S.  E.  71.  tiff  to  show  that  his  transferer  had 

"Cochran  v.  Siegfried   (Tex.  Civ.  paid  value  for  the  note,  it  being  a 

App.),  75  S.  W.  542.  foreign  one. 

"'Lauve  v.  Bell,  1  La.  (1  La.  O.  S.  ■'»  Herrick   v.    Carman,    10    Johns. 

191)  73.  (N.  Y.)   224.    But  see:    Case  v.  Me- 

"  Broadway     Sav.     Bank     of     St.  chanics'    Banking   Assoc,    4    N.    Y. 

Louis  V.  Vorster,  30  La.  Ann.  587.  166. 

''De    la    Chaumette    v.    Bank    of  »"  Eaton    v.    Alger,    57    Barb.    (N. 

England,  9  Barn.  &  C.  208,  but  there  Y.)  179. 
was  a  new  trial  granted,  one  of  the 


§    410]  WANT   OF    TITLE    OR   INTEREST.  524 

the  legal  title. °^  And  a  want  of  beneficial  interest  in  the  proceeds 
of  a  note  will  not  preclude  the  holder  of  the  legal  title  from  suing  on 
the  note,  where  the  assignment  is  made  in  order  that  he  may  realize 
on  the  paper  in  the  original  payee's  interest.*'^  ISTor  will  the  bene- 
ficial interest  of  the  indorsee  preclude  recovery  by  the  payee  of  a  note, 
indorsed  as  collateral  security,  where  the  payee  has  possession,  without 
fraud.''^  Nor  is  it  a  valid  objection  to  a  suit  that  it  is  brought  for 
the  benefit  of  the  principal  in  a  note,  which  is  sued  as  against  a  surety 
only  and  two  other  persons  as  executors  of  an  estate.®*  Nor  is  it  a 
defense  that  the  purchaser  took  only  the  nominal  title  to  a  note  and 
that  another  was  to  benefit  by  the  purchase.*'^  But  it  is  held  that  an " 
answer  that  the  note  had  been  delivered  to  another  party  with  author- 
ity to  collect  the  same  and  apply  the  proceeds  on  a  debt  due  to  him, 
shows  the  beneficial  interest  to  be  in  such  party  and  constitutes  a  good 
defense.®^ 

§  410.     Transfer  of  title  or  interest  after  suit  commenced. — It  is 

held  that  in  a  suit  on  a  bill  or  note,  a  plea  puis  darrein  continuance, 
that  since  suit  commenced  plaintiff  has  transferred  to  another  the 
legal  interest  in  the  bill  or  note,  is  a  good  bar.*^^  But,  under  an  Iowa 
decision,  after  an  action  has  been  commenced  the  plaintiff  may  sell 
and  dispose  of  the  judgment  he  may  recover  without  investing  the 
person  purchasing  it  with  the  legal  interest  to  the  chose  in  action, 
and  under  such  an  assignment  it  would  be  improper  for  the  court  to 
substitute  the  holder  of  it  as  plaintiff  in  the  action  with  power  to  prose- 
cute in  his  own  name.  And  where,  in  an  action  on  a  promissory 
note,  the  answer  denies  that  plaintiff  holds  against  him  any  such 
notes  as  are  described  in  his  petition,  such  a  denial,  without  more, 
relates  to  the  time  of  commencing  the  action,  and  means  only  that  it 

"  Hyde  v.  Lawrence,  49  Vt.  361.  "^  Hatchings  v.   Reinhalter,  23  R. 

Plaintiff  was  the  beneficial  owner  I.  518,  51  Atl.  429. 
wheji  the  suit  was  brought.    The  as-  "  Hampton  v.  Shehan,  7  Ala.  295. 
signee,  who  was  the  mere  legal  title  ^^  Anderson   v.   Johnson,   106   Wis. 
holder,    subsequently    appeared    and  218,  82  N.  W.  177,  aff'g  Anderson  v. 
admitted    plaintiff's   ownership   and  Chicago  Title  &  Trust  Co.,  101  Wis. 
disclaimed   title   in   himself,   and   it  385,  77  N.  W.  710. 
was  decided   that  the   defense   that  ^^  Gillispie  v.  Ft.  Wayne  &  South- 
plaintiff  was  not  the  owner  of  the  ern  R.  Co.,  12  Ind.  398. 
paper    was    unsustained.     Simon  •  v.  "^  Beebe   v.    Real    Estate    Bank,    5 
Wildt,  84  Ky.  157.  Pike   (Ark.)   183;   following  Gray  v. 

°=Manley  v.  Park,  68  Kan.  400,  75  Real    Estate    Bank,    5    Pike    (Ark.) 

Pac.  557,  76  Pac.  1130.  93. 


I 


525  CHARACTER    OF    TITLE   OR   INTEREST.  [§§    411,   413 

is  denied  that  plaintiff  holds  such  notes  as  are  described.  If  in  such, 
case  the  notes  offered  in  evidence  are  not  indorsed,  and  it  is  claimed 
that  the  assignment  shows  that  the  action  was  not  prosecuted  in  the 
name  of  the  real  party  in  interest ;  it  is  held  error  to  instruct  the  jury- 
to  find  for  the  defendant,  and  that  the  assignment  did  not  invest  the 
assignee  with  the  legal  interest  in  the  notes,  being  only  a  transfer 
of  the  judgment  the  assignor  expected  to  recover.*^ 

§'411.  Character  of  title  or  interest. — It  is  decided  that  the  holder 
of  the  legal  title  is  not  obligated,  in  order  to  recover,  to  show  in  what 
capacity  he  holds  the  note.'^'*  And,  ordinarily,  the  character  and  ex- 
tent or  nature  of  the  interest  of  the  legal  holder  of  negotiable  paper 
cannot  constitute  a  defense  as  to  the  amount  recoverable  from  the 
maker,  provided  he  is  entitled  to  any  recovery  whatever.'^"  Nor,  it  is 
decided,  can  the  maker,  when  sued  on  a  note  by  an  indorsee  from  the 
payee,  defend  as  to  the  character  in  which  the  plaintiff  sues,  and  which 
is  alleged  to  arise  from  a  guaranty  made  by  the  indorsee  to  a  bank 
where  he  had  discounted  the  note.'^^ 

§  412.  Void  or  voidable  title  or  transfer. — Any  illegality  in  the 
transfer  will  vitiate  the  title  of  one  who  derives  it  through  a  violation 
of  law  to  which  he  was  a  party,  although  one  not  a  party  to  such  vio- 
lation and  holding  it  bona  fide  might  recover.''^  And  while  it  is  gen- 
erally true  as  a  rule  that  if  a  promisor  induces  a  person  to  take  an 
assignment  of  a  note,  by  admitting  the  justice  of  the  debt,  or  by  de- 
claring that  he  has  no  defense,  he  cannot  afterward  deny  it  to  the 
prejudice  of  the  assignee,  yet  such  a  rule  has  no  application  to  a 
case  of  usury  where  the  assignee  has  knowledge  of  the  same,  and  es- 
pecially where  such  declarations  are  obtained  the  more  effectually  to 
cover  and  hide  the  same.'^^  If  a  note  has  been  actually  and  regularly 
indorsed  and  delivered  by  the  payee  to  the  indorsee  the  legal  title  be- 

"' Allen    v.    Newberry,     8     Clarke  England,  13  East  135.   Lord  Kenyon, 

(Iowa)  65.  C.  J.,  said:    "There  is  no  doubt  that 

»"  Graham  v.  Troth,  69  Kan.  861,  77  the  holder  of  a  bank  note  is  entitled 

Pac.  92.  prima  facie  to  prompt  payment;  but 

"Ellis  V.  Watkins,  73  Vt.  371,  50  if   the  other   party   has   been   plun- 

Atl.  1105.  dered    of    it   before,"    and    there   is 

"  Finney     v.     Pennsylvania     Iron  some    suspicion    of    priority    in    the 

Works  Co.,  22  App.  D.  C.  476.  fraud,    it   is  a  proper   question    for 

"Sproule  V.  Merrill,  16  Shep.    (29  the  jury.    See  §§  288,  et  seg.,  herein. 

Me.)   260.  See  Solomons  v.  Bank  of  "Nichols  v.  Levins,  15  Iowa  362. 


§    413]  WANT    OF   TITLE    OR   INTEREST.  526 

comes  thereby  transferred  to  such  indorsee  with  the  right  to  enforce 
payment  without  regard  to  the  relations  between  him  and  his  imme- 
diate indorser,  and  such  right  to  recover  cannot  be  successfully  chal- 
lenged by  either  the  maker  or  his  creditors  upon  the  grounds  that  the 
indorsement  was  made  causa  mortis  and  that  there  had  been  a  subse- 
quent revocation  by  the  recovery  by  the  donor.  The  gift  is  not  void, 
but  voidable,  and  that  only  by  the  donor  or  his  legal  representative. 
The  note  is  the  property  of  the  indorsee,  except  possibly  as  to  some 
offset  by  the  maker  against  the  payee  or  except  as  to  creditors  hin- 
dered, delayed  or  defrauded  by  such  assignment  made  and  accepted.'^'* 
The  character  of  the  paper,  however,  as  in  case  of  certificates  of  in- 
debtedness issued  by  a  municipality,  may  be  such  that  its  ultimate 
payment  depends  upon  contingencies  which  must  happen  before  any 
right  of  action  can  accrue,  these  conditions  precedent  being  imposed 
under  ordinance.  In  such  case  the  paper,  not  being  a  negotiable  or 
transferable  instrument,  the  holder  thereof  acquires  no  enforceable 
title  where  there  has  been  no  compliance  by  him  with  the  prerequisites 
upon  which  title  must  rest.'^^  But  if  an  assignment  is  voidable  only 
at  the  instance  of  other  parties  than  the  maker,  the  latter  cannot  set 
up  such  assignment  to  destroy  the  title  of  the  indorsee  in  a  suit  by 
him.'^®  And  although  a  cashier  of  a  bank  can  indorse  negotiable  paper 
and  convey  the  legal  title  to  any  person  but  himself,  yet  an  indorse- 
ment to  himself  would  be  voidable  merely  at  the  instance  of  the  bank, 
and  until  avoided  by  the  bank  would  pass  legal  title  to  the  cashier.''^ 

§  413.  Checks. — An  assignee  in  due  course  of  a  check  may  sue 
thereon.''^  And  in  a  recent  case  in  New  York  the  rule  is  affirmed  as 
settled  that  title  to  a  check,  like  title  to  any  other  chose  in  action,  can 
be  transferred  by  indorsement,  and  by  delivery  and  parol;  but  by 
such  transfer  its  negotiability  is  destroyed  and  the  transferee  takes 
simply  the  title  which  the  transferor  had  which  is  subject  to  equities 
existing  between  the  drawer  of  the  check  and  the  payee;  and  under 
the  Negotiable  Instruments  Law,  where  the  holder  of  an  instrument 
payable  to  his  order  transfers  it  for  value  without  indorsing  it,  the 

'*Hulley  V.  Chedic,  22  Nev.  127,  36  Pac.  1036.  per  Henshaw,  J.;  Preston 

Pac.  783.  v.  Cutter,  64  N.  H.  461,  463;  Haugan 

'^Newgrass    v.    City    of    New    Or-  v.  Sunwall,  60  Minn.  367,  62  N.  W. 

leans,  42  La.  Ann.  163,  7  So.  565.  398. 

™  Tyson  v.  Bray,  117  Ga.  639,  45  S.  ''  Kemp  v.  Northern  Trust  Co.,  108 

E.  74.  111.  App.  242. 

"Dyer  v.  Sebrell,  135  Cal.  597,  67 


537 


BILL   OF    LADING. 


[§  414 


transfer  vests  in  the  transferee  such  title  as  the  transferor  had  there- 
in, and  the  transferee  acquires  in  addition  the  right  to  have  the  in- 
dorsement of  the  transferor;  and  a  bank  certifying  a  check  so  de- 
livered without  indorsement  is  liable,  though  it  had  no  knowledge  as 
to  who  was  owner  of  the  check.''^ 


§  414.  Bill  of  lading. — It  is  decided  that  the  fact  that  goods  were 
taken  from  the  possession  of  the  carrier  by  one  having  title  para- 
mount to  that  of  the  consignor  is  a  good  defense  to  an  action  by  the 
consignee  or  indorsee  of  the  bill  of  lading  for  the  non-delivery  of  the 
property. ^°  The  statute  making  bills  of  lading  negotiable  does  not 
put  them  upon  the  footing  of  bills  of  exchange  and  charge  the  negotia- 
tion of  them  with  the  consequences  which  attend  or  follow  the  nego- 
tiation of  bills  or  notes,  but  merely  prescribes  the  mode  of  trans- 
ferring or  assigning  them,  and  provides  that  such  transfer  and  de- 
livery by  these  symbols  of  property  shall  for  certain  purposes  be 
equivalent  to  an  actual  transfer  and  delivery  of  the  property  itself. ^^ 


"  Mueur  v.  Phoenix  Nat.  Bk.,  88  N. 
Y.  Sup.  83,  94  App.  Div.  331,  aff'g  86 
N.  Y.  Supp.  701,  42  Misc.  341,  aff'd 
183  N.  Y.  (Mem.)  511.  See  Freund 
V.  Importers'  &  Traders'  Nat.  Bank, 
76  N.  Y.  352. 

*"  See  next  following  note. 

^^  National  Bank  of  Commerce  v. 
Chicago,  B.  &  N.  R.  Co.,  44  Minn. 
224,  232-237.  The  court,  per  Mitch- 
ell, J.,  said:  "There  is  an  unbroken 
line  of  authorities  in  England  that, 
even  as  against  a  bona  fide  con- 
signee or  indorsee  for  value,  the 
carrier  is  not  estopped  by  the  state- 
ments of  the  bill  of  lading,  issued  by 
his  agent,  from  showing  that  no 
goods  were  in  fact  received  for 
transportation.  Grant  v.  Norway,  10 
C.  b:  665;  Coleman  v.  Riches,  16  C. 

B.  104;  Hubbersty  v.  Ward,  8  Exch. 
330;  Brown  v.  Powell  Coal  Co.,  L.  R. 
10  C.  P.  562;  McLean  v.  Fleming,  L. 
R.  2  H.  L.  Sc.  128;  Cox  v.  Bruce,  18 
E.  B.  Div.  147;  Meyer  v.  Dresser,  16 

C.  B.  (U.  S.)  646;  Jessel  v.  Bath,  L. 
R.   2  Exch.   267.    And  this   has  not 


been  at  all  changed  by  the  'bills  of 
lading  act'  (18  and  19  Vict.,  c.  Ill, 
§  3).  It  is  also  the  settled  doctrine 
of  the  federal  courts.  Schooner 
Freeman  V.  Buckingham,  18  How. 
(U.  S.)  182;  The  Lady  Franklin,  8 
Wall.  (U.  S.)  325;  Pollard  v.  Vin- 
ton, 105  U.  S.  7;  St.  Louis,  etc.,  Ry. 
Co.  V.  Knight,  122  U.  S.  79  (7  Sup. 
Ct.  Rep.  1132);  Friedlander  v. 
Texas  &  Pac.  Ry.  Co.,  130  U.  S.  416 
(8  Sup.  Ct.  Rep.  570).  What  was 
said  on  the  subject  in  Schooner 
Freeman  v.  Buckingham  was  proba- 
bly obiter,  for  in  that  case  it  was 
sought  to  hold  the  interest  of  the 
general  owner  in  a  ship  liable  on  a 
bill  of  lading  issued  by  the  special 
owner,  who  was  not  the  agent  of  the 
former.  But  what  is  there  said  is 
important  both  as  being  the  utter- 
ance of  so  eminent  a  jurist  as 
Curtis,  J.,  and  also  because  so  often 
quoted  with  approval  by  the  same 
court  in  subsequent  cases.  The  case 
of  the  Lady  Franklin  did  not  in- 
volve the  question  of  a  bona  fide 


415] 


WANT    OF   TITLE    OR   INTEREST. 


523 


§  415.     To  protect  maker  or  let  in  his  defense. — If  the  maker  has 
a  good  defense,  as  between  him  and  the  payee,  but  is  prevented  from 


purchaser,  but  is  important  as  an- 
nouncing that  the  principle  is  the 
same,  whether  the  false  bill  of  lad- 
ing is  issued  fraudulently  or  by 
mistake.  But,  in  view  of  the  later 
cases  cited  above,  there  is  no  room 
to  doubt  that  that  court  is  firmly 
committed  to  the  doctrine  in  its 
broadest  scope.  The  same  rule  ob- 
tains in  Massachusetts,  Maryland, 
Louisiana,  Missouri,  North  Caro- 
lina, and  apparently  Ohio.  Sears  v. 
Wingate,  3  Allen  103;  Baltimore  & 
Ohio  R.  Co.  V.  Wilkins,  44  Md.  11; 
Fellows  V.  Steamer  Powell,  16  La. 
Ann.  316;  Hunt  v.  Miss.  Cent.  R. 
Co.,  29  La.  Ann.  446;  Louisiana  Nat. 
Bank  v.  Laveille,- 52  Mo.  380;  Wil- 
liams v.  Wilmington  &  Weldon  R. 
Co.,  93  N.  C.  42;  Dean  v.  King,  22 
Ohio  St.  118.  The  text  writers  all 
agree  that  the  overwhelming  weight 
of  authority  is  on  this  side.  See  38 
Am.  Dec.  410  (note  to  Chandler  v. 
Sprague).  The  reason  by  which  this 
doctrine  is  usually  supported  is  that 
a  bill  of  lading  is  not  negotiable  in 
the  sense  in  which  a  bill  of  exchange 
or  promissory  note  is  negotiable, 
where  the  purchaser  need  not  look 
beyond  the  instrument  itself;  that 
so  far  as  it  is  a  receipt  for  the  goods 
it  is  susceptible  of  explanation  or 
contradiction,  the  same  as  any  other 
receipt;  that  the  whole  question  is 
one  of  the  law  of  agency;  that  it  is 
not  within  the  scope  of  the  author- 
ity of  the  shipping  agent  of  a  car- 
rier to  issue  bills  of  lading  where 
no  property  is  in  fact  received  for 
transportation;  that  the  extent  of 
his  authority,  either  real  or  appar- 
ent, is  to  issue  bills  of  lading  for 
freight  actually  received;  that  his 
real   and   apparent  authority — i.   e., 


the  power  with  which  his  principal 
has  clothed  him  in  the  character  in 
which  he  is  held  out  to  the  world — 
is  the  same,  viz.,  to  give  bills  of  lad- 
ing for  goods  received  for  transpor- 
tation; and  that  this  limitation  upon 
his  authority  is  known  to  the  com- 
mercial world,  and  therefore  any  per- 
son purchasing  a  bill  of  lading  is- 
sued by  the  agent  of  a  carrier  acts 
at  his  own  risk  as  respects  the  ex- 
istence of  the  fact  (the  receipt  of 
the  goods)  upon  which  alone  the 
agent  has  authority  to  issue  the  bill, 
the  rule  being  that,  if  the  authority 
of  an  agent  is  known  to  be  open  for 
exercise  only  in  a  certain  event,  or 
upon  the  happening  of  a  certain 
contingency  or  the  performance  of  a 
certain  condition,  the  occurrence  of 
an  event,  or  the  happening  of  a  con- 
tingency, or  the  preponderance  of 
the  condition  must  be  ascertained 
by  him  who  would  avail  himself  of 
the  results  ensuing  from  the  exer- 
cise of  the  authority.  An  examina- 
tion of  the  authorities  also  shows 
that  they  apply  the  same  principle 
whether  the  bill  of  lading  was  issued 
fraudulently  and  collusively,  or 
merely  by  mistake.  The  only  States 
that  we  have  found  in  which  a  con- 
trary rule  has  been  adopted  are  New 
York,  Kansas,  Nebraska,  apparently 
Illinois,  and  perhaps  Pennsylvania. 
Armour  v.  Mich.  Central  R.  Co.,  65 
N.  Y.  Ill;  Bank  of  Batavia  v.  N.  Y. 
L.  E.  &  W.  R.  R.  Co.,  106  N.  Y.  195 
(12  N.  E.  433);  Sioux  City  &  Pac. 
R.  Co.  V.  First  Nat.  Bank,  10  Neb. 
556  (7  N.  W.  311) ;  St.  Louis  &  Iron 
Mt.  R.  Co.  V.  Larned,  103  111.  293; 
Brook  V.  New  York,  etc.,  R.  Co.,  108 
Pa.  St.  529  (1  Atl.  206).  The  rea- 
soning of  these  cases  is  in  substance 


529 


TO    PROTECT    MAKER    OR   LET    IN"    HIS    DEFEXSE.  [§    415 


making  it  in  consequence  of  the  note  having  passed  into  tlie  hands 
of  an  indorsee,  it  may  be  proper  to  show  the  circumstances  under  which 


that  the  question  does  not  at  all  de- 
pend upon  the  negotiability  of  bills 
of  lading,  but  upon  the  principle  of 
estoppel  in  pais;  that  where  a  prin- 
cipal has  clothed  an  agent  with 
power  to  do  an  act  in  case  of  the 
existence  of  some  extrinsic  fact, 
necessarily  and  peculiarly  within 
the  knowledge  of  the  agent,  and  of 
the  existence  of  which  the  act  of 
executing  the  power  Is  itself  a  rep- 
resentation, the  principal  is  estopped 
from  denying  the  existence  of  the 
fact,  to  the  prejudice  of  a  third  per- 
son who  has  dealt  with  the  agent  or 
acted  on  his  representation  in  good 
faith  in  the  ordinary  course  of  busi- 
ness. This  rule  this  court  in  effect 
adopted  and  applied  in  McCord  v. 
Western  Union  Telegraph  Co.,  39 
Minn.  181  (39  N.  W.  315,  318).  It  is 
urged  that  force  is  added  to  this 
reasoning  in  view  of  the  fact  that 
bills  of  lading  are  viewed  and  dealt 
with  by  the  commercial  world  as 
quasi  negotiable,  and  consequently  it 
is  desirable  that  they  should  be 
viewed  with  confidence  and  not  dis- 
trust; and  that  for  these  considera- 
tions it  is  better  to  cast  the  risk  of 
the  goods  not  having  been  shipped 
upon  the  carrier,  who  has  placed  it 
in  the  power  of  agent^  of  his  own 
choosing  to  make  these  representa- 
tions, rather  than  upon  the  inno- 
cent consignee  or  indorsee,  who,  as  a 
rule,  has  no  means  of  ascertaining 
the  fact.  If  the  question  was  res 
Integra,  we  confess  that  it  seems  to 
us  that  this  argument  would  be  very 
cogent.  But,  on  the  other  hand,  it 
may  be  said  that  carriers  are  not  in 
the  business  of  issuing  and  dealing 
in  bills  of  lading  in  the  same  sense 
in  which  bankers  issue  and  deal  in 
Joyce  Defenses — 34. 


bills  of  exchange;  that  their  busi- 
ness is  transporting  property,  and 
that  if  the  statements  in  the  receipt 
part  of  bills  of  lading  issued  by  any 
of  their  numerous  station  or  local 
agents  are  to  be  held  conclusive 
upon  them,  although  false,  it  would 
open  so  wide  a  door  for  fraud  and 
collusion  that  the  disastrous  conse- 
quences to  the  carrier  would  far  out- 
weigh the  inconvenience  resulting 
to  the  commercial  world  from  the 
opposite  rule.  It  is  also  to  be  ad- 
mitted that  it  requires  some  temer- 
ity to  attack  either  the  policy  or 
the  soundness  of  a  rule  which  seems 
to  have  stood  the  test  of  experience, 
which  has  been  approved  by  so 
many  eminent  courts,  and  under 
which  the  most  successful  commer- 
cial nation  in  the  world  has  devel- 
oped and  conducted  her  vast  com- 
merce ever  since  the  inception  of 
carriers'  bills  of  lading.  But  on 
questions  of  commercial  law  it  is 
eminently  desirable  that  there  be 
uniformity.  It  is  even  more  impor- 
tant that  the  rule  be  uniform  and 
certain  than  that  it  be  the  best  one 
that  might  be  adopted.  Moreover, 
on  questions  of  general  commercial 
law  the  federal  courts  refuse  to  fol- 
low the  decisions  of  the  state  courts, 
and  determine  the  law  according  to 
their  own  views  of  what  it  is.  It  is 
therefore  very  desirable  that  on  such 
questions  the  state  courts  should 
conform  to  the  doctrine  of  the  fed- 
eral courts.  The  inconvenience  and 
confusion  that  would  follow  from 
having  two  conflicting  rules  on  the 
same  question  in  the  same  state, 
one  in  the  federal  courts  and  an- 
other in  the  state  courts,  is  of  itself 
almost  a   sufficient   reason   why  we 


§  415] 


WAXT    OF   TITLE   OR   INTEREST. 


530 


the  indorsement  was  made,  as  that  it  was  indorsed  to  him  when  past 
due,  or  that  he  is  not  for  other  reasons  the  hona  fide  holder  of  the 
note.  Such  evidence  may  be  admissible  in  many  cases  in  order  to  sub- 
ject the  note  in  the  hands  of  the  indorsee  to  a  defense  existing  between 
the  original  parties.   Aside  from  that  consideration,  in  the  absence  of 


should  adopt  the  doctrine  of  the  fed- 
eral courts  on  this  question.  To  do 
otherwise,  so  long  as  the  jurisdic- 
tion of  those  courts  so  largely  de- 
pends on  the  citizenship  of  suitors, 
would  really  result  in  discrimination 
against  our  own  citizens.  In  defer- 
ence, therefore,  to  the  overwhelming 
weight  of  authority,  but  without 
committing  ourselves  to  all  the  rea- 
soning of  the  decided  cases  on  the 
subject  of  the  law  of  agency,  we 
deem  it  best  to  hold  that  a  bill  of 
lading  issued  by  a  station  or  ship- 
ping agent  of  a  railroad  company  or 
other  common  carrier,  without  re- 
ceiving the  goods  named  in  it  for 
transportation,  imposes  no  liability 
upon  the  carrier,  even  to  an  inno- 
cent consignee  or  indorsee  for  value, 
and  that  the  rule  is  the  same 
whether  the  act  of  the  agent  was 
fraudulent  and  collusive,  or  merely 
the  result  of  mistake.  Of  course  this 
presumption  is  predicated  upon  the 
assumption  that  the  authority  of 
the  agent  is  limited  to  issuing  bills 
of  lading  for  freight  receivable  be- 
fore, or  concurrent  with  the  issuing 
of  the  bills,  which  would  be  the 
presumption  In  the  absence  of  evi- 
dence to  the  contrary.  No  doubt  a 
carrier  might  adopt  a  different  mode 
of  doing  business  by  giving  his 
agents  authority  to  issue  bills  of 
lading  for  goods  not  received,  so  as 
to  render  him  liable  in  such  cases 
to  third  parties." 

As  to  negotiability  of  bills  of  lad- 
ing and  rights  on  transfer  thereof 
see  further: — 


United  States. — Farmers'  Loan  & 
Trust  Co.  v.  Northern  P.  R.  Co., 
120  Fed.  873,  57  C.  C.  A.  533,  rev'g 
112  Fed.  829. 

Connecticut. — Mather  v.  Gordon 
Bros.,  77  Conn.  341,  59  Atl.  424. 

Georgia. — Commercial  Bank  v.  J. 
K.  Armsby  Co.,  120  Ga.  74,  65  L.  R. 
A.  443,  47  S.  E.  589;  Raleigh  &  G.  R. 
Co.  V.  Lowe,  101  Ga.  320,  28  S.  E. 
867,  10  Am.  &  Eng.  R.  Cas.  N.  S. 
398. 

Kentucky. — Temple  Nat.  Bank  v. 
Louisville  Cotton  Oil  Co.,  26  Ky.  L. 
Rep.  518,  82  S.  W.  253. 

Maryland.  —  National  Bank  of 
Bristol  V.  Baltimore  &  O.  R.  Co.,  99 
Md.  661,  59  Atl.  134. 

Minnesota. — Ryan  v.  Great  North- 
ern R.  Co.,  90  Minn.  12,  95  N.  W. 
758. 

Missouri. — American  Zinc  L.  &  S. 
Co.  V.  Marble  Leadworks,  102  Mo. 
App.  158,  76  S.  W.  668;  Smith  v. 
Missouri  P.  R.  Co.,  74  Mo.  App.  48. 

Neiv  Hampshire. — Hart  v.  Boston 
&  M.  R.,  72  N.  H.  410,  56  Atl.  920. 

New  Jersey. — National  Newark 
Bkg.  Co.  V.  Delaware  L.  &  W.  R. 
Co.,  70  N.  J.  L.  774,  58  Atl.  311. 

North  Carolina. — Willard  Mfg.  Co. 
V.  G.  H.  Tierney  &  Co.,  133  N.  C. 
630,  45  S.  E.  1026.  • 

Texas. — Grayson  County  National 
Bank  V.  Nashville  C.  &  St.  L.  R. 
(Tex.  Civ.  App.),  79  S.  W.  1094: 
First  Nat.  Bank  v.  San  Antonio  & 
A.  P.  R.  Co.,  97  Tex.  201,  77  S.  W. 
410,  72  S.  W.  1033. 

Washington. — Seattle  Nat.  Bank 
v.  Powles,  33  Wash.  21,  73  Pac.  887. 


531  TO    PROTECT    MAKER   OR    LET    IN    HIS    DEFENSE.  [§    416 

illegality  in  the  transaction,  such  testimony  would  proljably  be  inad- 
missible. But  if  the  maker  justly  owes  the  debt  and  has  no  defense 
legal  or  equitable  which  should  shield  him  from  payment  of  the  note 
to  some  one,  it  is  immaterial  to  him  to  whom  he  pays  it  or  who  re- 
covers upon  it,  provided  that  when  the  payment  is  made,  or  a  recovery 
had,  it  will  bar  any  further  claim  on  the  note  by  others.^"  So  where 
the  holder  has  legal  title  to  a  demand,  and  the  defendants  would  be 
protected  in  payment  to,  or  recovery  by  him,  it  is  enough  to  entitle 
him  to  maintain  an  action  on  the  note  and  to  preclude  defendant  from 
questioning  the  conditions  or  considerations  on  which  the  transfer  was 
based.*^  And  the  maker  of  a  negotiable  note  has  no  interest  in  raising 
the  question  of  the  right  of  the  payee  to  indorse  it,  as  a  payment  to 
the  indorsee  and  holder  will  protect  him.^*  But  the  defendant  maker 
has  a  right  to  have  the  judgment  rendered  against  him  in  favor  of  the 
legal  holder,  so  as  to  become  a  bar  to  a  future  recovery  on  the  same 
instrument.^^ 

§416.  Same  subject. — It  is  held  that  the  general  rule  is  that,  in 
the  absence  of  7nala  fides,  plaintiff's  prima  facie  title  from  possession 
may  not  be  rebutted  by  the  debtor  by  evidence  that  the  title  is  in 
some  other  party  so  long  as  he  is  protected  against  the  claim  of  such 
party  by  the  payment  of  the  judgment  which  may  be  rendered  against 
him.^®  It  is  also  determined  that  unless  the  title  of  the  plaintiff  is 
necessary  for  a  defense  against  the  one  asserted  to  be  the  owner,  it 
cannot  be  disputed,  in  the  absence  of  a  showing  of  a  fictitious  or  fraud- 
ulent transfer,  made  to  deprive  the  maker  of  his  defense  against  the 
true  owner ;  that  it  is  not  a  good  plea  to  allege  that  the  note  sued  on 
is  the  property  of  another  and  not  of  the  plaintiff,  without  showing 
some  substantial  matter  of  defense  against  the  one  asserted  to  be  the 
owner,  and  which  could  not  be  set  up  against  the  plaintiff.^^    It  is  de- 

'^Tarbell    v.    Sturtevant,    26    Vt.  note  had  full  knowledge  of  all  the 

513,  517,  per  Isham,  J.  proceedings    in    the    suit,    and    had 

*=  Hunter  v.  Allen,  94  N.  Y.  Supp.  not    in    any    manner    asserted    any 

880,  106  N.  Y.  App.  Div.  557.  right  to  interfere,  it  was  held  that 

**  Taylor   v.    Littell,    21   La.    Ann.  a  payment  of  the  judgment  to  the 

665.  plaintiff,    if   permitted   by   the   real 

''Burnap  v.  Cook,  32  111.  168.  owner  of  the  note,  would  be  a  suf- 

^^Dyer  v.  Sebrell,  135  Cal.  597,  67  ficient  protection  to  the  defendant. 

Pac.  1036,  per  Henshaw,  J.  Hackett  v.  Kendall,  23  Vt.  275. 

"Where  it  appeared   that  the  per-        "  Gushee  v.  Leavitt,  5  Cal.  160,  63 

son    who    was    claimed    by    the    de-  Am.  Dec.  116,  approved  in  Giselman 

fendant  to  be  the  real  owner  of  the  v.    Starr,    106    Cal.    651,    657,    658, 


41C] 


WANT    OF    TITLE   OR   INTEREST. 


532 


where  the  court,  per  Henshaw,  J., 
said:  "The  defendant  has  a  statu- 
tory right  to  have  a  cause  of  action 
against  him  prosecuted  by  the  real 
person  in  interest  (Code  Civ.  Proc, 
§  307),  and  it  was  in  the  exercise 
of  that  right  that  he  pleaded  lack 
of  title  in  plaintiffs  and  asked  to 
have  determined  the  conflicting 
claims  of  those  whom  he  asserted 
to  be  the  owners.  But  the  purpose 
of  the  statute  is  readily  discerni- 
ble, and  the  right  is  limited  to  its 
purpose.  It  is  to  save  a  defendant, 
against  whom  a  judgment  may  be 
obtained,  from  further  harassment 
or  vexation  at  the  hands  of  other 
claimants  to  the  same  demand.  It  is 
to  prevent  a  claimant  from  making 
a  simulated  transfer,  and  thus  de- 
feating any  just  counter-claim  or 
set-off  which  defendant  would  have 
to  the  demand  if  pressed  by  the  real 
owner.  But  where  the  plaintiff 
shows  such  a  title  as  that  a  judg- 
ment upon  it  satisfied  by  defend- 
ant will  protect  him  from  future 
annoyance  or  loss,  and  where,  as 
against  the  party  suing,  defendant 
can  urge  any  defenses  he  could 
make  against  the  real  owner,  then 
there  is  an  end  of  the  defendant's 
concern  and  with  it  of  his  right 
to  object;  for,  so  far  as  he  is  in- 
terested, the  action  is  being  prose- 
cuted in  the  name  of  the  real  party 
in  interest.  The  cases  which  seem- 
ingly lay  down  the  broad  rule  that 
it  is  not  a  good  plea  to  allege  that 
the  note  sued  upon  is  the  property 
of  another  and  not  of  plaintiff,  with- 
out showing  some  substantial  mat- 
ter of  defense  against  the  one  as- 
serted to  be  the  owner,  are  to  be 
read  in  the  light  of  their  facts,  and 
so  read  they  will  be  found  to  be  in 
strict  accord  with  what  is  here  said. 
These  are  cases  where  prima  facie 
legal    title    is    shown    in    plaintiff. 


such  a  title  as  would  protect  de- 
fendant if  judgment  were  obtained 
upon  it.  If,  under  such  circum- 
stances, the  defendant  claims  an- 
other to  be  the  real  owner,  he  must 
support  his  right  to  make  that 
claim  by  showing  that  he  has  some 
equity  or  defense  against  the  real 
owner  which  he  cannot  maintain 
against  the  prima  facie  legal  owner. 
Such  is  the  meaning  of  Price  v. 
Dunlap,  5  Cal.  483,  and  Gushee  v. 
Leavitt,  5  Cal.  160,  63  Am.  Dec. 
116."  The  Giselman  case  is  cited  in 
Philbrook  v.  Superior  Court,  111 
Cal.  31,  35,  a  case  of  mandamus  to 
compel  substitution  of  assignee  and 
the  right  of  a  disbarred  attorney  at 
law  to  prosecute  cause  of  action, 
and  availability  of  defenses  against 
him;  also  cited  in  Herman  v.  Hecht, 
116  Cal.  553,  560,  561,  where  it  was 
declared  that  the  assignment  vested 
the  legal  title  to  the  note  in  plain- 
tiff and  carried  with  it  the  original 
debt,  and  that  it  was  immaterial 
whether  the  money  consideration 
mentioned  in  the  assignment  was  re- 
ceived by  plaintiff's  assignors  or 
whether  they  expected  to  obtain  a 
benefit  from  a  recovery  by  the  plain- 
tiff. That  the  writing  imported  a 
consideration  sufficient  to  sustain 
the  assignment,  "and  as  the  defend- 
ants do  not  show  that  they  have 
some  equity  or  defense  against 
plaintiff's  assignors  which  they  do 
not  have  against  the  plaintiff,  or 
show  that  a  judgment  against  them 
in  favor  of  the  plaintiff  would  not 
protect  them,  they  are  not  con- 
cerned with  what  the  plaintiff  may 
do  with  the  fruits  of  such  judg- 
ment." The  Giselman  case,  ante,  is 
also  cited  in  Seybold  v.  Bank,  5  N. 
D.  460,  465,  to  the  point  that  an 
assignee  having  naked  legal  title 
may  sue,  though  whole  beneficial 
interest  be  in  assignor. 


533  DENIAL   OF    OWNERSHIP    OR   TITLE.  [§    417 

cided  in  Georgia  that  the  holder's  title  cannot  be  made  the  subject 
of  inquiry  unless  necessary  for  the  maker's  protection  and  to  let  in 
his  defense/^  or  the  defense  which  he  seeks  to  make.^^ 

§  417.  Denial  of  ownership  or  title. — Upon  this  point  the  decisions 
are  not  in  harmony.  In  the  federal  courts  it  is  held  that  one  who 
has  not  a  meritorious  defense  cannot  be  permitted  to  show  that  the 
nominal  plaintiff,  in  whose  name  the  suit  is  brought,  is  no  longer 
the  real  party  in  interest.'"'  But  it  is  also  decided  that  a  denial  that 
plaintiff  is  the  lawful  owner  of  the  note  in  suit  is  a  good  defense.''^ 
Under  an  Alabama  decision  if  the  consideration  on  which  the  note  is 
based  moves  entirely  from  a  third  person  to  one  assuming  to  act  for 
him,  any  defense  of  the  maker  against  the  party  in  interest  is  admis- 
sible where  no  interest  in  the  note  is  disclosed  in  the  person  to  whom 
it  is  made.''-  In  California  it  is  held  that  it  may  be  shown  in  an 
action  by  the  transferee  that  one  is  not  the  legal  owner  of  a  note  for 
value.""  In  Indiana  it  is  determined  that  the  maker  of  a  note  cannot 
show,  as  a  defense  to  an  action  thereon,  that  the  payee  was  not  tlie 
real  party  in  interest  at  the  time  the  note  was  executed.""*  And  under 
another  decision  the  executor  can  maintain  an  action  on  notes  and 
mortgages  given  to  the  testator  and  it  is  no  defense  that  they  were 
specifically  bequeathed  to  another  and  that  the  suit  should  have  been 
brought  in  his  name."^  But  it  is  also  held  in  that  state  that  a  defense 
is  good  which  shows  that  no  administration  was  taken  out  on  the  estate 

^Ray  v.  Anderson,  119  Ga.  926,  47  citing  this,  amongst  other  cases,  the 

S.  E.  205;  Civ.  Code  1895,  §  3698.  court,  in  City  of  Cleveland  v.  Cleve- 

'"Bomar    v.    Equitable    Mort.    Co.,  land  C.  C.  &  St.  L.  Ry.  Co.,  93  Fed. 

Ill  Ga.   143,  36  S.  E.  1101;   Varner  113,    123,    says.    In    discussing    the 

V.  Lamar,  9  Ga.  589    (there  was  in  point  of  estoppel  in  that  case:    "The 

this  case  no  evidence  that  defend-  Supreme  Court  of  the  United  States, 

ant  had  any  defense  to  the  note  by  seemingly,      loosened      its     ancient 

way  of  set-off  or  otherwise  and  rule  moorings  upon  the  subject  of  admit- 

was   aflBrmed    as   settled);    Hall    v.  ting  equitable  defenses  in  actions  at 

Carey,    5    Ga.    239    (the    defendants  law." 

were  indebted  for  money  advanced,  »- McClure    v.    Litchfield,    11    Ala. 

for  which  notes  were  given,  and  it  337. 

was  not  necessary  for  their  defense  *=  Woodsum  v.  Cole,  69  Cal.  142,  10 

that  they   should    inquire    into   the  Pac.  331.   Examine  §  416  herein, 

validity  of  plaintiff's  title);   Nisbet  "Johnson    v.    Conklin,    119    Ind. 

V.  Lawson,  1  Kelly   (Ga.)   275.  109,  21   N.  E.  462,  12  Am.  St.  Rep. 

»*Lum  V.  Robertson,   6  Wall.    (73  371. 

U.  S.)  277,  18  L.  Ed.  743.  "^ Crist  v.  Crist,  1  Ind.  570,  50  Am. 

■»  Boggs  V.  Wann,  58  Fed.  681.    In  Dec.  461. 


§    417]  "WANT    OF    TITLE    OR   INTEREST.  534 

of  an  assignee  of  the  note,  that  it  came  by  assignment  and  indorse- 
ment into  plaintiff's  hands  through  the  widow  and  another  and  that 
defendant  was  a  creditor  of  the  estate;  the  note  being  first  indorsed 
in  blank.^*'  In  Iowa  it  is  decided  that  the  maker  must  show  that  he 
had  a  defense  against  the  payee  where  he  seeks  to  avail  himself  of  a 
defense  of  the  payee's  breach  of  agreement  not  to  transfer  the  note.®'' 
Under  a  Kansas  decision  it  must  be  shown,  where  it  is  averred  as  a 
defense  that  the  holder  is  not  the  real  party  in  interest  and  who  is  the 
unconditional  assignee,  that  the  defendants  would  be  unprotected 
against  other  liability  in  case  of  a  payment  to  such  transferee.*^*  Un- 
der a  Louisiana  decision  the  maker  or  indorser,  in  the  absence  of  an 
equity  existing  against  the  payee,  cannot  question  the  holder's  title; 
and  the  equities  which  the  defendant  is  entitled  to  plead  are  such  as 
operate  in  his  own  favor  and  not  those  which  belong  to  a  party  to  whom 
he  is  himself  liable. ®®  So  in  another  case  in  that  state  it  is  held 
that  the  maker  of  a  note  cannot  set  up,  in  defense  to  its  payment,  that 
the  holder  is  not  the  true  owner  unless  he  shows  that  the  assignment 
or  transfer  is  fictitious  and  fraudulent  and  made  to  deprive  him  of  a 
substantial  defense  against  the  true  owner.^*'''  It  is  also  decided 
that,  in  case  of  notes  indorsed  in  blank,  it  is  immaterial  to  inquire 
whether  plaintiff  is  the  absolute  owner  or  not,  where  defendant 
denies  that  plaintiff  is  the  owner  without  suggesting  that  he  has  any 
defense,  which  could  be  set  up  against  such  notes  in  the  hands  of  any 
person  whomsoever  which  would  not  be  available  against  the  plain- 
tiff.^°^  In  Maine  it  is  decided  that  a  person  may  retain  title  to  a  ne- 
gotiable note  and  order  its  contents  paid  to  another  who  may  sue  upon 
it,  and  the  maker  cannot  dispute  the  title,  because  he  had  promised  to 
pay,  not  necessarily  the  owner  but  to  the  order  of  the  payee  in  a  note 
payable  on  demand  to  such  order.  This  rule  was  applied  where  the 
payee  ordered  the  contents  of  the  note  undue  to  be  paid  to  a  third 

»'  Stebbins  v.  Goldthwait,  31  Ind.  La.  Ann.  283,  288.   See  Taylor  v.  Lit- 

159.  tell,  21  La.  Ann.  665. 

"  State  Bank  of  Indiana  v.  Ment-  The    simple    denial    of    plaintiff's 

zer  (Iowa),  100  N.  W.  69.  right  to  sue  as  the  holder  of  a  ne- 

'' Greene  v.    McAuley    (Kan.),   79  gotiable  instrument  cannot  author- 

Pac.  133.  ize  the  maker  to  contest  his  title  to 

»'  Ran  V.  Latham,  11  La.  Ann.  276.  it  when  he  holds  by  a  blank  indorse- 

^"°Case    V.    Watson,    21    La.    Ann.  ment,   unless   the  note   was  lost  or 

731.  stolen.    McKinney  v.  Beeson,  7  La. 

"^Scionneaux  v.  Wahuespack,   32  (14  La.  O.  S.  254)  530. 


535  DENIAL   OF    OWNERSHIP    OR   TITLE.  [§    -ilS 

person  by  the  maker  after  the  death  of  the  payee. ^*'-  Under  anotlier 
case  in  that  state  if  one  brings  a  suit  in  the  name  of  another  person, 
the  same  defense  may  be  made  as  if  he  were  a  party  to  the  record. ^''^ 

§  418.  Same  subject. — Under  a  Massachusetts  decision,  the  mere 
isolated  fact  that  a  bank  for  whose  benefit  the  suit  is  brought  has  no 
interest  in  or  legal  title  to  the  note  is  wholly  immaterial  to  the  defend- 
ant, in  a  suit  brought  in  the  name  of  the  person  who  has  the  legal 
title  to  its  use,  unless  a  foundation  is  laid  for  the  introduction  of  such 
evidence,  as  in  the  case  of  an  offer  to  prove  an  offset  against  the  nomi- 
nal plaintiff  or  payment  to  him."*  In  Missouri  it  is  held  that  an 
averment  is  good  which  positively  and  specifically  denies  that  the  note 
was  assigned  by  indorsement  and  that  the  legal  ownership  of  the  paper 
is  not  in  the  plaintiff. ^°^  Under  a  jSTebraska  decision  the  denial  of  in- 
dorsement and  ownership  is  a  good  defense."''  It  is  held  in  New  York, 
in  an  action  against  the  maker  by  an  indorsee,  an  answer  is  frivolous 
which  denies  that  plaintiff  lawfully  holds  or  owns  the  note  or  that  the 
lawful  owner  transferred  or  delivered  it  to  him."^  But  it  is  also  de- 
cided in  that  state  that  it  may,  under  certain  circumstances,  be  shown 
or  alleged  in  defense  that  plaintiff  is  not  the  real  party  in  interest."* 

"==  Downing    v.    Wheeler,    93    Me.  (holding  that  the  maker  cannot  in 

570,  45  Atl.  836.  suit  by  holder  allege  that  latter  did 

1"'  Sproule  V.  Merrill,  16  Shep.   (29  not  pay  value  or  that  it  was  not  law- 

Me.)  260.  fully     transferred     unless     he     can 

'"Brigham  v.  Marean,  7  Pick.  (24  show  that  he  was  defrauded  or  has 

Mass.)  40.  lost    some    d,efense    he    might   have 

"''Mechanics'  Bank  v.   Fowler,  36  had    against    the    payees    had    they 

Mo.  33,  35.    See  Cocker  v.  Cocker,  2  retained   it;    nor  is   it  any   defense 

Mo.  App.  451.  that  the  property  of  the  note  is  in 

"'Central   City   Bank    v.   Rice,   44  a     third     person     unless     plaintiff's 

Neb.  594,  63  N.  W.  60.  possession   is   mala   fide   or    defend- 

"' First    National    Bank    v.    Jen-  ant's    defense    prejudiced);     Guern- 

nings,  89  N.  Y.  Supp.  995,  44  Misc.  sey  v.  Burns,  25  Wend.   (N.  Y.)   411 

374.    See   Rowland   v.   Bates,   48   N.  (substantially    same    ruling    as    in 

Y.  St.  Rep.  642,  1  Misc.   (N.  Y.)   91,  last    case);     Andrews    v.    Bond,    16 

20  N.  Y.  Supp.  373,  aff'd  in  3  Misc.  Barb.  (N.  Y.)  633  (holding  that  the 

609,  22  N.  Y.  Supp.  557,  51  N.  Y.  St.  lawful    possession    of    a    negotiable 

Rep.  857    (holding  that  it  is  imma-  note  operates  as  a  full  authority  to 

terial    where    holder    obtained    note  the  holder  so  far  as  innocent  third 

indorsed  by  defendants  in  blank).  parties  are   concerned,   to  negotiate 

"'Wood   V.   Wellington,   30   N.   Y.  and  transfer  all  right,  title  and  in- 

218.      See    Aspinwall    v.     Meyer,     2  terest). 
Sandf.    (4    N.    Y.    Super.    Ct.)    180 


§    418]  WANT    OF   TITLE   OR   INTEREST.  •    536 

So  in  another  case  it  is  held  that  the  defendant  may,  since  the  code, 
prove  that  plaintiff  is  not  the  real  owner  of  the  note  sued  on,^**''  where 
such  defense  goes  entirely  to  disprove  any  ownership  or  interest  what- 
ever or  even  right  to  possession."*'  Under  a  Xorth  Carolina  decision, 
if  the  drawer  has  come  into  possession,  without  indorsement,  of  a 
bill  which  has  been  accepted  by  the  drawee  in  favor  of  another,  he 
cannot  recover  without  showing  that  the  bill  had  been  indorsed  to 
him  or  in  blank,  or  that  he  had  been  obliged  to  pay  the  money  as 
such  drawer,  or  that  the  acceptor  on  account  had,  was  indebted  to  him 
to  the  amount  of  the  bill.^^^  In  an  Oklahoma  case  it  is  decided  that 
a  denial  of  ownership  is  no  defense,  where  the  facts  on  which  a  pre- 
sumption of  ownership  exists  are  alleged  in  a  suit  on  a  note  payable  to 
a  certain  person  or  his  orders.  ^^^  In  Pennsylvania  it  is  held  that  an 
affidavit  of  defense  may  be  set  up  by  the  maker,  in  a  suit  by  the  in- 
dorsee, where  it  alleges  ownership  of  the  note  in  suit  by  a  bank  against 
whom  a  set-off  exists  on  the  note  under  a  collateral  contract.^^^  So 
in  that  state  it  is  held  to  be  a  sufficient  affidavit  of  defense  that  the  note 
is  actually  the  payee's  property,  and  that  the  indorser's  name  was  used 
by  the  plaintiffs  to  avoid  the  defense  of  usury.^^^  So  an  indorser  of 
a  negotiated  note  may  prove  that  he  has  paid  it,  and  that  the  plaintiff 
is  but  a  trustee  for  him,  and  that  ownership  is  in  another  to,  let 
in  creditors'  claims  may  also  be  shown.^^^  And  in  an  action  for  debt 
on  a  single  bill,  evidence  may  be  given  tending  to  show  that  another  is 
really  the  owner,  and  that  it  was  held  in  ti-ust  for  him  by  the  plaintiff, 

^o' Eaton    V.    Alger,    57    Barb.    (N.  "^  Smith   v.   Bryan,   33   N.    C.    (11 

Y.)  179.  Ired.  L.)  416. 

.  ""Hays  V.  Hathorn,  74  N.  Y.  486,  "^ Berry  v.  Barton,  12  Okla.  221,  71 

dist'g  Sheridan  v.  Mayor,  etc..  New  Pac.  1074. 

York-,  68  N.  Y.  30;  Eaton  v.  Alger,  "=  Long  v.  Long,  208  Pa.  368,  57 
47  N.  Y.  345;  Allen  v.  Brown,  44  N.  Atl.  759.  See  Graphic  Co.  v.  Marcy, 
Y.  228;  Brown  v.  Penfield,  36  N.  Y.  12  Phila.  (Pa.)  218,  holding  that  an 
473;  City  Bank  of  New  Haven  v.  affidavit  of  defense  is  good  which 
Perkins,  29  N.  Y.  554;  Cummings  v.  sets  up  that  the  party  in  whose  fa- 
Morris,  25  N.  Y.  625,  holding  that  vor  the  note  is  drawn  is  still  the 
code  has  changed  rule  in  Gage  v.  owner  and  real  holder  thereof,  to 
Kendall,  14  Wend.  (N.  Y.)  640,  and  whose  use  the  plaintiff  holds  it,  and 
reversing  Hays  v.  Southgate,  10  that  suit  is  brought  in  plaintiff's 
Hun  (N.  Y.)  511.  See,  further,  name  to  prevent  the  defense  of  set- 
Gerding  v.  Welch,   51   N.   Y.   Supp.  off. 

1064,  30  N.  Y.  App.  Div.  623;  Hughes  "*Eyre  v.  Yohe,  67  Pa.  St.  477.. 

V.    Wilcox,    17    Misc.    32,    39    N.    Y.  "^Maynard  v.  Nekervis,  9  Pa.  St. 

Supp.  210;  Clark  v.  Tryon,  23  N.  Y.  81. 
Supp.  780,  786,  4  Misc.  63. 


■I 


537  DENIAL    OF   OWNERSHIP    OR   TITLE.  [§    418 

and  that  said  owner  was  indebted  to  the  defendant  in  a  greater  amount, 
thereby  enabling  the  defendant  to  set  off  a  debt  due  from  the  equitable 
owner.^^*  So  under  another  decision  in  the  same  state  it  may  be 
shown  that  the  note  was  only  delivered  to  be  held  until  return  was 
demanded,  which  demand  had  been  made  and  refused  on  the  ground 
that  the  note  was  lost.^^^  But  it  is  also  deterniined  in  another  case 
that  in  a  suit  against  the  drawers  on  a  negotiable  note  indorsed  in 
blank,  the  defendants  have  no  concern  with  the  question  of  the  actual 
ownership  of  the  note,  except  where  the  defense  turns  upon  points 
involving  the  personal  conduct  of  the  true  owner  or  of  those  who  pre- 
ceded him,  inasmuch  as  the  owner  of  such  note  may  fill  it  up  with  what 
name  he  pleases,  and  the  person  whose  name  is  inserted  is  deemed  the 
legal  owner,  for  the  purposes  of  the  action.^^^  Under  a  South  Caro- 
lina decision,  in  an  action  by  the  bearer  on  a  note  payable  to  a  certain 
person  or  bearer,  the  defendant,  that  he  may  be  let  into  his  defense 
against  the  payee,  may  show  that  the  plaintiff  is  not  the  owner  of  the 
note,  or  has  no  interest,  or  that  he  gave  no  consideration  for  it.^^®  In 
a  South  Dakota  case  it  is  held  that  the  want  of  authority  of  a  national 
bank  to  purchase  a  note  cannot  be  availed  of  by  the  maker  in  a  suit 
against  him.^^°  In  Texas  it  is  decided  that  the  fact  alone  that  plaintiff 
is  not  the  real  owner  of  the  note  constitutes  no  defense  either  in  bar  or 
in  abatement,  and  that  the  plea  that  plaintiff  was  a  bankrupt,  and  that 
the  note  belonged  to  his  creditors,  who  had  not  been  paid,  was  bad  on 
demurrer,  where  it  was  not  alleged  that  the  assignee  in  bankruptcy  had 
reduced  the  note  to  possession  or  that  defendant  was  a  creditor.^-^ 
Under  a  Vermont  decision  the  defendant  cannot  contest  plaintiff's 

"' Childerston     v.     Hammond,     9  "« Lee  v.  Ware,  3  Rich.  L.   (S.  C.) 

Serg.  &  R.  (Pa.)  68.  193. 

"'Carskaddon    v.    Miller,    25    Pa.  '-"First  National   Bank   v.   Smith, 

Super.  Ct.  47.  8  S.  D.  7,  65  N.  W.  437,  aff'd  8  S.  D. 

'"Brown  v.  Clark,  14  Pa.  St.  469,  101,  65  N.  W.  439. 

a   case   of   a   partnership   note   and  "'  Brown  v.   Chenoworth,  51   Tex. 

dissolution  of  the  firm.    See  Rice  v.  469.   See  Sanders  v.  Atkinson,  1  Tex. 

Abbeles    (Pa.),   1  Wkly.   Notes  Cas.  Ct.   App.   Civ.    Cas.    (White   &  W.), 

38,  holding  that  an  affidavit  of  de-  §    1326,    holding   that   "it   has   been 

fense  is  insufficient  which  sets  forth  frequently  held  by  this  court  that  a 

that  the   defendant   was  an   accom-  debtor    cannot    resist    a    suit    on    a 

modation     maker    and     that    payee  note  by  a  party  in  possession  of  it 

was  still   the   true   owner  and   that  with    the    apparent   legal    right,    on 

the  indorsement  was  made  to  pre-  the  ground  that  he  is  not  in  fact  the 

vent  a  defense  which  defendant  had  owner,  but  that  in  equity  it  belongs 

against  the  payee.  to  some  one  else." 


418] 


WANT    OF   TITLE   OR   INTEREST. 


538 


title  to  sue  except  for  the  purpose  of  protecting  himself  from  a  sub- 
sequent suit,  in  the  name  of  some  one  having  a  better  title  and  who  has 
not  acquiesced  in  the  suit  commenced.^--  But  it  is  also  decided  in  that 
state  that  the  prima  facie  evidence  of  legal  interest  of  a  holder  in  a 
note  may  be  rebutted  by  showing  that  he  is  wrongfully  in  possession 
and  has  no  real  ricrht  or  title  to  the  note.^-* 


i^Hackett  v.  Kendall,  23  Vt.  275. 

In  an  action  against  members  of 
firm  on  a  note  executed  to  one  of 
them  by  all  for  value,  an  indorser 
for    collection    can    recover,    even 


though  the  wife  of  the  payee  is  the 
owner.    Ormsbee  v.   Kidder,   48   Vt. 
361. 
"^Fletcher  v.  Fletcher,  29  Vt.  98. 


I 


CHAPTER  XIX. 


PURCHASERS   AFTER  MATURITY. 


Sec.  Sec. 

419.  General  rule.  430. 

420.  Same  subject — Continued. 

421.  Application  of  rule — Generally. 

422.  Application   of   rule,    continued     431. 

— Set-off  and  recoupment. 

423.  Where   series   of   notes   mature     432. 

on  failure  to  pay  any  one.  433. 

424.  Where    payable    on    default    in 

payment  of  interest.  434. 

425.  Application  to  particular  paper. 

426.  Same  subject — Coupon  bonds.        435. 

427.  Certificate  of  deposit.  436. 

428.  Where    transferred    before    but 

not  indorsed  until  after  ma- 
turity. 437. 

429.  Non-negotiable  note. 


Effect  of  statute  providing  that 
suit  by  assignee  shall  be 
without  prejudice. 

Limitations  of  rule — In  gen- 
eral. 

Pro  tanto  recovery. 

Purchaser  from  hona  fide 
holder — General  rule. 

Same  subject — Application  of 
rule. 

Demand  paper. 

Defenses  and  equities  between 
maker  and  indorsee  or  inter- 
mediate holder. 

Secret  equity  in  favor  of  entire 
stranger. 


§  419.  General  rule. — It  is  a  general  rule  that  one  to  whom  com- 
mercial paper  is  indorsed  after  its  maturity  takes  it  subject  to  such 
defenses  as  existed  against  it  in  the  hands  of  his  indorser.^    The  dis- 


'^  Alabama. — Battle  v.  Weems,  44 
Ala.  105;  Glasscock  v.  Smith,  25  Ala. 
474;  Robertson  v.  Breedlove,  7  Port. 
(Ala.)   541. 

California. — Templeton  v.  Poole, 
59  Cal.  286;  Hayward  v.  Stearns,  39 
Cal.  58;  Coghlin  v.  May,  17  Cal.  515; 
Sherman  v.  Rollberg,  11  Cal.  38; 
Fuller  v.  Hutchings,  10  Cal.  523,  70 
Am.  Dec.  746;  Vinton  v.  Crowe,  4 
Cal.  309;  Folsom  v.  Bartlett,  2  Cal. 
163. 

Connecticut. — Bissell  v.  Gowdy, 
31  Conn.  47. 

Georgia. — Harrell  v.  Broxton,  78 
Ga.  129,  3  S.  E.  5;  Burton  v.  Wynne, 


55  Ga.  615;  Howard  v.  Gresham,  27 
Ga.  347;  Smith  v.  Lloyd,  Charit.  T. 
U.  P.   (Ga.)   253. 

Illinois. — Melendy  v.  Keen,  89  111. 
395;  Eagle  v.  Kohn,  84  111.  292; 
First  National  Bank  v.  Strang,  72 
111.  559;  Bissell  v.  Curran,  69  111.  20; 
Stricklin  v.  Cunningham,  58  111. 
293;  Lock  v.  Fulford,  52  111.  166; 
Stafford  v.  Fargo,  35  111.  481;  Lord 
V.  Favorite,  29  111.  149;  Bryan  v. 
Primm,  1  111.  59;  McCaffrey  v.  Dus- 
tin,  43  111.  App.  34;  Bradley  v.  Linn, 
19  111.  App.  322;  Cooper  v.  Nock,  17 
Peck  (111.)  301;  Griffin  v.  Ketchum, 
8  Peck  (111.)   392;  Bryan  v.  Primm, 


539 


§  ^19] 


PURCHASERS    AFTER    MATURITY. 


540 


tinction  to  be  observed  between  a  bill  indorsed  before  and  after  matur- 
ity is  that  in  the  former  case  it  comes  to  the  indorsee  with  no  sus- 


Breese  (111.)  59;  Reichert  v.  Koer- 
ner,  54  111.  306;  Morgan  v.  Bean,  100 
111.  App.  114. 

Indiana. — Cross  v.  Herr,  96  Ind. 
96. 

Iowa. — Leach  v.  Funk,  97  Iowa 
576,  66  N.  W.  768;  Hedge  v.  Gibson, 
58  Iowa  656,  12  N.  W.  713;  Clute  v. 
Frazier,  58  Iowa  268,  12  N.  W.  327; 
McCormick  v.  Williams,  54  Iowa  50, 
6  N.  W.  138;  Schuster  v.  Marsden, 
34  Iowa  181;  McNitt  v.  Helm,  33 
Iowa  342;  Stannus  v.  Stannus,  30 
Iowa  448;  Hay  ward  v.  Minger,  14 
Iowa  516;  Kurz  v.  Holbrook,  13 
Iowa  562;  Bates  v.  Kemp,  12  Iowa 
99;  Barlow  v.  Scott's  Adm'rs,  12 
Iowa  63. 

Kansas. — Eggan  v.  Briggs,  23 
Kan.  710;  Hadden  v.  Rodkey,  17 
Kan.  429. 

Kentucky. — Greenwell  v.  Haydon, 
78  Ky.  332. 

Louisiana. — State    v.    Sutherland, 
111  La.  381,  35   So.   608;    Lanata  v. 
Bayhi,  31  La.  Ann.  229;   Henderson 
V.  Case,  31  La.  Ann.  215;   Davis  v. 
Bradley,   26   La.   Ann.   555;    Walton 
v.  Young,  26  La.  Ann.  164;    Marcal 
V.    Melliet,    18    La.    Ann.    223;    Wil- 
liams v.   Benton,  10  La.  Ann.   158 
Sawyer  v.  Hoovey,  5  La.  Ann.  153 
Ford   V.   Dosson,   1   Rob.    (La.)    39 
McKown    V.    Mathes,    19    La.    542 
Shipmans  v.  Archinard,  19  La.  471 
Stetson  v.   Stackhouse,  18  La.   119 
Lapice  v.  Clifton,  17  La.  152;    Bur- 
roughs V.  Nettles,  7  La.  113;  Turcas 
V.  Rogers,  3  Mart.  N.  S.   (La.)   699; 
Herriman  v.  Mulhellan,  1  Mart.  N. 
S.   (La.)  605. 

Maine. — Cummings  v.  Little,  45 
Me.  183;  Davis  v.  Briggs,  39  Me. 
304;  Tucker  v.  Smith,  4  Me.  415; 
"Sprague  v.  Graham,  16  Shep.  (Me.) 


160;    Burnham   v.    Tucker,    6    Shep. 
(Me.)   179. 

Maryland. — Herrick  v.  Swomley, 
56  Md.  439,  465;  Clark  v.  Dederick, 
31  Md.  148. 

Massachusetts. — Holland  v.  Make- 
peace, 8  Mass.  418;  Ayer  v.  Hutch- 
ins,  4  Mass.  370,  3  Am.  Dec.  232; 
Gold  V.  Eddy,  1  Mass.  1;  American 
Bank  v.  Jenness,  2  Mete.  (Mass.) 
288;  Kellogg  v.  Barton,  12  Allen 
(Mass.)  527;  Thompson  v.  Hale,  6 
Pick.  (Mass.)  259. 

Michigan. — City  Bank  of  Dowa- 
giac  V.  Dill,  102  Mich.  305,  60  N.  W. 
767;  Simons  v.  Morris,  53  Mich.  155, 
18  N.  W.  625;  Church  v.  Clapp,  47 
Mich.  257,  10  N.  W.  362;  Comstock 
v.  Draper,  1  Man.  (Mich.)  481,  53 
Am.  Dec.  78. 

Mississippi. — Money  v.  Ricketts, 
62  Miss.  209;  Ainsworth  v.  Ains- 
worth,  24  Miss.  145. 

Missouri. — Kellogg  v.  Schnaake, 
56  Mo.  136;  Mattoon  v.  McDaniel,  34 
Mo.  138;  Farris  v.  Catlett,  32  Mo. 
469;  Wheller  v.  Barret,  20  Mo.  573; 
Shipp  v.  Stacker,  8  Mo.  145;  Wil- 
liams V.  Baker,  100  Mo.  App.  284,  73 
S.  W.  339. 

Nebraska. — May  v.  First  National 
Bank  (Neb.  1905),  104  N.  W.  184; 
Davis  V.  Neligh,  7  Nebr.  78,  84;  Kit- 
tle V.  De  Lamater,  3  Nebr.  325. 

New  Hampshire. — Southard  v. 
Porter,  43  N.  H.  379;  McDuffie  v. 
Dame,  11  N.  H.  244;  Odiorne  v. 
Howard,  10  N.  H.  343. 

New  Jersey. — Cumberland  Bank 
V.  Hann,  18  N.  J.  L.  222;  Youngs  v. 
Little,  15  N.  J.  L.  1. 

Neio  York. — Northampton  Nat. 
Bank  v.  Kidder,  106  N.  Y.  221,  12 
N.  E.  577;  Cowing  v.  Altman,  79  N. 
Y.   167;    Chester  v.   Dorr,  41   N.   Y. 


II 


541 


GENERAL    RULE. 


[§  419 


picion  on  the  face  of  it  and  lie  receives  it  on  its  own  intrinsic  credit, 
wliile  in  the  latter  case  it  is  transferred  out  of  the  common  course 
of  dealing,  which  gives  rise  to  suspicion.^  The  principle  upon  which 
this  general  rule  is  founded  does  not  have  reference  to  the  title  to  the 
paper.  Whether  a  person  acquires  such  paper  before  or  after  ma- 
turity is  not  material,  so  far  as  his  title  is  concerned.  "These  rules  re- 
late to  the  right  of  the  holder  growing  out  of  his  ownership  of  the 
paper,  and  not  to  his  title  to  the  paper  itself.  In  either  case  he  acquires 


279;   Cummings  v.  Morris,  25  N.  Y. 

'625;   Merrick  v.  Butler,  2  Lans.   (N. 

'Y.)  103;  Newell  v.  Gregg,  51  Barb. 
(N.  Y.)  263;  Farrington  v.  Bank,  39 
Barb.  (N.  Y.)  645;  Havens  v.  Hint- 
ington,  1  Cow.  (N.  Y.)  387;  Lan- 
sing V.  Lansing,  8  Johns.  (N.  Y.) 
354;  O'Callaghan  v.  Sawyer,  5 
Johns.  (N.  Y.)  118;  Lansing  v. 
Gaine,  2  Johns.  (N.  Y.)  300,  3  Am. 
Dec.  422;  Johnson  v.  Bloodgood,  2 
Cai.  Cas.  (N.  Y.)  302;  Sehring  v. 
Rathbun,  1  Johns.  Cas.  (N.  Y.)  331; 
De  Mott  V.  Starkey,  3  Barb.  Ch.  (ISi. 
Y.)  403;  Reed  v.  Warner,  5  Paige 
(N.  Y.)  650. 

North  Carolina. — Griffin  v.  Hasty, 
94  N.  C.  438;  Pugh  v.  Grant,  86  N. 
C.  39;  Capell  v.  Long,  84  N.  C.  17; 
Baucom  v.  Smith,  66  N.  C.  537;. 
Haywood  v.  McNair,  2  Dev.  &  Bat. 
(N.  C.)  283;  Turner  v.  Beggarly,  11 
Ired,  (N.  C.)  331;  Mosteller  v.  Bost, 
7  Ired.  Eq.   (N.  C.)  39. 

Pennsylvania.  —  March  v.  Mar- 
shall, 53  Pa.  St.  396;  Maples  v. 
Browne,  48  Pa.  St.  458;  Hoffman  v. 
Foster,  43  Pa.  St.  137;  Bower  v. 
Hastings,  36  Pa.  St.  285;  Clay  v. 
Cottrell,  18  Pa.  St.  408;  Snyder  v. 
Riley,  6  Pa.  St.  164;  Rtakert  v. 
Sanford,  5  Watts  &  S.  (Pa.)  164; 
Cromwell  v.  Arrott,  1  Serg.  &  R. 
(Pa.)  180;  McCullough  v.  Houston, 
1  Dall.  (Pa.)  441. 

South  Carolina. — British  Ameri- 
can Mortg.  Co.  V.  Smith,  45  S.  C.  83, 
22  S.  E.  747;  Gibson  v.  Hutchins,  43 


S.  C.  287,  21  S.  E.  250;  McNeill  v. 
McDonald,  1  Hill  (S.  C.)  1;  Cain  v. 
Apann,  1  McMull.   (S.  C.)   258. 

Tennessee.  —  Smith  v.  Lurry, 
Cooke   (Tenn.)   325. 

Texas. — Walker  v.  Wilson,  79  Tex. 
188,  14  S.  W.  798,  15  S.  W.  402; 
Mayfield  Grocer  Co.  v.  Price  &  Co. 
(Tex.  Civ.  App.  1906),  95  S.  W.  31; 
Goodson  V.  Johnson,  35  Tex.  622; 
Diamond  v.  Harris,  33  Tex.  634; 
Huddleston  v.  Kempner,  3  Tex.  Civ. 
App.  252,  22  S.  W.  871;  Bennett  v. 
Carsner,  1  Tex.  App.  Civ.  Cas.  Sec. 
618. 

Yermont. — Bowen  v.  Thrall,  28 
Vt.  382. 

Virginia. — Arents  v.  Com,  18 
Gratt.  (Va.)  750;  Davis  v.  Miller,  14 
Gratt.  (Va.)  1. 

West  Virginia. — Smith  v.  Lawson, 
18  W.  Va.  212. 

Federal. — Central  Trust  Co,  v. 
First  Nat.  Bank,  101  U.  S.  68,  25  L. 
Ed.  876;  Smyth  v.  Strader,  4  How. 
(U.  S.)  404,  11  L.  Ed.  1031;  Fossitt 
V.  Bell,  4  McLean  (U.  S.)  427; 
Gwathney  v.  McLane,  3  McLean  (U. 
S.)  371;  Lipsmeier  v.  Vehslage,  29 
Fed.  175. 

English. — Crossley  v.  Ham,  13 
East  498;  Easley  v.  Crockford,  3 
Moore  &  S.  700,  10  Bing.  243; 
Brown  v.  Davies,  3  Term.  R.  80; 
Taylor  v.  Mather,  3  Term.  R.  83, 
note;  Cripps  v.  Davis,  12  Mees.  & 
W.  159;  Lee  v.  Zagury,  8  Taunt.  114. 

''Brown  v.  Davies,  3  Term.  R.  80. 


§    420]  PURCHASERS   AFTER   MATURITY.  543 

a  valid  title  to  the  obligation  and  is  entitled  to  recover  on  it  in  the  one 
case  whatever  is  justly  due  from  the  parties  to  the  paper,  and  in  the 
other  case  whatever  the  paper  calls  for,  whether  it  is  justly  due  from 
the  parties  or  not.  In  cases  belonging  to  either  of  these  classes  no  ques- 
tion arises  as  to  the  title  of  the  holder.  He  is  conceded  to  be  the  owner 
of  the  obligation.  The  question  is,  what  is  the  extent  of  his  right  of 
recovery?  If  he  took  it  overdue,  he  cannot  recover  unless  the  person 
from  whom  he  received  it  could  have  recovered,  and  if  that  person 
could  only  have  recovered  a  part,  he  can  recover  no  more;  if  that 
person  could  have  recovered  all,  he  may  recover  all,  for  he  stands  in 
that  person's  place."^ 

§  420.  Same  subject  continued. — A  note  overdue  or  a  bill  dishon- 
ored is  a  circumstance  of  suspicion  to  put  those  dealing  for  it  on  their 
guard.*  It  suggests  inquiry,  which  the  intending  purchaser  is  bound 
to  make,  and,  not  making  it,  he  buys  at  his  peril,^  and  he  is  held  to  have 
notice  of  what  by  proper  effort  he  could  have  learned.®  So  it  is  said 
by  Lord  Ellenborough  in  an  early  English  case  that:  "After  a  bill  or 
note  is  due,  it  comes  disgraced  to  the  indorsee,  and  it  is  his  duty  to 
make  inquiries  concerning  it.  li  he  takes  it,  though  he  gives  a  full 
consideration  for  it,  he  takes  it  on  the  credit  of  the  indorser  and  sub- 
ject to  all  the  equities  with  which  it  may  be  incumbered."^  And  in  an 
early  case  in  Massachusetts  it  was  said :  "He  who  takes  it  with  notice 
of  grounds  of  defense,  or  after  it  is  due,  which  the  law  charges  as  no- 
tice, is  holden  to  take  it  altogether  on  the  credit  of  the  indorser,  know- 
ing, or  being  presumed  to  know,  that  if  the  promisor  had  any  dealings 
with  the  payee  which  would  justify  a  defense,  the  note  is  chargeable 
with  that  defense  in  his  hands."®  So  again,  in  a  recent  case  in 
Texas,  it  is  declared:  "The  transferee  of  overdue  commercial  paper 
gets  no  better  title  than  that  of  the  transferor.  The  holder  of  such 
paper  for  value  before  maturity  takes  it  discharged  of  every  defense 
against  it,  but  when  dishonored  it  is  in  respect  to  the  title  acquired 
by  a  subsequent  holder,  degraded  to  the  rank  of  a  personal  chattel,  the 

^Greenwell  v.  Haydon,  78  Ky.  332,  son  v.  Bloodgood,  1  Johns.  Cas.   (N. 

336,  per  Cofer,  J.  Y.)  51,  1  Am.  Dec.  93. 

^Fowler   v.    Brantly,    14    Pet.    (U.        ''Zeis  v.  Potter,  105  Fed.  671. 
S.)   318,  10  L.  Ed.  473.  '^  Tinson  v.  Francis,  1  Campb.  19. 

^  Phillips    v.    Runnels,     1    Morris        *  Sargent    v.     Southgate,    5    Pick. 

(Iowa)  391,  43  Am.  Dec.  109;  John-  (Mass.)    312,  16  Am.  Dec.  409. 


I 


543 


APPLICATION    OF   RULE. 


[§  421 


purchaser  of  which  acquires  only  such  title  as  the  seller  had/"*    And 
the  general  rule  has  been  affirmed  in  similar  language  by  other  courts.^" 

§  421.  Application  of  rule — Generally. — In  the  application  of  the 
general  rule  as  to  purchasers  after  maturity  it  has  been  decided  that 
as  against  such  a  purchaser  evidence  is  admissible  to  show  usury  in 
connection  with  the  note/^  and  it  may  be  shown  that  a  transfer  from 
the  payee  to  such  purchaser  was  in  fraudulent  violation  of  an  agree- 
ment between  the  maker  and  the  payee.^-  So  where  a  note  was  executed 
for  a  particular  purpose,  which  was  accomplished,  and  the  note  was 
taken  up  by  the  payee  in  accordance  with  the  agreement  between  him 
and  the  maker,  but  was  not  returned  to  the  latter  on  demand,  the 
payee  stating  to  him  that  the  note  had  been  destroyed,  when  in  fact 
it  had  not,  it  was  decided  that  such  facts  could  be  shown  in  defense 
to  an  action  by  one  to  whom  the  payee  had  transferred  the  note  after 
maturity. ^^  And  where  the  owner  of  a  note,  which  was  secured  by  a 
deed  of  trust  to  a  third  person,  agreed,  before  its  maturity,  with  the 
maker  that  a  certain  sum  should  be  paid  and  the  time  for  the  payment 


*  Mayfield  Grocer  Co.  v.  Andrew 
Price  &  Co.  (Tex.  Civ.  App.,  1906), 
95  S.  W.  31,  per  James,  C.  J.,  quot- 
ing from  Walker  v.  Wilson,  70  Tex. 
188,  14  S.  W.  798,  15  S.  W.  402.  The 
court  also  said:  "This  case  was  ap- 
proved in  Kempner  v.  Huddleston, 
90  Tex.  185,  37  S.  W.  1066,  where  a 
different  rule  was  held  to  be  appli- 
cable when  the  Indorsement  is  in 
such  language  and  terms  as  evi- 
dence ownership  of  the  notes  in 
the  person  to  whom  they  are  trans- 
ferred, in  which  case  the  transferor 
would  not  be  allowed  to  dispute  this 
as  against  a  subsequent  purchaser 
who  had  acted  upon  such  theory." 

"  "A  note  in  circulation  after  it  is 
due  carries  suspicion  upon  its  face. 
It  suggests  inquiry,  and  places  the 
purchaser  in  privity  with  his  in- 
dorser  and  subject  to  any  defense 
available  against  him.  It  is  better 
to  require  one  who  would  purchase 
a  negotiable  note  after  its  maturity 
to  ascertain  whether  it  is  a  subsist- 
ing demand,  than  to  subject  the  an- 


tecedent parties  to  the  necessity  of 
tracing  to  him  a  knowledge  that  it 
is  not."  Atkins  v.  Knight,  46  Ala. 
539,  per  Saffold,  J. 

"The  principle  is  certainly  well 
established,  and  not  to  be  denied, 
that  the  indorsee  of  a  negotiable 
promissory  note,  indorsed  after  due. 
is  considered  as  receiving  dishon- 
ored paper,  and  takes  it  subject  to 
all  the  infirmities  and  equities  and, 
some  cases  say,  defenses,  to  which  it 
was  liable  in  the  hands  of  the 
payee."  Robinson  v.  Lyman,  10 
Conn.  30,  25  Am.  Dec.  52,  per  Church. 
J. 

"The  plaintiff  took  this  bill  after 
dishonor  of  it  by  the  drawees;  he 
therefore  took  it  with  all  the  exist- 
ing infirmities  belonging  to  it  at  the 
time."  Crossley  v.  Ham,  13  East  498, 
per   Lord   Ellenborough. 

^' Tufts  V.  Shepherd,  49  Me.  312. 

"  Williamson  v.  Doby,  36  Ark.  689. 

"  Frazer  v.  Edwards,  5  Dana 
(Ky.)   538. 


§    422]  PURCHASERS    AFTER   MATURITY.  544 

of  the  balance  extended,  and  such  an  agreement  was  drawn  up  by  a 
clerk  of  the  trustee,  who  indorsed  the  payment  on  the  note,  and  also 
a  reference  to  the  agreement  for  extension,  but  the  agreement  was  only 
signed  by  the  maker  of  the  note  and  not  by  the  owner,  it  was  decided 
that  one  who  took  the  note  from  the  trustee,  after  maturity,  as  col- 
lateral security  for  his  debt  was  not  protected  by  such  agreement, 
there  being  nothing  in  the  papers  showing  who  was  the  owner  of  the 
note  and  it  not  appearing  that  the  legal  title  was  in  the  trustee.^* 
But  it  has  been  decided  that,  where  a  note  purports  to  be  executed 
upon  a  secular  day,  it  cannot  be  shown  against  a  hon^i.  fide  assignee 
after  maturity  that  it  was  in  fact  executed  on  a  Sunday,  it  being  de- 
clared that  it  is  only  against  a  person  in  equal  fault  that  a  defendant 
can  be  allowed  to  allege  his  own  turpitude,  ^^  And  where  a  note  has 
been  executed  by  a  firm  to  one  of  its  members  it  is  held  that  an  as- 
signee after  maturity  does  not  take  it  subject  to  the  disability  of  the 
payee  to  sue,  this  being  declared  not  to  be  one  of  the  equities  which  an 
indorsee  assumes.  ^^ 

§  422.     Application  of  rule,  continued — Set-off  and  recoupment. — A 

bill  or  note  in  the  hands  of  a  purchaser  after  maturity  may  be  subject 
to  a  set-off  which  would  have  been  available  in  favor  of  the  maker 
against  the  one  from  whom  the  instrument  was  purchased.^^*  So, 
where  it  was  agreed  between  the  original  parties  to  a  negotiable  promis- 
sory note,  while  it  was  in  the  hands  of  the  payee,  that  a  sum  then  as- 
certained to  be  due  from  the  payee  to  the  maker,  payable  in  futuro, 
should  be  applied  on  the  note,  and  it  was  afterwards  negotiated,  wlien 
overdue,  it  was  held  in  an  action  by  the  indorsee  against  the  maker 
that  such  sum  being  an  equity  which  attached  to  the  note  itself,  be- 
fore its  transfer,  ought  to  be  set  off  or  applied  on  the  note."  And 
where  a  note  was  given  by  a  corporation  to  a  stockholder,  and  it  was 
agreed  that  assessments  to  be  laid  upon  his  stock  in  the  corporation 
should,  when  payable,  be  considered  as  payments  upon  the  note  by 
the  corporation  to  him,  and  the  assessments  made  amounted  to  more 
than  the  face  of  the  note,  thus  constituting  a  payment  of  it,  one  whq 
took  the  note  as  indorsee  after  maturity  took  it  subject  to  the  defense 

"  Merchants'  Loan  &  Trust  Co.  v.  ^'*  Baker  v.   Kinsey,   41   Ohio   St. 

Welter,  205  111.  647,  68  N.  E.  1082.  403. 

'^^  Leightman  v.  Kadetska,  58  Iowa  "  Robinson  v.  Lyman,  10  Conn.  30, 

676,  12  N.  W.  736,  43  Am.  Rep.  129.  25  Am.  Dec.  52. 

"Young  v.  Chew,  9  Mo.  App.  387. 


545         NOTES   MATURE   ON    FAILURE    TO    PAY    ONE   OF    SERIES,       [§    423 

of  payment.^ ^  So  where  a  note  payable  to  an  insolvent  bank  was  long 
past  due  when  assigned  to  plaintiff  by  the  bank's  assignee  for  creditors, 
the  maker  was  held  entitled  to  set  off  against  the  note  the  amount  of  his 
deposit  account  with  the  bank.^^  Again,  where  notes  secured  by  a 
mortgage  were  given  for  the  unpaid  purchase  price  of  land,  and  one  of 
the  notes,  the  first  to  fall  due,  was  assigned,  after  its  maturity,  it  was 
decided  that  the  assignee  took  it  subject  to  the  right  of  the  vendee  to 
recoup  from  the  unpaid  purchase  money,  as  against  his  warrantor, 
whatever  sum  he  had  been  compelled  to  pay  to  clear  his  title. ^^  And 
where,  by  statute,  a  maker  can  avail  himself  of  moneys  paid,  goods 
sold  and  delivered,  or  services  rendered,  in  an  action  on  a  promissory 
note  by  the  payee,  this  is  held  to  be  in  fact  a  defense  legal  and  equita- 
ble, which  may  be  shown  in  defense  to  an  action  by  a  purchaser  after 
maturity. ^^ 

§  423.     Where  series  of  notes  matures  on  failure  to  pay  any  one. 

"Wliere  it  is  provided  in  each  note  of  a  series  of  notes  that  all  the  notes 
will  be  matured  upon  a  failure  to  pay  any  one  of  the  series,  one  who 
purchases  the  notes  after  such  a  failure  is  a  purchaser  after  maturity, 
and  in  such  a  case  it  is  decided  that  where  the  notes  were  secured  to- 
gether by  a  vendor's  lien,  the  purchaser  is  chargeable  with  notice  of 
homestead  rights  existing  as  a  defense  against  them  all.-^   And  where 

'*  Paine  v.  Central  Vermont  R.  R.  then  becomes  very  clear  that  Wolf 

Co.,  118  U.  S.  152,  6  Sup.  Ct.  1019.  would  have  the  right  to  recoup  from 

"Little  V.  Sturgis,  127  Iowa  298,  the     unpaid     purchase     money,     as 

103  N.  W.  205.  against     his     warrantor,     whatever 

=°Wolf  v.  Shelton,  159  Ind.  531,  65  sum  he  had  been  compelled  to  pay 

N.  E.  531,  in  which  the  court  said:  to  clear  his  title.   Watts  v.  Fletcher, 

"The  note  went  to  appellee  discred-  107   Ind.   391;    Doss  v.   Ditmars,   70 

ited  upon   its  face  by  non-payment  Ind.  451,  457;  Holman  v.  Creagmiles, 

at  maturity.    It  was  a  broken  con-  14  Ind.  177.    As  we  have  seen  appel- 

tract    when    appellee    purchased    it,  lant  has  this  same  right  against  the 

and  he  was  bound  to  take  notice  of  appellee    who    purchased    the    note 

the   defense,   and    to   know   that   he  charged  with  notice  that  the  maker 

would  have  no  greater  right  to  en-  had  a  defense  against  it.    Green  v. 

force  payment  than  the  payee  had  Louthain,    49    Ind.    139;    First    Nat. 

and   that  it  would  be  open   to  the  Bank  v.  Henry,  156  Ind.  1,  and  cases 

same  defenses  in  his  hands  that  it  cited."    Per  Hadley,  C.  J. 

would  have  been  subject  to  if  it  had  ^  Sargent    v.    Southgate,    5    Pick, 

remained  the  property  of  the  payee.  (Mass.)  312,  16  Am.  Dec.  409. 

Suppose  Foreman  had  not  assigned  "  Lybrand  v.  Fuller,  30  Tex.  Civ. 

the    note    at    all,    and    himself    had  App.  116,  69  S.  W.  1005.    The  court 

brought   this    suit   as    plaintiff.      It  said:    "In  the  case  at  bar  the  notes 
Joyce  Defenses — 35. 


433] 


PDRCHASEKS   AFTER    MATURITY. 


546 


five  notes  were  given  which  showed  upon  their  face  that  they  were 
installment  payments  of  one  common  consideration,  and  each  pur- 
ported to  be  for  a  part  of  the  purchase  money  of  a  named  and  certain 
tract  of  land,  and  showed  that  they  were  not  only  parts  of  the  same 
transaction,  but  that  they  in  fact  constituted  but  one  contract,  it  was 
decided  that  a  purchaser  of  the  notes  who  purchased  them  after  the 
first  note  had  matured  and  was  unpaid  took  them  subject  not  only  to 
any  defenses  which  existed  against  the  first  note  but  to  such  defenses 
as  might  exist  against  them  all.-^  The  court  said  in  this  case:  "The 
effect  of  notice  by  the  dishonor  of  the  note  overdue  was  to  call  atten- 
tion to  the  fact  that  the  maker  had  some  defense  against  the  note 
arising  out  of  the  original  transaction,  which  defense  must  apply 
equally  to  each  of  the  other  notes,  which  represent  parts  of  a  common 
consideration.  What  we  decide  upon  this  point  is  that,  all  of  the  notes 
being  together,  and  acquired  at  the  same  time  by  the  assignee,  it 
appearing  in  each  note  that  they  were  parts  of  one  consideration  and 
constitute  one  contract,  the  dishonor  of  the  first  note  being  overdue 
and  unpaid  charged  Claflin  &  Co.  with  notice  that  the  same  defense 
existed  in  favor  of  the  makers  against  the  notes  not  due  as  against 


were  dated  July  1,  1896,  and  the  first 
note  matured  January  1,  1897,  the 
second,  January  1,  1898,  and  the 
third,  January  1,  1899.  They  show 
upon  their  face  that  they  were  given 
as  a  part  of  the  consideration  for 
the  conveyance  from  J.  M.  Lybrand 
and  wife  to  R.  N.  Lybrand,  and  each 
stipulated  that  the  failure  to  pay 
any  one  of  the  notes  when  due 
should  mature  the  others.  When  ap- 
pellee acquired  the  notes  the  first 
two  were  past  due,  and  the  third 
had  matured  by  contract  making 
failure  to  pay  any  one  of  the  notes 
when  due  mature  the  others.  Thus 
all  of  the  notes,  under  their  very 
terms,  were  past  due  when  they 
were  conveyed  to  appellee.  Associa- 
tion V.  Stewart,  27  Tex.  Civ.  App. 
299,  61  S.  W.  Rep.  386.  Again  it  is 
held  in  the  case  of  Harrington  v. 
Claflin,  91  Tex.  295,  42  S.  W.  1055, 
that  where  several  notes  secured  by 
a  lien  upon  a  homestead  show  upon 


their  face  that  they  were  given  as 
parts  of  the  same  transaction  and  as 
installments  of  one  common  consid- 
eration, the  first  being  overdue 
when  transferred  to  plaintiffs,  it 
was  sufficient  to  charge  them  with 
notice  of  the  defense  as  to  all  the 
other  notes.  We  are  of  the  opinion 
that  the  principle  announced  in  that 
case  is  applicable  to  the  case  at  bar, 
although  the  party  resisting  the  en- 
forcement of  the  lien  In  that  case 
was  the  maker  of  the  notes,  while 
here  it  is  the  payee.  We  conclude 
that  the  appellee  was  not  an  inno- 
cent purchaser  of  the  notes,  he  hav- 
ing acquired  them  after  their  matur- 
ity. Not  being  an  innocent  pur- 
chaser of  the  notes,  the  appellee  was 
chargeable  with  such  infirmities  in 
their  execution  as  resulted  in  a 
want  of  consideration." 

"Harrington    v.    Claflin,   91    Tex. 
295,  42  S.  W.  1055. 


547   NOTE  PAYABLE  ON  DEFAULT  OF  PAYMENT  OF  INTEREST.   [§  434 

the  overdue  note."  So  in  the  case  of  a  mortgage  which  provides 
that  upon  the  failure  to  pay  any  one  of  the  notes  secured  by  it 
all  of  the  notes  are  to  become  due  and  collectible,  an  assignee  of  the 
notes  and  mortgages  is  chargeable  with  knowledge  of  such  provision, 
and  where  one  of  the  notes  is  past  due  and  dishonored  the  others  are 
due  by  the  terms  of  the  mortgage,  and  the  same  defense  may  be  made 
against  them  as  if  the  action  was  by  the  original  payee  and  mort- 
gagee.24 

§  424.  Note  payable  on  default  in  payment  of  interest. — Where  a 
note  provides  that  it  shall  become  due  and  collectible  or  payable  upon 
default  in  the  payment  of  any  installment  of  interest  due  by  the  terms 
of  such  note  it  becomes  a  matured  note  upon  failure  to  pay  as  pro- 
vided, and  one  who  takes  it  after  that  time  is  a  holder  after  maturity, 
subject  to  such  defenses  as  could  be  made  against  the  transferer  or 
indorser.  Thus  it  has  been  so  held  in  the  case  of  a  note  which  provided 
that  "such  delinquency  shall  cause  the  whole  note  to  become  immedi- 
ately due  and  collectible."  The  court  said:  "The  case  presented  is 
clearly  distinguishable  from  those  where  the  stipulation  for  accelerat- 
ing the  maturity  of  the  note  or  notes  on  non-payment  of  interest  or 
other  default  is  contained  in  a  mortgage  or  trust  deed  given  to  secure 
the  same,  and  which  mortgage  or  trust  deed  and  notes  are  construed  in 
some  jurisdictions  as  one  instrument  in  law.  In  such  a  case  the  note 
or  notes  may  be  transferred  without  the  transferee  having  any  knowl- 
edge of  such  stipulation  in  the  mortgage  or  trust  deed.  Here  the 
stipulation  is  in  the  notes  themselves,  and  every  transferee  of  the  same 
necessarily  took  them  with  knowledge  of  such  stipulation.  So  the  case 
presented  differs  from  those  where  one  of  a  series  of  notes  or  an  in- 
stallment of  interest  has  become  due  and  unpaid,  with  no  stipulation 
as  here,  that  'such  delinquency  shall  cause  the  whole  note  to  immedi- 
ately become  due  and  collectible.'  *  *  *  The  case  presented  is 
distinguishable  from  those  where  the  stipulation  for  accelerating  the 
maturity  of  the  note  or  notes  contained  therein  is  made  optional  with 
the  payee  or  mortgagee,  or  his  representatives  or  assigns.  *  *  * 
On  the  contrary  it  is  expressly  and  clearly  declared  therein  that  'such 
delinquency  shall  cause  the  whole  note  to  immediately  become  due 
and  collectible.'  To  construe  such  language  as  merely  optional  or 
permissive  would  be  to  destroy  the  clearly  expressed  contract  which  the 

^*  Stoy    V.    Bledsoe,    31    Ind.    App.  643,  68  N.  E.  907. 


§§    425,   426]  PURCHASERS   AFTER   MATURITY.  548 

parties  made  for  themselves  and  to  force  upon  them  a  contract  to 
which  neither  of  them  ever  gave  their  consent.  *  *  *  -^g  must 
hold  that  by  the  express  terms  of  the  stipulation  and  the  default  in 
paying  the  annual  interest  *  *  *  the  whole  of  each  note  'imme- 
diately became  due  and  collectible.'  It  follows  from  what  has  been 
said  that  the  plaintiffs  took  the  notes  after  they  became  due  and  paya- 
ble and  subject  to  the  equities  between  the  original  parties."^' 

§  425.  Application  to  particular  paper. — The  general  rule  as  to  one 
who  purchases  paper  after  maturity  has  been  applied  in  the  case  of 
bank  bills/^  and  to  a  due  bill  not  negotiable.^^  It  has,  however,  been 
decided  in  an  English  case  that  although  this  applies  to  bills  and  notes 
it  is  not  applicable  in  the  case  of  checks.^* 

§  426.  Same  subject — Coupon  bonds. — The  general  rule  also  ap- 
plies to  coupon  bonds  which  are  negotiable.^^  So  it  has  been  decided 
that  9.  party  buying  bonds  of  the  United  States  with  overdue  and  un- 
paid coupons  is  to  be  taken  as  affected  with  knowledge  of  prior  equities 
when  he  purchases  them  after  the  date  when  they  are  redeemable  and 
for  which  the  coupons  run.^"  So  where  coupon  bonds  which  were 
issued  by  the  United  States,  payable  to  the  state  of  Texas,  were 
alienated  by  the  insurgent  government  during  the  rebellion,  it  was  de- 
cided that  purchasers  of  such  bonds  after  the  date  at  which  they  be- 
came redeemable  were  affected  with  notice  of  want  or  defect  of  title 
in  the  seller.^^  And  where  bonds  were  stolen  before  the  maturity  of 
certain  coupons  thereon,  which  were  detached  and  sold  to  a  person  after 
maturity,  it  was  decided  in  an  action  of  replevin  by  the  owner  that 
such  person  took  them  with  notice  of  every  defect  which  in  fact  existed 
and  subject  to  all  the  defenses  which  the  promisor  might  make  to  them. 
And  the  court  held  that  though  the  coupons  had  passed  through  several 
hands  there  was  no  presumption  that  they  were  negotiated  by  the 
thief  before  maturity.^ ^  Though,  as  stated  above,  this  case  was  an  ac- 
tion of  replevin,  yet  the  following  quotation  is  of  value  as  showing 

^  Hodge  V.  Wallace   (Wis.,  1906),  (U.   S.)    72;    Greenwall  v.   Haydon, 

108  N.  W.  212,  per  Cassoday,  C.  J.  78  Ky.  332. 

^  Burroughs  v.  Bank,  70  N.  C.  283.  ^  Texas  v.   Hardenberg,   10   Wall. 

=^  Thompson  v.  McClelland,  29  Pa.  (U.  S.)  68. 

St.  475.  ^  Texas  v.  White,  7  Wall.   (U.  S.) 

^Rothchild  v.  Corney,  9  Barn.  &  700. 

C.  388.  ^-  Hinckley  v.  Bank,  131  Mass.  147^ 

=*  National  Bank  v.  Texas,  20  Wall. 


549  CERTIFICATE  OF  DEPOSIT.  [§  427 

the  application  of  the  general  rule  to  coupon  bonds.  The  court  here 
said:  ''The  claim  of  the  defendant  is  that,  inasmuch  as  the  coupon 
had  not  matured  when  the  bonds  were  stolen,  it  is  to  be  presumed  that 
the  thief  negotiated  them  before  maturity,  so  that  they  were  in  the 
market  under  the  protection' of  the  law  merchant  before  maturity; 
and  thus  that  the  true  owner  had  lost  his  right  of  property  in  them. 
No  authority  is  cited  which  supports  this  proposition,  and  it  is  not 
sound  in  principle.  *  *  *  jj^  h^q  (.a,se  at  bar  every  known  holder 
received  the  coupons  after  maturity,  and  it  is  not  important  to  decide 
whether  a  previous  holder  took  them  before  or  after  maturity,  when 
there  is  no  evidence  that  there  ever  was  a  previous  holder  after  they 
were  taken  from  the  plaintiff  except  the  thief.  It  is  never  to  be  as- 
sumed that  facts  exist  which  do  not  appear.  *  *  *  By  the  facts 
agreed  the  plaintiff  was  at  one  time  the  absolute  owner  of  the  coupons. 
He  remains  in  law  the  owner  until  the  contrary  appears.  Nothing  ap- 
pears in  reference  to  a  claim  of  title  in  any  other  person  till  a  time 
when  it  was  too  late  for  such  person  to  acquire  title ;  and,  in  the  ab- 
sence of  any  evidence  tending  to  show  that  any  other  person  but  the 
thief  had  any  possession  of  them  until  they  were  purchased,  as  de- 
scribed in  the  agreed  statement,  the  presumption,  which  is  one  of  fact, 
is  that  they  remained  in  the  possession  of  the  thief  until  thus  sold. 
\Yhen  they  were  purchased  they  were  detached  from  the  bonds,  were 
overdue,  and  carried  to  the  purchaser  notice  of  every  defect  which  in 
fact  existed,  and  he  took  them  subject  to  all  the  rights  which  any 
other  than  the  vendor  had  to  them,  and  to  all  the  defenses  which  the 
promisor  might  make  to  them."^^* 

§  427.  Certificate  of  deposit. — The  general  rule  as  to  a  purchaser 
after  maturity  being  subject  to  defenses  available  against  his  indorser 
has  been  applied  in  the  case  of  a  certificate  of  deposit.  So  where  on 
the  face  of  a  certificate  of  deposit  in  the  usual  form,  payable  to  the 
order  of  the  payee,  on  the  return  of  the  certificate  properly  indorsed, 
were  stamped  the  words :  "This  certificate,  payable  three  months  after 
date  with  six  per  cent,  interest  per  annum  for  the  time  specified,"  it 
was  decided  that  one  to  whom  it  was  transferred  more  than  thre(^ 
months  after  its  date  took  it  dishonored  and  subject  to  defenses  which 
could  have  been  made  to  it  m  the  hands  of  the  payee.^^ 

="*  Per  Lord,  J.  Bank,  34  Neb.  71,  51  N.  W.  305,  33 

^  First  Nat.  Bank  v.  Security  Nat.    Am.  St.  R.  618. 


§§   428-430]  PURCHASERS    AFTER   MATURITY.  550 

§  428.  Where  transferred  before  but  not  indorsed  until  after  ma- 
turity.— "WHiere  paper  is  indorsed  after  maturity  the  fact  that  it  was 
transferred  or  assigned  before  maturity  will  not  relieve  it  from  the 
operation  of  the  general  rule  as  to  equities  or  defenses  being  available 
against  a  purchaser  after  maturity.^*  So  the  fact  that  there  was  an 
equitable  assignment  of  a  note  before  its  maturity  will  not  except  it  in 
the  hands  of  the  assignee  from  the  operation  of  the  general  rule  as  to 
its  being  subject  to  defenses  in  the  hands  of  one  who  takes  it  after 
maturity,  where  it  is  not  indorsed  to  such  person  until  after  maturity. 
Thus  under  the  California  civil  code,  which  defines  a  holder  in  due 
course  as  one  who  takes  the  paper  in  the  ordinary  course  of  business  and 
for  value  before  its  apparent  maturity  without  knowledge  of  dishonor 
and  duly  indorsed,^^  one  to  whom  a  note  is  equitably  assigned  before 
maturity,  is  not  a  holder  in  due  course  where  it  is  not  duly  indorsed  to 
liini  until  after  maturity,  and  is,  in  such  a  case,  subject  to  any  equita- 
ble defense.^® 

§429.  Non-negotiable  note. — Wliere  a  non-negotiable  note  is  as- 
signed by  the  payee  after  maturity  it  is  subject  to  all  equities  and  de- 
fenses of  the  maker  against  the  payee.^^ 

§  430.  Effect  of  statute  providing  that  suit  by  assignee  shall  be 
without  prejudice. — The  general  rule  that  the  holder  of  a  note,  trans- 
ferred after  maturity,  takes  it  subject  to  all  equities  arising  out  of  the 
note  itself,  such  as  payment,  want  of  consideration,  or  fraud,  but  not 
subject  to  any  independent  set-off,  is  not  affected  by  a  statutory  pro- 
vision which  applies  to  the  assignee  of  a  chose  in  action  and  provides 
that  a  suit  in  his  name,  which  at  common  law  he  could  not  maintain, 
shall  be  without  prejudice  to  any  set-off  or  other  defense  existing  before 
notice  of  the  assignment.  And  the  fact  that  the  transfer  was  not  by 
indorsement  or  delivery,  but  by  a  formal  written  assignment,  will  not 
abridge  the  rights  of  the  transferee,  though  it  is  provided  by  statute 
that:  "N'otes  in  writing,  made  and  signed  by  any  person  promising 
to  pay  to  another  person  or  his  order,  or  bearer,  or  to  bearer  only,  any 

"Pavey  v.   StaufEer,  45   La.   Ann.  =^  Cal.  Civ.  Code,  §  3123. 

354,   361;    Savage    v.    King,    17    Me.  ="  Reese   v.   Bell,   138    Cal.  xix,   71 

301;    Clark  v.  Whittaker,  50  N.   H.  Pac.  87. 

474;    Southard  v.   Porter,   43   N.   H.  =' Graves    v.    Mining   Co.,    81    Cal. 

379;   Goshen  Bank  v.  Bingham,  118  303,  22  Pac.  665. 
N.  Y.  349;  Gilbert  v.  Sharp,  2  Lans. 
(N.  Y.)   412. 


551  LIMITATION   RULE.  [§    431 

sum  of  money,  are  negotiable  by  indorsement  or  delivery  in  the  same 
manner  as  inland  bills  of  exchange,  according  to  the  custom  of  mer- 
chants."^® So  in  considering  this  question  in  the  case  of  an  action 
upon  notes  payable  to  a  designated  payee  or  bearer  the  court  said : 
"If  they  had  been  passed  to  plaintiff  by  mere  delivery,  without  any 
writing,  after  maturity,  they  would  not  have  been  subject,  in  his 
lumds,  to  the  set-off  pleaded,  which  is  an  independent  cause  of  action 
existing  in  favor  of  the  maker  against  the  payee,  having  no  reference 
whatever  to  the  notes  in  question.  Now,  are  the  rights  of  the  plaintiff 
abridged  by  the  fact  that  the  notes  were  transferred  by  a  formal  writ- 
ten assignment,  and  not  by  mere  delivery?  We  know  of  no  principle  of 
law  or  reason  why  this  should  be  so.  The  written  assignment  merely 
gives  formal  expression  to  what  the  law,  by  the  mere  delivery  of  paper 
payable  to  bearer,  implies,  to  wit:  An  intention  to  vest  in  the  holder 
the  absolute  ownership.  And  if  the  law  gives  effect  to  this  unexpressed 
intention,  so  far  as  to  vest  in  the  holder  a  title  unincumbered  with 
rights  of  mere  set-off,  why  should  not  the  expressed  intention  have 
equal  effect?  Had  the  paper  been  a  non-negotiable  chose  in  action,  so 
that  the  simple  delivery  thereof  would  have  conferred  upon  the  holder 
no  right  at  common  law  to  sue  in  his  own  name,  the  assignee,  whether 
by  mere  delivery  or  by  written  assignment,  would  take  it  subject  to 
the  set-off  or  other  defenses  mentioned  in  section  2760.  And  the 
same  is  true  of  a  negotiable  note,  payable  to  order  and  transferred  by 
delivery  after  maturity."^® 

§  431.  Limitations  of  rule — In  general. — The  only  defenses  against 
which  an  indorsee  has  to  guard  in  accepting  overdue  bills  are  de- 
clared to  be,  first,  those  which  have  arisen  subsequent  to  the  execution 
of  the  note,  and  which  are  not  collateral  but  which  relate  to  the  note 
itself;  and  secondly,  those  which  are  inherent  in  the  note,  and  show 
it  to  have  been  void  ab  initio,  such  as  fraud,  mistake  and  absence  of  a 
sufficient  consideration.'*'^  And  it  has  been  determined  that  the  equi- 
ties are  such  as  are  connected  with  the  note  itself  and  not  such  as  grow 
out  of  distinct  and  independent  considerations  between  the  original 
parties.*^   "When  it  is  said  in  the  books  that  the  holder  of  a  negotiable 

^' Sec.  1794  of  Iowa  Revision.  *^  Alabama. — Robertson    v.    Breed- 

'» Richards  v.  Daily,  34  Iowa  427,  love,  7  Port.  (Ala.)  541. 

429,  per  Day,  J.  Connecticut. — Fairchild  v.  Brown, 

*°Renwick  v.  Williams,  2  Md.  356,  11  Conn.  26. 

364,  per  Mason,  J. 


§  431] 


PURCHASERS   AFTER   MATURITY. 


552 


promissory  note,  transferred  after  maturity,  takes  it  as  dishonored 
and  subject  to  all  the  equities  between  the  original  parties,  whether 
he  has  notice  of  the  same  or  not,  it  must  be  understood  that  the  equities 
meant  are  such  only  as  attach  to  the  particular  note,  and  such  as  be- 
tween the  parties  to  it  would  control,  qualify  or  extinguish  any  rights 
arising  thereon.  Equities  between  the  parties  to  the  note  arising  from 
other  and  independent  transactions  between  them  are  not  available 
against  the  note  in  the  hands  of  the  assignee."*-  So,  though  a  note 
may,  in  the  hands  of  such  a  holder,  be  subject  to  a  set-off,  in  accordance 
with  an  agreement  between  the  maker  and  the  payee,  made  while  the 
note  was  in  the  latter's  hands,  that  a  sum  then  ascertained  to  be  due 
from  the  payee  to  the  maker,  payable  in  futuro,  should  be  applied  on 
the  note,  yet  the  note  cannot  be  affected  by  an  agreement  as  to  a  set-off 
made  after  it  has  been  transferred.*^  Again,  it  is  decided  that  the 
infirmity,  equity  or  defense  which  may  be  available  against  an  indorsee 
after  maturity  must  be  one  which  attaches  to  the  paper  prior  to  its 
transfer.**  The  right,  however,  of  a  party  to  avail  himself  as  against 
a  purchaser  after  maturity  of  a  defense  arising  out  of  collateral  mat- 
ters or  independent  transactions  may  be  conferred  by  statute.*^ 


Florida. — Kilcrease  v.  White,  6 
Fla.  45. 

Indiana. — Hankins  v.'  Shoup,  2 
Ind.  342. 

Maryland. — Annan  v.  Houck,  4 
Gill  (Md.)  325,  45  Am.  Dec.  133. 

Missouri. — Barnes  v.  McMuUins, 
78  Mo.  260;  Cutler  v.  Cook,  77  Mo. 
388;  Arnot  v.  Woolburn,  35  Mo.  98; 
Unseld  v.  Stephenson,  33  Mo.  161; 
Gullett  v.  Hoy,  15  Mo.  399;  Henley 
v.  Holzer,  19  Mo.  App.  245;  Grier  v. 
Hinman,  9  Mo.  App.  213;  Haeussler 
V.  Greene,  8  Mo.  App.  451. 

New  York. — Titus  v.  Himrod,  39 
Barb.   (N.  Y.)  581. 

Pennsylvania. — Long  v.  Phawn,  75 
Pa.  St.  128;  Hughes  v.  Large,  2  Pa. 
St.  103;  Evans  v.  McHugh,  2  Woodw. 
Dec.   (Pa.)   21. 

Rhode  Island. — Trafford  v.  Hall,  7 
R.  I.  104,  82  Am.  Dec.  589. 

South  Carolina. — McAlpin  v.  Win- 
gard,  2  Rich.  L.  (S.  C.)  547. 


Vermont. — Armstrong  v.  Noble,  55 
Vt.  428. 

But  see  Davis  v.  Neligh,  7  Nebr. 
78,  84. 

^=  Shipman  v.  Robbins,  10  Iowa 
208.     Per  Wright,  C.  J. 

^^  Robinson  v.  Lyman,  10  Conn.  30, 
25  Am.  Dec.  52. 

*^  Robinson  v.  Lyman,  10  Conn.  30, 
25  Am.  Dec.  52. 

"'La  Due  v.  First  Nat.  Bank,  31 
Minn.  33,  16  N.  W.  426,  decided  un- 
der Minn.  Gen.  St.  1878,  c.  66,  §  27. 
wherein  the  court  says:  "According 
to  the  commercial  law  of  England, 
and  in  probably  all  those  states 
where  a  different  rule  has  not  been 
fixed  by  statute,  an  indorsee  of  an 
overdue  bill  or  negotiable  note  takes 
it  subject  only  to  such  equities  or 
defenses  as  attach  to  the  bill  or 
note  itself,  and  not  to  claims  aris- 
ing out  of  collateral  matters  or  in- 
dependent     transactions,      whether 


>53 


PRO    TANTO    RECOVERY. 


[§§  432,  433 


§  432.  Pro  tanto  recovery. — A  purchaser  after  maturity,  who  has 
not  paid  full  value,  can,  it  is  decided,  only  recover  to  the  extent  paid, 
unless  he  would  be  liable  over  for  the  difference  between  what  he  has 
thus  paid  and  the  original  amount  of  the  note.**'  So  where  an  ac- 
commodation note,  executed  to  be  used  by  the  payees  as  collateral  se- 
curity, was  indorsed  by  them  for  that  purpose  after  maturity,  and 
afterwards  sold  by  the  indorsee  to  satisfy  an  unpaid  balance  of  their 
debt,  it  was  held  that  it  could  be  enforced,  in  the  hands  of  the  pur- 
chasers, only  to  the  same  extent  as  though  still  held  by  the  first 
indorsees,  that  is,  to  the  amount  of  the  unpaid  portion  of  the  debt 
which  it  was  executed  to  secure.*^ 

§  433.  Purchaser  from  bona  fide  holder — General  rule. — One  who 
purchases  negotiable  paper  after  its  maturity  from  an  innocent  holder, 
who  acquired  the  same  before  maturity  for  value  and  without  notice 
of  any  defense  or  equities,  takes  the  same  free  from  such  defenses 
as  the  maker  might  avail  himself  of  in  an  action  by  the  payee.*^  Such 


they  are  against  the  payee  or  an 
intermediate  holder;  the  idea  being 
that  such  commercial  paper,  al- 
though overdue,  did  not  lose  its  ne- 
gotiability. Our  state,  following  the 
example  of  many  others,  has  by  stat- 
ute entirely  changed  this  rule."  Per 
Mitchell,  J. 

■*"  Bond  v.  Fitzpatrick,  8  Gray 
(Mass.)  536;  Preston  v.  Breedlove, 
36  Tex.  96. 

« First  Nat.  Bank  v.  Werst,  52 
Iowa  284,  3  N.  W.  711.  In  this  case 
it  appeared  that  a  note  of  $3,000 
was  given  as  an  accommodation 
note  to  be  used  as  collateral  security 
for  an  indebtedness  of  $2,500,  which 
was  evidenced  by  a  note  for 
that  amount.  Subsequently  the  in- 
debtedness was  reduced  by  a  pay- 
ment of  $500  and  a  new  note  was 
given.  The  renewal  note  was  also 
reduced  by  payments  so  that  the 
debt  was  only  $1,317.68,  principal 
and  interest.  The  note  was  sold  by 
the  creditor,  under  authority  given 
it  in  writing  to  sell  it  and  apply  the 
proceeds   upon   the   debt  and   costs 


of  sale.  The  plaintiff  in  this  action 
was  the  purchaser.  The  court  said: 
"The  note  was  executed  for  the  pur- 
pose of  securing  the  indebtedness  of 
the  payees  to  the  Chicago  Bank. 
Under  the  contract  between  the 
maker  and  the  payees  it  was  valid 
and  could  be  enforced  only  to  the 
extent  necessary  to  secure  the  bank. 
It  was  indorsed  after  maturity,  and 
the  holders  under  such  indorsement 
took  it  with  notice  of  the  equities 
and  defenses  of  the  maker.  The 
debt  for  which  it  was  made  as  se- 
curity was  paid  in  part,  the  note  re- 
mained valid  only  for  the  part  of 
the  debt  remaining  unpaid.  The 
plaintiff  acquired  no  higher  right 
than  the  Chicago  Bank;  the  cir- 
cumstances under  which  it  was 
transferred  to  plaintiff  created  no 
right  other  than  those  of  the  in- 
dorsee of  overdue  paper.  It  is  very 
plain  that  plaintiff  can  recover  no 
greater  sum  than  was  due  the  Chi- 
cago Bank."     Per  Beck,  C.  J. 

^'^  Illinois. — Matson    v.    Alley,    141 
111.  284,  31  N.  E.  419. 


;§  434,  435] 


PURCHASERS    AFTER    MATURITY. 


554 


a  purchaser  stands,  in  this  respect,  in  the  place  of  the  one  from  whom 
he  took  the  paper.*"  So  it  has  been  declared  that :  "Notwithstanding 
the  plaintiff  purchased  the  note  after  maturity  he  holds  it  free  from 
any  and  all  defenses  available  to  the  makers  against  the  payee,  for  it 
has  become  the  settled  law  of  this  country  that  where  a  negotiable  note 
is  purchased  after  due  from  an  innocent  holder,  the  purchaser  takes 
the  title  of  and  is  entitled  to  the  same  protection  as  his  indorser."^" 

§  434.  Same  subject — Application  of  rule. — A  purchaser  after  ma- 
turity of  negotiable  paper  will  not,  in  an  action  thereon,  be  subject  to 
the  defense  of  usury  where  the  one  from  whom  he  took  it  acquired  the 
same  before  maturity,  without  notice  or  knowledge  of  such  taint  and 
occupied  the  position  of  a  bona  fide  holder. ^^  ISTor  under  such  cir- 
cumstances can  the  defense  of  want  of  consideration  be  set  up.^^  An 
exception,  however,  to  the  general  rule  is  held  to  exist  where  the  payee 
becomes  the  purchaser.^^ 

§  435.  Demand  paper. — In  determining  the  respective  rights  of 
the  holder  of,  and  of  prior  parties  to,  commercial  paper  which  is  paya- 
ble on  demand,  it  is  declared  that  the  meaning  of  the  word  "overdue," 
as  used  in  connection  with  such  paper,  is  to  be  considered  and  that  the 
distinctions  made  as  to  the  different  sense  in  which  this  word  may  be 
used  are  to  be  borne  in  mind.  The  test  whether  a  purchaser  took  such 
paper  subject  to  equities  and  defenses  is  said  to  be  the  period  of  time 
which  it  had  been  outstanding  at  the  time  he  took  it  and  not  to  depend 
upon  the  question  whether  it  has  been  presented  for  payment.  If  it 
has  been  outstanding  such  a  length  of  time  as  to  put  the  purchaser 
upon  inquiry  he  will  then  be  regarded  as  taking  it,  charged  with  notice 
of  defenses  thereto.^* 


Louisiana. — Howell  v.  Crane,  12 
La.  Ann.  126,  68  Am.  Dec.  765. 

Michigan. — Host  v.  Bender,  25 
Mich.  515. 

Nebraska. — Barker  v.  LicMen- 
berger,  41  Neb.  751,  60  N.  W.  79. 

New  York. — Weems  v.  Shaugli- 
nessy,  70  Hun  (N.  Y.)  175,  24  N.  Y. 
Supp.  271;  Beall  v.  General  Electric 
Co.,  16  Misc.  (N.  Y.)  611,  38  N.  Y. 
Supp.  527;  Britton  v.  Hall,  1  Hilt. 
(N.  Y.)  528;  Benedict  v.  De  Groat, 
45  How.  Pr.  (N.  Y.)  384. 


North  Carolina. — Lewis  v.  Long, 
102  N.  C.  206,  9  S.  E.  637,  11  Am. 
St.  R.  725. 

^'Matson  v.  Alley,  141  111.  284,  31 
N.  E.  419. 

^"Koehler  v.  Dodge,  31  Neb.  328, 
47  N.  W.  913. 

"Woodwarth  v.  Huntoon,  40  111. 
131,  89  Am.  Dec.  340. 

^-  Cook  v.  Larkin,  19  La.  Ann.  507. 

"Koehler  v.  Dodge,  31  Neb.  32S, 
47  N.  W.  913. 

"La  Due  v.  First  Nat.  Bank,  31 


555 


DEFENSES   AND   EQUITIES, 


[§  436 


§  436.  Defenses  and  equities  between  maker  and  indorser  or 
intermediate  holder. — In  determining  what  equities  or  defenses  may 
be  set  up  against  a  purchaser  after  maturity  it  may  be  stated  that,  as 
a  general  rule,  such  a  purchaser  takes  the  paper  subject  to  such  equities 
or  defenses  as  exist  between  the  original  parties,  to  the  extent  that 
they  were  available  as  against  the  one  from  whom  he  received  it.^'* 


Minn.  33,  16  N.  W.  426.  In  this 
case  it  was  said  in  reference  to  a 
bill  of  exchange:  "The  term  'over- 
due' as  applied  to  a  demand  bill  of 
exchange  is  used  in  different  con- 
nections, in  each  of  which  it  has  a 
different  meaning;  and  the  failure 
to  keep  these  distinctions  in  mind 
has  perhaps  led  to  some  misappre- 
hension regarding  the  present  case. 
Sometimes  it  is  used  in  reference  to 
a  right  of  action  against  a  drawer 
or  indorser.  In  that  connection  a 
bill  is  not  overdue  until  presented 
to  the  drawer  for  payment  and  pay- 
ment refused.  Sometimes  the  term 
is  used  in  considering  whether  an 
indorser  has  been  released  by  a  fail- 
ure of  the  holder  to  present  the  bill 
for  payment,  and  to  give  the  in- 
dorser notice  of  its  dishonor  within 
a  reasonable  time.  Again,  the  term 
is  applied  to  a  bill  which  has  come 
into  the  hands  of  an  indorser  so 
long  after  its  issue  as  to  charge  him 
with  notice  of  its  dishonor,  and 
thus  subject  it  in  his  hands  to  the 
defenses  which  the  drawer  had 
against  it  in  the  hands  of  the  as- 
signor. It  is  in  this  last  connection 
that  the  term  'overdue'  is  consid- 
ered in  the  present  case.  That  in 
this  case  a  bill  may  be  said  to  be 
overdue,  although  it  has  never,  in 
fact,  been  presented  to  the  drawee 
for  payment,  is  recognized  every- 
where throughout  the  books.  Sup- 
pose a  draft  had  been  held  by  the 
payee  for  five  years,  without  ever 
having  been  presented  to  the  drawee 
for  payment,  and  is  then  indorsed 


to  another  party.  It  would  not  be 
due  so  as  to  give  a  right  of  action 
against  the  drawer,  because  his  con- 
tract is  only  to  pay  in  case  it  is  not 
paid  by  the  drawee  on  presentation. 
But  there  would  be  no  doubt  that  it 
would  be  overdue  and  dishonored, 
so  as  to  charge  it  in  the  hands  of 
the  indorsee  with  any  defenses 
which  the  drawer  had  against  it  in 
the  hands  of  the  payee,  although 
when  he  took  it  it  had  never  been 
presented  for  payment.  The  reten- 
tion of  a  demand  draft  for  so  long 
a  time  without  presentment,  when 
no  defense  exists  against  it,  is  so 
unusual  and  contrary  to  business 
usages  that  this  circumstance  would 
be  held  to  charge  the  indorsee  with 
notice,  when  he  purchased  the  draft, 
that  it  was  dishonored.  The  lapse 
of  time  would  in  such  a  case  be 
so  great  as  to  put  a  purchaser  upon 
inquiry  as  to  the  reason  why  it  was 
still  outstanding  and  unpaid.  *  *  * 
In  determining  whether  an  indorsee 
takes  such  paper  as  overdue  paper, 
subject  to  such  defenses  or  equities, 
the  question  of  actual  demand  and 
dishonor  does  not  enter  into  the 
discussion.  The  point  of  inquiry  is, 
had  the  paper  been  outstanding  so 
long  after  its  date  as  to  put  the 
purchaser  upon  inquiry  and  charge 
him  with  notice  that  there  is  some 
defense  to  it."  Per  Mitchell,  J.  See 
De  Mott  V.  Starkey,  3  Barb.  Ch.  (N. 
Y.)  403. 

^^  Alaltama. — Glasscock    v.    Smith, 
25  Ala.  474. 


437] 


PUECHASERS   AETER   MATURITY. 


55G 


This  rule  operates  to  subject  paper  in  the  hands  of  such  a  purchaser  to 
those  equities  and  defenses  which  were  available  against  his  immediate 
indorser,  without  regard  to  whether  such  indorser  is  the  payee  of  the 
paper  or  an  intermediate  party. ^®  It  has,  however,  been  determined 
that  this  rule  does  not  permit  the  maker  of  paper  to  set  up  against  a 
purchaser  after -maturity  an  equity  or  defense  which  may  exist  in  his 
favor  against  any  intermediate  holder,  but  which  is  not  available 
against  his  immediate  indorser.^^ 

§  437.     Secret  equity  in  favor  of  entire  stranger. — A  purchaser  for 
value  of  negotiable  paper  after  maturity  is  not  bound  by  a  secret  equity 


Georgia. — Thomas  v.  Kinsey,  8 
Ga.  421. 

Illinois. — Lord  v.  Favorite,  29  111. 
149. 

Indiana. — Green  v.  Louthain,  49 
Ind.  139. 

Iowa. — Duncan  v.  Finn,  79  Iowa 
658,  44  N.  W.  888;  Bates  v.  Kemp, 
12  Iowa  99. 

Louisiana. — Stern  v.  Bank,  34  La. 
Ann.  1119. 

Maine. — Sprague  v.  Graham,  29 
Me.  160;  Burnham  v.  Tucker,  18  Me. 
179. 

Massachusetts. — Mackay  v.  Hol- 
land, 4  Mete.  (Mass.)  69;  Howard 
V.  Ames,  3  Mete.  (Mass.)  308;  Sar- 
gent v.  Southgate,  5  Pick.  (Mass.) 
312. 

Michigan. — Simons  v.  Morris,  53 
Mich.  155,  18  N.  W.  625. 

Missouri. — Turner  v.  Hoyle,  95 
Mo.  345,  8  S.  W,  157;  Julian  v.  Calk- 
ins, 85  Mo.  202;  Ford  v.  Phillips,  83 
Mo.  530;  Livermore  v.  Blood,  40 
Mo.  48;  Wheeler  v.  Barret,  20  Mo. 
573;  Shipp  v.  Stacker,  8  Mo.  145. 

New  Jersey. — Little  v.  Cooper,  11 
N.  J.  Eq.  224. 

Vermont. — Miller  v.  Bingham,  29 
Vt.  82. 

Federal. — Andrews  v.  Pond,  13 
Pet.  (U.  S.)  65;  Foley  v.  Smith,  6 
Wall.   (U.  S.)   492. 


English. — Bounsall  v.  Harrison,  1 
Mees.  &  W.  611,  2  Gale  113. 

BUT  SEE  Eaton  v.  Corson,  59  Me. 
510,  wherein  it  is  decided  that  a 
purchaser  of  a  note  can  acquire  no 
greater  rights  than  his  vendor  can 
enforce,  and  that  the  general  rule 
extends  to  defenses  available 
against  all  prior  holders.  Zeis  v. 
Potter,  105  Fed.  671,  in  which  it  is 
declared  that  a  reasonable  rule 
would  seem  to  be  that  purchasers 
of  paper  which  is  overdue  or  non- 
negotiable  take  it  subject  to  the 
equities  of  all  who  appear  or  are 
known  to  have  had  an  interest  in  it. 

Want  of  title  in  any  of  the  par- 
ties acquiring  the  instrument  after 
its  maturity  can  be  set  up  by  the 
drawer.  Davis  v.  Bradley,  26  La. 
Ann.  555. 

^^  Butler  V.  Murison,  18  La.  Ann. 
363;  Shipp  v.  Stacker,  8  Mo.  145. 
See  also  cases  cited  in  preceding 
note. 

"Hayward  v.  Sterns,  39  Cal.  58, 
60;  Vinton  v.  Crowe.  4  Cal.  309; 
Perry  v.  Mays,  2  Bailey  (S.  C.)  354; 
Nixon  V.  English,  3  McCord  (S.  C.) 
549.  See  Favorite  v.  Lord,  35  111. 
142;  Root  V.  Irwin,  18  111.  147; 
Hooper  v.  Spicer,  2  Swan  (Tenn.) 
494. 


557 


SECRET    EQUITY    IN    FAVOR   OF    ENTIRE    STRANGER.  [§    437 


which  may  exist  in  favor  of  one  who  is  an  entire  stranger  to  the  paper, 
where  the  purchaser  had  no  knowledge  of  such  equity  or  notice  of  any 
facts  which  should  put  him  upon  inquiry.^^ 


^Fairchild  v.  Brown,  11  Conn.  26; 
Hibernian  Banli  v.  Everman,  52 
Miss.  500. 

SEE  Crosly  v.  Tanner,  40  Iowa 
136. 

In  Mohr  v.  Byrne,  135  Cal.  87,  67 
Pac.  11,  it  is  said  by  the  court  in 
this  connection:  "Nor  does  the  fact 
that  plaintiff  took  the  note  after 
maturity  make  him  any  the  less  a 
bona  fide  purchaser  as  against  the 
equities  of  intervener  herein  set  up. 
The  rule  that  indorsees  after  ma- 
turity take  with  notice  of  prior 
equities  applies  only  as  between  the 
parties  thereto,  and  does  not  apply 
as  to  third  persons  occupying  the 
position  of  intervener  herein,  where 
rights  are  merely  latent,  and  do  not 
appear  from  an  inspection  of  the 
note  or  the  indorsements  thereon. 
The  note,  though  due  when  assigned 
to  plaintiff,  carried  with  it  the  same 
presumptions  as  any  other  chose  in 
action,  and  quoting  from  the  well- 
considered  case  of  Duke  v.  Clark,  58 
Miss.  465  (at  page  474):  'It  is  true 
that  the  assignee  of  a  chose  in  ac- 
tion takes  it  subject  to  all  the 
equities  to  which  it  was  subject  in 
the  hands  of  the  assignor,  but  the 
equities  meant  are  such  as  obtained 
in  favor  of  the  debtor,  and  not  those 
claimed  by  a  third  person  against 
the   assignor.'     The   supreme   court 


of  Mississippi  cite  many  cases  in 
support  of  this  proposition,  includ- 
ing the  case  from  this  state,  Wright 
V.  Levy,  12  Cal.  257.  See  also  First 
Nat.  Bank  of  Bridgeport  v.  Ferris  Ir- 
rigation District,  107  Cal.,  at  page  62, 
40  Pac.  47,  wherein  it  is  said:  'The 
law  does  not  require  that  the  as- 
signee for  value  of  a  thing  in  action 
shall  take  it  subject  to  the  latent 
equities  of  third  persons  of  which 
he  has  no  notice,  but  only  that  the 
,  assignment  shall  be  subject  to  the 
equities  existing  in  favor  of  the 
debtor,  in  this  case  the  defendant.' 
In  Bank  v.  Everman,  52  Miss.  506, 
it  is  said:  'A  purchaser  of  nego- 
tiable paper,  even  after  maturity, 
cannot  be  bound  by  any  secret 
equity  in  favor  of  an  entire  stranger 
to  the  paper,  of  which  he  neither 
had  knowledge,  nor  anything  to  put 
him  on  inquiry.'  To  the  same  effect 
see  Crosley  v.  Tanner,  40  Iowa  136, 
where  some  authorities  are  cited, 
and  the  reason  for  the  rule  quoted 
from  an  opinion  by  Chancellor 
Kent.  It  seems  clear  that  the  note 
in  plaintiff's  hands  is  not  subject  to 
the  latent  claims  of  the  appellant, 
and  for  that  reason,  so  far  as  Mohr 
and  Kowalsky  are  concerned,  the 
conclusion  of  the  court  that  the  lat- 
ter should  take  nothing  was  cor- 
rect."   Per  Gray,  C. 


I 


CHAPTER  XX. 


BONA   FIDE    HOLDERS   AND   RIGHTS    ON   TRANSFER. 


Sec. 

438.  Bona  fide  holders — Preliminary- 

statement. 

439.  Bona  fide  holders — Rule. 

440.  Essentials  of  rule. 

441.  Exceptions  to  and  qualifications 

of  rule — Generally. 

442.  Bona    fide    holder    generally — 

Decisions. 

443.  Certified      bank      checks — Dis- 

counting paper. 

444.  Notes  under  seal. 

445.  Equities  generally. 

446.  Holder,  transferee  or  assignee 

— Non-negotiable     paper  — 
Equities  and  defenses. 

447.  Defenses  against  assignees. 

448.  Assignee — Equities  —  Construc- 

tion and  essentials  of  rule — 
Generally. 

449.  Assignee — Negation   and   quali- 

fications of  rule. 

450.  Assignee     of     void     note- -For- 

bearance to  sue. 

451.  So-called      assignments  —  Not 

subject  to  equities. 


Sec. 

452.  Assignment  by   parol — Suit   in 

own  name — Equities. 

453.  Suit  for  use  or  benefit  of  as- 

signee. 

454.  Subsequent  defenses  and  equi- 

ties. 

Note  payable  to  order  or  bearer. 

Transferee      without     indorse- 
ment. 

Agents  and  trustees. 

Agent's  unauthorized  acts. 

Corporate  certificates  of  indebt- 
edness issued  in  restraint  of 
trade — Anti-trust  law. 
460.  Guarantor — Guaranty. 

Same  subject. 

Pledge     of    note    by    holder — 
Pledgee's  rights. 

463.  Note  payable  to  order  or  bearer. 

464.  Under  statutes  and  codes — No- 

tice or  knowledge — Bad  faith. 

465.  Same  subject. 

466.  Joint  and  several  notes. 


455. 
456. 

457. 
458. 
459. 


461. 
462. 


§  438.  Bona  fide  holders — Preliminary  statement. — The  subject  of 
bona  fide  holders,  transferees  and  assignees  has  been  treated  so  fully 
throughout  this  work  that  only  such  general  rules,  principles  and  de- 
cisions will  be  considered  here  as  are  necessary  to  supply  matters 
omitted  or  not  fully  dealt  with  elsewhere  herein. 

§  439.  Bona  fide  holders — Rule. — It  is  a  general  and  constantly  as- 
serted rule  that  a  bona  fide  holder  of  negotiable  paper  holds  it  by  a 
good  title  clear  of  all  equities  and  defenses  between  the  original  or 

558 


m 


559 


BONA   FIDE    HOLDERS — RULE. 


[§  439 


intermediate  parties.^   Another  form  of  the  rule  is  as  follows :   A  per- 
son who  takes  net^otiablc  securities  before  due  for  a  valuable  consider- 


•^  United  States. — Brown  v.  Spof- 
ford,  95  U.  S.  474,  24  L.  Ed.  508. 
"The  bona /?de  holder  of  a  negotiable 
instrument  for  value,  if  acquired  be- 
fore maturity  and  without  notice  of 
any  facts  which  impeach  its  validity 
between  the  antecedent  parties,  has 
a  good  title  to  the  instrument,  un- 
affected by  any  such  prior  transac- 
tion and  may  recover  the  amount," 
per  Clifford,  J.  Goodman  v.  Si- 
monds,  20  How.  (61  U.  S.)  343,  15 
L.  Ed.  834;  Fossitt  &  Co.  v.  Bell,  4 
McLean  (U.  S.  C.  C.)  427,  Fed.  Cas. 
No.  4,958;  Crosby  v.  Lane,  Fed.  Cas., 
No.  3,423  (applied  to  a  note  re- 
ceived in  payment  of  a  pre-existing 
debt,  even  though  an  accommoda- 
tion note);  National  Exch.  Bank  v. 
White,  30  Fed.  412  (applied  to  com- 
mercial paper  made  by  one  of  the 
members  of  a  partnership,  but  case 
is  reversed  in  Bowling  v.  Exchange 
Bk.  of  Boston,  145  U.  S.  512,  upon 
the  ground  that  the  other  partners 
were  entitled  in  an  action  by  the 
holder  bank  to  recover  on  the  notes, 
to  have  it  submitted  to  the  jury, 
whether,  under  the  circumstances, 
they  were  estopped  to  dispute  the 
authority  of  their  partner  to  make 
and  put  such  paper  in  circulation. 
Examine  on  last  point  Hardie  & 
Co.,  In  re,  143  Fed.  553);  Johnson 
V.  Lewis,  6  Fed.  27.  (Holding  that 
the  rule  that  the  purchaser  of  a 
chattel  acquires  no  better  title  than 
his  vendor  passed,  has  no  applica- 
tion to  negotiable  paper,  as  the  pos- 
session of  such  paper  carries  the 
title  with  it  to  the  holder  for  value 
without  knowledge  and  in  good 
faith  and  that  such  title  is  good 
against  all  the  world.) 

Alabama. — Pond    v.    Lockwood,    8 
Ala.  669. 


Georgia. — Jenkins  v.  Jones,  108 
Ga.  556,  34  S.  E.  149;  Haskins  v. 
Throne,  101  Ga.  126,  28  S.  E.  611; 
Bedell  v.  Scarlett,  75  Ga.  56;  Smith 
V.  Lloyd,  Charlt.  (Ga.)  253;  Bond 
V.  Central  Bank,  2  Kelly  (Ga.)  92. 
See  Haug  v.  Riley,  101  Ga.  372,  40 
L.  R.  A.  244,  29  S.  E.  44. 

Illinois. — Bemis  v.  Horner,  165 
111.  347,  46  N.  E.  277,  aff'g  62  111. 
App.  38. 

Indiana. — Morrison  v.  Fishel,  64 
Ind.  177;  Bremmerman  v.  Jennings, 
60  Ind.  175. 

loica. — Council  Bluffs  Iron  Works 
V.  Cuppey,  41  Iowa  104. 

Kansas. — Holden  v.  Clark,  16 
Kan.  346. 

Kentucky. — Clarke  v.  Tanner,  100 
Ky.  275,  19  Ky.  L.  Rep.  590,  38  S.  W. 
11. 

Louisiana. — Taylor  v.  Bowles,  28 
La.  Ann.  294;  Gardner  v.  Maxwell, 
27  La.  Ann.  561;  Kohlman  v.  Lud- 
wig,  5  La.  Ann.  33;  Pralon  v.  Ay- 
mard,  12  Rob.  (La.)  486;  Bush  v. 
Wright,  10  Rob.  (La.)  23;  Maurin 
V.  Chambers,  6  Rob.  (La.)  62;  Me- 
lancon  v.  Melancon,  4  Rob.  (La.) 
33;  Bordelon  v.  Kilpatrick,  3  Rob. 
(La.)  159;  Robinson  v.  Shelton,  2 
Rob.  (La.)  277;  Jones  v.  Young,  19 
La.  553;  Van  Pelt  v.  Eagle  Ins.  Co., 
18  La.  64;  Hagan  v.  Caldwell,  15 
La.  380;  Crosby  v.  Heartt,  15  La. 
304;  Lanclos  v.  Robertson,  3  La. 
259;  Abat  v.  Gormley,  3  La.  238; 
Le  Blanc  v.  Sanglair,  12  Mart.  0.  S. 
(La.)  402,  13  Am.  Dec.  377;  Hub- 
bard V.  Fulton,  7  Mart.  0.  S.  (La.) 
241;  Thompson  v.  Gibson,  1  Mart. 
N.  S.  (La.)  150. 

Maine. — Hobart  v.  Penny,  70  Me. 
248;  Wait  v.  Chandler,  63  Me.  257. 

Massachusetts. — Pettee  v.  Prout,  3 
Gray  (Mass.)  502,  63  Am.  Dec.  778; 


§    439]  BONA    FIDE   HOLDERS    AND   RIGHTS    ON    TRANSFER. 


5G0 


ation  without  knowledge  of  any  defect  of  title  and  in  good  faith  holds 
such  paper  by  a  valid  title  good  as  against  all  the  world.^    Again: 


Cone  V.  Baldwin,  12  Pick.    (Mass.) 
545. 

Michigan. — Bostwick  v.  Dodge,  1 
Doug.  (Mich.)  413,  41  Am.  Dec.  584. 
Minnesota. — Merchants'  Sav.  Bank 
V.  Cross,  65  Minn.  154,  67  N.  W. 
1147;  Gale  v.  Birmingham,  64  Minn. 
555,  57  N.  W.  659. 

Mississippi. — Mercien  v.  Cotton, 
34  Miss.  64;  Craig  v.  Vicksburg,  31 
Miss.  216. 

Nebraska. — First  Nat.  Bk.  v.  Pen- 
nington, 57  Neb.  404,  77  N.  W.  1084. 
New    Hampshire. — Doe    v.    Burn- 
ham,  11  Fost.  (N.  H.)   426. 

New  Jersey. — Price  v.  Keen,  40  N.- 
J.  L.  332. 

New  York. — Perth  Amboy  Mut. 
Loan,  Homestead  &  Bldg.  Assn.  v. 
Chapman,  178  N.  Y.  558,  70  N.  E. 
1104,  aff'g  81  N.  Y.  Supp.  38,  80  App. 
Div.  556;  Citizens'  State  Bank  v. 
Cowles,  80  N.  Y.  Supp.  598,  39  Misc. 
571;  Smith  v.  Weston,  88  Hun  (N. 
Y.)  25,  24  N.  Y.  Supp.  557;  Elwell 
V.  Dodge,  33  Barb.  336. 

North  Carolina. — Toms  v.  Jones, 
127  N.  C.  464,  37  S.  E.  480;  Little  v. 
Dunlap,  44  N.  C.  40;  Reddick  v. 
Jones,  28  N.  C.  107,  44  Am.  Dec.  68. 
Ohio. — Kitchen  v.  Loudenback,  48 
Ohio  St.  177,  29  Am.  St.  Rep.  540, 
26  N.  E.  979  [affirming  3  Ohio  Cir. 
Ct.  R.  228];  Johnson  v.  "Way,  27 
Ohio  St.  374;  Second  Nat.  Bank  v. 
Hemingray,  31  Ohio  St.  168;  Baily 
V.  Smith,  14  Ohio  St.  402. 

Pennsylvania. — Northern  National 
Bank  v.  Arnold,  187  Pa.  356,  15 
Lane.  L.  Rev.  345,  31  Chic.  Leg.  N. 
36,  15  Bkg.  L.  J.  529,  40  Atl.  794; 
Bullock  V.  Wilcox,  7  Watts  (Pa.) 
328. 

South  Carolina. — King  v.  Johnson, 
3  McCord  (S.  C.)  365. 


Texas. — Rotan  v.  Maedgen  (Tex. 
1900),  59  S.  W.  585;  Blair  v.  Ruth- 
erford, 31  Tex.  465. 

Virginia. — Lomax  v  .Picot,  2 
Rand.   (Va.)   247. 

West  Virginia. — Quaker  City  Nat. 
Bank  v.  Showacre,  26  W.  Va.  48. 

Wisconsin. — Johnson  v.  Meeker, 
1  Wis.  436.  See  Thorpe  v.  Minde- 
man  (Wis.),  101  N.  W.  417,  68  L.  R. 

A.  146. 

But  as  to  rule  under  statute  in 
Kentucky,  see  Wade  v.  Foster,  24 
Ky.  L.  Rep.  1292,  71  S.  W.  443. 

^  Perth   Amboy   Mut.   Loan,   H.   & 

B.  Assn.  V.  Chapman,  81  N.  Y.  Supp. 
38,  80  App.  Div.  556,  aff'd  (Mem.), 
178  N.  Y.  558,  70  N.  E.  1108. 

See  Myers  v.  Kessler,  142  Fed. 
730.  In  this  case  the  notes  were 
regular  upon  their  face  and  plain- 
tiff had  purchased  them  in  good 
faith  and  for  value  before  maturity, 
and  without  notice  of  any  defense 
whatever.  It  was  held  that  the  de- 
fense was  not  available,  that  the 
notes  had  been  given  on  Sunday 
and  for  a  stock  gambling  transac- 
tion.  See  §§  288-301,  herein. 

The  popular  meaning  of  "negoti- 
ate" is  the  same  as  that  of  the  ne- 
gotiable instruments  law,  1897,  p. 
728,  c.  612,  §  60,  which  provides  that 
"an  instrument  is  negotiated  when 
it  is  transferred  from  one  person  to 
another  in  such  manner  as  to  con- 
stitute the  transferee  the  holder 
thereof.  If  payable  to  bearer  it  is 
negotiated  by  delivery;  if  payable 
to  order  it  is  negotiated  by  the  in- 
dorsement of  the  holder  completed 
by  delivery."  Rogers  v.  Morton,  95 
N.  Y.  Supp.  49.  50,  46  Misc.  494. 

As  to  governing  principle,  see  Van 


561       ESSENTIALS EXCEPTIOXS    AND    QUALIFICATIONS.       [§§    440,    441 

"It  is  firmly  imbedded  in  jurisprudence  that  a  hona  fide  purchaser 
for  a  consideration  before  maturity  is  protected,  at  least  to  the  ex- 
tent of  the  amount  paid  by  him;  the  note  he  holds  is  clear  of  all 
equities  between  the  parties."^ 

§  440.  Essentials  of  rule. — To  bring  the  holder  within  the  protec- 
tion of  the  rule  the  paper  must  have  been  acquired  by  him  before  ma- 
turity, in  due  course  of  business,  in  good  faith,  for  value,  and  without 
knowledge  or  notice  of  any  defects,  infirmities  or  defenses  or  of  facts 
which  impeach  its  validity,  subject,  however,  to  such  qualifications 
and  exceptions  as  are  hereinafter  specified.* 

§  441.     Exceptions  to  and  qualifications  of  rule — Generally. — The 

rules  precluding  defenses  and  equities  against  hofia  fide  holders  for 
value  have  been  made  subject  to  certain  exceptions  and  qualifications  f 
as  in  cases  where  the  note  is  void  at  its  creation  f  or  where  it  is  based 
on  an  illegal,  immoral  and  void  consideration  or  its  circulation  is 
prohibited  under  the  law,  or  the  maker  had  no  power  to  issue  it  f  as 


Winkle,  etc.,  Co.  v.  Citizens'  Bank 
(Tex.),  33  S.  W.  862. 

Bona  fide  holder  not  subject  to 
equities,  etc.,  see  Walker  v.  Wilson, 
79  Tex.  188,  14  S.  W.  798,  15  S.  W. 
402,  per  Gaines,  J. 

'Clark  v.  Whitaker,  117  La.  298, 
41  So.  580,  581,  per  Breaux,  C.  J. 

*  United  States. — National  Exch. 
Bank  v.  White,  30  Fed.  412. 

Colorado. — Rand  v.  Pantagraph 
Co.,  1  Colo.  App.  270,  28  Pac.  661. 

Connecticut. — Standard  Cement 
Co.  V.  Windham,  71  Conn.  668,  42 
Atl.  1006. 

Georgia. — Keith  v.  Fork,  105  Ga. 
511,  31  S.  E.  169;  Bedell  v.  Scar- 
lett, 75  Ga.  56. 

Maine. — Hobart  v.  Penny,  70  Me. 
248. 

Minnesota. — Daniels  v.  Wilson,  21 
Minn.  530. 

New  York. — Claflin  v.  Farmers' 
Bank,  25  N.  Y.  293,  rev'g  36  Barb. 
(N.  Y.)   540. 

Ohio. — Kitchen  v.  Loudenback,  48 
Joyce  Defenses — 36 


Ohio  St.  177,  29  Am.  St.  Rep.  540, 
26  N.  E.  979,  aff'g  3  Ohio  Cir.  Ct. 
Rep.  228;  Bailey  v.  Smith,  14  Ohio 
St.  402. 

Texas. — Rotan  v.  Maedgen  (Tex. 
1900),  59  S.  W.  585. 

Virginia. — Payne  v.  Zell,  98  Va. 
294,  36  S.  E.  379. 

Washington. — McNamara  v.  Jose, 
28  Wash.  461,  68  Pac.  903.  See  also 
citations  in  last  preceding  note. 

"  Hillhouse  v.  Adams,  57  Conn. 
153,  17  Atl.  698;  Barker  v.  Valen- 
tine, 10  Gray  (Mass.)  341;  Patter- 
son v.  Wright,  64  Wis.  289,  25  N.  W. 
10. 

'Baker  v.  Arnold,  3  Cai.  Cas.  (N. 
Y.)  279. 

'  Jenkins  v.  Jones,  108  Ga.  556,  34 
S.  E.  149;  Bedell  v.  Scarlett,  75  Ga. 
56;  Kitchen  v.  Loudenback,  48  Ohio 
St.  177,  26  S.  E.  979,  29  Am.  St. 
Rep.  540,  aff'g  3  Ohio  Cir.  Ct.  Rep. 
228. 

As  to  illegal  consideration  see 
§§  288-301,  herein. 


§  442] 


BONA    FIDE    HOLDERS    AND   RIGHTS    ON    TRANSFER. 


563 


in  case  of  bonds  issued  without  authority  and  so  invalid  f  or  where 
title  is  acquired  by  fraud  and  without  consideration  f  or  where  there 
is  a  plea  of  non  est  factum^°  Again,  a  certificate  of  deposit  may  be 
subject  to  equities  and  defenses/^  as  may  also  notes  which  are  not 
for  the  payment  of  money.^^  Other  exceptions  exist  and  are  noted 
elsewhere  herein. 


§  442.  Bona  fide  holder  generally — Decisions. — The  case  of  Good- 
man V.  Simonds^-*  holds  that  a  hojia  fide  holder  of  a  negotiable  in- 
strument for  a  valuable  consideration,  without  notice  of  facts  which 
impeach  its  validity  between  the  antecedent  parties,  if  he  takes  it  un- 
der an  indorsement  made  before  the  same  became  due,  holds  the  title 
unaffected  by  these  facts  and  may  recover  thereon,  although  as  between 
the  antecedent  parties  the  transaction  may  be  without  any  legal  valid- 
ity. In  Georgia,  a  ho7ia  fide  holder  of  a  negotiable  promissory  note, 
purchased  for  value  and  before  maturity,  is  protected  against  a  defense 
that  the  note  was  without  consideration,  and  where  a  negotiable  note 
was  payable  at  a  future  date  was  indorsed  by  the  payee  to  the  plaintiff, 
in  the  absence  of  proof  to  the  contrary  the  law  will  presume  that  the 
plaintiff  took  before  maturity,  for  value  and  without  notice.  So  where, 
in  defense  to  a  suit  upon  a  note,  the  defendant  pleads  that  the  plaintiff 
purchased  after  maturity,  and  there  is  no  evidence  to  sustain  the  plea, 
a  verdict  in  favor  of  defendant  is  contrary  to  law.^^  It  is  held  in  New 
York  that  under  the  negotiable  instruments  law,  "where  value  has  at 


*  Oswego  County  Sav.  Bk.  v.  Town 
of  Genoa,  72  N.  Y.  Supp.  786. 

»Keegan  v.  Rock  (Iowa),  102  N. 
W.  805.  See  also  Deppen  v.  German- 
American  Title  Co.,  24  Ky.  L.  Rep. 
1110,  70  S.  W.  868,  72  S.  W.  868. 

Defense  of  fraud  when  not  avail- 
able against  holder  taking  negotia- 
ble paper  in  good  faith,  without  no- 
tice, before  maturity  and  for  value. 
Douglas  v.  Matting,  29  Iowa  498,  4 
Am.  Rep.  238;  Clarke  v.  Tanner, 
100  Ky.  275,  10  Ky.  L.  Rep.  590,  38 
S.  W.  11;  Park  Bank  v.  Watson,  42 
N.  Y.  490,  1  Am.  Rep.  573;  Phelan 
v.  Moss,  67  Pa.  St.  59,  5  Am.  Rep. 
402. 

Defense  of  fraud  available  when 
not  taken  in  regular  course  of  busi- 


ness, as  where  A.  obtained  the  pa- 
per by  fraud  and  before  maturity 
indorsed  it  to  plaintiff,  who  had  no 
knowledge  of  the  fraud,  in  trust  for 
A.'s  creditors  and  the  balance  for 
A.'s  wife.  Roberts  v.  Hall,  37  Conn. 
205,  9  Am.  Rep.  308. 

^"Bedell  v.   Scarlett,  75  Ga.   56.  , 

"  Gregg  V.  Union  County  Nat. 
Bank,  87  Ind.  238;  Reed  v.  Stapp, 
9  U.  S.  App.  34,  3  C.  C.  A.  244,  52 
Fed,  641.  See  Shute  v.  Pacific  Nat. 
Bank,  136  Mass.  487. 

^-  Shamokin  Bank  v.  Street  16 
Ohio  St.  1. 

^^■*  20  How.  (61  U.  S.)  343.  15  L. 
Ed.  934. 

"  Parr  v.  Erickson,  115  Ga.  873, 
42  S.  E.  240. 


Il 


563 


BOXA    FIDE    HOLDERS    GENERALLY — DECISIONS. 


[   §442 


any  time  been  given  for  the  instrument,  the  holder  is  deemed  a  holder 
for  value  in  respect  to  all  parties  who  become  such  prior  to  that  time/' 
and  one  of  the  conditions  which  constitute  one  a  holder  in  due  course 
is,  "that  he  took  it  in  good  faith  and  for  value;"  therefore,  an  ad- 
mission in  the  defense  that  the  note  was  ever  negotiated  for  value 
would  be  fatal  to  a  demurrer  and  the  allegation  of  the  defense  in  a  suit 
by  the  holder  that  there  was  no  consideration  for  the  execution  and 
indorsement  of  the  note  is  insufficient.^*   The  statute  of  Iowa,  provid-. 


"  Rogers  v.  Morton,  95  N.  Y.  Supp. 
49,  46  Misc.  494.  The  court,  per 
Clarke,  J.,  said:  "Two  actions  are 
brought  on  promissory  notes  by  an 
indorsee;  one  against  the  maker 
and  payee,  and  the  other  against 
the  maker.  The  complaints  set  forth 
the  notes  and  contain  the  usual 
averments.  The  answers  are  alike, 
and  each  contain  a  general  denial, 
and  three  separate  defenses,  and  a 
counter-claim.  The  plaintiff  demurs 
to  each  defense  on  the  ground  that 
the  same  is  insufficient  in  law  upon 
the  face  thereof,  and  also  to  the 
counter-claim,  as  hereinafter  stated. 
The  facts  admitted  by  the  demurrer 
to  the  second  defense  (the  first 
separate  defense)  are:  Defendants 
were  heavily  interested  in  a  rail- 
road company,  and,  in  order  to  fur- 
nish money  to  said  company,  exe- 
cuted and  indorsed  the  note,  as 
maker,  payee,  and  indorser,  placed 
the  same  with  a  third  party  for  the 
purpose  of  having  it  discounted  for 
the  benefit  of  said  company,  and 
the  third  party  informed  these  de- 
fendants after  maturity  that  the 
note  was  in  her  possession,  and  de- 
fendants believe  the  note  now  to  be 
in  her  possession.  If  these  were  all 
the  allegations  of  this  defense,  it  is 
clear  that  the  demurrer  would  have 
to  be  sustained;  but  the  plea  con- 
tinues, 'and  denies  that  said  note 
was  ever  duly  negotiated  or  dis- 
counted   for    value.'     Plaintiff    con- 


tends that  this  denial  is  a  state- 
ment of  a  conclusion  of  law.  I  am 
of  opinion  that  the  denial  that  the 
note  was  ever  duly  negotiated  for 
value  is  the  statement  of  an  ulti- 
mate fact,  and  not  of  a  conclusion 
of  law.  *  *  *  The  allegation,  with 
reference  to  this  note,  which  is  pay- 
able to  order,  is  therefore  equiva- 
lent to  a  denial  that  the  note  was 
ever  duly  indorsed  and  delivered 
for  value.  A  denial  in  these  same 
words  was  held  by  Schnitzer  v. 
Gordon,  28  App.  Div.  342,  51  N.  Y. 
Supp.  152,  to  be  a  negative  preg- 
nant, but  nevertheless  sufficient  to 
raise  an  issue  calling  for  proof  upon 
the  trial.  It  admits  the  delivery 
and  indorsement,  but  denies  that 
any  value  was  ever  given  for  the 
note.  *  *  *  An  admission  that  the 
note  was  ever  negotiated  for  value 
is  therefore  fatal  to  the  demurrer. 
This  determination  is  not  in  accord 
with  a  ruling  in  the  second  depart- 
ment of  this  court."  The  court  then 
quotes  frorh  Green  v.  Brown,  49  N. 
Y.  Supp.  163,  22  Misc.  279,  and  Car- 
ter V.  Eighth  Ward  Bank,  67  N.  Y. 
Supp.  300,  33  Misc.  128,  and  says: 
"These  decisions  are  inconsistent 
with  the  rule  laid  down  by  Judge 
Andrews  in  Douglas  v.  Phoenix  Ins. 
Co.,  138  N.  Y.  209,  33  N.  E.  938,  20 
L.  R.  A.  118.  34  Am.  St.  Rep.  448. 
*  *  *  A  defense  differs  from  -a  de- 
nial, in  that  the  denial  puts  the 
plaintiff  to   his  proof,   and   the  de- 


442] 


BONA    FIDE    HOLDERS    AND   RIGHTS    ON    TRANSFER. 


564 


ing  that  if  a  negotiable  note  is  procured  of  the  maker  by  fraud  and  is 
afterward  indorsed  before  maturity,  for  value,  to  an  innocent  pur- 
chaser, yet  such  innocent  purchaser  can  only  recover  the  sum  he  paid 
for  the  note,  enters  into  and  becomes  a  part  of  the  contract  evidenced 
by  a  note  made  in  Iowa,  and  such  limitation  of  the  amoimt  payable  to 


fense  is  a  plea  by  way  of  confes- 
sion and  avoidance.  General  de- 
•nials  are  inconsistent  with  confes- 
sion, and  therefore  not  properly 
part  of  a  defense.  But  to  state  a 
valid  defense,  one  that  will  avoid 
the  cause  of  action  alleged,  it  may 
be  necessary  to  deny  specific  alle- 
gations of  the  complaint  which,  un- 
der our  rules  of  pleading,  would 
otherwise  be  admitted.  All  denials 
in  a  defense  are  not,  therefore,  ne- 
cessarily surplusage  or  immaterial. 
If  the  plaintiff  cannot  with  safety 
demur  to  a  pleading  containing  an 
immaterial  allegation  or  denial  of 
fact,  he  has  his  remedy  under  the 
code.  He  should  first  move  to  strike 
out  such  allegation  or  denial.  Steif- 
fel  V.  Tolhurst,  55  App.  Div.  532,  67 
N.  Y.  Supp.  274;  Blant  v.  Blant,  41 
Misc.  Rep.  572,  85  N.  Y.  Supp.  146. 
The  court  should  not  be  required 
to  determine  on  demurrer  matters 
which  may  be  disposed  of  on  mo- 
tion. The  second  demurrer  must  be 
sustained.  The  allegation  that 
'plaintiff  is  not  a  bona  fide  holder 
in  due  course  of  said  note'  is  a 
conclusion  of  law.  It  is  impossi- 
ble to  determine  which  of  the  con- 
ditions specified  in  section  91  of  the 
negotiable  instruments  law,  consti- 
tuting a  holder  in  due  course,  have 
not  been  complied  with.  The  alle- 
gation 'that  said  note  was  executed 
and  indorsed  without  any  consider- 
ation' is  of  itself  insufficient.  This 
defense  admits  the  allegation  of  the 
complaint  that  the  payee  indorsed 
and  delivered  the  note  for  value 
before  maturity.   Value  having  been 


given  prior  to  the  delivery  to 
plaintiff,  he  is  a  holder  for  value 
(negotiable  instruments  law,  laws 
1897,  p.  727,  §  52),  and  the  fact 
that  there  may  have  been  an  in- 
dorsement without  consideration  is 
immaterial.  The  allegation  that  the 
note  'had,  before  its  delivery  to  said 
plaintiff,  no  legal  inception,'  is  a 
conclusion  of  law,  and  is  not  helped 
by  the  immaterial  allegation  that 
the  'transfer  to  plaintiff  was  made 
after  maturity,'  and  the  insufficient 
allegation,  'at  a  rate  of  discount 
greater  than  legal  interest,  and  not 
in  the  ordinary  course  of  business, 
and  is  usurious  and  void.'  The  de- 
fense of  usury  must  set  up  the 
usurious  contract,  specifying  its 
terms  and  the  particular  facts  re^ 
lied  upon  to  bring  it  within  the  pro 
hibition  of  the  statute.  Western  T 
&  Coal  Co.  V.  Kilderhouse,  87  N.  Y, 
430,  435;  Manning  v.  Tyler,  21  N, 
Y.  567;  Degal  v.  Simmons,  23  N 
Y.  491;  Whitehead  v.  Heidenheimer 
57  App.  Div.  590,  595,  68  N.  Y.  Supp 
704.  The  third  demurrer  must  be 
sustained  on  the  same  grounds  as 
the  second. 

"The  additional  allegation  in  this 
separate  defense  that  'said  note  was 
wrongfully  converted  by  said  Agnes 
Ford,  and  fraudulently  delivered  to 
said  plaintiff  without  the  knowledge 
and  assent  of  these  defendants,  or 
either  of  them,'  is  a  mere  conclu- 
sion of  law.  The  authorities  have 
long  established  the  rule  that  the 
facts  constituting  the  alleged  fraud 
must  be  pleaded." 


I 


565  BOXA   FIDE    HOLDERS    GEXEHALLY — DECISIONS.  [§    442 

the  indorsee  in  such  case  applies  in  an  action  in  Missouri  on  the  note.^" 
Again,  it  is  declared  that  commercial  necessity  requires  that  only- 
slight  evidence  should  be  insisted  upon  to  establish  an  estoppel  in  pais 
as  to  the  validity  of  commercial  paper ;  therefore,  the  face  of  the  paper 
itself,  when  free  from  suspicion,  is  sufficient  evidence,  in  the  absence 
of  notice,  against  all  who  aid  to  put  it  into  circulation  in  that  condi- 
tion, unless  the  note  is  void  by  the  positive  command  of  a  statute.^® 
In  an  action  upon  a  promissory  note  an  affidavit  of  defense  is  insuffi- 
cient in  which  the  defendant  admits  that  he  made  a  note  identical 
with  the  copy  filed  in  date,  in  amount,  in  payee  and  in  time  and  place 
of  payment,  and  that  the  note  passed  by  indorsement  to  the  plaintiff 
in  renewal  of  his  prior  note  which  the  plaintiff  had  discounted,  and 
the  only  difference  averred  between  the  copy  filed,  and  the  note  al- 
leged to  have  been  made  is  that  the  latter  contained  the  words  and 
figures  "In  renewal  of  $5,000  note.""  Though  a  person  holds  a  note  as 
collateral  security,  in  the  absence  of  any  defense  against  it,  even  if 
it  was  still  in  the  hands  of  the  payee,  judgment  may  be  had  for  the 
whole  amount  due  on  the  note  with  liability  to  account  for  the  surplus 
to  the  owner  of  the  note.^.*  If  notes  are  acquired  in  good  faith  for 
value  before  maturity  they  are  not  vitiated  in  the  hands  of  the  holder 

"  Creston    Nat.    Bank    v.    Salmon  dence    in    the    absence    of    notice, 

(Mo.  App.  1906),  93  S.  W,  288.  against  all  who  aided  to  put  it  into 

"  Chemical  National  Bank  v.  Kel-  circulation,  unless  the  note  is  void 

logg,  183  N.  Y.  92,  aff' g  87  App.  Div.  by  the  positive  command  of  a  stat- 

633.    The  court,  per  Vann,  J.,  said:  ute,  such  as  the  act  against  usury. 

"The    business    of    this    country    is  No  other  rule  would  work  well,  for 

done  so   largely  by  means  of  com-  it  would  be  intolerable  if  every  bank 

mercial  paper  that  the  interests  of  had    to    learn    the   true    history   of 

commerce  require  that  a  promissory  each   piece   of   paper   presented   for 

note,  fair  on  its  face,  should  be  as  discount    before    it    could    act    in 

negotiable   as   a   government   bond,  safety.      It    is     better     that    there 

Every  restriction  upon  the  circula-  should  be  an  occasional  instance  of 

tion  of   negotiable   paper   is  an   in-  hardship,   than   to  have   doubt  and 

jury   to   the   state,   for   it   tends   to  distrust  hamper  a  common  method 

derange  trade  and  hinder  the  trans-  of  making  commercial  exchanges." 
action     of     business.       Commercial         '"Yardley   Nat.   Bank  v.   Vansant, 

necessity  requires   that  only   slight  214  Pa.  250,  63  Atl.  544. 
evidence  should  be  insisted  upon  to         '*  Camden   Nat.   Bank  of   Camden 

establish  an  estoppel   in  pais  as  to  v.    Fries-Breslin    Co.    (Supreme    Ct. 

the    validity    of    commercial    paper.  Pa.  1906),  63  Atl.  1022,  citing  4  Am. 

The  only  practicable  rule  is  to  make  &  Eng.  Ency.  of  Law    (2d  Ed.),  p. 

the  face   of  the  paper  itself,   when  347,  see  §  351  et  seq.,  herein, 
free   from   suspicion,   suflScient   evi- 


§§    443,    444]      BONA   FIDE    HOLDERS   AND   EIGHTS    OX   TRANSFER.      566 

"by  subsequent  information  of  the  infirmity  of  their  origin/®  and  an 
equity  arising  subsequent  to  the  transfer  is  no  defense  in  favor  of  the 
maker  against  the  transferee.-" 

§  443.  Certified  bank  checks — Discounting^  paper. — This  rule  as 
to  bona  fide  holders  has  been  applied  to  certified  bank  checks  ;^^  and 
it  is  held  that  the  fact  that  a  check  on  the  bank  has  been  certified  by 
the  bank  at  the  request  of  the  indorsers  and  before  delivery  to  the 
holder  will  not  discharge  the  indorsers,  such  a  certification  arouses 
no  implication  that  the  holder  intended  to  release  the  indorser  and 
look  only  to  the  bank.^^  The  rule  has  also  been  applied  to  one  dis- 
counting the  paper  in  good  faith. ^^  So  where  a  note  is  sued  on  which 
was  payable  to  and  discounted  by  a  bank,  it  is  incompetent,  for  the 
purpose  of  diminishing  the  amount  recoverable,  to  show  that  the  bills 
of  the  bank  were  at  a  depreciation  when  the  note  matured,  as  the  bank 
is  entitled  to  recover  the  full  amount.^* 

§  444.  Notes  under  seal. — The  general  rule  has  been  applied  in 
equity  to  a  due  bill  under  seal  purporting  on  its  face  to  have  been 
given  for  a  valuable  consideration.  Thus  where  a  due  bill  is  a  merely 
voluntary  contract  without  consideration  it  will  not  be  enforced  in 
equity  and  even  though  under  seal  and  purporting  on  its  face  to  be 
for  value  received  a  court  of  equity  may  inquire  into  the  real  con- 
sideration.^^ And  under  a  system  which  permits  law  and  equity  to 
be  blended  in  one  action  fraud  or  mistake  in  the  consideration  of  a 
bond  may  be  shown  and  it  may  also  he  proven  that  part  of  the  con- 
sideration was  usurious  interest,  but  while  fraud  in  the  factum  might 

"Hillard  v.  Taylor,  114  La.  883,  38  8  Fed.  1;  First  Nat.  Bank  v.  Schuy- 

So.  594.  ler,    39    N.    Y.    Super.    Ct.    (N.    Y.) 

=""  Campbell  v.  Rusch,  9  Iowa  337.  440;    Salina   Bank    v.    Babcock,    21 

See  Elwell  v.  Dodge,  33  Barb.    (N.  Wend.    (N.  Y.)    499.    But  see   Mer- 

Y.)   336.  chants',    etc..   Bank   v.    Millsaps,   71 

=' Farmers'     Bank     v.      Butchers'  Miss.  361,  15  So.  659;  National  Park 

Bank,  28  N.  Y.  425,  26  How.  Pr.  (N.  Bank  v.  German-American  Security 

Y.)    1;   s.  c.  Farmers',  etc.,  Bank  v.  Co.,  116  N.  Y.  281,  22  N.  E.  567,  5 

Butchers',  etc..  Bank,  14  N.  Y.  623.  L.  R.  A.  673,  rev'g  53  N.  Y.  Super. 

See   Mutual   Nat.   Bk.   v.   Rotge,    28  Ct.  367,  a  corporation  note. 

La.  Ann.  933,  26  Am.  Rep.  126.  =*  Commercial  Bank  v.  Atherton,  1 

=^Willetts    V.     PhcEnix     Bank,     2  Smedes  &  M.  (Miss.)  641. 

Duer  (N.  Y.)  121.  ===  Snyder  v.  Jones,  36  Md.  542. 

^  Waynesville  Nat.  Bank  v.  Irons, 


567       EQUITIES    GEXEIUVLLY NOX-NEGOTIABLE    PAPER.        [§§    445,   446 

avoid  a  bond  altogether,  fraud  or  mistake  in  the  consideration,  so  far 
as  the  consideration  is  legal,  may  be  shown. -*^ 

§445.  Equities  generally. — Generally  those  equities  only  can  be 
pleaded  by  defendant  which  operate  in  his  favor ;  he  cannot  rely  upon 
those  which  belong  to  the  party  to  whom  he  is  liable.^^  And  secret 
equities  will  not  he  of  any  avail  against  a  bona  fide  holder  of  a  note 
transferred  before  maturity.^''*  If  the  defense  relates  simply  to  the 
consideration  and  can  be  availed  of  at  law,  equity  will  refuse  its 
aid  to  reform  the  instrument.-^  But  where  conspiracy  in  obtaining  a 
note  is  relied  upon  and  plaintiff  can  show  that  certain  defendants  co- 
operated in  the  alleged  wrongful  acts,  equity  will  give  relief  to  the  ex- 
tent so  proven.-"  An  answer  may  be  compelled  to  interrogatories  to 
show  what  consideration  defendant  received  and  also  that  received  by 
other  parties  to  the  extent  of  his  knowledge.^"  But  defenses  of  an  ac- 
ceptor against  the  drawer  cannot  be  availed  of  in  equity  against  such 
bona  fide  holder.^ ^ 

§  446.  Holder,  transferee  or  assignee — Non-negotiable  paper — 
Equities  and  defenses. — In  case  of  non-negotiable  paper  the  equities 
and  defenses  between  prior  parties  may  be  such  as  will  preclude  a  re- 
covery by  the  holder,  transferee  or  assignee,  even  though  such  party 
obtained  the  paper  before  maturity,  for  value,  and  without  notice  or 
knowledge  of  such  equities  or  defenses,  as  non-negotiable  paper  rests 
upon  a  different  rule  from  that  which  governs  negotiable  paper  in  so 
far  as  its  transfer  and  the  rights  of  holders  are  concerned. ^- 

=«  Hughes  V.  Boone,  102' N.  C.  137,  Ranch  Co.  v.  San  Jose  Land  &  W. 

9  S.  E.  286.  Co.,    132    Cal.    582,    64    Pac.    1097; 

"Ran  V.  Latham,  11  La.  Ann.  276.  Bouche  v.   Souttit,  104  Cal.   230,  37 

"*  Clark  V.  Whitaker,  117  La.  298,  Pac.  902;   Graves  v.  Mining  Co.,  81 

41  So.  580,  582.  Cal.  303,  22  Pac.  665;    McGarvey  v. 

^Hausbrandt  v.  Hofler,  117   Iowa  Hall,  23  Cal.  140. 

103,  90  N.  W.  494.  ^"^oncZa.— Reddish    v.    Ritchie,    17 

-»More  v.  Finger,  128  Cal.  313,  60  Fla.  867. 

Pac.  933,  58  Pac.  322.  Georgia.— Cohen  v.  Prater,  56  Ga. 

^  Culverhouse     v.     Alexander,     2  203. 

Younge  &  C.  Exch.  218;   Glengall  v.  Illinois.— Uas\ie\\  v.  Brown,  65  111. 

Edwards,  2  Younge  &  C.  Exch.  125.  29.     See   Barker    v.    Barth,    192    111. 

''  Morrison    v.    Farmers'    Bank,    9  460,  61  N.  E.  388,  aff'g  88  111.  App. 

Okla.  697,  60  Pac.  273.  23. 

"^California. — Neale  v.   Head,   133  Indiana. — Henry  v.  Gilliland.  103 

Cal.    42,    65,    Pac.    131;     San    Jose  Ind.  177;   Herod  v.  Snyder,  48  Ind. 


447]         BONA   FIDE    HOLDERS    AND    RIGHTS    ON    TRANSFER. 


568 


§  447.  Defenses  against  assignees. — Defenses  or  equities  existing 
against  the  payee  at  the  time  of  the  assignment  or  before  notice 
thereof  are  available  against  the  assignee  to  preclude  his  recovery  on 
the  paper. ^^    And  the  maker  may  show  the  true  consideration  as 


480.    See  Rosenthal  v.   Rambo,  165 
Ind.  584,  76  N.  E.  404. 

Kansas. — South  Bend  Iron  Works 
V.  Paddock,  37  Kan.  510,  15  Pac. 
574;  Graham  v.  Wilson,  6  Kan.  489. 

Kentucky. — Gaines  v.  Bank,  19 
Ky.  L.  Rep.  171,  39  S.  W.  438. 

Massachusetts. — Dyer  v.  Homer, 
22  Pick.  (Mass.)  253;  Willis  v. 
Twambly,  13  Mass.  204. 

Missouri. — Smith  v.  Busby,  15  Mo. 
388,  57  Am.  Dec.  207. 

New  Hampshire. — Sanborn  v.  Lit- 
tle, 3  N.  H.  539. 

New  York. — Meuer  v.  Phoenix  Nat. 
Bk.,  88  N.  Y.  Supp.  83,  94  App.  Div. 
331,  aff'g  86  N.  Y.  Supp.  701,  42 
Misc.  341;  Kohn  v.  Consolidated 
Butter  &  Egg  Co.,  63  N.  Y.  Supp. 
265,  30  Misc.  725;  Chamberlain  v. 
Gorham,  20  Johns.   (N.  Y.)   144. 

North  Carolina. — Havens  v.  Potts, 
86  N.  C.  31;  First  Nat.  Bank  v.  By- 
num,  84  N.  C.  24,  37  Am.  Rep.  604. 

North  Dakota. — See  Massachu- 
setts Loan  &  Trust  Co.  v.  Twichell, 
7  N.  Dak.  440,  75  N.  W.  786. 

Oklahoma. — Dickerson  v.  Higgins 
(Okla.),  82  Pac.  649;  Cotton  v.  John 
Deere  Plow  Co.,  14  Okla.  605,  78  Pac. 
321. 

Pennsylvania. — Welter  v.  Kiley, 
95  Pa.  St.  461;  Miller  v.  Kreiter,  76 
Pa.  St.  78;  White  v.  Heylman,  .34 
Pa.  St.  142;  Thompson  v.  McClel- 
land, 29  Pa.  St.  475;  Bircleback  v. 
Wilkins,  22  Pa.  St.  26. 

Texas. — Sonnenthiel  v.  Skinner, 
67  Tex.  453,  3  S.  W.  686. 

^  United  States. — Omaha  Nat. 
Bank  v.  Walker,  5  Fed.  399,  403; 
Bradley  v.  Trammel,  1  Hemp.  (U. 
S.)  164,  Fed.  Cas.,  No.  1,788a. 


Alabama. — Clemens  v.  Logglns,  1 
Ala.  622;  Hudson  v.  Tindall,  1  Stew. 
&  P.   (Ala.)   237. 

Arkansas. — Coolidge  v.  Burns,  25 
Ark.  241;  Tatum  v.  Kelly,  25  Ark. 
209,  94  Am.  Dec.  717;  Oldham  v. 
Wallace,  4  Pike  (Ark.)  559. 

California. — Wright  v.  Levy,  12 
Cal.  257. 

Illinois.— ?>ims,  v.  Rice,  67  111.  88; 
Jeneson  v.  Jeneson,  66  111.  259; 
Bradley  v.  Marshall,  54  111.  173. 
Compare  Mann  v.  Merchants'  Loan 
&  Trust  Co.,  100  111.  App.  224. 

Indiana. — Second  Nat.  Bank  v. 
Brady,  96  Ind.  498;  Sheffield  School 
V.  Andress,  56  Ind.  157;  Shane  v. 
Lowry,  48  Ind.  205;  Marshall  v.  Bil- 
lingsley,  7  Ind.  250;  Henry  v.  Scott, 
3  Ind.  412;  Doremus  v.  Bond,  8 
Blackf.  (Ind.)  368.  See  First  Nat. 
Bk.  V.  Beach,  34  Ind.  App.  80,  72  N. 
E.  287. 

Iowa. — Hecker  v.  Boylan,  126 
Iowa  162,  101  N.  W.  755;  Sayre  v. 
Wheeler,  31  Iowa  112;  Pearson  v. 
Cummings,  28  Iowa  344;  Merchants', 
etc..  Bank  v.  Hewitt,  3  Clarke 
(Iowa)   93. 

Kentucky. — Harrigan  v.  Advance 
Thresher  Co.,  26  Ky.  L.  Rep.  317,  81 
S.  W.  261;  Power  v.  Hambrick,  25 
Ky.  L.  Rep.  30,  74  S.  W.  660;  Huber 
V.  Egner,  22  Ky.  L.  Rep.  1800,  61 
S.  W.  353;  Rogge  v.  Cassidy  (Ky. 
1890),  13  S.  W.  716;  Garrott  v.  Jaf- 
fray,  10  Bush.  (Ky.)  413;  Bement 
V.  McClaren,  1  B.  Mon.  (Ky.)  296; 
Triplett  v.  Holly,  4  Litt.  (Ky.)  130; 
Chiles  V.  Corn,  3  A.  K.  Marsh.  (Ky.) 
230;  Highbaugh  v.  Hubbard,  6  Ky.- 
L.  Rep.  511.    Examine  Cunningham 


569 


DEFENSES    AGAINST   ASSIGNEES. 


[§  447 


against  the  assignee  of  a  note  as  in  case  of  a  peddler's  note.^*  If  a 
note  has  been  given  by  the  vendee,  for  purchase  money,  and  the  vendor 
is  unable  to  make  title,  equity  will  allow,  against  the  assignee  equitable 
defenses  which  were  available  against  the  assignor.^^  And  where  a  rail- 
road company  negotiated  one  of  its  bonds  and  delivered  with  it  the 
note  of  the  defendant  as  security,  even  had  the  note  been  indorsed 
in  the  usual  mode,  before  maturity,  the  assignee,  by  a  proceeding  in 


V.  Potter,  23  Ky.  L.  Rep.  847,  64 
S.  W.  493. 

Louisiana. — Kugler  v.  Taylor,  19 
La.  Ann.  100. 

Maine. — Litchfield  v.  Dyer,  46  Me. 
31;  Calder  v.  Billington,  3  Shep. 
(Me.)  398. 

Maryland. — Steele  v.  Sellman,  79 
Md.  1,  28  Atl.  811. 

Massachusetts. — Stevens  v.  Par- 
ker, 5  Allen  (Mass.)  333. 

Mississippi. — Scott  v.  Searles,  7 
Smedes  &  M.  (Miss.)  498,  45  Am. 
Dec.  317. 

Missouri. — Munday  v.  Clements, 
58  Mo.  577;  Thompson  v.  Roatcup, 
27  Mo.  283. 

Montana. — Helena  Nat.  Bk.  v. 
Rocky  Mountain  Teleg.  Co.,  20  Mont. 
379,  63  Am.  St.  Rep.  628,  8  Am. 
&  Eng.  Corp.  Cas.  N.  S.  782,  51  Pac. 
829. 

Nebraska. — See  Gaylord  v.  Ne- 
braska Sav.  &  Exch.  Bk.,  54  Neb. 
104,  74  N.  W.  415. 

New  York. — Chase  v.  Kellogg,  59 
Hun  (N.  Y.)  623,  13  N.  Y.  Supp. 
351. 

Pennsylvania. — Lancaster  Bank  v. 
Huver,  114  Pa.  St.  216,  6  Atl.  1; 
Weaver  v.  Lynch,  25  Pa.  St.  449, 
64  Am.  Dec.  713;  Edgar  v.  Kline,  6 
Pa.  St.  327;  Baker  v.  Nipple,  16  Pa. 
Co.  Ct.  659. 

South  Dakota. — Searles  v.  Seipp, 
6  S.  D.  472,  61  N.  W.  804. 

Tennessee. — Vatterlein  v.  Howell, 
5  Sneed  (Tenn.)  441;  Robinson  v. 
Keyes,    9    Humphr.     (Tenn.)     144; 


Wormley  v.  Lowry,  1  Humphr. 
(Tenn.)  468. 

Texas. — Petigrew  v.  Dix,  33  Tex. 
277;  Boyd  v.  Tarrant,  14  Tex.  230; 
Weathered  v.  Smith,  9  Tex.  622,  60 
Am.  Dec.  186.  Examine  National 
Bk.  of  Commerce  v.  Kenney  (Tex.), 
83  S.  W.  368,  rev'g  80  S.  W,  555. 

Vermont. — Sanford,  etc.,  Co.  v. 
Hull;  Brayt.  (Vt.  231;  Wetmore  v. 
Blush,  Brayt.  (Vt.)  55. 

Certificates  of  deposit  non-negoti- 
able and  assignee  subject  to  de- 
fenses. Humboldt  Safe-Deposit  & 
Trust  Co.,  3  Pa.  Co.  Ct.  R.  621. 

When  agreement  that  payee  would 
not  hold  maker  responsible  may  be 
shown,  in  action  by  assignee  after 
maturity.  Citizens'  Nat;  Bk.  v. 
Cammer  (Tex.  Civ.  App.),  86  S.  W. 
625. 

Purchaser  of  note,  when  recovery 
limited  to  price  paid,  see  Theard  v. 
Gueringer,  115  La.  242,  38  So.  579. 

Defense  of  usury  available  against 
assignee.  Stokeley  v.  Buckler,  22 
Ky.  L.  Rep.  1740,  61  S.  W.  460. 

Note  purchased  at  execution  sale 
is  subject  to  equities.  Neale  v.  Head, 
133  Cal.  32,  65  Pac.  131. 

Defense  of  fraud  available  against 
assignee  of  note  payable  to  order. 
Kennedy  v.  Jones  (Miss.),  29  So. 
819. 

2*  Burns  v.  Sparks,  26  Ky.  L.  Rep. 
688,  82  S.  W.  425. 

^=  Smith  V.  Pettus,  1  Stew.  &  P. 
(Ala.)  107. 


447] 


BONA    FIDE   HOLDEES   AXD  EIGHTS    OX    TEAXSFEE. 


570 


equity  to  collect  the  same  by  foreclosure  of  a  mortgage  given  to  secure 
it,  which  is  not  negotiable,  will  take,  subject  to  any  defenses  the  maker 
had  as  against  the  original  mortgagees,  because  in  such  suit  the  mort- 
gage is  a  foundation  of  the  suit  and  the  note  is  only  the  incident  or 
evidence  of  the  debt.^^  So  the  payment  to  the  assignor  by  the  maker  of 
a  non-negotiable  instrument  may  constitute  a  good  defense  to  an  ac- 
tion thereon  by  the  assignee  when  such  payment  was  made  without  no- 
tice of  the  assignment  and  in  good  faith." '  So  an  action  on  a  note  may  . 
be  barred  by  a  release  by  the  payee  before  notice  given  of  assign- 
ment.^* Under  a  Missouri  decision  if  a  negotiable  instrument  is  as- 
signed only  those  equities  may  be  availed  of  as  are  apparent  upon  the 
paper.^''  Again,  in  an  action  by  the  assignee  it  is  unnecessary  to  con- 
sider the  question  whether  a  written  assignment  of  certain  notes  was 
properly  executed  or  admitted  in  evidence,  where  the  complaint  alleged 
the  assignment  and  delivery  of  the  notes  to  the  plaintiff  and  the  testi- 
mony showed  that  the  said  noies  were  transferred  and  delivered  to  the 
plaintiff  long  before  the  written  assignment  was  made;  no  objection 
being  interposed  to  the  admission  of  this  testimony  it  was  declared  to 
be  prima  facie  sufficient  under  the  pleadings  to  sustain  the  right  to 
recover.*"  The  holder  of  negotiable  paper  indorsed  in  blank  to  which 
he  has  no  legal  title,  or  in  which  he  has  no  beneficial  interest,  may 
maintain  after  maturity  a  suit  thereon  against  the  maker,  with  the 
consent  of  the  real  owner  to  whom,  when  recovered,  he  is  accountable 
for  the  proceeds.*^ 


•"  Haskell  v.  Brown,  65  111.  29. 

^^  Cornish  v.  Woolverton,  32  Mont. 
456,  81  Pac.  4,  Code  Civ.  Proc, 
§§  570,  571,  Civ.  Code,  §  1982.  See 
also  Sykes  v.  Citizens'  Nat.  Bk. 
69  Kan.  134,  76  Pac.  393;  Dickerson 
V.  Higgins,  15  Okl.  588,  82  Pac.  649. 

Payment  of  overdue  interest  to 
payee  by  maker  before  notice  of  as- 
signment when  available  against  as- 
signee, see  Hecker  v.  Boylan,  126 
Iowa  162,  101  N.  W.  755.  Compare 
Walter  v.  Logan,  63  Kan.  193,  65 
Pac.  225. 

^  Lowrey  v.  Danforth,  95  Mo.  App. 
441,  69  S.  W.  99. 

=°  Caldwell  v.  Dismukes,  111  Mo. 
App.  570,  86  S.  W.  270. 

« First  National  Bank  of  Council 


Bluffs  v.  Moore  (C.  C.  A.),  137  Fed. 
505. 

*^Jump  V.  Leon  (Mass.  1906),  78 
N.  E.  532,  declaring  that  this  rule 
has  been  settled  by  repeated  deci- 
sions beginning  with  Little  v. 
O'Brien,  9  Mass.  423,  and  citing 
with  other  cases  Fay  v.  Hunt,  190 
Mass.  378,  77  N.  E.  502;  Haskell  v. 
Avery,  181  Mass.  106,  63  N.  B.  15, 
92  Am.  St.  Rep.  401;  New  England 
Trust  Co.  V.  New  York  Belting  & 
Packing  Co.,  166  Mass.  42,  45,  43 
N.  E.  928. 

Jurisdiction  of  federal  court — as- 
signee—bona  fide  holders.  The  pro- 
visions of  the  act  of  August  13, 
1888,  25  Stat,  at  L.  433,  434,  pro- 
vides   that    no    circuit    court    shall 


571 


ASSIGNEE — EQUITIES. 


[§  448 


§  448.  Assignee — Equities — Construction  and  essentials  of  rule — 
Generally. — The  equities  within  the  rule  are  such  as  existed  in  favor 
of  the  original  debtor  and  not  a  collateral  matter  not  growing  out  of 
the  notes*-  and  such  as  the  holder  ought  to  have  ascertained  by  such 
inquiry  as  the  facts  and  the  law  require.''^  So  the  equities  must  be  ex- 
isting ones  between  the  maker  and  payee  in  order  to  be  available  by 
the  maker  to  defeat  the  assignee  ;*■*  the  equities  must  also  be  such  as 
attach  to  the  particular  contract*^  in  connection  with  which  the  note 
is  given.   And  the  rule  applies,  even  though  the  note  is  secured  by  col- 


have  cognizance  of  any  suit  to  re- 
cover the  contents  of  any  promis- 
sory note  in  favor  of  any  assignee, 
or  subsequent  holder  if  such  instru- 
ment be  payable  to  bearer,  unless 
such  suit  might  have  been  prose- 
cuted in  such  court  to  recover,  if  an 
assignment  or  transfer  had  not  been 
made.  Notes  were  made  by  a  cor- 
poration payable  to  the  order  of  its 
own  treasurer,  a  citizen  of  the  same 
state  as  a  matter  of  custom  and 
convenience  and  he  indorsed  and 
delivered  them  to  a  citizen  of  an- 
other state,  a  bona  fide  holder,  who 
furnished  directly  to  the  corpora- 
tion the  money  evidenced  by  the 
note.  It  was  decided  that  the  treas- 
urer was  not  in  fact  the  assignee 
of  the  note  within  the  statute  and 
that  the  holder  could  maintain  suit 
in  the  federal  circuit  court  of  com- 
petent jurisdiction,  even  though  as 
to  the  treasurer  diversity  did  not 
exist;  "as  the  notes  were  made  pay- 
able to  the  order  of  'Markham  B. 
Orde,  Treas.,'  and  there  is  no  alle- 
gation that  Orde  was  not  a  citizen 
of  the  state  of  Illinois,  of  which 
state  the  defendant  companies  were 
corporations  and  citizens,  it  is  in- 
sisted that  the  jurisdiction  must 
fail,  under  the  provisions  of  the 
statute  just  referred  to.    Assuming 


without  deciding  that  this  question 
could  be  raised  by  way  of  defense 
to  the  ancillary  bill,  we  think  the 
objection  must  fail,  for  under  the 
allegations  of  the  declaration  the 
money  was  furnished  directly  to  the 
defendants  by  the  Guaranty  Trust 
Company,  and  that  company  was 
the  first  taker  of  the  notes.  In  Falk 
V.  Moebs,  127  U.  S.  597  (32  L.  Ed. 
266,  8  Sup.  Ct.  1319),  it  was  held 
that  notes  made  in  this  form,  pay- 
able to  the  treasurer,  indorsed  be- 
fore delivery  by  him  are  notes  of 
the  company.  And  when  it  appears 
that  the  indorser  is  not  in  fact  an 
assignee  of  the  paper,  suit  may  be 
brought  in  a  federal  court  by  a 
holder  having  the  requisite  diverse 
citizenship,  notwithstanding  the  in- 
dorser might  have  been  a  citizen 
of  the  same  state  with  the  defend- 
ant. Holmes  v.  Goldsmith,  147  U.  S. 
150  (37  L.  Ed.  118,  13  Sup.  Ct.  288)." 
Blair  v.  Chicago,  201  U.  S.  400,  447, 
448,  26  Sup.  Ct.  427,  per  Day,  J. 

*=Fairchild  v.  Brown,  11  Conn.  26; 
Duke  V.  Clark,  58  Miss.  465,  474. 

"  Fairchild  v.  Brown,  11  Conn.  26. 
See  Summers  v.  Hutson,  48  Ind.  228. 

"Reece  v.  Knott,  3  Utah  451,  24 
Pac.  757. 

«=  Wright  V.  Levy,  12  Cal.  257.     • 


I 


gg    449-451]       BONA   FIDE    HOLDERS    AND    RIGHTS    ON    TRANSFER.       572 

lateral.*"    The  maker  must  also  have  some  interest  to  justify  an  in- 
quiry into  the  validity  of  the  assignment.*^ 

§  449.  Assignee — Negation  and  qualification  of  rule. — Notwith- 
standing the  preecding  general  rule,  there  are  decisions  which 
hold  to  the  contrary,  either  upon  principle  or  by  reason  of  the  par- 
ticular circumstances,  or  which  are,  at  least,  qualificative.**  Said 
general  rule  may  also  be  subject  to  qualification  by  code  provision.'*® 

§  450.  Assignee  of  void  note — Forbearance  to  sue. — A  note  given 
for  an  improvement  on  public  land,  where  there  is  no  right  of  pre- 
emption, is  for  an  illegal  consideration  and  void,  and  where,  subse- 
quent to  Ihe  assignment  of  the  note,  there  is  a  promise  to  pay  on  con- 
dition of  forbearance  to  sue,  it  is  held  that  such  note  is  subject  to  de- 
fenses, as,  the  note  being  void,  the  forbearance  to  sue  could  not  give  it 
validity.^* 

§  451.  So-called  assignment — Not  subject  to  equities. — Where  a  so- 
called  assignment  is  written  on  the  back  of  a  note,  acknowledges  the 
receipt  of  a  consideration,  employs  apt  words  to  transfer  the  full  and 
complete  title  to  the  paper,  and  actually  purports  to  make  such  trans- 

"  Reddish  v.  Ritchie,  17  Fla.  867.  Sandf.  Ch.   (N.  Y.)   333;   Snyder  v. 

See  §§  364-367,  herein.  Gruniger,  77  N.  Y.  Supp.   234. 

*'TerrilI  v.  Gamblin,  10  La.  Ann.  Ohio. — Ehrman    v.     Union     Cent. 

623.  Life  Ins.  Co.,  35  Ohio  St.  324;   Pan- 

*^United  /Sia^es.— Arthurs  v.  Hart,  coast  v.  Ruffin,  1  Ham.  (Ohio)  381; 

17  How.  (U.  S.)  6,  15  L.  Ed.  30.  Block  v.  Espy,  6  Ohio  Dec.  833. 

Arkansas. — McLain   v.   Coulter,   5  Pennsylvayiia.—UarTisonhurg   Bk. 

Pike   (Ark.)   13.  v.  Meyer,  6  Serg.  &  R.   (Pa.)  537. 

Colorado. — Parkinson  v.  Boddiker,  Virginia. — M'Neil     v.      Baird,      6 

10  Colo.  503,  15  Pac.  806.  Munf.  (Va.)  316. 

Illinois.— Yan  Buskirk  v.  Day,  32  Equities  against  assignee  may  be 

111.  260.  cut   off   by   assignment   under   stat- 

Indiana. — Glover    v.    Jennings,    6  ute.    Peck  v.  Bligh,  37  111.  317. 

Blackf.   (Ind.)   10.  "Adams  v.  Robinson,  69  Ga.  627 

Iowa. — Schleissman  v.  Kallenberg,  (this  case  makes  a  distinction  be- 

72  Iowa  338,  33  N.  W.  459.  tween  a  negotiable  and  a  non-nego- 

Kentucky. — Walker   v.    McKay,   2  tiable  paper  under  code,  §  2244.    It 

Mete.    (Ky.)    294;    Reid    v.    Cain,    3  also    distinguishes    the   case   of   Co- 

Ky.  L.  Rep.  329.  hen   v.   Prather,   56    Ga.    203).    See 

Missouri. — Powers    v.    Heath,    20  §  446,  herein. 

Mo.  319.  ^"Lindsey  v.  Sellers,  4  Cushm.  (26 

New    York.— Cooke    v.    Smith,    3  Miss.)   169. 


I 


573        ASSIGNMENT   BY    PAROL SUIT    IN    OWN    NAME.         [§§    452,    453 

fer  it  is  not  merely  an  assignment  of  a  chose  in  action,  subject  in  the 
assignee's  hands  to  defenses  available  against  the  assignor,  but  is  in 
all  essential  respects,  the  equivalent  of  a  blank  indorsement  and  re- 
lieves an  innocent  holder  from  equities  existing  between  the  maker 
and  payee;  especially  so  when  there  are  no  words  of  a  conditional  or 
restrictive  character  employed,  and  the  state  statute  makes  a  note, 
whether  payable  to  a  person  or  his  assigns,  or  to  a  person  or  his 
order,  equally  negotiable.  And  any  one  receiving  the  paper  with  a 
transfer  in  blank  may  treat  it  as  a  blank  indorsement  and  transfer  it 
by  delivery,  or  may  so  fill  it  up  as  to  make  a  special  indorsement.^^ 

§  452.     Assignment  by  parol — Suit  in  own  name — Equities. — In 

the  absence  of  a  statute  to  the  contrary  an  assignment  by  parol  of  a 
note  payable  to  order  is  sufficient,  a  written  assignment  being  unneces- 
sary to  transfer  the  equitable  title  to  the  assignee.  In  such  case  the 
title  so  transferred  being  equitable  it  is  subject  to  defenses  which  the 
maker  might  have  made  prior  to  the  transfer  and  although  irrespec- 
tive of  the  code  an  action  to  recover  on  the  note  could  be  prosecuted 
only  by  the  holder  in  the  name  of  the  payee,  yet  under  the  code 
system  a  negotiable  unindorsed  promissory  note,  payable  to  order, 
may,  for  a  valuable  consideration,  be  assigned  by  mere  delivery,  so  as 
to  give  the  transferee  a  right  to  recover  thereon  in  his  own  name.^^ 

§  453.  Suit  for  use  or  benefit  of  assignee. — Defenses  and  equities 
are  available  the  same  as  if  the  note  had  not  been  assigned  where  the 
action  is  brought  for  the  use  or  benefit  of  the  assignee.^^ 

"Leahy  v.  Haworth,  141  Fed.  850,  Rep.    547;     Markey    v.    Corey,    108 

859-861;     Neb.     Comp.     Stat.     1901,  Mich.  184,  66  N.  W.  493,  62  Am.  St. 

§    3380.     The    so-called    assignment  Rep.    698,   36   L.   R.   A.   117;    Maine 

read:    "For  value  received  the  Da-  Trust  &  Banking  Co.  v.  Butler,  45 

kota     Mortgage     Loan     Corporation  Minn.  506,  48  N.  W.  333,  12  L.  R.  A. 

hereby    assigns    and    transfers    the  370;  Everett  v.  Tidball,  34  Neb.  803, 

within   note   and   coupons,    together  52   N.  W.   816;    Lovell  v.  Evertson, 

with  all  its  right,  title  and  interest  11  Johns.    (N.  Y.)    52;    Davidson  v. 

under  the  real  estate  mortgage  se-  Powell,  114  N.  C.  575,  19  S.  E.  601; 

curing  the   same,   without  recourse  Bisbing   v.    Graham,   14    Pa.    14,    53 

to   .     [Signed.]     The    Dakota  Am.  Dec.  510;   Merrill  v.  Hurley,  6 

Mortgage  Loan  Corporation,  by  Al-  S.  D.  593,  63  N.  W.  958,  55  Am.  St. 

lison    Z.    Mason,    Treasurer."     The  Rep.  859.                      , 

court  cites  and  considers  Evans  v.  "  First  National  Bank  of  Council 

Gee,  11  Pet.   (36  U.  S.)   80,  9  L.  Ed.  Bluffs  v.  Moore   (C.  C.  A.)   137  Fed. 

639;    Sears   v.    Lanz,    47    Iowa  658;  505. 

Adams  v.  Blethen,  66  Me.  19,  22  Am.  "  Gildersleeve  v.  Caraway,  19  Ala. 


gg    454— 4:5G]       BONA   FIDE    HOLDERS    AND   EIGHTS   ON   TKANSFEK.       574 

§  454.  Subsequent  defenses  and  equities. — Equities  arising  be- 
tween the  maker  and  assignor  of  a  note  after  the  assignment  cannot 
avail  against  the  assignee.^* 

§  455.  Note  payable  to  order  or  bearer.-=— Where  a  note  payable  to 
order  or  to  bearer  is  assigned  defenses  in  equity  are  available  against 
the  assignee. ^^  This  rule  has  been  also  applied  to  a  writing  payable 
to  order.^^ 

§  456.  Transferee  without  indorsement. — A  note  may  be  trans- 
ferred by  delivery  when  payable  to  the  maker's  order  and  indorsed  in  ' 
blank.^'  So  a  note  may  pass  by  delivery  in  due  course  of  business."^  ■ 
The  title  to  warehouse  receipts  may  also  pass  by  delivery  without 
formal  indorsement.^"  And  a  check  payable  to  a  certain  person  may 
pass  title  by  its  delivery.''**  It  is  held,  however,  that  the  legal  title 
does  not  pass  by  the  delivery  only  of  negotiable  paper,  though  indorsed 
to  the  "order  of  over  the  holder's  signature.*^^  It  is  also  decided  that 
a  consideration  must  be  proven  to  warrant  a  recovery  by  a  transferee 
without  indorsement  of  a  negotiable  instrument. ''-  If  a  note  is  trans- 
ferred without  the  payee's  indorsement  the  transferee  cannot  hold  a 
person  as  indorser  thereof  where  his  signature  had  been  procured  on 
the  promise  of  the  maker  to  procure  the  payee's  indorsement  before 
negotiating  the  note.'^^  And  it  is  decided  that  one  is  not  a  bona  fide 
holder  of  paper  payable  to  order  transferred  to  him  by  delivery  only 
without  indorsement,  although  he  acquires  title  thereto  by  the  pay- 
ment of  value.^*  Under  the  negotiable  instruments  law  of  New 
York  "where  the  holder   of  an   indorsement,  payable  to  his   order, 

246;  Dunning  V.  Say  ward,  1  Greenl.  ^^  Sloan  v.  Johnson,  20  Pa.  Super. 

(Me.)  366;  Dyer  v.  Homer,  22  Pick.  Ct.  643. 

(Mass.)   253.  «°  Meuer  v.   Phenix  Nat.  Banli,  86 

''^  Daviess     v.     Newton,     5     J.     J.  N.  Y.  Supp.  701,  42  Misc.  341,  aff'd 

Marsh.    (Ky.)    89.  88  N.  Y.  Supp.  83,  94  App.  Div.  331. 

'-'■  Woodward   v.   Mathews,   15   Ind.  "  Gaylord     v.     Nebraslca     Sav.    & 

339;    Kennedy  v.   Jones    (Miss.),  29  Exch.    Bk.,   54   Neb.   104,   74   N.   W. 

So.  819.  415. 

'"  Chase   v.   Kellogg,    59    Hun    (N.  '   "- Farris  v.  Wells,  68  Ga.  604. 

Y.)   623,  13  N.  Y.  Supp.  351.  "^Gibson  v.   Miller,   29   Mich.   355, 

"Meyer   v.    Roster,    147    Cal.    166,  18  Am.  Rep.  98. 

81  Pac.  402.    See  Swenson  v.  Stoltz,  ""Moore  v.  Miller,  6  Oreg.  254,  25 

36  Wash.  318,  78  Pac.  999.  Am.  Rep.  518.    See  Breese  v.  Crump- 

■^^  Barnard    State   Bank   v.   Fesler,  ton,  121  N.  C.  122,  28  S.  E.  351. 
80  Mo.  App.  217. 


AGENTS   AND    TRUSTEES. 


[§  457 


transfers  it  for  value  without  indorsing  it,  the  transfer  vests  in  the 
transferee  such  title  as  the  transferrer  had  therein,  and  the  transferee 
acquires,  in  addition,  the  right  to  have  the  indorsement  of  the  trans- 
ferrer. But  for  the  purpose  of  determining  whether  the  transferee 
is  a  holder  in  due  course,  the  negotiation  takes  effect  at  tlie  time  when 
the  indorsement  is  actually  made."^°  In  case  a  bill  is  not  transferable 
by  delivery,  defenses  which  may  be  set  up  against  the  payee  may  be 
availed  of  as  against  a  transferee  without  indorsement.***'  This  rule 
has  been  applied  where  a  co-partnership  holds  a  note  without  indorse- 
ment payable  to  one  of  its  members  f''  where  a  note  has  been  trans- 
ferred for  the  benefit  of  creditors  by  assignment  from  the  payee;®* 
where  the  transfer  is  not  by  indorsement  and  the  note  is  ostensibly 
given  for  a  pretended  conveyance  in  fraud  of  the  rights  of  creditors  f^ 
and  where  a  person  is  the  transferee  in  the  first  instance  without  in- 
dorsement of  a  note  payable  to  another.'^'' 

§  457.  Agents  and  trustees. — An  indorsee  for  collection  only  with- 
out an  interest  other  than  to  apply  the  money  collected  on  his  in- 
dorser's  debt  holds  subject  to  equities.^^  So  an  indorsement  to  a  bank 
of  a  draft  "for  collection"  is  such  a  restricted  indorsement  as  vests 
no  general  property  to  the  paper  in  the  indorsee  but  only  constitutes 
him  an  agent  for  the  purpose  of  collecting  the  paper.''^  And  the 
payee's  collecting  agent  is  likewise  subject  to  equities.''^    So  an  agent 


'"'Negot.  Inst's  Law  1897,  ch.  712, 
§  79;  3  Gumming  &  Gilbert's  Annot. 
Gen'l  Laws  &  Stat.   N.   Y.,  p.   2550. 

Warranty  when  negotiation  by  de- 
livery, etc.  See  Negot.  Inst's  Law, 
§  115,  appendix  herein. 

«'  United  States.— Tvnst  Co.  v.  Na- 
tional Bank,  101  U.  S.  68;  Lyman 
v.  Warner,  113  Fed.  87. 

Alabama. — Ferguson  v.  Hill,  3 
Stew.    (Ala.)   485. 

Indiana. — Foreman  v.  Beckwith, 
73  Ind.  515. 

Kentucky. — Gray  v.  Farmers' 
Bank  (Ky.),  60  S.  W.  537. 

Michigan. — Gibson  v.  Miller,  29 
Mich.  355. 

Missouri. — Weber  v.  Orten,  91 
Mo.  677,  4  S.  W.  271. 

Nebraska. — Camp  v.  Sturdevant, 
16  Neb.  693,  21  N.  Y.  449. 


New  Hampshire. — Dunn  v.  Me- 
serve,  58  N.  H.  429. 

Tennessee. — Ingram  v.  Morgan,  4 
Humphr.  (Tenn.)  66,  40  Am.  Dec. 
626.  But  see  Central  Bank  v.  Lang, 
1  Bosw.   (N.  Y.)   202. 

"  Norton  v.  Pickens,  21  La.  Ann. 
575. 

"^  Sims  v.  Wilson,  47  Ind.  226. 

""  Davis  V.  Sittig,  65  Tex.  497.    . 

■""Boody  V.  Bartlett,  42  N.  H.  558; 
Marvin  v.  McCullum,  20  Johns.  (N. 
Y.)    288. 

"  Solomons  v.  Bank  of  England, 
13  East  135,  note. 

~-  First  Nat.  Bk.  of  Hastings  v. 
Farmers'  &  Merchants'  Bank  (Neb. 
1901),  95  N.  W.  1062.  Plaintiff  was 
an  assignee  of  the  check. 

"  Sinnot  v.  Schlater,  22  La.  Ann. 
201. 


§§    458-460]       BOXA   FIDE    HOLDERS    AND   RIGHTS    OX    TRANSFER,       576 

to  sell  holds  the  purchase-money  note  taken  in  his  own  name  subject 
to  defenses.'^*  And  where  an  agent  holds  a  note  payable  to  him  as 
trustee  but  not  indorsed  by  him,  equitable  defenses  are  available  against 
such  note  in  the  principal's  hands. "^  Again  the  rule  allowing  defenses 
applies  to  a  payee  who  is  partner  and  agent  of  plaintiff.'^'^  Xor  does 
the  repurchase  of  a  note  from  a  hona  fide  holder  aid  the  payee  to  pre- 
clude defenses  originally  available  against  himJ^ 

§  458.  Agent's  unauthorized  acts. — Where  an  agent,  without  ap- 
parent authority,  individually  executes  notes  to  the  creditor  for  the 
purchase  of  property,  assuming  the  vendor's  debts,  and  indorses  the 
name  of  the  non-resident  corporation  for  which  he  was  agent  on  each 
note,  and  the  creditor  releases  the  debtor,  such  notes  are  in  excess  of 
the  agent's  power,  even  though  he  was  the  sole  official  representative 
of  the  company  in  the  state,  and  the  corporation  was  not  liable  as 
principal  on  the  notes ;  otherwise  if  the  agent  acted  upon  due  author- 
ity.^« 

§  459.  Corporate  certificate  of  indebtedness  issued  in  restraint  of 
trade — Anti-trust  law. — Where  certificates  of  indebtedness  of  a  cor- 
poration are  negotiable  paper  it  is  no  defense  that  they  were  executed 
as  a  part  of  a  scheme  in  restraint  of  trade  prohibited  by  an  anti-trust 
law  of  a  state  as  against  a  purchaser  of  the  certificates  who  had  bought 
them  before  maturity  and  without  notice  of  the  invalidating  facts. '^^ 

§  460.  Guarantor — Guaranty. — The  determination  of  the  ques- 
tion whether  equities  and  defenses  between  original  parties  are  availa- 
ble against  a  hona  fide  holder  in  case  of  a  contract  of  guaranty,  must 
rest  largely  upon  the  construction  placed  upon  that  contract  in  the 
different  jurisdictions,  and  where  it  is  determined  that  a  payee  or 
holder,  who  writes  above  his  indorsement  of  negotiable  paper  a  guar- 
anty of  payment,  stands  in  the  position  of  an  indorser  with  an  enlarged 
liability,  such  a  transfer  constitutes  an  indorsement  of  the  paper.®** 

"Rutherford   v.    Newsom,   30   Ga.  1906),   94    S.    W.    1117;    Manhattan 

728.  Liquor     Co.     v.     German     National 

'=  Thomson  Co.  v.  Capital  Co.,  56  Bank     (Tex.    Civ.    App.    1906),    94 

Fed.  849.  S.  W.  1120. 

^«  Kelley  v.  Pemher,  35  Vt.  183.  "  National   Salt   Co.   v.    Ingraham 

"Kost  v.  Bender,  25  Mich.  515.  (C.   C.  A.),   143   Fed.    805,   807,  per 

"  Manhattan  Liquor  Co.  v.  Joseph  Wallace,  C.  J. 

A.   Magnus  &  Co.    (Tex.   Civ.   App.  ^^  Dunham    v.    Peterson,    5    N.    D. 


577 


GUARANTOR GUARANTY. 


[§  4G0 


The  Nebraska  Statute"  modifies  the  law  merchant  concerning  what  is 
a  negotiable  instrument,  since  the  statute  extends  negotiability  to  a 


414,  419,  67  N.  W.  293,  57  Am,  St. 
Rep.  556,  36  L.  R.  A.  232.  But  see 
contra,  Tuttle  v.  Bartholomew,  12 
Mete.  (Mass.)  454;  Belcher  v.  Smith, 
7  Cush.  (Mass.)  482;  Lamourieux 
V.  Hewitt,  5  Wend.  (N.  Y.)  307; 
Trust  Co.  V.  National  Bank,  101  U. 
S.  70;  Dunham  v.  Peterson,  5  N.  D. 
414,  419,  67  N.  W.  293,  57  Am.  St. 
Rep.  556,  36  L.  R.  A.  232.  See 
Robinson  v.  Lair,  31  Iowa  9;  Hel- 
mer  v.  Commercial  Bank,  28  Nebr. 
474,  44  N.  W.  482;  State  Nat.  Bank 
V.  Haylen,  14  Nebr.  480,  16  N.  W. 
754;   Partridge  v.  Davis,  20  Vt.  499. 

Transfer  of  title  to  note  in  form 
of  guaranty  when  and  when  not  an 
indorsement.  See  note  36,  L.  R.  A. 
232. 

In  Georgia  it  is  held  that  a  guar- 
anty "for  a  consideration  not  here- 
in named"  for  the  payment  of  a 
claim  payable  to  order  of  the  per- 
son to  whom  the  guaranty  is  made 
constitutes  a  guaranty  and  not  an 
indorsement.  Geysor  Mfg.  Co.  v. 
Jones,  90  Ga.  307,  17  S.  E.  81.  Un- 
der the  Illinois  statute  providing 
that  every  indorser  of  paper  pay- 
able to  bearer  shall,  unless  other- 
wise expressed,  be  deemed  a  guar- 
antor, one  who  writes  his  indorse- 
ment below  that  of  the  maker  on  a 
negotiable  instrument  payable  to 
order  is  liable  as  second  iiidorser 
and  not  as  guarantor.  Chicago 
Trust  &  S.  Bank  v.  Nordgren,  157 
111.  663,  42  N.  E.  148.  Under  other 
decisions  in  that  state  a  guarantor 
of  a  note  is  not  regarded  as  a  surety 
but  as  an  original  promisor.  Dun- 
canson  v.  Kirby,  90  111.  App.  15. 
See  Davis  v.  Wolff  Mfg.  Co.,  84  111. 
App.  579.  And  under  another  de- 
cision a  contract  of  indorsement 
Joyce  Defenses — 37. 


and  not  of  guaranty  is  created  by 
the  words  "indorsed  by"  written 
above  the  name  of  one  not  a  party 
to  the  note.     Delameter  v.  Kearns, 

35  111.  App.  634. 

Under  a  Missouri  decision  the 
rights  of  the  first  indorsee  pass  to  a 
bona  fide  purchaser  of  a  note  in- 
dorsed in  blank  by  the  payee,  and 
having  a  written  assignment  and 
guaranty  of  payment,  even  though 
not  a  technical  indorsement.  Hawes 
V.  Mulholland,  78  Mo.  App.  493,  2 
Mo.  A.  Rep.  279.  Under  a  Kansas 
decision  if  a  guaranty  is  written  in 
blank  by  the  payee  before  delivery 
it  passes  by  such  delivery  for  value. 
Crissey  v.  Interstate  Loan  &  T.  Co., 
59  Kan.  561,  53  Pac.  867,  8  Am.  & 
Eng.  Co.  Corp.  Cas.  N.  S.  781.  Again, 
guarantors  will  be  obligated  by  a 
guaranty  of  prompt  payment  of  a 
corporation  note,  even  though  the 
corporation  is  not  bound.  Holm  v. 
Jamieson,  173  111.  295,  59  N.  E.  702, 
rev'g  69  111.  App.  119.  In  case  a  ne- 
gotiable note  is  transferred  by  de- 
livery an  action  on  a  guaranty  for 
its  payment  is  not  within  the  terms 
of  a  statute  making  liable  only  those 
persons  whose  signature  appears  on 
negotiable  paper.    Swenson  v.  Stolz, 

36  Wash.  318,  78  Pac.  999. 
*'Comp.    Stat.   Neb.    1901,    §   3380, 

reads  as  follows:  "All  bonds, 
promissory  notes,  bills  of  exchange, 
foreign  and  inland,  drawn  for  any 
sum  or  sums  of  money  certain, 
and  made  payable  to  any  person  or 
order,  or  to  any  person  or  assigns, 
shall  be  negotiable  by  indorsement ' 
thereon,  so  as  absolutely  to  trans- 
fer and  vest  the  property  thereof  in 
each  and  every  indorsee  succes- 
sively, but  nothing  in  this  section 


§    461]         BOXA    FIDE    HOLDERS   AND   RIGHTS    ON    TRANSFER.  578 

note  payable  to  some  person  or  his  assigns,  while  under  the  law  mer- 
chant a  note  to  be  negotiable  must  be  payable  to  the  order  of  some 
person  or  to  bearer.  The  statute  further  provides  that  in  case  a  note  is 
payable  to  some  person  or  his  assigns  the  assignment  may  be  made  by  a 
blank  indorsement.  Therefore,  under  the  laws  of  that  state  a  guar- 
anty signed  by  the  payee,  before  its  maturity,  on  the  back  of  a  note 
payable  to  his  order,  constitutes  in  itself  a  transfer  of  the  legal  title, 
equivalent  to  a  blank  indorsement,  and  is  such  a  transfer  as  entitles 
the  transferee  or  subsequent  holder  to  maintain  suit  upon  the  note 
for  its  collection  free  from  equities  existing  between  the  maker  and 
the  payee. ^^ 

§  461.  Same  subject. — If  one  guarantees  notes  given  in  settlement 
of  a  claim  against  him  he  is  precluded  as  against  a  bona  fide  holder 
from  availing  himself  of  defenses  between  himself  and  the  original 
transferee,  and  defenses  available  against  the  immediate  payee  cannot 
be  urged  against  a  bona  fide  holder  by  a  guarantor.^^  Under  a  North 
Dakota  decision  an  innocent  purchaser  of  a  note  transferred  before 
maturity  by  an  indorsement  of  guaranty  waiving  notice  of  protest  and 
demand  is  not  subject  to  defenses  available  between  the  original  par- 
ties.^* Again,  the  fact  that  the  maker  of  a  note  payable  to  his  own 
order  has  never  indorsed  it  does  not  avail  a  guarantor  to  defeat  a  re- 
covery in  an  action  against  him,  neither  party  having  any  knowledge 
of  the  fact  as  to  said  indorsement  until  after  date  of  payment.^"*  But 
it  is  also  decided  that  all  the  equities  available  in  behalf  of  the  maker 
can  be  urged  by  a  guarantor  who  is  not  a  party  to  the  instrument.^® 
A  failure  of  consideration  constitutes  a  defense  available  by  guar- 
antors who  have  not  received  a  consideration  direct  from  creditors.  ^^ 

shall  be  construed  to  make  negotia-        "  Jackson  v.  Foote,  12  Fed.  37. 
ble  any  such  bond,  note  or  bill  of         **  Dunham  v.  Peterson,  5  N.  Dak. 

exchange,    drawn    payable    to    any  414,  36  L.  R.  A.  232,  67  N.  W.  293. 
person    or    persons   alone,    and    not         '^  Jones      v.      Thayer,      12      Gray 

drawn  payable   to   order,  bearer  or  (Mass.)   443,  74  Am.  Dec.  602. 
assigns:     Provided,    That    all    such         '''' Brou  v.  Becnel,  20  La.  Ann.  254. 
bonds,    promissory    notes    and    bills         *^  Walter   A.    Wood    Mowing"  &  R. 

of      exchange,      made     payable     to  Mach.  Co.  v.   Laud,  98   Ky.  516,  17 

bearer,  shall  be  transferable  by  de-  Ky.  L.  Rep.  791,  792,  32  S.  W.  607, 

livery    without    indorsement    there-  608.     Examine    Evansville    National 

on     *     *     *  ."  Bank  v.  Kaufman,  93  N.  Y.  273,  45 

«=  Leahy   v.    Haworth    (C.    C.   A.),  Am.  Rep.  204. 
141   Fed.   850,   856-859.    See   §§   212, 
352,  herein. 


i 


579  NOTE    PAYABLE    TO    OUDER   OR    BEARER.         [§§    4G2-4G-1- 

§  462.  Pledge  of  note  by  holder — Pledgee's  rights. — The  holder 
of  a  note  may  pledge  a  note,  secured  by  eolhiteral,  as  security  for  his 
own  note,  and  the  security  given  the  pledgor  passes  with  his  note  into 
the  pledgee's  hands,  who  may  collect  the  pledged  note  by  suit  thereon 
or  sale  of  the  collateral  or  both.^* 

§  463.  Note  payable  to  order  or  bearer. — Under  the  rule  by  which 
equities  and  defenses  between  original  parties  are  not  available  against 
hona  fide  holders  generally  such  holder  of  a  note  payable  to  order  or 
bearer  is  entitled  to  protection.^^  A  transfer  by  indorsement  has,  how- 
ever, been  held  necessary  to  preclude  defenses  which  might  be  avail- 
able where  a  note  is  payable  to  order.'*'^  And  where  a  note  is  payable 
to  a  person  or  bearer,  it  is  determined  that  the  maker  can  avail  him- 
self of  any  defenses  which  might  have  been  set  up  against  the  payee 
in  an  action  on  such  note  by  a  transferee  by  delivery  brought  in  his 
name.^^  And  it  is  decided  that  a  transfer  by  delivery  only  of  nego- 
tiable paper  payable  to  order  and  secured  by  mortgage  vests  in  the 
assignee  of  tlie  note  and  mortgage  an  equitable  and  not  the  legal  title 
and  subjects  him  to  all  equitable  defenses  available  as  against  such 
note  and  mortgage.'*^ 

r 

§  464.    Under  statutes  and  codes — Notice  or  knowledge — Bad  faith. 

— One  who  has  taken  an  instrument  complete  and  regular  upon  its  face 
is  a  holder  in  due  course  under  the  negotiable  instruments  law  of  New 
York.^^    But  one  who  takes  an  incomplete  instrument  is  not  a  holder 

'^Eddy  V.  Fogg    (Mass.  1906),   78  73    Miss.    96,    15    So.    138;    Winona 

N.  E.  548.   See  §§  351  et  seq.,  herein  Bank  v.   Wofford,   71    Miss.    711,   14 

as  to  collateral  security.  So.  262;    Central  Bank  v.  Lang,   14 

^  Musselman     v.     McElhenny,     23  N.  Y.  Super.  Ct.  202. 

Ind.   4,  85  Am.  Dec.  445;    Potter  v.  ""  Younker  v.  Martin,  18  Iowa  143; 

Sheets,   5   Ind.   App.    506,   32   N.    E.  Hadden    v.    Rodkey,    17    Kan.    429; 

811;    Winstead    v.    Davis,    40    Miss.  Lehchar  v.  Lambert,  23  Utah  1,  63 

785;    Stokes   v.    Winslow,    31    Miss.  Pac.  628. 

518;    Dunham  v.  Peterson,  5   N.   D.  "' Rabberman     v.     Muchlausen,     3 

414,  417,  67  N.  W.  293,  57  Am.  St.  Bradw.    (111.)    326,  Rev.  Stat,  c.  96, 

Rep.  556,  36  L.  R.  A.  232.  §  4;    Osborn  v.  Kistler,  35  Ohio  St. 

When  such  note  not  within  stat-  99.    See  §  358  herein, 

ute  allowing  defenses,   see:    Robin-  °=  McCriim  v.  Corby,  11  Kan.  464. 

son    V.    Crenshaw,    2    Stew.    &    P.  See  §§  364-368,  376,  herein. 

(Ala.)    276;    Sweetzer  v.  First  Nat.  »=  Elias  v.  Whitney,  98  N.  Y.  Supp. 

Bank,   73   Miss.   96,  15  So.  138;    Co-  667,  Neg.  Inst.  Law,  Laws  1897.  pp. 

lumbus  Ins.  Co.  v.  First  Nat.  Bank,  732,  745,  c.  712,  §  91;   2  Camming  & 


§    465]  BONA   FIDE    HOLDERS   AND   RIGHTS    ON    TRANSFER.  580 

in  due  course.®*  And  paper  payable  on  demand  should  be  negotiated 
within  a  reasonable  time  after  its  issue  to  constitute  one  such  a 
holder.®^  Again,  the  rule  which  precludes  those  defenses  against  bona 
fide  holders  which  might  be  available  between  prior  parties  is  ex- 
pressly made  applicable  to  holders  in  due  course  under  the  New  York 
statute  above  noted.®**  And  the  title  of  a  bona  fide  holder  will  not  be 
defeated  by  construction  of  the  terms  of  a  statute  not  expressly  in- 
validating the  paper.®'^  So  one  who  purchases  a  note  for  less  than 
its  face  value  is  none  the  less  a  bona  fi.de  holder  because  of  such  fact.®^ 
And  the  fact  that  a  note  was  not  stamped  as  required  by  a  revenue  law 
when  received  by  the  assignee,  does  not  subject  him  to  equities  between 
prior  parties.®®  Under  the  negotiable  instruments  law  of  congress, 
(act  of  congress,  January  12,  1899)  one  purchasing  a  note  for  value 
without  notice  has  a  good  title,  even  though  such  note  is  based  on  a 
gambling  transaction. ^*''' 

§465.  Same  subject. — One  is  a  holder  in  due  course  who  dis- 
counts, in  good  faith,  without  knowledge  of  infirmities  in  the  paper, 
a  note  payable  to  bearer. ^"^  And  one  may  be  a  bona  fide  holder  of 
negotiable  paper,  though  tainted,  under  a  statute,  with  illegality  in 
the  hands  of  the  payee."^  If  the  circumstances,  though,  sufficient  to 
put  a  reasonably  prudent  man  on  inquiry,  do  not  show  bad  faith  a 
purchaser  of  a  check  is  a  bona  fide  holder  under  the  Montana  code.^"^ 
And  mere  suspicion,  or  even  gross  negligence  not  amounting  to  bad 
faith  will  not  prevent  recovery  by  an  assignee  under  a  statute  provid- 

Gilbert's    Annot.    Genl.    Laws    and  "'  McNamara  v.  Jose,  28  Wash.  461, 

Stat.  N.  y.,  p.  2551.    See  Appendix,  68  Pac.  903;  Sess.  Laws  1899,  p.  350, 

herein.  §    57.     Examine   Orr    v.    Sparkman, 

"^  Davis    Sewing    Machine    Co.    v.  120   Ala.    9,   23    So.   829.    See   §   188 

Best,  105  N.  Y.  59,  6  N.  Y.  St.  R.  et  seq.,  240,  376,  herein. 

779,  26  W.  D.  182.  '^  Ebert  v.  Gitt,  95  Md.  186,  52  Atl. 

^^Negot.    Inst.    Law,    N.    Y.    Laws  900;  U.  S.  Int.  Rev.  Act  1898. 

1897,   c.    712,    §    92;    2    Gumming    &  ^o"  Wirt  v.  Stubblefield,  17  App.  D. 

Gilbert's    Annot.    Genl.    Laws    and  C.  283. 

Stat.  N.  Y.,  p.  2551.    See  also  Grim  ^"^  Massachusetts      Nat.      Bk.      v. 

V.  Starkweather,  88  N.  Y.  339.    Ex-  Snow,  187  Mass.  159,  72  N.  E.  959; 

amine    McLean    v.    Bryer,    24    R.    I.  Rev.  Laws,  c.  73,  §§  69-76. 

599,  54  Atl.  373.  i"' National    Bk.    of    Commerce   v. 

""Broadway    Trust    Co.    v.    Man-  Pick   (N.  Dak.),  99  N.  W.  63;   Rev. 

helm,   95   N.  Y.   Supp.  93,   47   Misc.  Codes,  1899,  §  3265. 

415,  34  Civ.  Proc.  310.  ^^^  Harrington  v.   Butte  &  Boston 

"Citizens'     State     Bk.     v.     Nore  Min.  Co.  (Mont.),  83  Pac.  467. 
67  Neb.  69,  93  N.  W.  160. 


581 


NOTICE    on   KNOWLEDGE — BAD    FAITH. 


[§  465 


ing  that  actual  knowledge  or  bad  faith  are  necessary  to  defeat  such 
title. ^"^  Again,  a  merchant  who  accepts  a  check,  which  had  been  in- 
dorsed, in  blank  and  lost,  is  not  guilty  of  bad  faith  in  receiving  it  from 
a  customer,  although  a  stranger  to  him,  a  few  days  after  it  was  drawn, 
without  the  latter's  identification."^  But  a  holder  of  a  note  not  duly 
indorsed  before  its  apparent  maturity  is  subject  to  defenses.^"^  And 
certificates  of  deposit  may  give  such  actual  notice  of  infirmity  as  to 
necessitate  inquiry  or  subject  the  holder  to  the  charge  of  bad  faith.^"' 
So  bad  faith  or  knowledge  may  constitute  one  not  a  holder  in  due 
course  under  the  statute."^  And,  under  the  Iowa  statute  an  assignee 
of  a  note  and  mortgage,  whose  title  is  based  upon  fraud  and  is  with- 
out consideration,  is  not  a  bona  fide  holder. ^°^ 


^•^  Valley  Savings  Bk.  v.  Mercer 
97  Md.  458,  55  Atl.  435. 

^"''Unaka  Nat.  Bk.  v.  Butler 
113  Tenn.  574,  83  S.  W.  655;  Negot. 
Inst.  Law,  Acts  1899,  c.  94,  §  56,  p. 
150. 

"•^  Reese  v.  Bell,  138  Cal.  1,  XIX, 
71  Pac.  87. 

i<"  Ford  V.  H.  C.  Brown  &  Co.,  114 
Tenn.  467,  1  L.  R.  A.  N.  S.  188,  88 
S.  W.  1036;  Negot.  Inst.  Law,  Acts 
1899,  c.  94,  §  56,  p.  150. 

^"^Keene  v.  Behan,  40  Wash.  505, 
82  Plac.  884;  Negot.  Inst.  Law,  Sess. 
Laws  1899,  p.  350,  c.  149,  §  56. 

'°»Keegan  v.  Rock  (Iowa),  102  N. 
W.  805;  Negot.  Inst.  Act,  29th  Genl. 
Assemb.,  c.  130,  §  52,  Code  Supp., 
§  360a,  52. 

Who  is  and  is  not  holder  in  due 
course  under  Bills  of  Exchange  Act 
1882,  §  29.  See  Lewis  v.  Clay  (Q. 
B.),  77  Law  T.  R.  653,  67  L.  J.  Q.  B. 
N.  S.  224,  30  Chic.  Leg.  N.  211. 

.When  defenses  not  available  un- 
der codes  or  statutes,  see: 

Arkansas. — Worthington  v.  Curd, 
22  Ark.  277   (after  1873). 

Indiana. — Hankins  v.  Shoup,  2 
Ind.  342. 

Massachusetts. — Thayer     v.     Buf- 
fum,  11  Mete.   (Mass.)   398. 
■  Mississippi. — Winona       Bank       v. 


Wofford,  71  Miss.  711,  14  So.  262; 
Meggett  v.  Baum,  57  Miss.  22;  CofE- 
man  v.  Bank,  41  Miss.  212;  Win- 
stead  V.  Davis,  40  Miss.  785;  Mer- 
cien  V.  Cotton,  34  Miss.  64;  Stokes 
V.  Winslow,  31  Miss.  518. 

Washington. — McNamara  v.  Jose, 
28  Wash.  461,  68  Pac.  903  (Wash. 
Sess.  Laws  1899,  p.  350,  §§  56,  57). 

Defense  under  code  when  one  is 
not  a  bona  fide  holder.  Van  Val- 
kenburgh  v.  Stupplebeen,  49  (N. 
Y.)   99. 

When  defenses  available  under 
codes  or  statutes,  see:  Woodruff  v. 
Webb,  32  Ark.  612  (unless  the  note 
contained  the  words  "without  de- 
falcation"); Worthington  v.  Curd, 
22  Ark.  277;  Hankins  v.  Shoup,  2 
Ind.  342  (Rev.  Stat.  1843,  pp.  577, 
578);  Aldrich  v.  Stockwell,  9  Al- 
len (Mass.)  45;  Spring  v.  Lovett, 
11  Pick.  (Mass.)  417  Robertshaw  v. 
Britton,  74  Miss.  873,  21  So.  523; 
Merchants'  &c.  Bank  v.  Millsaps, 
71  Miss.  361,  15  So.  659  (Code, 
§  3503)  ;  Union  Nat.  Bank  v.  Fraser, 
63  Miss.  231;  Etheridge  v.  Gal- 
lagher, 55  Miss.  458  (under  code 
Miss.,  §  3503). 

See  further  as  to  defenses  under 
codes  and  statutes  the  following 
cases: 


§  ^G(^] 


BONA   FIDE    HOLDERS    AND   RIGHTS    ON   TRANSFER. 


582 


§  466.  Joint  and  several  notes. — Where  one  not  appearing  to  be  a 
party  to  a  negotiable  promissory  note,  either  as  payee  or  indorsee,  puts 
his  name  on  the  back  of  it  in  blank,  at  its  inception  and  before  its 
negotiation,  is  presumed  by  the  law  of  the  state  to  be  a  joint  and 
several  promisor,  such  presumption  will  prevail  in  favor  of  an  inno- 
cent indorsee  who  receives  the  note  for  value  before  due  and  in  the 
ordinary  course  of  business,  and  his  rights  cannot  be  infringed  by 
proof  of  any  extrinsic  facts  which  might  affect  the  original  parties  to 
the  contract  or  those  occupying  their  position  and  having  their  rights 
only.^^*^  It  is  also  decided  that  where  a  note  is  payable  to  several 
jointly  and  they  unite  in  indorsing  it  to  one  of  their  number  the 
indorsees  will  stand  in  the  same  position  in  respect  to  the  defense  of 


United  States. — Gates  v.  Mont- 
gomery Bank,  100  U.  S.  239,  25  L. 
Ed.  580  (immunity  from  set-off,  dis- 
count, or  equities,  Act  Ala.  1873,  p. 
111). 

Alabama. — Bostick  v.  Scruggs,  50 
Ala.  10  (Rev.  Code,  §  2542,  as  to 
set-off). 

Indiana. — Shirk  v.  North,  138 
Ind.  210,  37  N.  E.  500  (Burns'  Rev. 
Stat.  1894,  §  6962;  Rev.  Stat.  1881, 
§  5117,  when  married  women  bound 
by  estoppel  in  pais  against  bona 
fide  purchaser). 

Iowa. — Jack  v.  Hosmer,  97  Iowa 
17,  65  N.  W.  1009  (code  as  to  as- 
signment counter-claim  and  de- 
fense) ;  Richards  v.  Monroe,  85 
Iowa  359,  52  N.  W.  339,  39  Am.  St. 
Rep.  301  (Code  1873,  §  2114,  as 
amended.  Acts  22d  General  Assem., 
c.  90,  as  to  bona  fide  purchaser  of 
note  tainted  with  fraud);  Bowling 
V.  Gibson,  52  Iowa  517,  5  N.  W.  620 
(Code,  §  2546,  as  to  counter-claim 
or  defense). 

Kentucky. — Spencers  v.  Biggs,  2 
Mete.  (Ky.)  123  (statute  as  to  as- 
signee defenses,  discount,  or  set- 
off);  Kelly  V.  Smith,  1  Mete.  (Ky.) 
313  (statute  as  to  assignment,  de- 
fenses, discount,  or  set-off). 

Massachusetts. — Shoe    &    Leather 


Bank  v.  Wood,  142  Mass.  563,  8  N. 
E.  753  (statute  as  to  defenses,  dis- 
counts, and  off-sets) ;  Thayer  v.  Buf- 
fum,  11  Mete.  (Mass.)  398  (Stat. 
1829,  c.  121,  allowing  defenses 
against  indorsee  on  demand  note 
does  not  apply  to  firm  note  payable 
to  member  or  order). 

Minnesota. — Savage  v.  Laclede 
Bank,  62  Minn.  586  (Code  1880, 
§  1124,  as  to  set-offs  on  assigned  bill 
of  exchange). 

Neio  Jersey. — Youngs  v.  Little,  15 
N.  J.  L.  1  (Rev.  Laws  396  offsets 
and  discounts  against  payees  and 
indorsees;  note  payable  "without 
defalcation  or  discount"). 

Neio  York. — Smith  v.  Van  Loan, 
16  Wend.  (N.  Y.)  659  (2  Rev.  Stat., 
p.  354,  §  18,  subd.  10,  as  to  right  of 
set-off ) . 

Tennessee. — Snoddy  v.  American 
Bank,  88  Tenn.  573,  13  S.  W.  127,  17 
Am.  St.  Rep.  918,  7  L.  R.  A.  705 
(Code  1884,  §§  2444,  5708,  gaming 
or  wagering  consideration;  bona 
fide  holder). 

Vermont. — Alden  v.  Parkhill,  18 
Vt.  205  (Act  1836,  set-off  against  in- 
dorsee). 

""Merchants'  Trust  &  Bkg.  Co.  v. 
Jones,  95  Me.  335,  50  Atl.  48. 


583  JOINT    AXD   SEVERAL    NOTES.  [§    466 

want  of  consideration  as  a  payee  where  the  note  is  to  him  alone  by 
the  other  payees  without  alleging  notice  of  such  want  to  him.  So 
another  person,  by  becoming  a  holder  jointly  with  the  payee,  is  held 
to  be  subject  to  the  same  defense."^  So  a  negotiable  note,  payable 
to  two  or  more  persons  jointly,  indorsed  by  one  only  of  two  joint 
payees,  is  subject  to  any  equities  existing  in  favor  of  the  maker,  the 
same  as  if  it  had  not  been  indorsed  by  either ;  such  a  note  is  payable  to 
all  the  payees  or  to  their  joint  order  and  cannot  be  transferred  except 
by  the  joint  indorsement  of  all  the  payees.^ ^- 

"^Saxton  V.  Dodge,  57  Barb.    (N.         "=  Haydon    v.    Nicolette,    18    Nev. 
Y.)  116.  290,  3  Pac.  473. 


I 


CHAPTER  XXI. 


BONA   FIDE  HOLDERS   AND  RIGHTS   ON    TRANSFER  CONTINUED. 


Sec. 

467.  Overdue  paper. 

468.  Overdue  paper — Default  in  pay- 

ment of  interest. 

469.  Overdue  paper — Demand  notes. 

470.  Delivery  of  paper  to   impostor 

or  wrong  party — Liability  to 
drawee  or  bona  fide  holder. 

471.  Application    by    bank    of    pro- 

ceeds to  credit  of  depositor. 

472.  Notice     or     knowledge — Gener- 

ally. 

473.  Notice    or    knowledge — Contin- 

ued. 

474.  Notice    or    knowledge — Matters 

apparent  from   the  paper   it- 
self. 

475.  Notice      or      knowledge  —  Sus- 

picious circumstances — Gross 
negligence — Bad  faith. 

476.  Same  subject — Decisions. 


Sec. 

477.  Same     subject — Rule     in     Ver- 

mont. 

478.  Indorsement  subsequent  to  no- 

tice. 

479.  Notice — Fraud. 

480.  Notice — Fraudulent    alteration. 

481.  Erasures — Forgery  —  Notice  — 

Negligence — Recovery. 

482.  Knowledge — Purchaser  of  mar- 

ried woman's  note. 

483.  Notice — Accommodation    paper. 

484.  Notice — Notes  of  a  series. 

485.  Notice — Corporation — Agency. 

486.  Same  subject. 

487.  Corporation    indorsement  —  Ac- 

commodation paper. 

488.  Notice — Purchaser  of  bonds. 

489.  Transferee  of  hona  fide  holder 

— Notice. 


§  467.  Overdue  paper, ^ — Ordinarily  the  indorsee  or  transferee  of 
overdue  commercial  paper  obtains  no  better  title  than  that  of  the  trans- 
ferrer.^*   Under  the  negotiable  instruments  law,  one  of  the  require- 


^See  §  239,  herein. 

^*  United  States. — Fowler  v.  Brant- 
ley, 14  Pet.  (U.  S.)  318;  Foley  v. 
Smith,  6  Wall.  (U.  S.)  492. 

AZa&ama.— Marshall  v.  Shiff,  130 
Ala.  545,  30  So.  335. 

Georgia. — Harrell  v.  Citizens'  Bkg. 
Co.,  Ill  Ga.  846,  36  S.  E.  400;  Steed 
V.  Groves,  103  Ga.  550;  30  S.  E.  626. 

Illinois. — Morgan  v.  Bean,  100  111. 
App.  114. 

Missouri. — Williams  v.  Baker,  100 
Mo.  App.  284,  73  S.  W.  339;  Mayer  v. 


Columbia  Sav.  Bk.,  86  Mo.  App. 
108. 

Nebraska. — May  v.  First  Nat.  Bk. 
(Neb.),  104  N.  W.  184. 

Louisiana. — Metropolitan  Bk.  v. 
Bouny,  42  La.  Ann.  439,  7  So.  586. 

New  Hampshire.  —  Quimby  v. 
Stoddard,  67  N.  H.  283,  35  Atl.  1106. 

Texas. — Walker  v.  Wilson,  79  Tex. 
188,  14  S.  W.  798,  15  S.  W.  402,  per 
Gaines,  J.;  Mayfield  Grocer  Co.  v. 
Andrew  Price  &  Co.  (Tex.  Civ.  App. 
1906),  95  S.  W.  31. 

84 


585 


OVERDUE  PAPER. 


[§  467 


ments  of  a  holder  in  due  course  is  that  he  became  a  holder  of  the  in- 
strument "heiore  it  was  overdue  without  notice  that  it  had  been  previ- 
ously dishonored,  if  such  was  the  fact;"  and  "In  the  hands  of  any 
other  than  a  holder  in  due  course,  a  negotiable  instrument  is  subject 
to  the  same  defenses  as  if  it  were  non-negotiable/'^  So  the  purdiaser 
from  a  bank,  of  overdue  paper,  is  subject  to  equities,  even  though  he 
had  no  actual  notice  of  the  bank's  want  of  authority  to  sell,  and  only 
knowledge  of  circumstances  which  ought  to  have  put  him  on  inquiry.^ 


Washington. — Gordon  v.  Decker, 
19  Wash.  188,  52  Pac.  856.  See  Mer- 
chants' Loan  &  Trust  Co.  v.  Welter, 
205  111.  647,  68  N.  E.  1082. 

Rights  of  holder  of  negotiable  pa- 
per transferred  after  maturity.  See 
note  46  L.  R.  A.  753,  under  the  fol- 
lowing headings:  "(I.)  Effect  of 
transfer  after  maturity  on  negotia- 
bility; (II.)  rights  acquired  under 
transfer:  (a)  the  general  doctrine; 
(&)  different  statements  of  the 
rule;  (c)  the  correct  rule;  (III.)  de- 
fenses which  maker  may  make: 
(a),  general  rules  as  to  right  to  de- 
fend; (b)  want  or  failure  of  con- 
sideration; (c)  illegal  considera- 
tion; (d)  usury;  (e)  fraud  in  incep- 
tion; (f)  violation  of  contemporane- 
ous agreement;  (g)  that  it  was 
partnership  paper;  (h)  that  it  was 
accommodation  paper;  (i)  that  it 
was  intended  for  collateral  secur- 
ity; (;■)  that  it  had  been  lost  or 
stolen;  (fc)  that  transfer  was  un- 
authorized; (l)  that  debt  had  been 
attached  or  garnished;  (m)  pay- 
ment: (1)  as  a  defense  generally; 
(2)  payment  by  person  only  second- 
arily liable;  (3)  effect  of  reissue 
after  payment;  (n)  right  of  the 
transferee  to  sue;  (IV.)  equities 
of  intermediate  holders;  (V.)  ex- 
ception as  to  paper  taken  from  bona 
fide  holder;  (VI.)  exception  as  to 
collateral  matters:  (a)  the  general 
rule;  (b)  what  matters  are  col- 
lateral—instances;      (VII.)      excep- 


tions as  to  set-offs  and  counter- 
claims: (a)  the  general  rule;  (b) 
under  statutes  as  to  set-off  of  mu- 
tual claims;  (c)  under  special  stat- 
utes; (d)  equitable  set-offs;  (e)  in- 
terposition of  set-off  against  set-off; 
if)  effect  of  agreement  for  set-off; 
(VIII.)  exception  as  to  instruments 
drawn  payable  without  defalcation 
or  discount;  (IX.)  effect  of  dis- 
honor as  to  interest,  instalments,  or 
part  of  a  series;  (X.)  effect  of 
transfer  and  indorsement  at  differ- 
ent times;  (XI.)  effect  of  extension 
of  time;  (XII.)  effect  of  renewal  of 
note;  (XIII.)  effect  of  action 
brought;  (XIV.)  rights  of  holder 
against  indorser:  (a)  general  rules 
as  to  effect  of  transfer;  (b)  demand 
and  notice  to  charge  indorser:  (1) 
on  time  notes;  (2)  on  demand 
notes;  (XV.)  special  rules  based  on 
character  of  the  instrument:  (a) 
checks;  (b)  certificates  of  deposit; 
(c)  negotiable  bonds;  (XVI.)  ac- 
tions against  transferees  to  enforce 
equities;  (XVII.)  proof  with  refer^ 
ence  to  equities." 

"  Negot.  Insts.  Law  N.  Y.,  Laws 
1897,  c.  712,  §§  91  (subd.  2),  97;  2 
Gumming  &  Gilbert's  Annot.  Genl. 
Laws  &  Stat.  N.  Y.,  pp.  2551,  2553. 
See  Lawrence  v.  Glark,  36  N.  Y. 
127. 

"  Cussen  v.  Brandt,  97  Va.  1,  5  Va. 
Law  Reg.  98,  1  Va.  Sup.  Ct.  Rep. 
193,  32  S.  E.  791. 


§  468] 


BOXA    FIDE    HOLDERS    AXD   EIGHTS    OX    TRAXSFER, 


58G 


This  rule  is,  however,  subject  to  qualifications  and  exceptions,  or  at 
least  there  are  certain  cases  in  which  purchasers  of  overdue  paper  have 
not  been  precluded  from  recovering  thereon.*  And  it  is  held  that  the 
equities  to  which  a  purchaser  of  overdue  paper  is  subject  are  limited 
to  those  which  arise  out  of  tlie  note  itself  and  not  out  of  independent 
transactions  between  prior  parties.^  A  purchaser  from  the  transferee 
of  a  note  secured  by  mortgage  may,  it  is  decided,  obtain  a  title  free 
from  equities  where  he  pays  value  therefor  in  good  faith,  even  though 
the  paper  was  obtained  by  fraud  and  was  overdue  in  the  owner's  hands 
before  it  was  assigned  to  the  transferee.^  Again,  where  a  negotiable 
promissory  note  has  been,  before  its  maturity,  duly  indorsed  and  de- 
livered in  escrow,  with  the  contract  of  its  purchaser  to  convey  in  con- 
sideration of  it  certain  land,  and  proceedings  were  necessary  to  enable 
the  purchaser  of  the  note  to  convey  the  land  and  carry  out  the  contract 
for  which  the  note  was  taken,  the  fact  that  such  proceedings  were  not 
completed,  and  the  contract  not  fulfilled  and  the  note  not  delivered  by 
the  depositary  to  the  purchaser  until  after  it  matured,  will  not  deprive 
the  buyer  of  the  rights  of  the  bona  fide  purchaser  before  maturity, 
where  he  has  completed  the  transaction  in  ignorance  of  any  defense.'^ 

§  468.  Overdue  paper — Default  in  payment  of  interest. — The  rule 
that  one  who  takes  notes  after  they  become  due  and  payable,  or  after 
maturity,  is  not  a  holder  in  due  course,  and  takes  the  paper  subject 
to  the  equities  between  the  original  parties,  applies  to  a  person  who 
takes  notes  after  they  have  become  due  and  collectible  for  default  in 


*  Examine  the  following  deci- 
sions: 

California. — Reese  v.  Bell,  138 
Cal.  1,  XIX,  71  Pac.  87. 

Colorado. — Beach  v.  Bennett,  16 
Colo.  App.  459,  66  Pac.  567. 

Illinois. — Young  Men's  Christian 
Association  Gymnasium  Co.  v. 
Rockford  Nat.  Bk.,  179  III.  599,  54 
N.  E.  297,  46  L.  R.  A.  753,  affg.  78 
111.  App.  180. 

Nebraska. — C  uniningham  v. 
Holmes,  66  Neb.  723,  92  N.  W.  1023; 
Shabata  v.  Johnson,  53  Neb.  12,  73 
N.  W.  278. 

New    York. — Fealey    v.    Bull,    163 


N.  Y.  397,  57  N.  E.  631,  aff'g  50  N. 
Y.  Supp.  1126. 

Tennessee. — Equitable  Ins.  Co.  v. 
Harvey,  98  Tenn.  636,  40  S.  W.  1092. 

"Hunleath  v.  Leahy,  146  Mo.  408, 
48  S.  W.  459. 

"  Gardner  v.  Beacon  Trust  Co.,  190 
Mass.  27,  76  N.  E.  455.  See  Whitney 
Nat.  Bk.  v.  Cannon,  52  La.  Ann. 
1484,  27  So.  948. 

Note  indorsed  after  maturity  but 
taken  before  maturity.  Transferee 
may  be  holder  in  good  faith.  Ft. 
Dearborn  Nat.  Bk.  v.  Berrott,  23 
Tex.  Civ.  App.  662,  57  S.  W.  340. 

■  Cunningham  v.  Holmes,  66  Neb. 
723,  92  N.  W.  1023. 


587  OVERDUE  PAPER — DEMAND  NOTES.     [§§  469,  470 

payment  of  the  annual  interest,  said  notes  expressly  stipulating  that 
any  delinquency  in  the  payment  of  interest  should  cause  the  whole 
note  to  become  immediately  due  and  collectible.^ 

§  469.  Overdue  paper — Demand  notes. — The  general  rule  above 
stated  as  to  overdue  paper**  applies  to  a  note  payable  on  de- 
mand.® But  a  demand  note  is  not  overdue  and  subject,  as  against 
the  indorsee  or  transferee,  to  equities  between  the  parties,  where  it  is 
kept  alive  for  a  period  of  time  beyond  which  it  would  otherwise  have 
been  overdue,  by  continuous  payments  of  monthly  interest  to  the 
original  payee,  and  it  also  appears  that  if  payments  were  made  as 
principal  the  note  was  to  run  for  a  certain  period,  which  period  ex- 
tended beyond  the  time  of  the  transfer.  And  in  such  case  the  special 
equity  that  payments  made  as  principal  had  been  credited  as  interest 
amounting  in  all  to  enough  to  pay  the  notes,  with  interest,  was  held 
not  available  where  the  maker  knew  that  the  payments  were  applied 
as  interest.^" 

§  470.  Delivery  of  paper  to  impostor  or  wrong  party — ^Liability  to 
drawee  or  bona  fide  holder. — The  drawer  of  a  check,  draft,  or  a  bill 

'Hodge  V.  Wallace  ("Wis.  1906),  promissory  note,  which  shows  that 
108  N.  W.  212.  The  court,  per  Cas-  interest  on  the  principal  sum  there- 
sody,  C.  J.,  declared  this  case  distin-  in  named  is  past  due  and  unpaid, 
guishable  from  those  cases  "where  takes  it  subject  to  all  equities  be- 
the  stipulation  for  accelerating  the  tween  the  original  parties.'  Hart  v. 
maturity  of  the  note  or  notes  on  Stickney,  41  Wis.  630,  22  Am.  Rep. 
non-payment  of  interest  or  other  728.  That  case  followed  Newell  v. 
default  is  contained  in  a  mortgage  Gregg,  51  Barb.  (N.  Y.)  263.  To  the 
or  trust  deed  given  to  secure  the  same  effect:  First  National  Bank 
same"  from  "those  where  one  of  a  v.  Forsyth,  67  Minn.  257,  69  N.  W. 
series  of  notes  or  an  instalment  of  909,  64  Am.  St.  Rep.  415.  Such  rul- 
interest  has  become  due  and  un-  ing,  however,  was  out  of  harmony 
paid,  with  no  stipulation  as  here,  with  the  decisions  of  this  court  al- 
that  'such  delinquency  shall  cause  ready  cited,  and  goes  beyond  what 
the  whole  note  to  immediately  be-  was  necessary  to  sustain  the  con- 
come  due  and  collectible;'"  from  tention  of  the  defendants  in  this 
those  cases  "where  the  stipulation  case,  based  on  such  express  stipula- 
for  accelerating  the  maturity  of  the  tion."  Laws  1899,  p.  705,  c.  356, 
note  or  notes  contained  therein  is  §§  1676-22. 
made  optional  with  the  payee  or  **  See  §  467,  herein, 
mortgagee,  or  his  representatives  or  *  Causey  v.  Snow,  122  N.  C.  326, 
assigns,"  and  the  court  also  says:  29  S.  E.  359.  See  §§  464,  465  herein. 
"It  was  held  by  this  court,  several  '"  McLean  v.  Bryer,  24  R.  L  599,  94 
years  ago,   that   'one   who   takes   a  N.  W.  695. 


470] 


BONA    FIDE   HOLDERS   AND   RIGHTS    ON   TRANSFER. 


588 


of  exchange,  who  delivered  it  to  an  impostor,  supposing  him  to  be  the 
person  whose  name  he  has  assumed,  must,  as  against  the  drawee  or  a 
bona  fide  holder,  bear  the  loss  where  the  impostor  obtains  payment  of, 
or  negotiates  the  same.  In  such  a  case  the  fact  that  the  check  was 
drawn  by  the  trust  department  of  a  trust  company  on  its  own  bank- 
ing department  and  payment  of  it  refused  by  the  banking  depart- 
ment, because  of  lack  of  identification  of  the  person  presenting  the 
check  immediately  after  it  was  issued,  is  immaterial.^ ^  Again,  a 
telegraph  company  which,  upon  order  by  telegraph,  issues  and  de- 
livers its  check  by  mistake  to  the  wrong  party,  is  liable  in  the  amount 
thereof  to  an  innocent  purchaser  for  value,  who  takes  the  same  upon 
his  indorsement.  Prima  facie  such  indorser  is  the  payee  intended, 
and  a  purchaser  who  takes  the  check  from  him  in  good  faith,  believing 
him  to  be  the  payee,  is  not  called  upon  to  inquire  any  further  than 
may  be  necessary  to  establish  the  identity  of  the  indorser  and  the  party 
to  whom  the  check  was  delivered  as  payee.^^ 


"  Land  Title  &  Trust  Co.  v.  North- 
western National  Bank,  211  Pa.  211, 
60  Atl.  723  (Dean,  J.,  and  Potter,  J., 
dissenting).  The  court  relied  upon 
Land  Title  &  Trust  Co.  v.  North- 
western National  Bank,  196  Pa.  230, 
46  Atl.  420,  50  L.  R.  A.  75,  79  Am. 
St.  Rep.  717,  which  holds  that  a 
bank  is  not  liable  for  the  payment 
of  a  check  on  a  forged  indorsement 
where  the  person  who  committed 
the  forgery  and  received  the  money 
was  in  fact  the  person  to  whom 
the  drawer  delivered  the  check,  and 
whom  he  believed  to  be  the  payee 
named.  In  this  case  the  facts  were 
as  follows.  A  person  calling  liim- 
self  A  called  on  B,  a  property 
owner,  under  the  pretense  of  de- 
siring to  purchase  real  estate,  and 
secured  from  his  title  papers.  A 
took  the  papers  to  a  responsible 
conveyancer,  to  whom  he  applied 
for  a  loan  on  mortgage,  represent- 
ing himself  as  B.  The  conveyancer, 
believing  the  man  to  be  B,  negoti- 
ated the  loan,  and  a  settlement  was 
made  through  a  trust  company,  to 


which  the  conveyancer  introduced 
A  as  B.    A  signed  the  mortgage  as 

B,  and  received  the  trust  company's 
check  drawn  on  itself  to  the  order 
of  B.  This  check,  indorsed  with 
B's  name,  was  deposited  in  a  bank 
by  a  person  who  had  opened  an  ac- 
count with  it  as  R,  and  was  col- 
lected by  the  bank  of  the  trust  com- 
pany in  the  usual  course  of  busi- 
ness. It  did  not  appear  that  A  and 
R  were  the  same  person.  The  fraud 
was  discovered  six  months  later, 
when  B  was  called  upon  to  pay  the 
interest  on  the  mortgage.  The 
money  was  drawn  out  of  the  bank 
by  R  four  weeks  after  it  was  de- 
posited. A  and  R  disappeared,  and 
were  not  heard  of  afterwards,  It 
was  held  that  the  trust  company 
could  not  recover  from  the  bank 
the  amount  of  the  check.     (Green, 

C.  J.,  and  Dean,  J.,  dissented.) 

"  Burrows  v.  Western  Union  Tel- 
egraph Co.,  86  Minn.  499,  90  N.  W. 
1111.  The  court,  per  Lewis,  J.,  said: 
"This  presents  a  question  somewhat 
difficult  of  solution.   We  have  found 


589    APPLICATIOX  OF  PROCEEDS  TO  CREDIT  OF  DEPOSITOR.   [§  471 

§  471.     Application  by  bank  of  proceeds  to  credit  of  depositor. — 

We  have  considered  elsewhere  the  case  where  a  bank  discounts  paper 


no  case  in  the  books  presenting  ex- 
actly the  same  facts.  It  is  well  set- 
tled that  a  bank  has  no  authority 
to  pay  out  the  money  of  its  deposit- 
ors upon  a  check  where  the  name 
of  the  payee  has  been  forged.  It  is 
also  the  law  that  where  the  entire 
transaction  is  fictitious,  and  the 
payee  and  check  have  no  existence 
in  fact,  and  at  no  time  does  such 
check  obtain  legal  status,  no  matter 
whether  parties  deal  with  it  in  good 
faith  or  not.  It  has  been  decided 
that  when  a  check  has  been  issued, 
payable  to  a  certain  party  as  payee, 
and  another  party  of  the  same  name 
comes  into  possession  of  it  either 
by  mistake  or  fraud,  and  forges 
the  signature  of  the  real  party,  this 
does  not  give  the  check  any  legal 
status,  so  as  to  protect  a  bank 
against  which  it  was  drawn.  Mead 
V.  Young,  4  Term  R.  28;  Graves  v. 
American,  17  N.  Y.  205;  Famous  v. 
Crosswhite,  124  Mo.  34,  27  S.  W. 
397.  The  authorities  on  this  subject 
are  quite  thoroughly  reviewed  in  the 
note  to  Land  v.  Northwestern,  196 
Pa.  St.  230,  50  L.  R.  A.  75,  84,  and 
thus  *  *  *  the  test  to  be  applied 
is  whether,  by  the  usual  custom 
with  reference  to  identification,  ap- 
pellant was  negligent  in  failing  to 
have  the  party  presenting  the  check 
identified  as  the  party  to  whom  it 
was  given.  It  was  said  in  the  case 
of  Estes  V.  Lovering  Shoe  Co.,  59 
Minn.  504,  61  N.  W.  674,  that  a 
check  is  within  the  purview  of  G.  S. 
1878,  c.  73,  §  89,  which  provides 
that  possession  of  a  note  or  bill  is 
prima  facie  evidence  that  the  same 
was  indorsed  by  the  person  by 
whom  it  purports  to  be  indorsed, 
and    checks    were    brought    within 


this  provision  of  the  statute  for  the 
reason  that  they  are  negotiable  in- 
struments, much  used  and  growing 
in  use  in  business  ti'ansactions,  and 
possessing  all  of  the  characteristics 
of  inland  bills.  If,  therefore,  a 
check  is  indorsed  when  presented, 
it  is  to  be  received  as  prima  facie 
evidence  that  it  is  the  indorsement 
of  the  payee,  because  such  rule  is 
required  by  the  necessities  of  the 
business.  For  like  reason,  when  the 
person  indorsing  the  check  as  payee, 
and  presenting  it,  has  been  identi- 
fied as  the  party  who  received  it 
from  the  maker,  and  whom  the 
maker  designated  as  payee,  he  is 
presumed  to  be  the  payee,  and  en- 
titled to  receive  the  proceeds.  Ap- 
pellant was  required  to  do  no  more 
in  this  instance.  He  was  required 
to  determine  whether  the  party  pre- 
senting the  check  to  him  was  the 
person  to  whom  it  had  been  de- 
livered as  the  payee  by  the  tele- 
graph company.  He  could  have  as- 
certained that  fact  by  accompanying 
the  indorser  across  the  street  to 
the  office  of  the  telegraph  company 
and  asking  them  if  this  was  the 
party  entitled  to  the  check.  Or 
Bellevean,  who  was  waiting  at  the 
door  of  the  store,  might  have  been 
called  in,  and  repeated  the  identifi- 
cation made  to  the  telegraph  com- 
pany. In  such  case  appellant  would 
have  been  justified  in  taking  the 
check.  Instead  of  so  doing  he  took 
his  chances  as  to  his  being  the  same 
man.  He  was  the  same,  and  hence 
inquiry  was  unnecessary.  Respon- 
dent sent  the  man  out  with  the 
check,  and  with  the  authority  to 
dispose  of  it  in  the  usual  course  of 
business   to   any   one   who   in   good 


I 


§  472] 


BONA   FIDE   HOLDER   AND    RIGHTS    ON    TRANSFER. 


oi;o 


for  one  of  its  depositors,  giving  him  credit  therefor  upon  its  hooks  for 
the  proceeds,  it  being  held  that  it  is  not  a  bona  fide  holder  unless 
some  other  and  valuable  consideration  passes,  as  such  a  transaction 
simply  creates  the  relation  of  debtor  and  creditor,  A  distinction  is 
also  made  between  crediting  the  amount  of  a  note  on  undrawn  de- 
posits and  a  credit  on  a  pre-existing  indebtedness.^^  Where,  however, 
a  bank  discounts  a  note  to  extinguish  a  debt  due  from  it  to  the  holder, 
or  the  proceeds  are  applied  towards  discharge  of  his  liability,  such  acts 
are  equivalent  to  paying  value  at  the  time  and  constitute  the  bank  a 
holder  for  a  valuable  consideration.^* 

§  472.  Notice  or  knowledge  generally.^** — It  may  be  stated  gener- 
ally that  if  the  purchaser  has  a  sufficient  notice  or  knowledge  of  defects 
or  infirmities,  or  of  defenses  or  equities  against  the  paper,  he  is  not 
such  a  bona  fide  holder  as  to  be  entitled  to  protection  against  equities 
and  defenses  which  would  be  available  against  the  payee.  ^^    A  person 


faith  believed  him  to  be  the  party 
to  whom  the  check  had  been  de- 
livered as  payee;  and,  as  against 
such  innocent  purchaser,  it  is 
estopped  from  denying  the  validity 
of  the  instrument  which  it  set 
afloat  in  the  commercial  world. 
However,  it  is  claimed  that  appel- 
lant was  negligent  in  taking  no 
steps  to  make  inquiry  about  the 
personality  of  the  party  present- 
ing the  check,  for  the  reason,  if  he 
had,  he  might  possibly  have  dis- 
covered that  the  party  was  not  the 
real  Jerome.  We  have  already  an- 
swered this  objection.  It  was  not 
the  duty  of  appellant  to  go  beyond 
the  necessities  of  identification  as 
above  outlined,  and  the  mere  fact 
that  he  might  have  discovered  more 
than  he  was  required  to  cannot  be 
charged  against  him  as* an  act  of 
negligence  unless  there  were  facts 
which  should  put  him  upon  inquiry. 
The  facts  in  this  case  are  undis- 
puted. There  was  nothing  to  arouse 
suspicion,  and  appellant  is  entitled 
to  the  relief  sought  as  a  matter  of 
law." 


"  See  §  243  herein  considering 
City  Deposit  Bank  of  Columbus 
(Iowa  1906),  106  N.  W.  942.  See 
Symonds  v.  Riley,  188  Mass.  470, 
74  N.  E.  926;  Citizens'  State  Bank 
V.  Cowles,  180  N.  Y.  346,  73  N.  E. 
33,  rev'g  86  N.  Y.  Supp.  38,  89  App. 
Div.  281,  and  other  cases.  Compare 
United  States  Nat.  Bank  v.  First 
Nat.  Bank,  79  Fed.  296,  49  U.  S.  App. 
67;  Israel  v.  Gale,  77  Fed.  532,  45 
U.  S.  App.  219,  23  C.  C.  A.  274,  aff'd 
174  U.  S.  391,  19  Sup.  Ct.  768,  43  L. 
Ed.  1019.  See  §§  243,  284-287,  here- 
in, as  to  antecedent  indebtedness. 

"  Bank  of  Sandusky  v.  Scoville, 
24  Wend.  (N.  Y.)  116. 

"*  See  §§  464,  465,  herein. 

15  United  States. — Fowler  v.  Brant- 
ly,  14  Pet.  (U.  S.)  318. 

Ala'bama. — Gilman  v.  Railroad 
Co.,  72  Ala.  566. 

Illinois. — Belleville  Sav.  Bank  v. 
Bornman  (111.),  10  N.  B.  552. 

Maine. — Burrill  v.  Stevens,  73  Me. 
395. 

Massachusetts. — Chelsea  Bank  v. 
Goodsell,    107    Mass.    149;    Robb    v. 


i 


591  NOTICE    OR   KNOWLEDGE   GENERALLY.  [§    472 

is  not  a  hona  fide  purchaser  who,  before  purchase,  is  told  that  the 
maker  refuses  to  pay  it.i«  But  although  there  is  fraud  in  the  transac- 
tion constituting  the  consideration  of  a  note,  yet  the  fact  that  an- 
other note  given  for  the  same  consideration  was  due,  or  that  the  in- 
terest on  the  notes  remained  unpaid,  is  no  such  notice  as  to  affect  the 
hona  fides  of  a  plaintiff's  purchase.^^  So  notes  indorsed  in  blank  are 
payable  to  bearer,  and  when  the  bearer  presents  them  for  discount  to  a 
bank  the  presumption  is .  raised  that  the  bearer  is  the  owner  of  them, 
and  if  the  bank  discounts  the  note  without  actual  knowledge  of  any 
infirmity  or  defect,  or  knowledge  of  such  facts  that  its  action  in  taking 
the  instrument  amounts  to  bad  faith,  it  is  a  hona  fide  holder  in  due 
course."  But  if  a  bank  to  whom  a  note  is  transferred  has  knowledge 
of  the  usurious  character  of  the  note  in  the  hands  of  its  transferer, 
the  bank  is  not  a  holder  in  due  course,'  and  such  facts  constitute  a  good 
defense  to  an  action  on  said  note.^^  Evidence,  however,  that  the  holder 
paid  value  for  a  check  is  not  conclusive  evidence  of  the  fact  of  hona 
fides,  although  entitled  to  great  weight-^**  It  is  held  in  New  York  that 
where  a  check  is  without  consideration  and  the  original  holder  could 
not  have  recovered  thereon,  it  is  immaterial  upon  the  transferee  suing 
thereon  to  show  the  circumstances  under  which  he  came  into  possession 

Mudge,  14  Gray  (Mass.)  534;  Fisher  Washington. — Murray  v.  Reed,  17 

V.  Leiand,  4  Cush.   (Mass.)   456.  Wash.  1,  48  Pac.  343. 

Minnesota. — Daniels  v.  Wilson,  21  Wisconsin. — Knott     v.     Tidyman, 

Minn.  530.  86  Wis.  164,  56  N.  W.  632;  Case,  etc., 

Missouri. — Wagner     v.     Diedrich,  Co.   v.   Wolfenden,    63    Wis.   185,    23 

50  Mo.  484.  N.   W.    485;    Moulton   v.    Posteu,   52 

New   Jersey. — Zabriskie   v.    Spiel-  Wis.  169. 

man,  46  N.  J.  L.  35.  England. — Lloyd  v.  Davis,  3  L.  J. 

New  York. — Frail  v.  Hinchman,  6  K.  B.  38. 

Duer     (N.     Y.)     351;     Holbrook    v.  "Old  National  Bk.  of  Ft.  Wayne 

Mix,   1   E.   D.    Smith    (N.    Y.)    154;  v.  Marcy  (Ark.  1906),  95  S.  W.  145. 

Small  v.  Smith,  1  Den.  (N.  Y.)  583;  "Patterson    v.    Wright,    64    Wis. 

Powell   V.   Waters,   8   Cow.    (N.   Y.)  289,  25  N.  W.  10. 

669     [affirming    17    Johns.     (N    Y.)  '^Massachusetts  National  Bank  v. 

176];     McFadden     v.     Maxwell,     17  Snow,  187  Mass.  159,  72  N.  E.  959; 

Johns.  (N.  Y.)  188;  Wiggin  v.  Bush,  R.  L.,  c.  73,  §  26,  cl.  5,  id.,  §§  69,  76, 

12  Johns.    (N.  Y.)    306;    De  Mott  V.  207. 

Starkey,  3  Barb.  Ch.   (NY.)   403.  "  Schlesinger   v.   Lehmaier    (Sup. 

O/iJo.— Jacobs      V.      Mitchell,      46  Ct.  App.  Term),  99  N.  Y.  Supp.  389, 

Ohio  St.  601,  22  N.  E.  768;  Stone  v.  50  Misc.  610;  Negot.  Inst.  Law  1897, 

Vance,  6  Ohio  246.  p.  732,  c.  612,  §  91;    Banking  Laws 

Tennessee.— Tennessee     Bank     v.  1892,  p.  1869,  c.  689,  §  55. 

Johnson,  1  Swan    (Tenn.)    217.  =°Tischler  v.   Shurman,   97   N.   Y. 

Supp.  360. 


I 


473] 


BONA    TIDE   HOLDERS   AND   EIGHTS    ON    TRANSFER. 


592 


of  the  paper  and  that  he  acted  in  good  faith. ^^  It  is  also  decided  in 
that  state  that  it  devolves  upon  the  defendant  to  show  that  plaintiff 
is  not  a  bona  fide  holder,  and  he  can  be  examined  by  the  defendant  to 
enable  him  to  frame  his  answer  since  he  must  allege  the  fact  that  the 
plaintiff  is  not  a  ho7ia  fide  holder  in  his  answer  in  order  to  avail  him- 
self of  the  defense.^-  If  a  note  is  based  upon  a  consideration  which  is 
illegal  and  against  public  policy  it  is  held  to  be  invalid  in  the  hands 
of  a  transferee  with  notice  and  knowledge."^  Defenses  or  equities  are 
also  especially  available  where  an  assignee  is  chargeable  with  knowl- 
edge or  notice  thereof.-* 

§  473.  Notice  or  knowledge  continued. — A  person  is  not  a  bona 
fide  holder  of  pajaer  when  he  has  actual  notice  or  knowledge,  or  con- 
structive notice  amounting  to  actual  notice  or  knowledge  of  infirmities 
constituting  valid  defenses  and  equities  between  prior  parties,^^  and 


"Tischler  v.  Shurman,  97  N.  Y. 
Supp.  360. 

"Koppel  V.  Hatch,  98  N.  Y.  Supp. 
619.  See  Smith  v.  Weston,  159  N. 
Y.  194,  54  N.  E.  38,  aff'g  34  N.  Y. 
Supp.  557,  88  Hun  25. 

Burden  of  proof,  see  notes  17  L. 
R.  A.  326;  10  L.  R.  A.  676. 

^  Dickson  v.  Kittson,  75  Minn. 
168,  74  Am.  St.  Rep.  447,  77  N.  W. 
820. 

^Alabama. — Griggs  v.  Woodruff, 
14  Ala.  9. 

California. — More  v.  Finger 
(Cal.),  58  Pac.  322,  128  Cal.  313,  60 
Pac.  933. 

Connecticut. — Beecher  v.  Buck- 
ingham, 18  Conn.  110,  44  Am.  Dec. 
580. 

Illinois. — Haskell  v.  Brown,  65 
111.  29;  Jay  v.  Reed,  56  111.  130. 

Indiana. — Black  v.  Mitchell,  14 
Ind.  397. 

Ohio. — Bradford  v.  Beyer,  17  Ohio 
St.  388. 

Tennessee. — Ryland  v.  Brown,  2 
Head.  (Tenn.)   270. 

Vermont. — Pierce  v.  Kibbee,  51  Vt. 
559. 


Examine  also  the  following  cases: 

AlabaTua. — Gildersleeve  v.  Cara- 
way, 19  Ala.  246. 

Arkansas. — Tatum  v.  Kelley,  25 
Ark;  209,  94  Am.  Dec.  717. 

Indiana. — Bostwick  v.  Bryant,  113 
Ind.  448,  16  N.  E.  378;  Tellon  v. 
City  Bank,  9  Ind.  119  (1  Rev.  Stat., 
p.  378,  §  3);  Bartholomew  v.  Hen- 
drix,  5  Blackf.  (Ind.)  572;  West- 
brook  V.  Robinson,  5  Blackf.  (Ind.) 
105. 

Iowa. — Allison  v.  Barrett,  16  Iowa 
278. 

Kentucky. — Walker  v.  McKay,  2 
Mete.  (Ky.)  294;  Chiles  v.  Corn,  3 
A.  K.  Marsh.  (Ky.)  230. 

Massachusetts. — Murphy  v.  Bar- 
nard, 162  Mass.  72,  38  N.  E.  29,  44 
Am.  St.  Rep.  340. 

Pennsylvania. — Reed  v.  Mitchell, 
18  Pa.  St.  405. 

==  United  States. — Hutch  v.  John- 
son Loan  &  T.  Co.,  79  Fed.  828. 

Arkansas.— Old  Nat.  Bk.  of  Ft. 
Wayne  v.  Marcy  (Ark.),  95  S.  W. 
145;  Evans  v.  Speer  Hardware  Co., 
65  Ark.  204.  3  Chic.  L.  J.  Wkly.  282, 
45  S.  W.  370. 


d 


593 


NOTICE   OR   KNOWLEDGE. 


[§  474 


matters  apparent  on  the  instrument  itself,  coupled  with  other  facts, 
may  necessitate  inquiry.^*^  And  knowledge  may  arise  from  papers  de- 
livered with  the  note.^^ 

§474.  Notice  or  knowledge — Matters  apparent  from  the  paper 
itself. — If  the  instrument  itself  contains  matters  sufficient,  within  the 
rules  governing  the  question  of  notice  or  knowledge,  to  necessitate 


California. — Russ  Lumber  &  Mill 
Co.  V.  Muscupiabe  Land  &  W.  Co., 
120  Cal.  521,  52  Pac.  995. 

Georgia. — Shelden  v.  Heard,  110 
Ga.  461,  35  S.  E.  707;  Snyder  v. 
Webb,  100  Ga.  793,  28  S.  E.  976. 

Indiana. — Irving  v.  Guthrie  (Ind. 
App.),  62  N.  E.  709. 

lovxi. — state  Bank  of  Indiana  v. 
Meutzer,  125  Iowa  101,  100  N.  W. 
69;  Wray  v.  Warner,  111  Iowa  64, 
82  N.  W.  455. 

Minnesota. — See  First  Nat.  Bk.  v. 
Buchan,  79  Minn.  322,  82  N.  W.  641. 

Missouri. — Vette  v.  Sacher,  114 
Mo.  App.  363,  89  S.  W.  360. 

Nevada. — Swinney  v.  Patterson 
25  Nev.  411,  62  Pac.  1. 

North  Carolina. — Loftin  v.  Hill, 
131  N.  C.  105,  42  S.  E.  548. 

Oregofi. — Benson  v.  Keller,  37  Ore. 
120,  60  Pac.  918. 

Pennsylvania. — Troxell  v.  Malin,  9 
Pa.  Super.  Ct.  383,  43  W.  N.  C.  547. 

Texas. — Kersey  v.  Fuqua  (Tex. 
Civ.  App.),  75  S.  W.  56. 

West  Virginia. — M  erchants'  & 
Mfrs.  Nat.  Bk.  v.  Ohio  Valley  Fur- 
niture Co.  (W.  Va.),  50  S.  E.  880. 

Wisconsin. — Collins  v.  Schmidt, 
126  Wis.  227,  105  N.  W.  671. 

Wyoming. — Kinney  v.  Hynds,  7 
Wyo.  22,  49  Pac.  403,  52  Pac.  1081. 

When  knowledge  that  note  given 
for  land  and  that  there  was  a  lien 
thereon  does  not  preclude  recovery. 
Merchants'  &  P.  Bank  v.  Penland, 
101  Tenn.  445,  47  S.  W.  693,  9  Am. 
&  Eng.  Corp.  Cas.  N.  S.  298.  Exam- 
Jo  yce  Defenses  38. 


ine  Campbell  v.  Brown,  100  Tenn. 
245.  See  Biegler  v.  Merchants'  Loan 
&  T.  Co.,  164  111.  197,  45  S.  E.  512. 

When  knowledge  not  given  by 
newspaper  advertisement.  English- 
American  Loan  &  Trust  Co.  v.  Hiers, 
112  Ga.  823,  38  S.  E.  103. 

When  pendency  of  suit  not  con- 
structive notice.  Fulton  v.  Andres, 
70  Minn.  445,  73  N.  W.  256. 

Knowledge  that  guaranty  was  con- 
sideration of  note  does  not  put  on 
notice.  Hudson  v.  Best,  104  Ga.  131, 
30  S.  E.  688. 

Failure  to  inquire  as  to  maker's 
financial  condition  when  does  not 
prevent  being  bona  fide  holder. 
Christianson  v.  Farmers'  Warehouse 
Assoc,  5  N.  D.  438,  67  N.  W.  300, 
32  L.  R.  A.  730.  See  Germania  Bank 
V.  La  Follette,  72  Fed.  145. 

Knowledge  as  to  parties  when  pre- 
vents being  bona  fide  holder.  Mer- 
chants' Nat.  Bk.  v.  Sullivan,  63 
Minn.  468,  65  N.  W.  924.  Examine 
Hardy  v.  First  Nat.  Bk.,  56  Kan.  493, 
43  Pac.  1125;  American  Exch.  Nat. 
Bk.  V.  New  York  Belting  Co.,  148  N. 
Y.  698,  43  N.  E.  168. 

^  Orr  V.  South  Amboy  Terra  Cotta 
Co.,  94  N.  Y.  Supp.  524,  47  Misc. 
604;  Wisconsin  Yearly  Meeting  of 
Freewill  Baptists  v.  Babler,  115  Wis. 
289,  91  N.  W.  678. 

""  Bristol  Bank  &  T.  Co.  v.  Jones- 
boro  Bkg.  &  T.  Co.,  101  Tenn.  545. 
48  S.  W.  228,  9  Am.  &  Eng.  Corp. 
Cas.  N.  S.  790. 


474] 


BOXA    FIDE    HOLDERS    AXD   EIGHTS    OX    TRANSFER. 


594 


inquiry  on  the  part  of  the  taker,  liis  failure  to  make  such  inquiry  will 
prevent  him  from  claiming  the  protection  and  rights  of  a  bona  fide 
holder. ^^  Where  a  check  is  not  complete  and  regular  upon  its  face 
at  the  time  it  is  taken,  and  a  mere  inspection  shows  its  defect  and 
that  it  had  been  changed  or  altered,  the  holder  has  notice  of  its  in- 
firmity when  he  takes  it  and  is  not  a  holder  in  due  course.^"  A  trans- 
feree is  not  charged  with  notice  of  equities  by  the  fact  that  the  note 
is  insufficiently  stamped,  as  required  by  a  revenue  statute.^" 


^Illinois. — Chicago  Title  &  Trust 
Co.  V.  Brugger,  196  III.  96,  63  N.  E. 
637;  Lang  v.  Metzger,  86  111.  App. 
117. 

Kentucky. — Gaskill  v.  Huffaker, 
20  Ky.  L.  Rep.  1555,  49  S.  W.  770. 

Massachusetts. — North  Ave.  Sav- 
ings Bk.  V.  Hayes,  188  Mass.  135,  74 
N.  E.  311. 

Minnesota. — Fuller  v.  Quesnel,  63 
Minn.  302,  65  N.  W.  634. 

Missouri. — See  Bishop  v.  Chase, 
156  Mo.  158,  56  S.  W.  1080. 

Nebraska. — First  Nat.  Bank  v. 
Farmers'  &  Merchants'  Bank  (Neb.), 
95  N.  W.  1062;  Stough  v.  Ponca  Mill 
Co.,  54  Neb.  500,  74  N.  W.  868,  8 
Am.  &  Eng.  Corp.  Cas.  N.  S.  285. 

New  York. — Spero  v.  Holoschutz, 
74  N.  Y.  Supp.  852,  36  Misc.  764. 

North  Carolina. — Breese  v.  Comp- 
ton,  121  N.  C.  122,  28  N.  E.  351. 

Pennsylvania. — Brown  v.  Pettit, 
178  Pa.  17,  35  Atl.  865,  34  L.  R.  A. 
723. 

South  Dakota. — Rochford  v.  Mc- 
Gee  (S.  Dak.),  94  N.  W.  695. 

Tennessee. — Ford  v.  H.  C.  Brown 
&  Co.,  114  Tenn.  467,  1  L.  R.  A.  (N. 
S.)   188,  88  S.  W.  1036. 

Wisconsin. — Pelton  v.  Spider  Lake 
Sawmill  &  Lumber  Co.,  117  Wis.  569, 
94  N.  W.  293. 

When  matters  apparent  on  instru- 
ment itself  do  not  charge  with  no- 
tice or  knowledge. 

See  United  States. — Troy  &  Cohoes 
Shirt  Co.,  In  re,  136  Fed.  420. 


Colorado. — Posey  v.  Denver  Nat. 
Bk.,  24  Colo.  199,  49  Pac.  282. 

Georgia. — Post  v.  Abbeville  &  W. 
R.  Co.,  99  Ga.  232,  25  S.  E.  405. 

Illinois. — Merritt  v.  Boyden,  93  111. 
App.  613,  afl'd  191  111.  136,  60  N.  E. 
907. 

Minnesota. — American  Trust  &  S. 
Bk.  V.  Gluck,  68  Minn.  129,  70  N.  W. 
1085;  Collins  v.  McDowell,  65  Minn. 
10,  67  N.  W.  845. 

New  York. — Hathaway  v.  Dela- 
ware County,  93  N.  Y.  Supp.  436,  103 
App.  Div.  179. 

Tennessee. — ^Tradesman's  Nat.  Bk. 
V.  Looney,  99  Tenn.  278,  42  S.  W. 
149,  38  L.  R.  A.  837. 

^  Elias  V.  Whitney,  98  N.  Y.  Supp. 
667. 

^"Ebert  v.  Gitt,  95  Md.  186,  194- 
196,  52  Atl.  900,  act  congress,  June 
13,  1898  (U.  S.  Inter.  Rev.  Act). 
The  court,  per  Jones,  J.,  said: 
"Proof  of  the  note  established  prima 
facie  the  right  of  the  plaintiff  to 
recover  upon  it.  When  the  circum- 
stances attending  the  origin  of  the 
note  and  its  transfer  to  the  plain- 
tiff (appellee)  were  made  to  appear 
in  evidence,  the  burden  of  proof  was 
put  upon  him  to  show  that  he  ac- 
quired title  to  the  note  in  the  usual 
course  of  business,  before  maturity, 
for  a  valuable  consideration,  and 
bond  fide.  Totten  v.  Bucy,  57  Md. 
452;  Williams  V.  Huntington,  68  Md. 
590,  13  Atl.  336,  6  Am.  St.  Rep.  477; 
McCosker  v.  Banks,  84  Md.  292,  297, 


I 


595 


NOTICE   OK    KNOWLEDGE. 


[§  474 


35  Atl.  935,  and  cases  there  cited. 
Whether  the  plaintiff  in  any  case 
gratifies  this  burden  of  proof  is  a 
deduction  from  the  facts  and  cir- 
cumstances in  evidence.  It  is  not 
perceived  how  it  can  be  predicated 
of  any  one  circumstance,  as  matter 
of  law,  which  the  prayer  in  question 
does,  that  it  is  sufficient  to  prove 
notice  of  infirmity  of  title  by  which 
negotiable  paper  is  held.  Especially 
is  it  not  perceived  how  the  particu- 
lar fact  relied  upon  in  the  prayer  in 
question  to  have  such  effect  could 
give  notice  here  to  the  appellee 
(plaintiff  below)  of  the  circum- 
stances attending  the  origin  and  the 
fraud  in  the  transfer  of  the  note 
here  in  suit.  At  best  it  could  only 
be  a  circumstance  to  excite  suspicion 
and  lead  to  inquiry,  and  could  only 
be  allowed  such  probative  force,  as 
reflecting  upon  the  question  of  no- 
tice as  might  attach  to  it  in  connec- 
tion with  other  evidence.  In  Totten 
V.  Bucy,  supra,  it  was  said:  'The 
transferee  of  the  note  was  not  bound 
to  show  that  he  had  acted  vigilantly, 
or  even  cautiously,  in  inquiring  into 
the  origin  and  history  of  the  instru- 
ment, in  order  to  sustain  his  posi- 
tion as  bona  fide  holder  for  value. 
The  question  is  not  what  are  facts 
the  knowledge  of  which  will  or  will 
not  be  sufficient  to  put  the  party 
on  inquiry?  but  the  question  is 
whether  the  party  had  knowledge  of 
the  infirmity  of  the  note  at  the  time 
of  the  transfer  to  him,  or,  in  other 
words,  whether  he  procured  the  note 
in  good  faith,  for  valuable  consider- 
ation.' This  statement  of  the  law 
was  cited  and  reaffirmed  in  the  case 
of  Williams  v.  Huntington,  supra, 
where  it  was  also  said,  adopting 
the  language  of  the  United  States 
Supreme  Court:  'Suspicion  of  defect 
of  title,  or  the  knowledge  of  circum- 


stances which  would  excite  suspi- 
cion in  the  mind  of  a  prudent  man, 
or  gross  negligence  oa  the  part  of 
the  taker  at  the  time  of  the  transfer, 
will  not  defeat  his  title.  That  re- 
sult can  be  produced  only  by  bad 
faith  on  his  part.'  And  in  the  case 
of  Cover  v.  Myers,  75  Md.  406,  23 
Atl.  850,  32  Am.  St.  Rep.  394,  a 
prayer  granted  by  the  court  below 
was  approved  by  this  court,  which 
affirmed  that  'merely  suspicious  cir- 
cumstances sufficient  to  put  a  pru- 
dent man  upon  inquiry,  or  even 
gross  negligence  on  the  part  of  the 
plaintiff  at  the  time  of  the  purchase 
and  delivery  of  said  note,  are  not 
sufficient  of  themselves  to  prevent  a 
recovery  by  the  plaintiff,  unless  the 
jury  find  from  the  evidence  that  in 
taking  said  note  the  plaintiff  acted 
in  bad  faith.'  Now  in  this  case  the 
proof  in  the  facts  admitted,  shows 
that  the  appellee  acquired  title  to 
the  note  in  suit  in  the  usual  course 
of  business,  before  maturity,  for  a 
valuable  consideration,  and  without 
any  actual  notice  of  any  infirmity 
in  the  title  of  Alteman,  the  payee, 
who  transferred  it  to  him.  It  also 
appears  from  the  proof  that  the 
omission  of  the  proper  amount  of 
stamps  from  the  note  was  not  due 
to  any  attempted  fraud  upon  the 
revenue  act  of  the  United  States 
government.  In  the  bill  filed  by  the 
appellant  in  the  equity  case,  which 
has  been  referred  to,  there  appears 
the  express  averment  that,  'through 
mistake  or  inadvertence,  and  with- 
out any  attempt  to  defraud  the  gov- 
ernment of  the  United  States,  an  in- 
sufficient amount  of  stamps  were 
put  on  said  note.'  It  is  further  ad- 
mitted as  a  fact  that  at  the  time 
of  the  transfer  of  the  note  in  suit 
to  him  the  appellee  'overlooked  the 
fact  that  the  note  was  insufficiently 


§    475]         BOXA   FIDE    HOLDERS    AXD    RIGHTS    OX    TRAXSFER.  596 

§  475.  Notice  or  knowledge — Suspicious  circumstances — Gross 
negligence — Bad  faith. ^^ — Merel}'  suspicious  circumstances^^  or  care- 
lessness are  insufficient  to  necessitate  inquiry  and  prevent  a  person 
from  being  a  hona  fide  holder/^  nor  is  mere  suspicion  evidence  of 
negligence  vrliich  will  defeat  a  right  to  recover  as  a  bona  fide  holder.^* 
So  under  a  California  decision  such  suspicion  is  insufficient  without 
circumstances  creating  a  presumption  that  facts  impeaching  the  va- 
lidity of  the  paper  were  kno^n  by  the  holder.^^  And  in  Connecticut  it 
is  held  that  the  holder  of  negotiable  paper  is  not  put  upon  inquiry 
by  a  knowledge  of  facts  which,  although  capable  of  supporting  a  sus- 
picion of  some  unknown  defect,  are  fully  consistent  with  a  valid  title 
in  the  vendor.^^  So  under  other  decisions  the  acts  of  the  holder  in 
failing  to  make  inquiry  must  have  amounted  to  bad  faith  to  preclude 
recovery.^''  And  even  gross  negligence  without  bad  faith  is  insuf- 
ficient.^^ But  if  the  acts  of  the  holder  in  obtaining  the  paper  consti- 
tute bad  faith  he  will  not  be  entitled  to  protection  as  a  hona  fide 
holder.^"  It  may  therefore  be  stated  as  a  rule  that  suspicious  cir- 
cumstances alone,  even  though  sufficient  to  put  an  ordinarily  prudent 
man  on  inquiry,  will  not,  in  the  al^sence  of  bad  faith,  or  a  wilful 
disregard  of  the  facts  showing  an  infirmity  in  the  paper,  destroy  the 
title  of  a  taker  of  negotiable  paper  as  that  of  a  ho7ia  fide  holder.*" 

stamped.'      There     was,     therefore,  York  Nat.  Exch.  Bk.  v.  Crowell,  177 

proof  going  to  establish  every  requi-  Pa.  313,  39  W.  N.  C.  228,  35  Atl.  613; 

site  to  sustain  the  title  of  the  ap-  Unapa    Nat    Bank    v.    Butler,    113 

pellee  to  the  note  in  controversy."  Tenn.  574,  83  S.  W.  655. 

^^See  §§  464,  465.  =^  McCarty  v.  Louisville  Bkg.  Co., 

'=>  Brewer  v.  Slater,  18  App.  D.  C.  100  Ky.  4,  18,  Ky.  L.  Rep.  569,  37  S. 

48;   Lehman  v.  Press,  106  Iowa  389,  W.  144. 

76  N.  W.  818.  =»  Robbins  v.  Swinburne  Print.  Co. 

==>  Lehman  v.  Press,  106  Iowa  389,  91    Minn.    491,    98    N.    W.    331,   867; 

76  N.  W.  818.  Keene  v.   Behan,  40   Wash.   505,  82 

=*Bank  of   Ind.  Ty.  v.  First  Nat.  Pac.  884. 

Bank,   109   Mo.  App.   665,   83   S.  W.  *"  United    States.— Boe    v.    North- 

577.    See  Setzer  &  Russell  v.  Deal,  western  Coal  &  T.  Co.,  78  Fed.  62; 

135  N.  C.  428,  47  S.  E.  406.  Atlas  Nat.  Bk.  v.  Holm,  71  Fed.  489, 

==  Sinklar  v.   Siljan,   136  Cal.   356,  34  U.  S.  App.  472. 

68  Pac.  1024.  Colorado.— St.  Joe  &  M.  F.  Consol. 

^  Rockville  Nat.  Bank  v.  Citizens'  Min.  Co.  v.  First  Nat.  Bank,  10  Colo. 

Gas   Light   Co.,    72   Conn.    576,   582.  App.  339,  50  Pac.  1055,  s.  c.  24  Colo. 

See  Mack  v.  Starr,  78  Conn.  184,  187.  537,  52  Pac.  678. 

"  Massachusetts  Nat.  Bk.  v.  Snow,  Georgia. — Montgomery  v.  Hunt,  93 

187  Mass.  159,  72  N.  E.  959;    Goet-  Ga.  438,  21  S.  E.  50. 

ting  V.  Day,  87  N.  Y.  Supp.  510;  New  JZIinois.— Metcalf  v.  Draper,  98  111. 


I 


597 


NOTICE    OR' KNOWLEDGE. 


[§   476 


§  476.  Same  subject — Decisions. — In  a  case  in  the  United  States 
Supreme  Court,  where  an  accepted  and  indorsed  bill  of  exchange  was 
placed  by  the  drawer  as  collateral  security  for  his  own  debt  in  the 
hands  of  his  creditor,  and  the  latter  sued  the  acceptor,  an  instruction 
was  held  erroneous  "that  if  such  facts  and  circumstances  were  known 
to  the  plaintiff  as  caused  him  to  suspect,  or  that  would  have  caused 
one  of  ordinary  prudence  to  suspect,  that  the  drawer  had  no  interest 
in  the  bill,  and  no  authority  to  use  the  same  for  his  own  benefit,  and 
by  ordinary  diligence  he  could  have  ascertained  these  facts/'  then 
the  jury  should  find  for  defendant.'*^    In  Maryland  if  the  indorsements 


App.  309;  Merritt  v.  Boyden,  93  111. 
App.  613,  aff'd  191  111.  136,  60  N.  E. 
907. 

Maine. — Wing  v.  Ford,  89  Me.  140, 
35  Atl.  1023. 

Minnesota. — Tourtelot  v.  Reed,  62 
Minn.  384,  64  N.  W.  928.  See  Bur- 
rows V.  Western  Union  Teleg.  Co., 
86  Minn.  499,  91  Am.  St.  Rep.  380, 
90  N.  W.  1111,  58  L.  R.  A.  433. 

Missouri. — Bergen  Invest.  Co.  v. 
Vette,  142  Mo.  560,  44  S.  W.  754,  64 
Am.  St.  Rep.  567;  First  State  Bk. 
V.  Hammond,  104  Mo.  App.  403,  79 
S.  W.  493;  Wilson  v.  Riddler,  92  Mo. 
App.  335;  Schroeder  v.  Seittz,  68  Mo. 
App.  233.  Examine  Brown  v.  Hof- 
felmeir,  74  Mo.  App.  385,  1  Mo.  App. 
Rep'r  303. 

Montana. — Harrington  v.  Butte  & 
Boston  Min.  Co.  (Mont.),  83  Pac. 
467. 

Pennsylvania. — Lancaster  County 
Nat.  Bk.  V.  Garber,  178  Pa.  91,  39 
W.  N.  C.  55,  13  Lane.  L.  Rev.  377, 
35  Atl.  848. 

Texas. — Hynes  v.  Winston  (Tex. 
Civ.  App.),  40  S.  W.  1025. 

West  Virginia. — Merchants'  & 
Mfrs.  Nat.  Bk.  v.  Ohio  Valley  Fur- 
niture Co.  (W.  Va.),  50  S.  E.  880. 

"  Goodman  v.  Simonds,  20  How. 
(61  U.  S.)  343,  15  L.  Ed.  934.  This 
leading  case  is  cited  in  the  following 
decisions    in    the    federal    courts: 


Lytle  V.  Lansing,  147  U.  S.  59,  71, 
37  L.  Ed.  78.  (Negotiable  securities, 
holding  that  it  is  the  duty  of  one 
who  purchases  municipal  bonds 
from  litigating  parties  with  actual 
notice  of  a  suit  must  do  so  at  their 
peril;  "no  rule  of  law  protects  a 
purchaser  who  wilfully  closes  his 
ears  to  information,  or  refuses  to 
make  inquiry  when  circumstances 
of  grave  suspicion  imperatively  de- 
mand it") ;  King  v.  Doane,  139  U.  S. 
166,  173,  35  L.  Ed.  84,  11  Sup.  Ct.  465 
(to  the  point  that  the  payment  of 
value  being  established,  the  indorsee 
will  be  entitled  to  recover  unless  it 
is  proved  that  he  purchased  with 
actual  knowledge  of  defect  in  the 
title,  or  in  bad  faith,  implying 
guilty  knowledge  or  wilfiil  ignor- 
ance) ;  Montclair  v.  Ramsdell,  107 
U.  S.  147,  158,  27  L.  Ed.  431,  2  Sup. 
Ct.  391  (to  the  point  that  the 
holder  of  bonds  is  presumed  to  have 
acquired  them  in  good  faith  and  for 
value);  Swift  v.  Smith,  102  U.  S. 
442,  444,  26  L.  Ed.  193  (to  the  point 
that  where  mercantile  paper  is  not 
due  and  there  is  nothing  upon  it 
or  in  the  indorsement  to  show  want 
of  good  faith  the  purchaser  of  such 
paper  from  one  apparently  the 
owner,  who  gives  consideration,  ob- 
tains a  good  title,  though  he  may 
know  facts  and  circumstances  that 


476]         BONA   FIDE   HOLDERS   AND   EIGHTS    ON    TRANSFER. 


598 


1 


on  paper  are  the  only  suspicious  circumstances  they  are  not  sufficient 
to  constitute  bad  faith  and  prevent  recovery  on  a  note  taken  before 


cause  him  to  suspect,  or  would  cause 
one  of  ordinary  prudence  to  suspect, 
that  the  person  from  whom  he  ob- 
tained  it  had  no  interest  in  it,  or 
authority  to  use  it  for  his  own  bene- 
fit,   and    though    by    ordinary    dili- 
gence   he    could    have    ascertained 
those  facts.    "He  can  lose  his  right 
only    by   actual   knowledge   or    bad 
faith.    It  is  true  that  if  the  bill  or 
note  be  so  marked  on  its  face  as  to 
show  that  it  belongs  to  some  other 
person  than  the  one  who  offers  to 
negotiate  it,  the  purchaser  will   be 
presumed  to  have  knowledge  of  the 
true   owner   and   his   purchase   will 
not  be  bona  fide'') ;  Brooklyn  City  & 
Newtown  R.  Co.  v.  National  Bank  of 
the  Republic,  102  U.  S.  14,  38,  41,  26 
L.   Ed.   61.    In   concurring  opinion: 
"Possession  of  such   an   instrument 
before  maturity,  if  indorsed  in  blank 
and  payable  to  bearer,  is  privia  facie 
evidence    that    the    holder    is    the 
owner  and  lawful  possessor  of  the 
same;    and  nothing  short  of  proof 
that  he  had  knowledge,  at  the  time 
he  took  it,  of  the  facts  which  im- 
peach the  title  as  between   antece- 
dent parties,  not  even   gross  negli- 
gence, if  unattended  with  mala  fides, 
is  sufficient  to  overcome  the  effect 
of   that  evidence,   or  to    invalidate 
the  title  of  the  holder  supported  by 
that  presumption,"  and  also  that  the 
doctrine  of  Gill  v.   Cubett,  3  Barn. 
&  Cress.  466,  holding  that  the  trans- 
feree could   not  recover  if  the   cir- 
cumstances under  which  the  trans- 
fer took  place  were  such  as  would 
naturally    have    excited    the    suspi- 
cion of  a  prudent  and  careful  man, 
although    erroneously    followed    by 
state  court  decisions  in  many  cases, 
"has  been  authoritatively  overruled 


in   the    tribunal   where    it   had    its 
origin,  and  the  old  rule  as  re-estab- 
lished   by    the   later   adjudications, 
has     been     in     repeated     instances 
adopted   by   this   court  and   by  the 
highest  courts  of   the   state   where 
the    controversy    arose");    Shaw    v. 
Railroad  Co.,  101  U.  S.  557,  564,  25 
L.  Ed.  892   (cited  to  the  point  that 
the  transferee  of  a  bill  or  note  may 
hold    it,    though    he   took   it   negli- 
gently and  when  there  were  suspi- 
cious   circumstances   attending   the 
transfer.    "Nothing  short  of  actual 
or   constructive  notice   that  the  in- 
strument is  not  the  property  of  the 
person   who   offers  to   sell   it;    that 
is,  nothing  short  of  mala  fides  will 
defeat    his    right,    *    *    *    the    pur- 
chaser is  not  bound  to  look  beyond 
the  instrument.    *    *    *    The  reason 
can  have  no  application  to  the  case 
of   a   lost  or   stolen   bill   of   lading. 
The  function  of  that  instrument  is 
entirely  different  from  that  of  a  bill 
or    note,"    even    though    a    statute 
makes   a   bill    of   lading   negotiable 
by  indorsement) ;  Gates  v.  First  Na- 
tional Bank  of  Montgomery,  100  U. 
S.  239,  247,  248,  25  L.  Ed.  580  (cited 
upon  the  point  that  one  taking  ne- 
gotiable  paper   before  its   maturity 
as  collateral  security  for  a  preexist- 
ing debt,  without  knowledge  of  facts 
impeaching  the  title  between  ante- 
cedent parties   is   a  holder   in   due 
course,  at  least  to  the  extent  of  the 
debt) ;    Brown  v.  Spofford,  95  U.  S. 
474,    478,    481,    483,    24    L.    Ed.    508 
(to    the    point    that    possession    of 
paper  payable  to  bearer  or  indorsed 
in  blank  is  prima  facie  evidence  of 
lawful    ownership    and    possession; 
and  nothing  short  of  fraud,  not  even 
gross  negligence,  if  unattended  with 


599 


NOTICE   OR   KNOWLEDGE. 


[§   470 


mala  fides,  is  sufficient  to  overcome 
the  effect  of  that  evidence,  or  to 
invalidate  the  title  of  the  holder 
so  supported;  and  that  the  holder 
must  be  shown  to  have  had  knowl- 
edge of  the  impeaching  facts  and 
circumstances  at  the  time  the  trans- 
fer was  made) ;  Cromwell  v.  County 
of  Sac,  94  U.  S.  362,  24  L.  Ed.  (to 
the  point  that  presumption  is  that 
note  payable  to  bearer  was  nego- 
tiated at  time  of  execution  in  the 
usual  course  of  business  for  value 
and  without  notice  of  equities  be- 
tween prior  parties) ;  Commission- 
ers of  Marion  County  v.  Clark,  94 
U.  S.  278,  286,  24  L.  Ed.  59  (to 
same  point  as  last  case  and  that 
nothing  short  of  fraud,  not  even 
gross  negligence,  will  overcome  this 
presumption  and  invalidate  his 
title);  Angle  v.  Northwestern  Mut. 
L.  Ins.  Co.,  92  U.  S.  330,  341,  23  L. 
Ed.  556  (to  the  point  that  holders 
of  negotiable  securities  are  charge- 
able with  notice  where  the  marks 
on  the  instrument  are  of  a  char- 
acter to  apprise  one  of  the  alleged 
defect.  The  case  was  one  of  ma- 
terial alteration);  Hotchkiss  v.  Na- 
tional Bank,  21  Wall.  (88  U.  S.) 
354,  359,  22  L.  Ed.  645  (to  the 
point  that  "a  suspicion  that  there 
is  a  defect  of  title  in  the  holder,  or 
a  knowledge  of  circumstances  that 
might  excite  such  suspicion  in  the 
mind  of  a  cautious  person,  or  even 
gross  negligence  at  the  time,  will 
not  defeat  the  title  of  the  pur- 
chaser. That  result  can  be  produced 
only  by  bad  faith,  which  implies 
guilty  knowledge  or  wilful  ignor- 
ance, and  the  burden  of  proof  lies 
on  the  assailant  of  the  title"); 
Chambers  County  v.  Clewes,  21  Wall. 
(88  U.  S.)  317,  323,  22  L.  Ed.  517 
(to  the  point  of  transferee  being 
presumptively  a  holder  for  value 
without  notice)  ;    National  Bank  of 


Washington  v.  Texas,  20  Wall.  (87 
U.  S.)  72,  90,  22  L.  Ed.  295  (cited 
generally  in  a  case  of  overdue  pa- 
per; burden  of  proof  and  presump- 
tion of  being  holder  bona  fide) ; 
Sawyer  v.  Prickett  and  Wife,  19 
Wall.  (86  U.  S.)  146,  166,  22  L.  Ed. 
105  (cited  to  point  that  part  con- 
sideration sufficient  to  constitute 
h07ia  fide  holder  who  receives  note 
before  maturity  without  notice  of 
defenses) ;  Smith  v.  Sac  County,  11 
Wall.  (78  U.  S.)  139,  150,  153,  20  L. 
Ed.  102  (cited  in  a  case  of  fraud 
and  negotiable  security  in  dissent- 
ing opinion  to  the  point  that  trans- 
feree, without  notice,  etc.,  has  pre- 
sumptively good  title,  free  from 
equities);  Merchants'  National 
Bank  v.  State  National  Bank,  10 
Wall.  (77  U.  S.)  604,  671,  19  L.  Ed. 
1008  (cited  in  dissenting  opinion: 
"Where  the  defect  or  infirmity  ap- 
pears on  the  face  of  the  instrument, 
the  question  whether  the  party  who 
took  it  had  notice  or  not  is  a  ques- 
tion of  law"  for  the  court) ;  The 
Lulu,  10  Wall.  (77  U.  S.)  192,  201, 
19  L.  Ed.  906  (a  case  of  master's 
authority  to  obtain  credit  for  repairs 
of  ship  in  foreign  port;  to  the  point 
that  express  knowledge  is  not  neces- 
sary to  maintain  the  charge  of  bad 
faith;  that  where  a  party's  rights 
are  liable  to  be  injuriously  affected 
by  notice  he  cannot  wilfully  shut 
his  eyes  to  the  means  of  knowledge 
which  he  knows  are  at  hand;  "or, 
in  other  words,  the  general  rule  is 
that  knowledge  of  such  facts  and 
circumstances  as  are  sufficient  to 
put  a  party  upon  inquiry,  and  to 
show  that  if  he  had  exercised  due 
diligence  he  would  have  ascertained 
the  truth  of  the  case,  is  equivalent 
to  actual  notice  of  the  matter  in  re- 
spect to  which  the  inquiry  ought  to 
have  been  made");  Supervisors  v. 
Schenck,  5  Wall.  (72  U.  S.)  772,  784, 


I 


476] 


BONA   FIDE   HOLDERS    AXD   RIGHTS    ON   TRANSFER. 


600 


18  L.  Ed.  556  (county  bonds:  "It 
is  well  settled  that  a  negotiable  se- 
curity of  a  corporation  which,  upon 
its  face  appears  to  have  been  duly 
issued  by  such  corporation,  and  in 
conformity  with  the  provisions  of 
its  charter,  is  valid  in  the  hands  of 
a  bona  fide  holder  thereof,  without 
notice,  although  such  security  was 
in  point  of  fact  issued  for  a  pur- 
pose, and  at  a  place  not  authorized 
by  the  charter  of  the  corporation") ; 
Murray  v.  Lardner,  2  Wall.  (69  U. 
S.)  110,  121,  17  L.  Ed.  857  (coupon 
bonds;  cited  to  point  that  suspicion 
of  defect  of  title  or  knowledge  which 
would  excite  suspicion  in  mind  of 
prudent  man,  or  gross  negligence 
of  taker  at  time  of  transfer  will  not 
defeat  his  title;  only  bad  faith  can 
produce  that  result;  and  burden  of 
proof  is  on  person  assailing  title) ; 
Bank  of  Pittsburgh  v.  Neal,  22  How. 
(63  U.  S.)  96,  108,  16  L.  Ed.  323 
(cited  to  point  that  hona  fide  holder, 
without  notice  of  facts  which  im- 
peach validity  between  antecedent 
parties,  may  recover) ;  Ferris  Irri- 
gation District  v.  Thompson,  116 
Fed.  832,  834,  54  C.  C.  A.  336,  341,  in 
error,  dismissed  for  want  of  juris- 
diction, 196  U.  S.  637  {bona  fide 
holder  of  bonds  of  irrigation  dis- 
trict; cited  to  point:  "It  was  not 
enough  that  the  circumstances 
might  have  been  such  as  to  create 
suspicion  in  the  mind  of  one  ordi- 
narily prudent.  In  order  to  render 
the  transaction  invalid,  facts  must 
have  come  to  the  notice  of  the  de- 
fendant in  error  or  his  agent  of 
such  a  nature  that  to  refrain  from 
pursuing  further  inquiry  would  of 
itself  amount  to  evidence  of  bad 
faith");  Pickens  Tp.  v.  Post,  99 
Fed.  659,  662,  41  C.  C.  A.  1  (bona 
fide  holder  of  municipal  bonds;  to 
the  point  that  "to  impeach  the 
title  of  a  holder  for  value  of  nego- 


tiable paper,  by  proof  of  any  facts 
and  circumstances  outside  of  the  in- 
strument itself,  it  must  be  first 
shown  that  he  had  knowledge  of 
such  facts  and  circumstances  at  the 
time  the  transfer  was  made"); 
D'Esterre  v.  City  of  Brooklyn,  90 
Fed.  586,  592  (to  the  point  that  a 
person  is  a  bona  fide  purchaser  of 
bonds  where  he  surrenders  other 
bonds  held  as  collateral  and  substi- 
tutes the  bonds  in  suit,  as  there 
exists  a  good  consideration  in  such 
case) ;  John  Hancock  Mut.  Life  Ins. 
Co.  V.  City  of  Huron,  80  Fed.  652, 
653  (negotiable  bonds;  to  the  point 
of  presumption  that  one  holds  in 
good  faith  without  notice,  etc.  But 
presumption  was  overcome  by  proof 
of  invalidity);  Kaiser  v.  First  Nat. 
Bank  of  Brandon,  78  Fed.  281,  284 
(to  the  point  that  purchaser  for 
value,  before  maturity,  from  ap- 
parent owner  obtains  a  good  title, 
though  he  may  know  facts  and  cir- 
cumstances that  would  cause  him 
to  suspect,  or  would  cause  one  of 
ordinary  prudence  to  suspect,  that 
the  person  from  whom  he  obtained 
it  had  no  interest  in  or  authority 
to  use  it  for  his  own  benefit,  and 
though  by  ordinary  diligence  he 
could  have  ascertained  those  facts) ; 
Doe  V.  Northwestern  Coal  &  Trans- 
portation Co.,  78  Fed.  62,  68  (cor- 
poration notes:  "In  the  federal 
courts  it  is  the  well-settled  rule  that 
the  purchaser  of  a  promissory  note 
is  not  deprived  of  his  character  of 
purchaser  in  good  faith  by  proof 
that  he  took  the  note  with  knowl- 
edge of  such  circumstances  as  ought 
to  put  an  ordinarily  prudent  man 
upon  inquiry  to  ascertain  the  facts. 
The  proof  must  go  further  and  show 
that  he  had,  at  the  time  of  the  trans- 
fer, knowledge  of  facts  that  would 
impeach  the  title  as  between  the 
antecedent  parties  to   the  note,  or 


GOl 


NOTICE    OR   KNOWLEDGE. 


[§  47G 


knowledge  of  such  facts  that  his 
abstention  from  further  inquiry  will 
be  tantamount  to  a  wilful  closing 
of  the  eyes  to  the  means  of  knowl- 
edge which  he  knows  are  available, 
and  therefore  presumptive  evidence 
of  bad  faith  on  his  part") ;  Atlas 
Nat.  Bank  v.  Holm,  71  Fed.  489,  491, 
492,  19  C.  C.  A.  94— aff'd  Holm  v. 
Atlas  Nat.  Bank,  84  Fed.  119— (to 
the  point  that  an  assignee  of  com- 
mercial paper,  before  maturity,  for 
value  without  notice  of  infirmity  is 
bona  fide  holder,  that  it  is  not 
enough  that  he  neglected  to  make 
inquiry  which  a  prudent  man  ought 
to  make  or  would  have  made;  that 
it  is  not  a  question  of  negligence 
but  of  bad  faith;  that  the  question 
is,  did  the  purchaser  have  knowl- 
edge? and  that  every  one  must  con- 
duct himself  honestly  and  not  wil- 
fully shut  his  eyes  to  the  means  of 
knowledge  at  hand,  as  such  con- 
duct would  be  evidence  of  bad  faith. 
The  note  in  this  case  was  held  in- 
valid except  in  the  hands  of  an  in- 
nocent purchaser) ;  Long  Island 
Loan  &  Trust  Co.  v.  Columbus  & 
Indianapolis  Cent.  Ry.  Co.,  65  Fed. 
455,  457  (negotiable  railroad  bonds 
and  bona  fide  holder;  to  the  point 
that  mere  suspicion  or  gross  negli- 
gence or  knowledge  suflficient  to  ex- 
cite the  suspicion  of  a  prudent  man 
will  not  affect  the  title  of  the  holder 
"nothing  short  of  bad  faith  on  the 
part  of  the  purchaser  of  negotiable 
bonds  passing  by  delivery,  and 
which  are  fair  upon  their  face,  will 
destroy  their  validity;  and  the  bur- 
den of  proof  lies  upon  the  party 
who  assails  the  title  of  the  party  in 
possession");  Thomson-Houston 

Electric  Co.  v.  Capitol  Electric  Co., 
65  Fed.  341,  350,  12  C.  C.  A.  643 
(generally  to  the  point  of  notice 
and  rights  of  pledgee  of  negotiable 
paper  as  collateral);  Bank  of  Edge- 


field V.  Farmers'  Co-operative  Mfg. 
Co.,  52  Fed.  98,  103,  2  C.  C.  A.  637 
(to  the  point  that  it  is  well  settled 
in  the  courts  of  the  United  States 
since  this  leading  case,  "that  one 
who  acquires  mercantile  paper  be- 
fore maturity  from  another  who  is 
apparently  the  owner,  giving  a  con- 
sideration for  it,  obtains  a  good  title, 
though  he  may  know  facts  and  cir- 
cumstances that  would  cause  him  to 
suspect,  or  would  cause  one  of  or- 
dinary prudence  to  suspect,  that  the 
person  from  whom  he  obtained  it 
had  no  interest  in  or  authority  to 
use  it  for  his  own  benefit,  and 
though  by  ordinary  diligence  he 
could  have  ascertained  these  facts." 
In  this  case  three  of  the  notes  were 
taken  before  maturity  and  three 
others  then  taken  were  past  due 
protested  notes  by  the  same  makers 
and  indorsers  and  the  court  apply- 
ing the  above  principle  said:  "It 
follows  that,  although  the  three 
notes  of  the  same  date  as  those  ac- 
quired by  the  plaintiff  were  past 
due,  and  that  the  plaintiff  was  in- 
formed of  that  fact,  still  that  would 
not  be  notice  that  the  three  notts 
not  yet  due  were  in  any  wise  tainted 
by  defective  consideration,  or  for 
any  other  cause");  Sawyer  v.  Equi- 
table Accident  Ins.  Co.  of  Cincin- 
nati, 42  Fed.  30,  36  (to  the  point 
that:  "Even  holders  of  negotiable 
securities  taken  before  maturity,  in 
the  usual  course  of  business,  are 
•  held  chargeable  with  notice  when 
the  marks  on  the  instrument  are 
of  a  character  to  apprise  one  to 
whom  the  same  is  offered  of  the  al- 
leged defect."  Applied  to  a  case  of 
misstatements  by  an  agent  made  by 
alteration  of  answers  in  an  appli- 
cation for  insurance  by  such  agent 
without  the  applicant's  knowledge, 
such  alteration  being  patent  upon 
the  face  of  the  paper) ;  Anderson  v. 


^<    47G]  BONA    FIDE   HOLDERS   AXD   EIGHTS   OX   TRANSFER, 


602 


1 


maturity  and  for  value,  especialh'  so  where  inquiry  would  not  have 
disclosed  fraud,  or  failure  of  consideration  or  defect  of  title.*^  So 
in  Minnesota,  where  the  only  circumstance  from  which  the  suspicion 


Kissam,  35  Fed.  699,  704  (to  the 
point  that  defendants  were  given 
full  benefit  of  the  distinction  be- 
tween negligence  and  mala  fides  in 
the  purchase  of  negotiable  paper, 
and  that  the  jury  were  instructed 
that  mere  suspicion  was  insufficient 
to  charge  defendants  with  notice 
that  the  agent  from  whom  they 
were  obtained  was  using  them  with- 
out authority.  In  this  case  the 
checks  were  made  by  a  bank  cashier 
without  authority,  and  the  pur- 
chaser was  held  charged  with  no- 
tice or  rather  that  there  was  an  ob- 
ligation to  ascertain  the  cashier's 
authority.  The  case  was  reversed 
in  Kissam  v.  Anderson,  145  U,  S. 
435,  36  L.  Ed.  765,  12  Sup.  Ct.  960) ; 
Third  Nat.  Bank  v.  Harrison,  10 
Fed.  243,  248  (cited  generally  to 
the  point  that  the  bank  was  a  b07ia 
fide  holder  of  a  note,  no  evidence 
being  given  that  it  had  notice  of  the 
infirmity  of  the  paper,  said  note  be- 
ing based  on  an  illegal  contract  or 
"option  deal") ;  Bank  of  Sherman 
v.  Apperson,  4  Fed.  25,  28  ("In  the 
courts  of  the  United  States,  where 
the  rule  is  that  there  must  be  ac- 
tual notice,  or  bad  faith,  to  charge 
the  holder  for  value,  there  can  be 
no  question  that  the  recitals  of  this 
note  are  not  sufficient  to  charge  the 
plaintiff  with  any  equities  between 
the  defendants  and  the  payee."  The 
note  recited  value  received  and  also 
that  the  consideration  was  for  land, 
"being  for  a  part  of  the  third  pay- 
ment on  the  Goree  plantation  as 
per  agreement"). 

The  doctrine  of  Goodman  v.  Si- 
monds  (at  the  head  of  this  note)  is 
declared  by  Carpenter,  J.,  to  be  the 
law  of  Connecticut  and  also  of  this 


country.  Credit  Company  v.  Howe 
Machine  Co.,  54  Conn.  357,  384,  8 
Atl.  476,  1  Am.  St.  Rep.  129.  The 
rule  of  the  principal  case  is  applied 
to  bonds  in  Gilman  Sons  &  Co.  v. 
New  Orleans  &  Selma  R.  Co.  &  Im- 
migrant Assoc,  72  Ala.  566,  582,  583, 
585.  It  is  also  applied  to  purchaser 
before  maturity  of  note  in  posses- 
sion of  payee.  Winship  &  Bros.  v. 
Merchants'  Nat.  Bk.,  42  Ark.  22. 
Bank  had  right  to  treat  paper  as 
property  of  payee  and  was  not 
obliged  to  inquire  whether  held  as 
agent  or  owner. 

^-"Valley  Savings  Bk.  of  Middle- 
town  v.  Mercer,  97  Md.  458,  55  Atl. 
435.  The  court,  per  Fowler,  J.,  in 
considering  certain  instructions  and 
requests  to  charge  the  jury,  says: 
"In  the  leading  case  of  Totten  v. 
Bucy,  57  Me.  446,  the  former  learned 
chief  justice  of  this  court  said:  'The 
question  is  not  what  facts  will  or  will 
not  be  sufficient  to  put  the  party  on 
inquiry,  but  the  question  is  whether 
the  party  had  knowledge  of  the  in- 
firmity of  the  note  at  the  time  of 
the  transfer  to  him;  or,  in  other 
words,  whether  he  procured  the  note 
in  good  faith  for  valuable  consider- 
ation.' Maitland  v.  Bank,  40  Md. 
568,  17  Am.  Rep.  620;  Bank  v. 
Hooper,  47  Md.  88;  Williams  v. 
Huntington,  68  Md.  590-601,  13  Atl. 
336,  6  Am.  St.  Rep.  477.  And  so  in 
the  case  last  cited  the  present  chief 
justice  quotes  the  language  of  Judge 
Alvey,  with  approval  and  says: 
'The  question  is  one  of  fraud  or 
bad  faith  on  the  part  of  the  taker 
of  the  note.'  In  Cheever  v.  Pitts- 
burg R.  R.  Co.,  150  N.  Y.  65-67,  44 
N.  E.  701,  34  L.  R.  A.  69,  55  Am.  St. 
Rep.  646,  it  is  said:    'The  rights  of 


603 


NOTICE    OK   KNOWLEDGE. 


[§   476 


could  arise  that  one  discounting  negotiable  paper  was  not  a  bona  fide 
purchaser  is  the  fact  that  he  purchased  them  from  his  son,  such  evi- 
dence will  not  impeach  the  character  of  his  holding  in  good  faith/^ 
And  in  that  state  bad  faith  in  the  purchase  for  value  of  an  invalid 
and  void  bank  check  may  be  partly  evidenced  by  the  gross  negligence 
of  the  purchaser;  and  it  may  also  be  shown  by  a  variety  of  circum- 
stances, some  of  them  slight  in  character  and  others  of  a  greater  sig- 
nificance. But  whether  a  purchaser  has  notice  or  knowledge,  or  has 
means  of  knowledge,  which  he  wilfully  disregards,  is  usually  for  the 
jury  rather  than  the  court.  A  distinction  has  also  been  made  between 
banking  houses  and  individuals  not  engaged  in  banking  in  respect  to 
good  faith  in  discounting  paper.**  In  Missouri  neither  suspicion  nor 
negligence  in  its  purchase  will  destroy  the  title  of  a  purchaser  of  a 
note.  Such  indorsee  must  be  held  an  innocent  purchaser  unless  he  had 
actual  knowledge  of  infirmities.*^  In  New  Hampshire  mere  suspicion 
on  the  part  of  the  plaintiff  that  there  was  infirmity  in  the  notes  sued 
on  would  not  be  sufficient  to  show  that  he  was  not  a  hona  fide  holder. 


I 


the  holder  are  to  be  determined  by 
the  simple  test  of  honesty  and  good 
faith  and  not  by  a  speculative  issue 
as  to  his  diligence  or  negligence.' 
Equally  clear,  simple  and  broad  is 
the  rule  expressed  in  §  75,  of  Art.  13 
(our  Negotiable  Instruments  Act) 
by  which,  of  course,  we  must  be 
governed.  The  notice,  that  section 
provides,  which  will  prevent  a 
holder  of  a  note  from  recovering  is 
'actual  knowledge  of  the  infirmity 
or  defect,  or  knowledge  of  such 
facts  that  his  action  in  taking  the 
instrument  amounted  to  bad  faith.'  " 
The  action  in  the  principal  case  (97 
Md.  458)  was  by  a  savings  bank 
against  the  makers  upon  a  joint  and 
several  note.  The  following  indorse- 
ments were  upon  its  face:  "Received 
of  J.  W.  Downey  thirty-three  33-100 
dollars  on  within  note,  and  he  is 
hereby  released  from  any  further 
payment  on  the  same,"  and  "Re- 
ceived of  E.  D.  Hobbs  thirty-three 
33-100  dollars  on  within  note." 
Neither  of  these  was  signed,  then 
followed    the    indorsement    written 


when  the  note  was  delivered  to 
plaintiff.  The  note  was  one  of  three, 
each  for  a  like  amount,  and  were  re- 
ceived by  the  bank  as  collateral  se- 
curity for  money  loaned.  The  mak- 
ers of  the  note  were  thirteen  de- 
fendants and  another. 

«Monat  V.  Wells,  76  Minn.  438, 
79  N.  W.  499. 

"  Drew  V.  Wheelihan,  75  Minn.  68, 
77  N.  W.  558. 

^^Creston  National  Bank  v.  Sal- 
mon (Mo.  App.  1906),  93  S.  W.  288. 
Ellison,  J.,  said:  "The  policy  of  the 
law  is  to  encourage  commercial  af- 
fairs and  to  facilitate  the  transac- 
tion of  that  class  of  business.  To 
that  end  it  protects  indorsees  of 
commercial  paper  unless  they  have 
actual  knowledge  of  its  infirmity." 
Citing  Borgess  Investment  Co.  v. 
Vette,  142  Mo.  560,  573,  44  S.  W. 
754,  64  Am.  St.  Rep.  567.  (Where 
Burgess,  J.,  said:  "Nor  will  mere 
suspicion  alone  that  the  note  is 
without  consideration  brought  home 
to  the  transferee  before  he  acquires 
the  note  be  sufficient  to  defeat  a  re- 


476] 


BONA   FIDE   HOLDERS    AND    EIGHTS    ON    TRANSFER. 


G04 


or  to  put  him  upon  inquiry  concerning  their  original  character.  To 
constitute  a  person  a  bona  fide  holder  of  a  note  he  is  not  required, 
as  a  matter  of  law,  to  make  inquiries  concerning  the  character  and 
financial  standing  of  the  parties  to  the  notes,  nor  to  act  as  a  reasona- 
bly prudent  man  would  act  in  making  the  purchase,  and  although,  the 
circumstances  may  be  such  as  to  excite  his  suspicion  concerning  the 
validity  of  the  notes,  he  is  not  required  to  desist  from  the  purchase 
on  that  account,  nor  to  investigate  the  matter  with  a  view  to  ascer- 
taining whether  his  suspicion  is  well  grounded  or  not.  The  law  only 
requires  him  to  act  honestly  and  in  good  faith,  and  if  he  so  acts  his 
rights  and  title  will  be  upheld  even  though  his  action  was  imprudent 
and  unusual.**'    In  New  Jersey*'^*  it  is  held  that  suspicious  circum- 


covery  upon  the  note  by  him.  Bad 
faith  alone  upon  the  part  of  the 
holder  in  taking  the  note  will  not 
defeat  a  recovery  by  him  against 
the  party  thereto");  Mayes  v.  Rob- 
inson, 93  Mo.  114,  5  S.  W.  611;  Ham- 
ilton V.  Marks,  63  Mo.  167. 

^Hallock  V.  Young,  72  N.  H.  416, 
419,  420,  57  Atl.  236,  per  Chase,  J. 
The  evidence  was  in  substance  that 
the  plaintiff  purchased  the  notes  be- 
fore their  maturity  with  no  knowl- 
edge concerning  the  character  and 
financial  ability  of  the  makers  ex- 
cept what  the  seller  gave  him,  and 
no  knowledge  of  the  latter's  finan- 
cial ability,  and  slight  and  appar- 
ently very  unreliable  knowledge  of 
his  character,  and  gave  therefor  a 
horse  and  $500  in  money,  and  it 
was  held  that  this  did  not  prevent 
his  being  a  bona  fide  holder.  The 
court  also  said:  "It  was  said  in  the 
leading  case  on  the  subject  in  this 
country,  that  'every  one  must  con- 
duct himself  honestly  in  respect  to 
the  antecedent  parties  when  he 
•takes  negotiable  paper,  in  order  to 
acquire  a  title  which  will  shield 
him  against  prior  equities.  While  he 
is  not  obliged  to  make  inquiries,  he 
must  not  wilfully  shut  his  eyes  to 
the  means  of  knowledge  which  he 
knows  are  at  hand    *    *    *    for  the 


reason  that  such  conduct,  whether 
equivalent  to  notice  or  not,  would 
be  plenary  evidence  of  bad  faith.' 
Goodman  v.  Simonds,  20  How.  (61 
U.  S.)  343,  366,  15  L.  Ed.  934.  See 
also  Lytle  v.  Lansing,  147  U.  S.  59, 
71,  13  Sup.  Ct.  254,  37  L.  Ed.  78. 
While  negligence  of  the  holder, 
though  gross,  will  not  of  itself  de- 
prive him  as  matter  of  law  of  the 
character  of  a  bona  fide  holder,  it 
may  be  evidence  of  bad  faith.  Good- 
man V.  Harvey,  4  A.  &  E.  870.  See 
also,  Canajoharie  Nat'l  Bk.  v.  Dief- 
endorf,  123  N.  Y.  191,  25  N.  E.  402. 
10  L.  R.  A.  676.  Suspicious  circum- 
stances attending  the  transaction, 
though,  as  above  stated,  insufficient 
in  and  of  themselves  to  prevent  the 
holder  from  having  the  rights  of  a 
bona  fide  holder,  are  proper  matters 
for  the  consideration  of  the  jury 
on  the  question  of  his  good  faith. 
Smith  V.  Livingston,  111  Mass.  342. 
345;  Sullivan  v.  Langley,  120  Mass. 
437.  In  applying  the  general  rule 
by  which  such  evidence  is  compe- 
tent upon  questions  of  good  faith, 
the  law  does  not  except  a  case  of 
this  kind."  The  evidence  as  to  the 
character  of  the  holding  came  most- 
ly from  the  plaintiff  and  his  witness. 
*"*  Hamilton  v.  Vought,  34  N.  J.  L. 
187.    The  court  said:    "An  examina- 


■I 


605  NOTICE    OR   KNOWLEDGE.  [§    47G 

stances  are  not  sufficient  unless  such  circumstances  prove  mala  fides, 
and  that  mere  carelessness  in  taking  a  note  fraudulent  in  its  inception 
will  not  of  itself  impair  the  title,  but  carelessness  may,  however,  be  so 
gross  that  bad  faith  may  be  inferred  therefrom.  So  in  New  York  it  is 
declared  in  a  recent  case  that  mere  surmise  or  suspicion  is  no  longer 
sufficient  to  put  a  purchaser  of  negotiable  paper  upon  inquiry ;  the  facts 
necessary  to  cause  such  inquiry  must  be  such  as  to  show  dishonesty  or 
bad  faith  on  his  part  in  refraining  from  making  the  inquiry,  and  that 
this  rule  applies  to  negotiable  bonds  and  coupons  held  by  one  who  de- 
rived his  title  through  a  holder  in  due  course,  who  is  an  innocent  pur- 
chaser for  value  not  affected  as  a  party  to  any  fraud  or  illegality  in  the 
paper.*^  And  in  another  case  in  that  state  the  rule  that  suspicion  of 
defect  of  title,  or  the  knowledge  of  circumstances  such  as  would  ex- 
cite suspicion  in  the  mind  of  a  prudent  man,  or  gross  negligence  on 
the  part  of  a  taker  at  the  time  of  the  transfer,  will  not  defeat  his  title, 
as  such  a  result  can  only  be  produced  by  bad  faith  on  his  part,  and 
that  the  question  is  one  of  honesty  or  dishonesty  and  that  guilty 
knowledge  and  wilful  ignorance  involve  the  result  of  bad  faith,  and 
fraud  established  is  fatal  to  the  title  applies  to  negotiable  securities, 
and  this  is  declared  to  be  settled  law  in  Kew  York.** 

tion  of  the  American  reports  will  can  be  produced  only  where  he  has 
disclose  a  similar  mutation  of  judi-  taken  title  in  bad  faith") ;  in  Heb- 
cial  opinion  upon  this  subject.  For  herd  v.  Southwestern  Land  and  Cat- 
a  time,  in  several  of  the  states,  the  tie  Co.,  55  N.  J.  Eq.  18,  29,  36  Atl. 
rule  broached  in  the  case  of  Gill  v.  132  (bonds  payable  to  bearer  and 
Cubitt,  3  Barn.  &  Cress,  466,  has  transferable  by  delivery);  in  Hack- 
been  acted  upon;  but  now  in  most  ettstown  Nat.  Bank  v.  Wing,  52 
of  them,  and  in  those  of  the  most  N.  J.  Eq.  156,  161,  27  Atl.  920 
commercial  importance,  that  rule  (married  woman's  note  discounted 
has  been  entirely  discarded."  Id.,  by  bank  and  bank  official  had  notice 
191.  The  principal  case  is  cited  in  that  note  was  made  without  consid- 
Second  Nat.  Bk.  v.  Hewitt,  59  N.  J.  eration  and  for  discount,  and  wife 
L.  57,  58;  in  Dowden  v.  Cryder,  55  was  held  estopped  to  defend  that 
N.  J.  L.,  329,  331  ("this  legal  rule  is  she  was  surety  only).  See  also  Na- 
thoroughly  established"):  Fifth  tional  Bank  of  Republic  v.  Young, 
Ward  Sav.  Bk.  v.  First  Nat.  Bank,  48  41  N.  J.  Eq.  531,  7  Atl.  488. 
N.  J.  L.  r.l3,  516  (coupon  bonds  paya-  ^^  Hibbs  v.  Brown,  98  N.  Y.  Supp. 
ble  to  bearer  and  issued  under  legis-  353. 

lative  authority:    "Proof  that  such  a  ''Perth  Amboy   Mut.   Loan   H.   & 

holder  took  the  securities  under  sus-  B.  Assn.  v.  Chapman,  81  N.  Y.  Supp. 

picious    circumstances    is    not    suffi-  38,  80  App.  Div.  556,  aff'd    (mem.), 

cient  to  defeat  his  title.   That  result  178  N.  Y.  558   70  N.  E.  1108. 


§    477]  BONA    FIDE    HOLDERS    AND    RIGHTS    ON    TRANSFER.  GOG 

§  477.  Same  subject — Rule  in  Vermont. — In  Vermont  it  is  de- 
clared that  the  purchaser  of  negotiable  paper  must  exercise  reasonable 
prudence  and  caution  in  taking  it,  if  the  circumstances  are  such  as 
ought  to  excite  the  suspicion  of  a  prudent  and  careful  man  as  to  the 
validity  of  a  paper  as  between  the  parties  to  it,  or  the  propriety  of  the 
transfer,  and  if  the  purchaser  takes  it  without  inquiry  he  does  not 
stand  in  the  position  of  a  bona  fide  holder,  but  in  the  position  of  the 
party  from  whom  he  takes  it,  though  he  may  have  paid  value  for  it.*** 
This  declaration  is  quoted  in  a  comparatively  recent  case,  which 
holds  that  when  the  payee  of  a  check,  which,  on  account  of  his  fraud, 
is  invalid  as  between  him  and  the  drawer,  transfers  it  to  a  third  per- 
son, who  brings  suit  thereon  against  the  drawer,  the  burden  is  on  the 
plaintiff  to  show  that  he  took  the  check  in  the  usual  course  of  busi- 
ness, for  a  valuable  consideration,  without  knowledge  of  facts  which 
impeached  its  validity  as  between  the  original  parties  thereto,  and 
without  knowledge  of  facts  or  circimistances  which  would  lead  a" care- 
ful and  prudent  man  to  suspect  that  the  check  was  invalid  as  between 
the  antecedent  parties.  In  such  case,  if  the  circumstances  would  excite 
the  suspicion  of  a  prudent  man  as  to  the  validity  of  the  paper  as  be- 
tween the  antecedent  parties  to  it,  and  the  purchaser  takes  it  without 
inquiry,  he  is  not  a  hond  fide  purchaser,  though  he  paid  value  for  it; 
and  whether  the  plaintiff,  as  a  careful  and  prudent  person,  had  reason 
to  suspect  when  it  took  the  check,  that  it  was  invalid  as  between  the 
parties  thereto,  is  a  question  of  fact.  The  facts  of  this  case  were  as  fol- 
lows: A  check  for  $1,000  was  invalid  as  between  the  drawer  and 
payee  because  of  the  latter's  fraud.  The  payee,  for  valuable  consider- 
ation, transferred  the  check  to  the  plaintiff,  who  brought  suit  thereon 
against  the  drawer.  The  trial  court  found  that  when  the  plaintiff 
took  the  check  its  officers  knew  that  the  payee  was  financially  irre- 
sponsible and  a  forger;  that  he  had  four  days  before  defrauded  the 
plaintiff  by  procuring  it  to  discount,  as  genuine,  a  note  for  $300,  on 
which  he  had  forged  the  name  of  the  surety  and  the  approval  of 
plaintiff's  president ;  that  the  plaintiff's  president  had  reason  to  sus- 
pect— what  was  the  fact — that  the  payee  had  forged  the  name  of  the 
surety  to  a  $1,700  note  which  he  had  fraudulently  procured  the  plain- 
tiff to  discount  as  genuine,  and  which  it  then  owned.  It  was  held  that 
the  failure  of  the  trial  court  to  find  that  plaintiff,  as  a  careful  and 
prudent  person,  had  no  reason  to  suspect,  when  it  took  the  check,  that 

''  Bromley  v.  Hawley,  60  Vt.  50,  12  Atl.  222. 


607 


NOTICE    OR   KNOWLEDGE — VERMONT    RULE. 


[§  477 


the  same  was  invalid  as  between  the  original  parties  thereto  would  not 
be  reversed ;  and  that  it  could  not  be  said  that  the  equities  were  with 
the  plaintiff  and  it  was  entitled  to  recover  the  amount  of  the  check 
notwithstanding  the  failure  of  the  trial  court  to  make  said  fmdinjr.^" 


''"Capital  Savings  Bank  &  Trust 
Co.  v.  Montpelier  Savings  Bank  & 
Trust  Co.,  77  Vt.  189,  190,  59  Atl. 
827.  The  court,  per  Stuart,  J.,  said: 
"The  plaintiff  insists  that  it  is  enti- 
tled to  a  judgment  on  the  facts 
found  and  relies  upon  the  case  of 
Bank  v.  Goss,  31  Vt.  315,  and  Brom- 
ley V.  Hawley,  60  Vt.  46,  12  Atl.  220. 
But  the  facts  as  reported  in  those 
cases  are  unlike  those  in  the  case  at 
bar.  In  Bank  v.  Goss,  the  defend- 
ant, Goss,  procured  the  defendant, 
Page,  to  sign  the  note  in  suit  for 
the  purpose  of  enabling  Goss  to  ob- 
tain a  loan  at  the  bank  in  the  usual 
course  of  business.  At  the  time  the 
note  was  signed  it  was  agreed  by 
Goss  that  he  would  not  use  it,  un- 
less he  could  also  procure  the  signa- 
ture of  one  Brown  upon  it.  Goss,  in 
violation  of  this  agreement,  pro- 
cured the  plaintiff  to  discount  the 
note,  without  the  signature  of 
Brown.  Neither  the  bank  nor  any 
of  its  officers  had  any  knowledge  or 
notice  of  the  alleged  agreement. 
In  Bromley  v.  Hawley,  the  trial 
court  rendered  judgment  for  the 
plaintiff  and  this  court  said  that  the 
fact  that  the  note  was  overdue;  that 
it  amounted  to  over  four  thousand 
dollars;  that  it  had  different  num- 
bers on  it,  one  placed  there  by  the 
maker  and  the  other  by  the  bank, 
were  not  sufficient  to  put  the  plain- 
tiff upon  inquiry;  it  appearing  that 
he  took  the  note  in  good  faith;  and 
that  the  party  with  whom  he  nego- 
tiated was  a  man  of  extensive  busi- 
ness, and  his  character  and  financial 
standing  high,  and,  in  so  doing, 
quoted  with  approval  the  rule,  here- 


in referred  to,  respecting  the  duty 
of  the  purchaser  of  negotiable  paper. 
In  the  case  at  bar,  the  plaintiff, 
in  negotiating  for  the  check  was 
dealing  with  a  party  known  to  it 
to  be  irresponsible  and  a  forger. 
Harkness  had  only  four  days  before 
perpetrated  a  fraud  upon  the  plain- 
tiff by  procuring  it  to  discount,  as 
genuine,  a  note  for  three  hundred 
dollars  in  which  he  had  forged  the 
name  of  the  surety,  and  the  ap- 
proval of  the  plaintiff's  president. 
Also,  the  plaintiff,  in  negotiating  for 
the  check,  was  dealing  with  a  party 
who  had  before  defrauded  the  plain- 
tiff in  procuring  it  to  discount,  as 
genuine,  a  note  for  $1,700,  to  which 
the  party  had  forged  the  name  of 
a  surety  appearing  thereon,  and  it 
is  found  that,  at  the  time  of  the 
transfer  of  the  check,  the  plaintiff's 
president  had  reason  to  suspect  that 
the  name  of  the  surety  on  this  note 
was  forged.  In  view  of  these  and 
other  facts  and  circumstances  and  ap- 
pearing from  the  findings  of  a  court 
might  well  consider  that  the  plain- 
tiff's officers  knew  of  the  fraudulent 
and  dishonest  methods  resorted  to 
by  Hawkins  to  obtain  money  and 
credit;  that  they  had  reason  to  sus- 
pect that  the  check  was  obtained 
from  the  defendant  by  the  same 
methods,  and  hesitate  to  find  that 
the  plaintiff  had  no  reason  to  sus- 
pect that  Harkness  had  procured 
the  check  from  the  defendant  by 
fraud.  In  these  circumstances  it 
cannot  be  said  that  the  equities  are 
with  the  plaintiff,  or  that  it  is  enti- 
tled to  recover  the  amount  of  the 
check    notwithstanding   the    failure 


I 


§  478] 


BONA   FIDE   HOLDERS    AXD   RIGHTS    OX   TRANSFER. 


G08 


§478.     Indorsement  subsequent  to  notice. — An  indorsement  made 
subsequent  to  notice  of  the  payor's  defense,  will  not  relate  back  to  the 


of  the  court  to  find  that  it  had  no 
reason  to  suspect,  when  it  took  the 
check,  that  the  same  was  invalid  as 
between  the  original  parties  thereto. 
The  case  of  Ormsbee  v.  Howe,  54 
Vt.  182,  was  for  the  benefit  of  one 
Healey,  who  purchased  the  note  be- 
fore due  of  one  Preston  the  payee. 
The  note  was  given  in  settlement  of 
a  fraudulent  debt  and  was  wholly 
without  consideration.  The  case 
was  tried  by  the  court,  and  it  was 
found  that  Healey  had  such  knowl- 
edge, in  regard  to  the  way  in  which 
orders  and  notes  for  wire  were  ob- 
tained by  Preston  that  he  might 
reasonably  expect  that  the  note  in 
suit  was  obtained  in  the  same  man- 
ner. Notwithstanding  this  finding 
the  trial  court  rendered  judgment 
for  the  plaintiff  to  recover  on  the 
note,  but  this  court  on  the  finding 
reversed  the  judgment  and  rendered 
judgment  for  the  defendant  to  re- 
cover his  costs.  See  Limerick  Nat. 
Bk.  V.  Adams,  70  Vt.  133,  40  Atl.  166. 
Bona  fide  holder — Suspicious  cir- 
cumstances— Gross  negligence — Bad 
faith — Opinions  of  text  writers. — 
Mr.  Bigelow  says:  "Negligence 
only,  even  though  gross,  according- 
ly, was  and  still  is  in  England  held 
insufficient  to  defeat  the  claim  of 
one  whose  right  to  recover  is  other- 
wise perfect;  nothing  short  of  bad 
faith  will  suffice  to  subject  him  to 
the  equities  which  the  defendant 
seeks  to  set  up.  And  that  has  long 
been  the  prevailing  rule  in  this 
country,  the  most  of  our  courts 
which  had  at  first  accepted  the  ear- 
lier doctrine,  having,  since  1836, 
abandoned  that  doctrine  for  the  one 
just  stated  *  *  *.  Proof  of  bad 
faith    will    subject    the    plaintiff    to 


equities,  if  such  exist;  and  bad 
faith  may  be  shown,  for  instance, 
by  evidence  that  he  himself  ac- 
tually had  reasonable  suspicion, 
from  facts  within  his  knowledge, 
that  the  prior  holder's  title  was 
somehow  tainted  or  defective,  and 
still  went  forward  and  purchased 
the  instrument,  closing  his  eyes  to 
the  facts  and  not  making  inquiry. 
To  that  extent  the  doctrine  of  con- 
structive notice,  a  term  which  may 
cover  cases  of  bad  faith  as  well  as 
negligence,  obtains  in  the  law  of 
bills,  notes,  and  checques,  and  to  that 
extent  only,  except  in  the  few  states 
in  ~which  the  courts  still  adhere 
to  the  English  doctrine  of  1824." 
Bigelow  on  Bills,  Notes  and 
Cheques   (2d  ed.  1900),  pp.  235,  236. 

In  Byles  on  Bills  it  is  said:  "A 
wilful  and  fraudulent  abstinence 
from  inquiry  into  the  circumstances 
where  they  are  known  to  be  such, 
as  to  invite  inquiry,  will  (if  a  jury 
think  that  the.  abstinence  from,  in- 
quiry arose  from  a  belief  or  suspi- 
cion that  inquiry  would  disclose  a 
vice  in  the  bill)  amount  to  general 
or  implied  notice.  But  mere  negli- 
gence, however  gross,  not  amount- 
ing to  wilful  or  fraudulent  blind- 
ness and  abstinence  from  inquiry, 
will  not  of  itself  amount  to  notice, 
though  it  may  be  evidence  of  it." 
Byles  on  Bills  (6th  Amer.  ed.,  1874), 
p.  195  [*122]. 

Mr.  Chalmers  says:  "The  test 
bona  fides  as  regards  bill  transac- 
tions has  varied  greatly.  Previous 
to  1820  the  law  was  much  as  it  is 
under  the  act.  But  under  the  in- 
fiuence  of  Lord  Tenterden  due  care 
and  caution  was  made  the  test,  and 
this   principle  seems  to  be  adopted 


609 


INDORSEMENT    SUBSEQUENT    TO    NOTICE. 


[§  478 


by  section  9  of  the  Indian  Negotia- 
ble Instrument  Act.  In  1834  the 
Court  of  King's  Bench  held  that 
nothing  short  of  gross  negligence 
could  defeat  the  title  of  a  holder 
for  value.  Two  years  later  Lord 
Denman  states  it  as  settled  law  that 
bad  faith  alone  could  prevent  a 
holder  for  value  from  recovering. 
Gross  negligence  might  be  evidence 
of  bad  faith,  but  was  not  conclusive 
of  it.  This  principle  has  never  since 
been  shaken  in  England,  and  it 
seems  now  firmly  established  in  the 
United  States."  Chalmers  on  Bills 
of  Exch.  (6th  ed.,  1903),  p.  276. 
Mr.  Daniel  says:  "The  circum- 
stances of  the  transaction  may  be 
of  such  a  character  as  to  intimate 
strongly  a  defect  in  the  title,  and 
if  they  are  such  as  to  invite  inquiry 
they  will  suffice,  provided  the  jury 
think  that  abstinence  from  inquiry 
arose  from  a  belief  or  suspicion  that 
inquiry  would  disclose  a  vice  in  the 
paper.  Then  indeed  his  hona  fides 
would  be  impeached.  But  further 
than  this,  gross  negligence,  which 
is  not  in  itself  proof  of  mala  fides, 
may  be  so  great  as  to  amount  to 
proof  of  notice  *  *  *  the  more  cor- 
rect opinion  as  it' seems  to  us,  that 
the  circumstances  must  be  so  point- 
ed and  emphatic  as  to  amount  to 
proof  of  viala  fides  in  the  abstinence 
of  inquiry,  or  such  as  to  be  prima 
facie  inconsistent  with  any  other 
view  than  that  there  is  something 
wrong  in  the  title,  and  thus  amount 
to  constructive  notice.  In  other 
words,  we  would  say  that  if  the  cir- 
cumstances are  of  such  a  character 
as  to  create  such  a  distinct  legal 
presumption  and  prima  facie  proof 
of  fraud,  or  of  some  equity  between 
prior  parties,  it  would  operate  as  le- 
gal information  and  constructive 
notice  to  the  transferee.  This  rule 
fixes  a  criterion  for  judgment  which 
Joyce  Defenses — 39. 


is  definite,  and  seems  to  us  the  one 
which  should  be  adopted.  The  proof 
of  the  existence  of  the  circum- 
stances amounting  to  implied  notice 
must  be  clear."  Daniel  on  Negot. 
Inst.    (5th   ed.,  1903),   §§  795b,   796. 

Messrs.  Eaton  and  Gilbert  say: 
"Suspicious  circumstances  are  not, 
in  themselves,  sufficient  to  consti- 
tute one  who  takes  an  assignment 
of  commercial  paper  before  maturi- 
ty, paying  value  therefor,  a  pur- 
chaser in  bad  faith;  nor  is  it 
enough  that  he  neglected  to  make 
the  inquiry,  which,  under  the  cir- 
cumstances, a  prudent  man  would 
or  ought  to  have  made."  Eaton  & 
Gilbert's  Commercial  Paper  (ed. 
1903),  p.  371,  §  75. 

Mr.  Edwards  says:  "The  question 
is,  not  whether  the  holder  took  the 
bill  or  note  negligently  and  without 
exercising  sufficient  prudence  and 
care,  but  whether  he  took  it  under 
such  circumstances  as  to  charge  him 
with  receiving  it  viala  fide.  For,  un- 
less he  is  chargeable  with  notice  of 
the  misuse  or  misappropriation  of 
the  paper,  even  gross  negligence 
will  not  affect  his  right  of  recovery, 
passed  to  the  plaintiff,  without  any 
proof  of  bad  faith  in  him,  there  is 
no  objection  to  his  title."  Edwards 
on  Bills  and  Promissory  Notes  (2d 
ed.,  1863),  p.  300,  *318.  See  also  id., 
p.  353,  *372,  p.  651,  *688. 

Mr.  Justice  Maclaren  cites  the 
statute  as  follows:  "A  thing  is 
deemed  to  be  done  in  good  faith, 
within  the  meaning  of  this  act, 
where  it  is  in  fact  done  honestly 
whether  it  is  done  negligently  or 
not.  Imp.  Act,  §  90,  and  says:  'The 
old  rule  in  England  was  similar  to 
that  laid  down  in  the  recent  cases 
and  adopted  by  the  act.  ■  Some 
American  authorities  followed  Gill 
v.  Cubitt,  3  B.  &  C.  466.  *  *  *  Tbi« 
rule  has  been  generally  recognized 


478]         BONA   FIDE    HOLDERS    AND   EIGHTS    ON    TRANSEEK. 


610 


in  Canada;  although  there  are  ex- 
pressions in  certain  cases  that  are 
not  quite  consistent  with  it."  Mac- 
laren  on  Notes,  Bills  and  Cheques 
(3d  ed.,  1904,  Bills  of  Exch.  Act, 
1890,  and  Admts.,  Canada),  §  89,  p. 
428.  See  id.,  §  29,  pp.  175  et  seq. 
Mr.  Norton  says:  "It  is  now  the 
rule  of  the  law  merchant  that  mere 
knowledge  of  any  facts  sufficient  to 
put.  a  reasonably  prudent  man  on 
inquiry  is  not  sufficient,  but  that  to 
defeat  his  claim  to  be  considered 
a  bona  fide  holder  he  must  be  guilty 
of  bad  faith.  Actual  mala  fides 
must  be  shown  to  the  satisfaction 
of  the  jury  to  deprive  a  holder  for 
value  of  the  character  of  bona  fide 
holder,  and  negligence  in  not  in- 
quiring into  facts  which  ought  to 
have  put  him  on  inquiry  is  not  suf- 
ficient. Gross  carelessness,  even, 
on  the  part  of  the  holder  is  not  con- 
clusive of  notice,  though  it  is,  of 
course,  perfectly  competent  evidence 
to  go  to  the  jury  on  the  question  of 
bad  faith.  *  *  *  The  question  is 
simply  one  of  good  faith  in  the  pur- 
chaser; and  unless  the  evidence 
makes  out  a  case  upon  which  the 
jury  would  be  authorized  to  find 
fraud  or  bad  faith  in  the  purchaser, 
it  is  the  duty  of  the  court  to  direct 
a  verdict  for  the  holder."  Norton 
on  Bills  and  Notes  (3d  ed.,  1900), 
pp.  319-321. 

Mr.  Parsons  says:  "The  'good 
faith'  required  of  the  holder  certain- 
ly does  not  require  reasonable  care 
and  diligence  on  his  part  to  ascer- 
tain the  right  of  the  transferrer  to 
give  him  the  paper.  There  was, 
however,  a  period,  though  not  a  long 
one,  when  this  requirement  was  a 
part  of  the  English  law  of  negotia- 
ble paper.  Then  gross  negligence 
was  adopted  as  the  rule.  After- 
wards   gross    negligence    was    held 


merely  to  be  evidence  of  mala  fides, 
and  not  the  thing  itself.  And  now, 
to  use  the  emphatic  words  of  Lord 
Denman,  the  last  remnant  of  that 
doctrine  is  shaken  off.  It  may  now 
be  said  to  be  the  law  in  that  coun- 
try, that  the  holder  of  negotiable 
paper  does  not  lose  his  rights  by 
proof  that  he  took  the  paper  negli- 
gently, nor  unless  fraud  be  shown. 
The  doctrine  of  Gill  v.  Cubitt,  3  B. 
&  C.  466,  has  been  followed  in  sev- 
eral cases  in  this  country,  but  on 
principle  and  on  high  authority  we 
incline  to  the  opinion  that  the  rule 
of  the  late  English  cases  is  better 
adapted  to  the  free  circulation  of 
negotiable  paper,  and  the  true  in- 
terests of  trade.  But  it  must  still 
be  true  that  while  gross  or  even 
the  grossest  negligence  is  a  dif- 
ferent thing  from  fraud,  negli- 
gence may  be  such,'  and  so  accom- 
panied, as  to  afford  reasonable  and 
sufficient  grounds  for  believing  that 
it  was  intentional  and  fraudulent. 
Thus,  although  notice  or  knowledge 
of  defeating  circumstances  may  not 
be  proved,  the  facts  of  the  case,  the 
relations  between  the  parties  and 
their  method  of  dealing  may  be 
such  as  to  show  that  there  was 
either  knowledge  or  an  intentional 
and  careful  avoidance  of  knowledge; 
this,  we  should  say,  must  have  the 
same  effect  in  law  as  knowledge." 
1  Parsons  on  Notes  &  Bills  (ed. 
1869),  pp.  258-260. 

Mr.  Selover  says:  "To  constitute 
notice  of  an  infirmity  in  the  instru- 
ment or  defect  in  the  title  of  the 
person  negotiating  the  same,  the  per- 
son to  whom  it  was  negotiated  must 
have  had  actual  knowledge  of  the 
infirmity  or  defect,  or  knowledge  of 
such  facts  that  his  action  in  taking 
the  instrument  amounted  to  bad 
faith.  A  mere  suspicion  of  infirmity 


611 


NOTICE — FRAUD. 


[§  479 


time  of  purchase,  so  as  to  cut  off  the  equities  of  the  pa3'or  against  the 
payee.  ^^ 

§  479.  Notice — Fraud. — Where  it  has  been  judicially  adjudged  by 
a  competent  court  that  dividends  were  regularly  declared  and  that 
thereupon  a  corporation  note  was  given,  thus  admitting  that  said  note 
was  given  in  payment  or  part  payment  of  such  dividends,  an  affidavit 
of  defense,  in  a  suit  upon  the  note,  is  insufficient  which  sets  up  that 
said  dividends  had  not  been  earned  but  had  been  made  to  appear  as 
due  and  earned  by  means  of  fictitious  inventories,  when  in  fact  they 
had  not  been  earned,  said  judgment  establishing  their  regularity  not 
having  been  opened,  modified  or  reversed  and  there  being  no  averment 
that  said  judgment  was  not  still  standing,  even  though  if  the  note  had 
been  procured  by  fraud  the  holder  would  be  put  to  proof  of  consider- 
ation that  it  had  acted  fairly,  paid  value  and  had  no  notice  of  the 
alleged  fraud ;  and  the  fact  that  the  defendant  company  had  been  en- 
joined from  paying  to  the  payee  of  the  notes  certain  alleged  profits 
is  immaterial  as  long  as  the  judgment  declaring  the  regularity  of  the 
dividends  stands  unimpeached.^^ 


will  not  constitute  notice."  Selover's 
Negotiable  Instrument  Law  (ed. 
1900),  §  183,  p.  221. 

Mr.  Story  says:  "It  is  agreed 
on  all  sides  that  express  notice 
is  not  indispensable;  but  it  will 
be  sufficient  if  the  circumstances 
are  of  such  a  strong  and  pointed 
character  as  necessarily  to  cast  a 
shade  upon  the  transaction  and 
to  put  the  holder  upon  inquiry. 
For  a  considerable  length  of  time 
the  doctrine  prevailed,  that,  if  the 
holder  took  the  note  under  suspi- 
cious circumstances,  or  without  due 
caution  and  inquiry,  although  he 
gave  value  for  it,  yet  he  was  not  to 
be  deemed  a  holder  bona  fide  with- 
out notice.  But  this  doctrine  has 
been  since  overruled  and  abandoned, 
upon  the  ground  of  its  inconve- 
nience, and  its  obstruction  to  the 
free  circulation  and  negotiation  of 
exchange   and    transferable   paper." 


Story  on  Promissory  Notes  (7th  ed., 
1878),  §  197. 

Mr.  Tiedeman  says:  "It  is  not 
every  suspicion  that  good  faith 
would  require  to  be  investigated. 
*  *  *  The  purchaser  cannot  claim 
to  be  a  bona  fide  holder,  if  he  is 
guilty  of  gross  negligence  not  pur- 
suing an  inquiry  that  would,  under 
the  circumstances,  be  suggested  to 
a  reasonably  prudent  man.  But  the 
better  opinion  is  that  the  suspicion 
must  be  so  well-grounded  as  to  be 
almost  proof  of  mala  fides."  Tiede- 
man on  Commercial  Paper  (ed. 
1889),  §  300. 

••=0.sgood  V.  Artt,  17  Fed.  575;  Pa- 
vey  V.  Stauffer,  45  La.  Ann.  353,  12 
So.  512,  19  L.  R.  A.  716.  But  com- 
pare Beard  v.  Dedolph,  29  Wis.  136. 

"  Camden  Nat.  Bank  of  Camden  v. 
Fries-Breslin  Co.,  214  Pa.  395.  63  Atl. 
1022.  Plaintiff  averred  that  it  was 
the  holder  of  the  note   in  suit  for 


§§    480,   481]      BOXA   FIDE    HOLDERS    AXD   RIGHTS    ON    TRANSFER.      G12 

§480.  Notice — Fraudulent  alteration. — An  indorsee,  even  with- 
out notice,  is  not  siicli  a  horm  fide  holder  as  to  enable  him  to  recover 
on  an  instrument  which  is,  without  negligence  on  the  maker's  part, 
so  vitiated  by  fraudulent  alteration  as  to  change  the  relation  of  the 
immediate  parties  and  the  identity  and  legal  effect  of  the  instrument.^* 
Where  the  statute  provides  that  the  indorsement  of  all  the  payees  is 
necessary  to  give  good  title  to  the  transferee ;  that  every  indorser  who 
indorses  without  qualification  warrants  to  all  subsequent  holders  in 
due  course  that  the  instrument  is  genuine  and  in  all  respects  what  it 
purports  to  be;  and  that  if  "a  negotiable  instrument  is  materially  al- 
tered without  the  assent  of  all  the  parties  liable  thereon,  it  is  avoided, 
except  as  against  a  party  who  has  himself  made,  authorized  or  assented 
to  the  alteration  and  subsequent  indorsers ;"  and  the  maker  of  a  note 
to  which  there  are  several  payees  alters  it  by  substituting,  without  au- 
thority, his  own  name  in  place  of  one  of  the  payees,  and  as  thus  al- 
tered, without  the  indorsement  of  the  payee  whose  name  is  thus 
changed,  negotiates  the  note,  said  note  is  not  enforceable  according 
to  its  "tenor"  against  an  indorser  who  had  no  knowledge  of  such  alter- 
ation, even  though  the  plaintiff  be  assumed  to  be  a  holder  in  due  course, 
and  even  if  the  maker  in  such  a  case  could  be  assumed  to  be  an  agent 
of  the  indorser  to  alter  the  note  the  agency  would,  to  the  knowledge  of 
the  plaintiff,  be  of  such  a  limited  character  as  to  preclude  the  defend- 
ant being  barred  by  any  departure  from  the  strict  terms  of  the  agency.^^ 

§  481.  Erasures — Forgery — Notice — Negligence — Recovery. — The 
mere  erasure  of  a  signature  made  by  a  rubber  stamp  upon  a  corporation 
note,  otherwise  regular  upon  its  face,  does  not  give  notice  to  a  pur- 
chaser of  the  note  of  any  defect  therein  or  notice  of  any  agreement 
between  an  indorser  and  the  corporation  tending  to  relieve  the  former 
of  liability,  or  notice  that  the  note  would  be  used  for  any  improper 
purpose  or  that  the  corporate  funds  obtained  by  the  negotiation  of 
,said  note  would  be  wrongfully  used.  This  rule  was  applied  in  a  case 
where  one  of  the  members  of  a  corporation  who  was  about  to  leave  the 
state  for  a  time  was  informed  by  the  secretary  and  treasurer  of  the 
corporation  of  its  need  to  borrow  money  for  corporation  purposes  and 
was  requested,  with  another  member  of  the  company,  to  indorse  a 
note  in  blank  to  be  drawn  by  the  corporation  and  used  by  it  as  its 

value  before  maturity,  and  without         ^*  Rochford  v.  McGee,  16  S.  D.  606, 

notice  of  any  defense  that  the  maker     94  N.  W.  695. 

might  have.  °=  First  National  Bank  v.  Gridley, 


613  ERASURES — FORGERY — XOTICE — XEGLIGENCE RECOVERY.  [§  481 

secretary  should  determine.  This  was  refused,  but  said  member  agreed 
to  sign  a  note  which  bore  a  rubber  stamp  signature  of  the  corporation 
name  with  a  dotted  line  below  and  the  word  "Treasurer"  at  the  end  of 
such  line,  the  corporate  signature  being  made  complete  by  the  name  of 
the  treasurer  and  it  was  not  complete  until  it  bore  said  treasurer's 
name.  The  note  was  in  the  latter's  possession,  indorsed  by  the  cor- 
poration and  each  of  its  officers,  the  proceeds  of  the  note  were  credited 
to  the  corporation  and  the  funds  were  paid  in  upon  the  checks  of  the 
corporation  in  the  regular  course  of  business  and  were  placed  in  the 
manner  above  stated,  with  said  treasurer,  for  the  purpose  of  raising 
funds  for  the  corporation.  It  was  claimed  that  the  erasure  constituted 
a  forgery  and  notice  of  the  defect  and  of  the  agreement,  but  the  defense 
was  held  not  sustained  and  as  the  evidence  did  not  show  that  the  cor- 
poration ever  signed  the  note  as  maker  that  it  was  for  the  indorsers 
to  pay  the  obligation.'^*'  It  is  held  in  a  recent  case  in  North  Dakota 
that  the  drawee  of  a  check  who  has  paid  the  same  without  detecting 
the  forgery,  may,  upon  discovery  of  the  forgery,  recover  the  money  paid 
from  the  party  who  received  the  money,  even  though  the  latter  was  a 
good  faith  holder,  provided  the  latter  had  not  been  misled  or  preju- 
diced by  the  drawee's  failure  to  detect  the  forgery.^'^ 


112  App.  Div.  398,  98  N.  Y.  Supp. 
445;  Negot.  Inst.  Law,  Laws  1897, 
ch.  612.  §§  71,  116,  205;  Laws  1898, 
ch.  336,  333.  » 

^  Nassau  Trust  Co.  v.  Matherson 
(Sup.  Ct.  App.  Div.),  100  N.  Y.  Supp. 
55,  113  App.  Div.  693. 

"  First  National  Bank  of  Lisbon 
V.  Bank  of  Wyndmere  (N.  D.,  1906), 
108  N.  W.  546.  The  court,  per  En- 
gerud,  J.,  said:  "Most  of  tbe  courts 
now  agree  that  one  who  purchases 
a  check  or  draft  is  bound  to  satisfy 
himself  that  the  paper  is  genuine; 
and  that  by  indorsing  it  or  pre- 
senting it  for  payment  or  putting 
it  into  circulation  before  presenta- 
tion he  impliedly  asserts  that  he  has 
performed  this  duty.  Consequently 
it  is  held  that  if  it  appears  that  he 
has  neglected  this  duty,  the  drawee 
who  has,  without  actual  negligence 
on  his  part,  paid  the  forged  demand 


may  recover  the  money  paid  from 
such  negligent  purchaser.  The  re- 
covery is  permitted  in  such  cases, 
because,  although  the  drawee  was 
constructively  negligent  in  failing 
to  detect  the  forgery,  yet  if  the  pur- 
chaser had  performed  his  duty,  the 
forgery  would  in  all  probability  have 
been  detected  and  the  fraud  defeat- 
ed. *  *  *  While  all  these  authori- 
ties agree  that  negligence  on  the 
part  of  the  purchaser  in  taking  a 
forged  check  subjects  him  to  liabil- 
ity for  the  loss,  they  are  not  in  ac- 
cord as  to  what  constitutes  such  neg- 
ligence. *  *  *  It  must  be  conceded 
that  the  majority  of  the  courts  that 
have  passed  on  the  question  are  com- 
mitted to  the  doctrine  that  the 
drawee  who  has  paid  a  spurious 
check  can  recover  the  payment  from 
a  good  faith  holder  only  when  the 
latter   has   been    negligent.     If   the 


482]         BOXA    FIDE    HOLDERS   AND   EIGHTS   ON    TRANSFER. 


614 


§  482.  Knowledge — Purchaser  of  married  woman's  note. — Where 
a  statute  makes  certain  provisions  as  to  the  debts  which  a  married 
woman  may  contract  it  is  obligatory  upon  the  purchaser  of  a  negotiable 
paper  issued  by  her,  and  he  must  take  notice  of  the  coverture  and  the 
existence  or  the  want  of  existence  of  the  circumstances  and  facts  that 
would  authorize  her  to  execute  a  contract  such  as  the  statute  author- 
izes.^^ If  the  seller  of  corporate  stock  knows  that  it  is  worthless  and 
carries  on  negotiations  for  its  sale  with  the  husband  who  obtains  his 
wife's  signature  for  the  purchase  price,  the  circumstances  are  suffi- 
cient to  put  the  seller  upon  notice  that  the  husband  or  some  one  else 
must  have  misrepresented  the  value  of  the  stock  or  that  she  was  in- 
competent to  protect  herself  in  a  business  transaction.^^  A  married 
woman  who,  at  her  residence  in  the  state  of  New  Jersey,  indorses  in 
blank  and  solely  for  the  benefit  of  her  husband's  promissory  note, 
dated  and  payable  in  the  state  of  Xew  York,  where  it  is  discounted 
in  good  faith,  without  notice  that  the  indorser  was  a  non-resident,  or 
that  the  indorsement  was  made  in  another  state,  is  estopped  from  de- 
nying that  her  indorsement  is  a  New  York  contract  and  from  claim- 
ing that  it  is  a  New  Jersey  contract,  the  laws  of  which  state  do  not 


law  of  this  state  is  to  be  deter- 
mined by  the  mere  weight  of  author- 
ity alone,  as  evidenced  by  the  deci- 
sions in  other  states,  then  we  should 
be  constrained  to  hold  that  this  com- 
plaint shows  no  liability  on  defend- 
ant's part,  because  it  does  not  show 
that  the  defendant  has  been  in  any 
degree  negligent.  However  valuable 
the  decisions  of  courts  in  other  ju- 
risdictions may  be  as  guides  to  aid 
us  in  coming  to  a  correct  decision, 
it  can  not  be  admitted  that  such  de- 
cisions, however  numerous  and  uni- 
form, conclusively  establish  the  law 
for  this  jurisdiction.  They  are,  after 
all,  only  arguments  in  support  of  the 
views  entertained  by  the  judges 
who  uttered  them.  Unless  the  doc- 
trines advocated  by  them  have  be- 
come part  of  the  law  of  this  state 
by  the  adoption  of  them  by  positive 
law  or  general  usage  and  opinion, 
they  must  be  received   and   consid- 


ered by  us  merely  as  arguments  to 
be  weighed,  and  adopted  or  rejected 
according  as  we  deem  them  sound 
or  unsound.  If,  in  our  opinion,  a 
doctrine  advocated  by  the  courts  of 
other  states  is  an  unwarranted  de- 
parture from  the  fundamental  prin- 
ciples of  law,  it  is  our  duty  to  reject 
it,  unless  the  rule  so  advocated,  even 
though  fundamentally  erroneous, 
has  become  part  of  our  common  law 
by  general  usage  and  custom;  or  has 
been  expressly  or  impliedly  made 
part  of  our  law  by  statute." 

"'^  Haas  V.  American  Nat.  Bank  of 
Austin  (Tex.  Civ.  App.,  1906),  94 
S.  W.  439,  440. 

^^  Ditto  V.  Slaughter  (Ky.  Ct.  App., 
1906),  92  S.  W.  2.  As  to  obligation 
of  purchaser  of  note  of  married 
woman  to  take  notice  of  coverture, 
see  Haas  v.  American  Nat.  Bk.  of 
Austin  (Tex.  Civ.  App.,  1906).  94  S. 
W.  439. 


615  NOTICE — ACCOilMODATION    PAPER.  [§    483 

permit  a  married  woman  to  become  a  simple   accommodation   in- 
dorser.^" 

§•483.  Notice — Accommodation  paper. — The  manner  of  discount- 
ing a  note  may  sufficiently  apprise  the  discounter  that  the  indorse- 
ment is  for  accommodation,  as  where  it  is  discounted  by  the  maker 
for  his  own  benefit.'^^  If  notes  are  presented  for  discount  by  a  cus- 
tomer of  a  trust  company  at  its  banking  house  and  such  agent  states 
that  they  were  made  and  delivered  to  his  principal  for  advances  made 
and  there  is  nothing  upon  the  notes  or  in  the  facts  known  to  the  com- 
pany to  show  that  such  was  not  the  truth,  and  there  is  nothing  im- 
probable in  the  fact,  there  is  nothing  to  charge  the  party  so  discounting 
the  notes  with  notice  of  their  true  character,  as  notes  executed  by  a 
corporation  for  accommodation  and  so  unenforceable  against  it;  nor 
would  such  notice  be  chargeable  from  the  form  of  the  execution  and  in- 
dorsement where  the  notes  were  payable  to  the  corporation's  order  and 
indorsed  with  the  name  of  the  corporation,  and  then  with  the  names  of 
the  president  and  treasurer  individually,  although  said  corporation  was 
one  having  its  place  of  business  in  another  state  and  said  notes  having 
been  thus  made  and  indorsed  were  delivered  to  the  vice-president  who, 
without  consideration,  indorsed  and  delivered  them  to  a  firm  and  co- 
partnership in  the  same  state,  composed  solely  as  to  membership  of 
the  said  three  corporation  officers,  but  carrying  on  a  separate  and  dis- 
tinct business  from  that  of  the  corporation ;  nor  would  the  fact  that  the 
discounting  company  knew  the  relations  of  the  corporation  officers  as 
members  of  the  co-partnership,  that  fact  appearing  on  the  face  and 
back  of  the  notes  in  question,  charge  such  holder  with  notice  of  the 
character  of  the  notes. ''- 

"  Chemical  National  Bank  of  New  Company    for    discount     with    the 

York  V.  Kellogg,  183  N.  Y.  92,  aff'd  statement  that  he  desired  the  money 

87  App.  Div.  633.     See  §§  30  et  seq.  for  his  own  purposes,  or  that  he  was 

herein.  procuring  the  discount  for  himself 

^  First  National  Bank  v.  Gridley,  and  not  for  the  maker,  this  would 

112  App.  Div.   398,   98  N.  Y.   Supp.  have    been    notice    to    the    Interna- 

445.  tional  Trust  Company  of  the  inval- 

"Hn  re  Troy  &  Cohoes  Shirt  Co.,  idity   of   the   notes;    but   the   notes 

136  Fed.  420;  aff'd  on  opinion  below,  were  not  presented  for  discount  by 

142  Fed.  1038.     Ray,  Dist.  J.,  said:  any   officer  of  the   maker.     On  the 

"It  is  probably  true  that,  had  either  other  hand,  each  note  was  presented 

the  president  or  secretary  and  treas-  on  the  day  of  its  date  by  an  agent 

urer  taken  these  notes,  indorsed  as  *    *    *    of  an  independent  company, 

they  were,  to  the  International  Trust  doing  an  independent  business,  who 


I 


§  484] 


BONA    FIDE   HOLDERS    AXD   RIGHTS    ON   TRANSFER. 


616 


§  484.     Notice — Notes  of  a  series. — A  bank  which  has  discounted 
from  time  to  time  a  series  of  notes  upon  the  representations  of  the 


sought  to  discount  the  note  for 
the  benefit  of  this  independent  com- 
pany. *  *  *  In  Wilson  v.  the  Met- 
ropolitan E.  R.  Co.,  120  N.  Y.  145 
(30  N.  Y.  St.  R.  787),  the  court  says, 
at  page  150  (24  N.  E.  385,  17  Am. 
St.  Rep.  625) :  'Undoubtedly  the  gen- 
eral rule  is  that  one  who  receives 
from  an  officer  of  a  corporation  the 
notes  or  securities  of  such  corpora- 
tion in  payment  of  or  as  security 
for,  a  personal  debt  of  such  ofllcer, 
does  so  at  his  own  peril.  Prima 
facie  the  act  is  unlawful,  and,  unless 
specially  authorized,  the  purchaser 
will  be  deemed  to  have  taken  them 
with  notice  of  the  rights  of  the  cor- 
poration. Garrard  v.  Pittsburgh  & 
Connellsville  R.  Co.,  29  Pa.  154; 
Pendleton  v.  Fay,  2  Paige  (N.  Y.) 
202;  Shaw  v.  Spencer,  100  Mass.  388, 
97  Am.  Dec.  107,  1  Am.  Rep.  115.' 
The  cashier  of  a  bank  is  not  pre- 
sumed to  have  power  to  bind  it  as 
an  accommodation  indorser  on  his 
individual  note,  and  the  payee  can- 
not, unless  he  proves  authority  to 
make  the  indorsement,  recover 
against  the  bank.  West  St.  Louis 
Bank  v.  Shawnee  Bank,  95  U.  S.  557, 
24  L.  Ed.  490.  It  is  conceded  that 
such  are  the  rules.  In  Collins  v. 
Gilbert,  94  U.  S.  753,  24  L.  Ed.  170. 
*  *  *  The  headnotes  are:  '(1)  A 
negotiable  instrument,  payable  to 
bearer,  or  indorsed  in  blank,  pro- 
duced by  a  transferee  suing  to  re- 
cover its  contents,  is,  when  received 
in  evidence,  clothed  with  the  prima 
facie  presumption  that  he  became 
the  holder  of  it  for  value  at  its  date 
in  the  usual  course  of  business, 
without  notice  of  anything  to  im- 
peach his  title.  (2)  The  title  of  a 
bona  fide  holder  for  value  of  an  ac- 


cepted draft,  indorsed  in  blank,  is 
not  affected  by  the  fact  that  the  par- 
ty from  whom  he  received  it  before 
its  maturity  had  possession  of  it 
for  certain  purposes,  and  misappro- 
priated it.'  And  in  that  case,  at 
page  758  of  94  U.  S.  (24  L.  Ed.  170), 
the  court  said:  'Where  the  supposed 
defect  or  infirmity  in  the  title  of  the 
instrument  appears  on  its  face  at 
the  time  of  the  transfer,  the  ques- 
tion whether  the  party  who  took  it 
had  notice  or  not  is,  in  general,  a 
question  of  construction,  and  must 
be  determined  by  the  court  as  a  mat- 
ter of  law.  Andrews  v.  Pond,  13 
Pet.  (38  U.  S.)  65,  10  L.  Ed.  61; 
Fowler  v.  Brantley,  14  Pet.  (39  U. 
S.)  318,  10  L.  Ed.  473;  Brown  v.  Da- 
vis, 3  T.  R.  86.'  In  Chemical  Na- 
tional Bank  v.  Colwell  (Sup.),  9  N. 
Y.  Supp.  285,  *  *  *  it  was  held 
that:  'The  fact  that  Jones  was  a 
director  of  the  company,  and  that 
the  proceeds  of  the  note  were  ap- 
plied by  him  to  his  own  use,  does 
not  show  that  the  note  was  made 
for  his  accommodation,  nor  did  the 
possession  of  the  note  by  him  natu- 
rally give  rise  to  the  question  as  to 
whether  he  was  not  confederating 
with  the  president  of  the  company 
to  make  an  improper  use  of  the 
credit  and  the  paper  of  the  com- 
pany. The  note  was  signed  "New 
York  Lumber  Company,  Limited, 
D.  C.  Wheeler,  Pres.,"  and  was 
drawn  to  the  order  of  "New  York 
Lumber  Co.,  Lim.,"  and  it  was  in- 
dorsed exactly  as  it  was  signed. 
Such  a  note,  so  indorsed,  though 
presented  for  discount  by  a  director 
of  the  company  twenty  days  after  it 
bore  date,  did  not,  upon  its  face, 
suggest  that  it  was  an  accommoda- 


I 


G17 


NOTICE — NOTES    OF   A   SERIES. 


[§  484 


payee  and  of  the  firm  which  made  them,  that  they  were  given  for  value, 
and  which  were  promptly  paid,  is  not  chargeable  with  negligence  or 


tion  note;  nor  did  the  possession  of 
it  by  a  director  argue  that  it  was 
used  for  a  dishonest  purpose.  If, 
in  point  of  fact,  the  proceeds  of  the 
note  went  into  the  company  busi- 
ness; or  if  the  note,  after  Laving 
been  used  in  the  business  of  the 
company,  had  found  its  way  into 
the  hands  of  a  director  (and  the 
bank  had  nothing  before  it  to  show 
that  either  state  of  affairs  was  un- 
likely), what  reason  was  there  why 
it  should  not  be  discounted?'  The  sec- 
ond headnote  is  as  follows:  'A  note 
of  such  a  company,  drawn  to  its  own 
order,  and  signed  and  indorsed  by 
the  president  when  presented  for 
discount,  although  so  presented  by  a 
director  some  time  after  its  date, 
does  not,  on  its  face,  suggest  that  it 
was  an  accommodation  note,  nor 
does  the  possession  of  it  by  the  di- 
rector tend  to  show  that  it  was  used 
for  a  dishonest  purpose.'  "  The  court 
cites  and  considers,  also,  Goetz  v. 
Bank  of  Kansas  City.  119  U.  S.  551,  7 
Sup.  Ct.  318,  30  L.  Ed.  515  (to  the 
point  that  "  'The  bad  faith  in  the 
taker  of  negotiable  paper  which  will 
defeat  a  recovery  by  him  must  be 
something  more  than  a  mere  failure 
to  inquire  into  the  consideration 
upon  which  it  was  made  or  accept- 
ed, because  of  rumors  or  general 
reputation  as  to  the  bad  character 
of  the  maker  or  drawer'");  Hotch- 
kiss  V.  National  Banks,  21  Wall.  (88 
U.  S.)  354,  22  L.  Ed.  645;  Atlas  Nat. 
Bank  v.  Holm,  71  Fed.  489,  19  C.  C. 
A.  94  (to  the  point  that  "  'In  order 
to  deprive  one  of  the  character  of  a 
bona  fide  purchaser,  it  is  not  enough 
that  he  neglected  to  make  the  in- 
quiry which  a  prudent  man  would 
or  ought  to  have  made,  but  he  must 


have  acted  in  bad  faith.  There  is 
no  presumption  that  a  purchaser  of 
a  note  was  aware  of  existing  de- 
fenses thereto'  ") ;  Tod  v.  Kentucky 
Union  L.  Co.,  57  Fed.  52;  Richmond 
R.  &  E.  Co.  V.  Dick,  52  Fed.  379,  3 
C.  C.  A.  149  (to  the  point  that  "  'a 
manufacturing  corporation  received 
negotiable  notes  for  property  sold. 
The  notes  were  discounted  by  a 
banking  firm,  in  which  the  president 
of  the  corporation  was  a  partner, 
but  he  had  no  actual  knowledge  as 
to  the  consideration  for  the  notes, 
or  of  the  transaction  in  which  they 
were  given.  Held,  that  the  mere 
fact  of  his  connection  with  the  two 
concerns  was  not  sufficient  to  affect 
the  banking  firm  with  constructive 
notice  of  the  consideration  for  the 
notes  and  of  an  alleged  failure 
thereof'");  National  Park  Bank  of 
New  York  v.  Remsen  (C.  C),  43 
Fed.  226;  Shaw  v.  Spencer,  100 
Mass.  382,  97  Am.  Dec.  107,  1  Am. 
Rep.  115;  Bank  of  Monongahela  Val- 
ley V.  Weston,  159  N.  Y.  201,  54  N. 
E.  40,  45  L.  R.  A.  547;  Smith  v. 
Weston,  159  N.  Y.  194,  54  N.  E.  38 
(to  the  point  that  "'When  a  prom- 
issory note  was  not  received  by  the 
holder  from  any  party  prior  in  order 
of  liability  or  possession  to  the  in- 
dorser,  it  is  not  within  the  rule  that 
when  a  note  is  presented  by  the 
maker  the  purchaser  has,  from  that 
fact,  notice  that  the  Indorsements 
were  not  made  in  the  ordinary 
course  of  business'");  Cheever  v. 
The  Pittsburg,  Shenango  &  Lake 
Erie  R.  Co..  150  N.  Y.  59.  44  N.  E. 
701,  34  L.  R.  A.  69.  55  Am.  St.  Rep. 
646;  American  Exchange  Nat.  Bk.  v. 
New  York  Belting  &  Packing  Co., 
148  N.  Y.  698,  43  N.  E.  168;  National 


484] 


BOXA   FIDE    HOLDERS    AXD    RIGHTS    ON    TRANSFER. 


618 


bad  faith,  and  a  verdict  is  properly  directed  in  its  favor  on  that  issue, 
wliere  it  subsequently  discounted  accommodation  notes  executed  to 
the  same  payee  by  a  member  of  the  same  firm,  in  the  name  of  the  firm, 
but  after  its  dissolution,  of  which  fact  no  sufficient  notice  was  given, 
where  the  payee  represented  that  the  notes  were  based  upon  a  valid 
consideration,  and  the  purchase  by  the  bank  of  notes  at  a  discount  of 
eight  per  cent,  per  annum,  when  the  legal  rate  of  interest  is  six  per 
cent.,  is  not  such  an  excessive  rate  of  discount  as  to  warrant  the  in- 
ference of  bad  faith.^^  If  there  are  several  notes  constituting  one 
transaction  but  due  at  different  times,  the  fact  that  one  is  overdue 
and  unpaid  is  notice  to  the  purchaser  of  all  to  put  him  on  his  guard 
as  to  each.®'*  Where  certain  notes  have  serial  numbers  on  their  face 
and  the  cashier  of  a  bank  knew  that  the  notes  were  the  last  of  a  series, 
and  the  consideration  thereof  and  the  course  of  business  of  the  payee 
were  sufficient  to  justify  the  conclusion  that  the  notes  were  given  for  a 
single  consideration,  the  bank  is  not  a  purchaser  for  value  of  such 
notes. ®^  Knowledge  that  notes  were  the  first  of  a  series  may  be  im- 
puted to  the  cashier  of  a  bank  which  was  assignee  by  purchase  of 
the  notes,  where  the  face  of  the  notes  showed  that  they  were  of  a 
series  and  the  cashier  knew  for  what  the  notes  were  given  and  the 


Park  Bank  of  New  York  v.  German 
American  M.  W.  &  S.  Co.,  116  N.  Y. 
281,  22  N.  E.  567,  5  L.  R.  A.  673; 
Hart  v.  Potter,  4  Duer  (N.  Y.)  458; 
3  Cook  on  Corp.  (5th  ed.),  §  761,  p. 
1978;  1  Cook  on  Corp.  (5th  ed.), 
§  293,  p.  640. 

"^  Second  National  Bank  v.  Weston, 
172  N.  Y.  250,  64  N.  E.  949,  rev'g  61 
N.  Y.  S.  1147.  The  court,  per  Cul- 
len,  J.,  said:  "While  after  proof  had 
been  given  on  behalf  of  defendants 
that  the  notes  were  fraudulently 
and  illegally  issued,  it  became  in- 
cumbent upon  the  plaintiff,  in  order 
to  succeed,  to  establish  that  it  had 
acquired  the  notes  in  good  faith  for 
value,  still  the  question  was  solely 
one  of  good  faith.  'The  rights  of  a 
holder  are  to  be  determined  by  the 
simple  test  of  honesty  and  good 
faith,  and  not  by  a  speculative  issue 
as  to  his  diligence  or  negligence.' 
Magee  v.  Badger,  34  N.  Y.  247;  Can- 


ajoharie  National  Bank  v.  Deefen- 
dorf,  123  N.  Y.  202;  American  Ex- 
change National  Bank  v.  New  York 
Belting  &  P.  Co.,  148  N.  Y.  698.  Neg- 
ligence of  the  holder  is  simply  ma- 
terial so  far  as  it  goes  to  show  lack 
of  good  faith.  'The  holder's  rights 
cannot  be  defeated  without  proof  of 
actual  notice  of  the  defect  in  title  or 
bad  faith  on  his  part  evidenced  by 
circumstances.  Though  he  may  have 
been  negligent  in  taking  the  paper 
and  omitted  precautions  which  a 
prudent  man  would  have  taken,  nev- 
ertheless, unless  he  acted  mala  fide, 
his  title,  according  to  settled  doc- 
trine, will  prevail.' "  Cheever  v. 
Pittsburgh,  S.  &  L.  E.  R.  R.  Co.,  150 
N.  Y.  59,  66,  44  N.  E.  701. 

"Harrell  v.  Broxton,  78  Ga.  129, 
3  S.  E.  5. 

•^Old  Nat.  Bk.  of  Ft.  Wayne  v. 
Marcy  (Ark.  1906),  95  S.  W.  145. 


619  NOTICE — CORPORATION — AGENCY.  [§  485 

payee's  course  of  business;  and,  although  tlie  authorities  are  not 
in  harmony  as  to  the  effect  of  notice  of  dishonor  in  cases  of  series 
of  notes  based  upon  the  same  consideration,  yet  an  instruction  in 
an  action  by  the  indorsee  is  not  improper  that  "In  order  for  you 
to  find  for  the  defendant  in  this  case  you  must  find  that  the  plaintiff 
bank  knew  that  all  of  these  notes  were  given  for  a  single  consideration, 
or  that  the  bank  had  such  notice  of  that  fact  as  would  amount  to  bad 
faith  on  its  part  in  the  purchase  of  the  last  three  notes."*'® 

§  485.  Notice — Corporation — Agency. — A  corporation  may  confer 
upon  its  officers  or  agents  larger  powers  than  ordinarily  belong  to  them 
by  holding  them  out  to  the  public  as  possessing  such  powers  by  habitu- 
ally permitting  them  to  exercise  them,  so  contracts  made  by  the  presi- 
dent or  other  officers  of  the  corporation  may  be  subsequently  ratified 
and  validated.*''^  A  person,  however,  taking  negotiable  paper  of  a  cor- 
poration in  payment  of  the  individual  obligation  of  an  officer  is  charge- 
able with  notice  and  is  put  upon  inquiry  as  to  the  authority  upon 
which  the  paper  was  issued.  But  the  rule  applicable  to  notes  made  by 
officers  of  a  corporation  to  their  own  order  and  used  to  pay  their  in- 
dividual obligations  has  no  application  to  notes  made  by  the  duly  au- 
thorized officers  and  payable  to  a  director.  Officers  of  a  corporation 
may  not  lawfully  contract  with  themselves  or  use  the  credit  of  the  cor- 
poration for  their  own  benefit  individually,  but  directors  not  infre- 
quently have  business  dealings  with  the  corporation  and  may  legiti- 
mately do  so  if  they  do  not  vote  or  use  their  personal  influence  with 
the  other  directors  for  their  own  personal  advantage  at  the  expense  of 
the  corporation.*'^  This  decision  reversed  and  remanded  a  case  in 
which  it  was  declared  that  a  note  or  other  obligation  given  by  a 
corporation  to  an  officer  is  not  necessarily  void  on  that  account.  It 
may  be  perfectly  lawful  and  valid.  But  as  it  is  out  of  the  usual  course 
of  business  for  a  corporation  to  issue  its  obligations  to  its  officers, 
the  fact  that  an  obligation  is  so  made  suggests  that  it  may  be 
irregular,  and  consequently  a  third  person  taking  such  an  obliga- 
tion, and  knowing  that  the  payee  is  an  officer  of  the  maker  cor- 
poration, is  put  upon  his  inquiry  as  to  whether  or  not  the  obligation 
has  been  lawfully  issued.    There  is  no  reason  why  this  rule  should  not 

""Old  National  Bk.  of  Ft.  Wayne  Co..    113    App.    Div.    103,    98    N.    Y. 

V.  Marcy  (Ark.,  1906),  95  S.  W.  14.5.  Supp.    1026;    rev'g   94    N.    Y.    Supp. 

"Carrington      v.      Turner      (Md.,  524.    Substantially  the   language  of 

1905),  61  Atl.  324.  Laughlin,  J. 

®'  Orr  V.  South  Amboy  Terra  Cotta 


§    485]         BONA    FIDE   HOLDERS   AND   EIGHTS    ON    TRANSPER.  620 

apply  as  well  to  directors  as  to  any  other  officer.  When  the  note  or 
obligation  shows  upon  its  face  that  it  is  made  to  an  officer,  the  note 
itself  conveys  the  notice  to  all  persons  into  whose  hands  it  may  come. 
When,,  as  in  this  case,  it  is  made  to  a  person  without  designation 
indicating  that  he  is  an  officer,  the  transferee  may  or  may  not  know 
the  fact  from  other  sources.  If  he  does  know  it,  as  the  appellants  did 
in  this  case,  he  is  put  upon  his  inquiry ;  and  if  it  afterward  turns  out 
that  the  obligation  was  subject  to  legal  infirmity  at  its  inception,  he 
cannot  avoid  the  effect  of  the  infirmity  by  claiming  to  be  a  bona  fide 
holder  without  notice.*''*  Again,  the  question  of  bona  fides  has  been 
applied  to  bank  or  cashiers'^  drafts  which  are  declared  to  have  almost 
acquired  the  characteristics  of  money.  So  long  as  they  are  drawn  on 
behalf  of  a  solvent  bank  and  upon  a  solvent  drawee  and  signed  by  one 
of  the  officers  usually  signing  such  instruments,  and  the  fact  that 
such  a  draft  was  drawn  by  a  cashier  directly  in  favor  of  his  own 
creditor  and  sent  to  that  creditor  by  him,  would  not  naturally  give  rise 
to  the  suspicion  that  there  was  anything  irregular,  fraudulent  or 
wrong  in  the  conduct  of  the  cashier.  This  principle  was  applied  to  a 
case  where  a  county  treasurer  owed  the  state  money  for  taxes  which 
he  had  collected  from  the  county  and  neglected  to  pay  over  and  pay- 
ment had  been  demanded.  He  was  also  cashier  of  a  national  bank 
and  under  his  authority  as  such  cashier  he  drew  a  draft  upon  blanks 
in  his  possession  upon  a  correspondent  bank  in  New  York,  payable 
to  the  order  of  the  comptroller  and  sent  it  to  him  in  payment  of  the 
taxes  so  due  from  him  to  the  state.  The  comptroller  took  the  draft  in 
good  faith  and  without  knowledge  of  its  wrongful  and  unauthorized 
issuance,  indorsed  the  draft,  and  obtained  the  amount  from  the  said 
drawee  and  credited  it  to  said  treasurer  in  discharge  of  taxes.  It  was 
paid  by  said  drawee  from  moneys  belonging  to  the  bank  of  which  the 
debtor  for  taxes  was  cashier,  who  drew  such  draft  without  paying 
therefor  or  without  any  charge  against  himself  in  favor  of  the  bank. 
He  thereafter  absconded  and  the  bank  made  a  claim  against  the  state 
to  recover  back  the  amount  and  the  court  held  that  the  state  was  not 
liable  to  refund  the  amount  of  the  draft.  The  court,  however,  said 
that  the  question  whether  the  state  was  a  holder  of  the  draft  for  value 

•^Opinion  of  court,  per   Scott,   P.  said:    "I  am  of  the  opinion  that  the 

J.,    in   Orr   v.    South   Amboy   Terra  law  ought  to  be  as  MacLean,  J.,  sug- 

Cotta  Co.,   94   N.   Y.   Supp.   524,    47  gests,  but  that  it  is  as  Scott,  P.  J., 

Misc.  604,  aff'g  92  N.  Y.  Supp.  521,  decides."      Case    was,    however,    re- 

MacLean,  J.,  dissenting.     Dugro,  J.,  versed,  see  last  preceding  note. 


621 


NOTICE — CORPORATION — AGENCY. 


[§  486 


or  not  did  not  arise  and  that  the  case  was  not  one  of  the  diversion  of 
commercial  paper  signed  by  one  for  the  accommodation  of  another. ''*' 

§•486.  Same  subject. — A  transferee  of  a  note  is  held  to  be  entitled 
to  recover  thereon,  even  though  it  was  given  by  a  corporation  to  its 
president  for  advancements  of  moneys  and  payments  of  subsisting 
notes  indorsed  by  him  and  upon  which  he  was  liable,  said  advance- 
ments and  payments  being  merged  in  the  note  given  to  him  and  con- 
stituting an  actual  indebtedness.'^^  But  where  the  president  of  a  bank 


'"Goshen  Nat.  Bank  v.  State,  141 
N.  Y.  379,  57  N.  Y.  St.  R.  597.  36  N. 
E.  316.  Considered,  quoted  from  and 
principle  applied  to  a  similar  case 
in  Hathaway  v.  Delaware  County, 
93  N.  Y.  Supp.  436,  103  App.  Div. 
179,  Houghton,  J.,  dissenting.  The 
court  in  this  case  also  cites,  in  its 
opinion,  Campbell  v.  Upton,  73  N. 
Y.  Supp.  1084,  66  App.  Div.  434, 
aff'd  171  N.  Y.  644,  63  N.  E.  1115. 
But  the  court  says,  however,  "I  rec- 
ognize the  fact  that  a  very  large 
amount  of  the  business  of  the  coun- 
try is  done  through  drafts  pur- 
chased from  banks,  and  which  are 
made  payable  directly  to  the  cred- 
itor of  the  one  who  makes  the  pur- 
chase, and  yet  I  would  be  inclined 
to  hold  that  upon  its  face  such  a 
draft  discredits  the  claim  that  the 
alleged  purchaser  has  any  owner- 
ship in  it,  were  it  not  for  the  deci- 
sion in  the  Goshen  case  above  cited. 

"  First  National  Bank  of  Bing- 
hamton  v.  Commercial  Travelers' 
Home  Assoc,  108  N.  Y.  App.  Div.  78; 
aff'd  (mem.)  185  N.  Y.  575.  Inthis 
case,  in  addition  to  the  point  above 
decided,  there  was  a  ratification  by 
the  corporation.  The  court,  per 
Houghton,  J.,  said:  "With  respect  to 
the  consideration,  irrespective  of 
any  presumption  which  arises  in 
plaintiff's  favor  by  reason  of  the  ne- 
gotiability of  the  instrument,  and 
the  taking  of  it  without  notice,  there 


is  no  question.  *  *  *  The  president 
of  a  corporation,  in  the  absence  of 
bad  faith,  has  the  right  to  take  obli- 
gations or  security  from  his  corpo- 
ration for  an  actual  indebtedness  to 
himself  (Duncomb  v.  New  York, 
Housatonic  &  N.  R.  Co.,  88  N.  Y.  1). 

*  *  *  Defendant  was  a  member- 
ship    corporation     without     stock. 

*  *  *  If  the  defendant  can  be 
deemed  a  business  corporation 
there  can  be  no  question  but  its 
board  of  managers  would  have 
power  to  appoint  an  executive  com- 
mittee of  their  own  number  to 
transact  business  of  the  corporation 
during  the  interval  between  meet- 
ings of  the  board,  and  that  this  busi- 
ness might  involve  the  giving  of  ne- 
gotiable notes  for  legitimate  indebt- 
edness incurred  (Sheridan  Electric 
Light  Co.  V.  Chatham  Nat.  Bank, 
127  N.  Y.  517,  522,  40  N.  Y.  St.  R. 
31,  28  N.  E.  467,  aff'g  52  Hun  575, 
24  N.  Y.  St.  R.  622,  5  N.  Y.  Supp. 
529).  *  *  *  Stockholders  of  a  cor- 
poration may  subsequently  ratify 
the  acts  and  validate  the  originally 
unauthorized  transactions  of  its  of- 
ficers (Kent  V.  Quicksilver  Mining 
Co.,  78  N.  Y.  159;  Martin  v.  Niagara 
Falls  Paper  Mfg.  Co.,  122  N.  Y.  165, 
172,  33  N.  Y.  St.  R.  318,  25  N.  E. 
303,  aff'g  44  Hun  130,  8  N.  Y.  St.  R. 
265,  26  W.  D.  251).  If  this  be  so  of 
the  stockholders  of  an  ordinary 
stock  corporation,  it  is  doubly  true 


§    486]  BONA    FIDE    HOLDERS    AND    RIGHTS    ON    TRANSFER.  622 

and  payee  of  a  note  in  procuring  its  purchase  by  the  bank  acts  solely 
and  individually  in  his  own  behalf  and  at  arm's  length  to  the  bank 
his  knowledge  is  not  the  knowledge  of  the  bank  so  as  to  afEect  it  with 
any  constructive  notice  of  defenses  as  a  purchaser,  even  though  the 
purchase  was  made  by  vote  of  the  directors,  the  president  being  ab- 
sent, and  no  actual  knowledge  of  defenses  being  chargeable  to  the  bank. 
The  same  rule  also  applies  to  a  former  secretary  who  obtained  his 
knowledge  while  acting  for  the  bank  and  who  was  absent  at  the  direct- 
ors' meeting,  and  also  applies  to  the  secretary  elected  in  his  place  on 
the  day  the  bank  acted  and  who  presented  the  note  as  agent  of  the 
president.''^  Again,  where  the  president  of  a  corporation  was  vice-presi- 
dent of  a  bank  and  a  stockholder  therein  and  the  secretary  of  said  cor- 
poration was  a  director  and  stockholder  of  the  bank  and  the  bank 
discounted  paper  of  the  corporation,  but  in  discounting  the  same  it  was 
represented  by  its  president  and  the  corporation  was  represented  by 
its  secretary,  such  facts  do  not  militate  against  the  bona  fide  character 
of  the  bank's  holding  of  such  paper,  where  there  was  nothing  else  to 
put  the  bank  on  inquiry,  since  the  officers  of  the  corporation  must  be 
held  as  strangers  to  the  bank  who  would  conceal  from  the  bank  any 
knowledge  possessed  by  them  as  to  any  infirmity  in  the  note.  If  an 
"  officer  of  a  corporation  is  thus  dealing  with  them  in  his  own  inter- 
est opposed  to  theirs,  he  must  not  be  held  to  represent  them  in  the 
transaction,  so  as  to  charge  them  with  the  knowledge  he  may  possess 
but  which  is  not  communicated  to  them,  and  which  they  do  not  other- 
wise possess  of  facts  derogatory  to  the  title  he  conveys.  "^^  So  the 
facts  that  the  president  of  a  bank  is  a  stockholder,  and  the  cashier  a 

of  a  membership  corporation.   *   *   *  board  of  managers  had  been  author- 

The    defendant    had    had     Green's  ized  to  even  execute  a  mortgage  up- 

( president)  money.    It  had  obtained  on   the  defendant's  property  to  se- 

credit    by    his    indorsements   of    its  cure    the    same    indebtedness.      In- 

notes.     Those  notes,  as  well  as  the  stead    of    doing    that,    a    man    was 

money  advanced  by  him,  were  rec-  found     willing    to     take    a    simple 

ognized     as     subsisting    obligations  promissory    note,    which    it    would 

against   the   corporation.     Payment  appear    in    fairness    the    defendant 

of    the    money    loaned    and    of    the  should  pay." 

notes  outstanding  could  have  been  '-  McDonald   v.   Randall,   139   Cal. 

enforced.     The  giving  of  the  note  to  246,  72  Pac.  997,  Beatty,  C.  J.,  dis- 

him  upon  his  paying  the  outstand-  senting. 

Ing  obligations  upon  which  he  was  "  Holm  v.  Atlas  Nat.  Bk.,  84  Fed. 

liable  as  indorser  cast  no  additional  119,  aff'g  Atlas  Nat.  Bank  v.  Holm, 

burden    upon    the    corporation    and  71  Fed.  489. 
took  away  none  of  its  property.   The 


G23        CORPORATION    INDORSEMENT — ACCOMMODATION    PAPER.      [§    487 

stockliolder  and  secretary,  of  a  corporation  which  is  the  payee  of  a  note 
transferred  to  the  bank  does  not  charge  the  bank  with  constructive 
notice  of  defenses  of  the  maker  against  the  corporation  payee,  when 
cither  the  president  or  cashier  had  actual  notice.'*  Where  an  agent  is 
in  lawful  possession  of  checks  of  his  principal  with  a  clear  right  to  in- 
dorse them  in  the  latter's  name  and  after  indorsing  them  he  unlaw- 
fully diverts  them  to  his  own  use  by  delivering  them  to  a  broker  to  be 
credited  to  his  own  speculative  stock  account,  and  they  are  transferred 
to  a  bank  in  the  regular  course  of  business  for  collection  and  the  bank 
receives  them  in  good  faith,  without  notice,  knowledge,  or  suspicion 
tending  to  impeach  the  checks,  and  collects  the  proceeds  and  without 
notice  pays  them  over  to  the  broker,  an  action  for  conversion  will  not 
lie  against  said  bank  in  favor  of  the  principal ;  but  the  broker  who  had 
knowledge  and  notice  of  the  agent's  unlawful  act  is  liable  for  the 
amount  of  the  checks  to  the  principal.  In  such  a  case  the  indorse- 
ments were  held  not  forgeries  under  the  negotiable  instruments  law.'^ 

§  487.  Corporation  indorsement — Accommodation  paper. — Where  a 
corporation  engaged  in  business  has  implied  power  to  make  negotiable 
paper  for  use  within  the  scope  of  its  business,  but  it  has  no  power, 
express  or  implied,  to  become  a  party  to  bills  or  notes  for  the  accom- 
modation of  others,  such  paper  is  valid  and  enforceable  only  in  the 
hands 'of  a  holder  taking  the  same  before  maturity,  bona  fide  and 
without  notice.  The  general  doctrine  of  the  law  is  that  where  a  cor- 
poration has  power  under  any  circumstances  to  issue  negotiable  paper, 
a  bona  fide  holder  has  the  right  to  presume  that  it  was  issued  under 
the  circumstances  which  give  the  requisite  authority,  and  such  paper 
is  no  more  liable  to  be  impeached  for  any  infirmity  in  the  hands  of 
such  a  holder  than  any  other  commercial  paper.  This  doctrine  is 
applied  to  commercial  paper  made  by  a  corporation  for  the  accommo- 
dation of  a  third  party  when  in  the  hands  of  a  bona  fide  holder,  who 
has  discounted  it  before  maturity  on  the  faith  of  its  being  business 
paper, ■^'^     So  when  a  person  receives  a  note  for  the  debt  of  another 

"  Iowa   Nat.    Bk.    of   Ottumwa   v.  pue,      J.,      citing      Supervisors      v. 

Sherman  &  Bratager,  17  S.  D.  396,  Schenck,  5  Wall.  (72  U.  S.)  772,  784, 

97  N.  W.  12.  18   L.   Ed.   556;    Gelpcke  v.  City  of 

''■Salen  v.  Bank  of  State  of  New  Dubuque,   1   Wall.    (68   U.    S.)    175, 

York,    97   N.    Y.    Supp.    361;    Negot.  203,  17  L.  Ed.  520;    Monument  Na- 

Inst.  Law  1897,  c.  612,  §  42.  tional    Bank    v.    Globe    Works,    101 

'"National    Bank    of    Republic    v.  Mass.  57;  Bird  v.  Daggett,  97  Mass. 

Young,  41  N.  J.  Eq.  531,  535,  per  De-  494;    Hackensack  Water  Co.  v.   De 


§    488]  BONA    FIDE   HOLDERS    AND  EIGHTS   ON    TRANSFER.  624 

which  bears  the  indorsement  of  a  third  person  or  corporation  not  in 
the  chain  of  title  is  charged  with  notice  that  the  indorsement  is  an 
accommodation  indorsement,  and  a  person  receiving  such  paper  either 
knowing  or  charged  with  knowledge  of  the  fact  that  it  is  accommoda- 
tion paper  cannot  recover  of  a  corporation  in  an  action  against  it  as 
indorser,  an  officer  of  a  corporation  having  no  power  in  the  absence  of 
special  authority  to  execute  accommodation  paper  in  the  corporate 
nameJ^ 

§  488.  Notice — Purchaser  of  bonds. — If  a  person  has  distinct  no- 
tice of  the  fact  that  the  pledgor  of  negotiable  securities  is  not  the 
owner  of  the  bonds  nor  entitled  to  pledge  them  for  personal  advances 
made  to  him  and  he  makes  advances  subsequent  to  such  notice  he  is 
not  a  hona  fide  holder ;  but  it  is  not  necessary  in  order  to  attack  the 
lona  fides  of  the  holder  of  negotiable  securities  that  he  should  have 
express  notice  of  the  particular  individual  who  is  the  real  owner  of  the 
securities.  If  the  transferee  or  pledgee  had  notice  that  such  bonds 
had  been  stolen  or  fraudulently  misapplied  he  is  chargeable  with  bad 
faith,  even  though  he  had  no  notice  from  the  particular  individual 
from  whom  they  had  been  fraudulently  obtained,  nor  need  the  pur- 
chaser have  notice  of  the  particular  fraud,  and  if  the  proof  shows  that 
paper  has  been  fraudulently,  illegally  or  feloniously  obtained  from  its 
owner  or  maker,  then  the  burden  of  proving  good  faith  is  upon  the 
party  asserting  title  as  a  hona  fide  holder.  The  question  of  good  faith 
or  hona  fides  is  the  issue,  not  the  nature  of  a  third  party's  title  to  the 
paper,  and  if  facts  are  proven  which,  before  the  actual  advances  had 
been  made,  would  sustain  a  finding  of  bad  faith  or  fraiid  as  against 
the  true  owner,  the  person  receiving  the  paper  or  securities  is  not  a 
hona  fide  holder.'^®  In  a  case  in  the  United  States  Circuit  Court  of  Ap- 
peals the  following  points  were  decided:  (1)  An  innocent  purchaser 
of  municipal  bonds,  which  recite  that  they  are  issued  in  pursuance  of 

Kay,  36  N.  J.  Eq.  548;    Mechanics'  38,  43,  80  App.  Div.  556,  per  Ingra- 

Bkg.  Assn.  V.  White  Lead  Co.,  35  N.  ham,  J.    (case  aff'd   [mem.],  178  N. 

Y.  505;   1  Daniel  Neg.  Inst,  §§  382,  Y.  558,  70  N.  E.  1108),  citing  Can- 

386;    Green's    Brice's    Ultra    Vires,  ajoharie  Nat.  Bk.  v.  Diefendorf,  123 

255,  272.  N.  Y.  191,  25  N.  E.  402,  10  L.  R.  A. 

"Pelton  V.  Spider  Lake   Sawmill  676;  Vosburgh  v.  Diefendorf,  119  N. 

and  Lumber  Co.,  117  Wis.  569,  94  N.  Y.  357,  23  N.  E.  801,  16  Am.  St.  Rep. 

W.  293.  836,  1  Daniel  Negot.  Inst.,  §  799;   4 

"Perth  Amboy   Mut.   Loan,  H.   &  Am.  &  Eng.  Ency.  of  Law   (2d  ed.) 

B.  Assn.  V.  Chapman,  81  N.  Y.  Supp.  303. 


625  NOTICE — PURCHASER   OF   BONDS.  [§    488 

an  act  of  the  legislature,  which  authorized  their  issue  for  a  lawful 
purpose,  and  which  also  recite  that  they  are  issued  in  pursuance  of  an 
ordinance  or  resolution  of  a  given  date  or  title,  which,  if  read,  would 
disclose  the  fact  that  they  are  issued  for  an  unlawful  purpose,  is  not 
chargeable  with  notice  of  the  terms  or  contents  of  the  ordinance  or 
resolutions.  (2)  A  recital  in  school  district  bonds,  that  they  are  is- 
sued in  pursuance  of  a  lawful  refunding  act  and  of  a  resolution  of  a 
proper  board,  designated  by  its  date,  imports  that  they  were  issued  in 
pursuance  of  a  lawful  resolution  and  of  just  and  proper  action  of  the 
board;  and  it  estops  the  district,  as  against  an  innocent  purchaser, 
from  defeating  the  bonds,  on  the  ground  that  they  were  issued  for  a 
fictitious,  invalid,  or  unconstitutional  claim,  although  that  fact  was 
disclosed  by  the  resolution,  the  date  of  which  was  recited  in  the  bonds. 
(3)  A  recital  in  the  bonds  of  a  school  district,  that  they  are  issued 
in  pursuance  of  a  lawful  refunding  act,  which  authorizes  the  issue 
of  bonds  to  fund  the  debt  of  the  district,  conclusively  estops  the  quasi 
municipality  from  defeating  the  bonds  in  the  hands  of  an  innocent 
purchaser,  on  the  ground  that  it  had  no  fundable  debt,  or  that  the 
debt  refunded  was  unconstitutional,  fictitious,  or  invalid.  (4)  Fund- 
ing bonds  neither  create  nor  increase  the  indebtedness  of  a  munici- 
pality, but  merely  change  its  form.  (5)  The  certificate  upon  the  face 
of  municipal  bonds,  that  they  have  been  issued  in  pursuance  of  legis- 
lative authority,  for  the  purpose  of  funding  the  indebtedness  of  the 
municipality,  is  a  declaration  that  they  have  been  issued  for  the  pur- 
pose of  funding  a  valid  debt  in  the  method  prescribed  by  law,  and 
that  they  neither  create  nor  increase  any  indebtedness  of  the  munici- 
pality, and,  as  against  a  bona  fide  purchaser,  they  estop  the  munici- 
pality from  denying  this  declaration."  The  court,  per  Sanborn,  C.  J., 
said :  "Is  a  bona  fide  purchaser  of  municipal  bonds,  which  recite  that 
they  were  issued  in  pursuance  of  a  statute  autliorizing  the  municipality 
to  issue  them  for  a  lawful  purpose,  and  in  conformity  with  an  ordi- 
nance or  a  resolution  of  a  specified  date,  which  disclosed  the  fact 
that  they  are  issued  for  an  unlawful  purpose,  charged  with  notice  of 
the  terms  and  contents  of  the  ordinance  or  resolution?  Tlie  question 
is  not  new,  and  the  answer  to  it  is  to  be  found  in  the  opinions  of  the 
federal  courts.  In  the  earlier  decisions  of  this  court,  and  in  at  least 
one  of  those  of  the  circuit  court  of  appeals  of  the  seventh  circuit,  this 
question  was  answered  in  tlie  affirmative.*"    But  after  the  decision  of 

^°  Fairfield   v.   Rural    Independent  «"  Citing   National   Bank   of   Com- 

School  District,  116  Fed.  838,  54  C.  merce  v.  Town  of  Granada,  54  Fed. 

C.  A.  342,  s.  c.  187  U.  S.  643.  100,"  4  C.  C.  A.  212;  Hinkley  v.  City 
Joyce  Defenses — 40. 


§    488]         BONA    FIDE    HOLDERS    AXD   RIGHTS    ON"    TRANSFER.  626 

the  supreme  court  in  Town  of  Evansville  v.  Dennett,'^^  and  after  a 
careful  reconsideration  of  the  question,  in  view  of  the  opinion  in  tliat 
case,  those  earlier  cases  were  overruled,  and  the  proposition  was  an- 
nounced to  which  this  court  has  since  adhered.  It  is  that  the  recital 
in  municipal  bonds  that  they  were  issued  in  accordance  with  the  pro- 
visions of  the  enabling  statute  imports  that  they  were  sent  forth  in 
pursuance  of  a  lawful  and  proper  resolution  or  ordinance,  and  of 
just  and  proper  action  by  the  governing  boards  of  the  municipality. 
It  relieves  the  innocent  purchaser  of  all  inquiry,  notice,  and  knowl- 
edge of  the  actual  action  and  record  of  the  board  or  council,  and  es- 
tops the  municipality  from  denying  that  proper  action  was  taken  and 
that  a  lawful  resolution  or  ordinance  was  passed."®^  Where  the  bonds 
of  an  irrigation  district  contained  recitals  showing  that  they  were 
regularly  issued  by  authority  of,  pursuant  to,  and  after  a  full  compli- 
ance with  all  the  requirements  of  the  statute,  the  holder  of  such  bonds 
is  protected  by  the  recitals  and  had  a  right  to  purchase  them  from 
any  one  who  could  lawfully  have  been  the  owner  thereof,  nor  would 
the  fact  that  the  bonds  stood  in  the  name  of  the  president  of  the  cor- 
poration constitute  a  suspicious  circumstance  necessitating  inquiry  nor 
impeach  the  bona  fide  character  of  the  purchaser's  ownership,  nor  in 
such  case  would  the  defense  be  available  that  there  were  irregularities 
in  the  issuance  of  the  bonds  rendering  tliem  invalid,  since  the  rule 
applies  that  the  circumstances  must  be  such  as  not  merely  to  create 
suspicion  in  the  mind  of  an  ordinarily  prudent  man,  but  facts  must 
have  come  to  the  notice  of  the  holder  or  his  agent  of  such  a  nature 
that  a  neglect  to  further  inquire  would  in  itself  constitute  evidence  of 
bad  faith. ^^  Again,  a  bank  to  which  stolen  coupon  bonds,  payable  to 
bearer,  have  been  pledged,  as  collateral  security  for  a  loan,  by  the  thief 
in  the  ordinary  course  of  business,  without  notice  to  the  bank  of  any 
infirmity  in  the  title,  and  without  any  circumstances  to  put  the  bank 

of  Arkansas  City,  69  Fed.  768,  773,  99  U.  S.  86,  95,  25  L.  Ed.  363;  Town 

16   C    C.   A.   395,   400;    Port  v.   Pu-  of  Evansville  v.  Dennett,  161  U.  S. 

laski   Co.,   1   C.   C.  A.   405,   49   Fed.  434,  439,  16  Sup.  Ct.  613,  40  L.  Ed. 

628.  760;  Waite  v.  City  of  Santa  Cruz,  22 

«il61  U.   S.   434,  439,  443,  16  Sup.'  Sup.    Ct.    327,    333,    46    L.    Ed.    552; 

Ct.  613,  40  L.  Ed.  760.  Wesson  v.   Saline  Co.,  73  Fed.  917, 

^Citing  Board   of  Commissioners  919,  20  C.  C.  A.  227,  229. 

of  Haskell  Co.  v.  National  Life  Ins.  *^  Perris     Irrigation     District     v. 

Co.,   32   C.   C.   A.   591,   594,   90   Fed.  Thompson,  116  Fed.  832.  54  C.  C.  A. 

228,  231;  Hackett  v.  City  of  Ottawa,  336,  dismissed  in  error  196  U.  S.  637. 


G27 


TRANSFEREE    OF    BOXA    FIDE    HOLDER NOTICE. 


[§  -189 


on  inquiry,  takes  a  good  title  thereto  as  against  him  from  whom  the}' 
were  stolen.^* 

§489,  Transferee  of  bona  fide  holder — Notice. — The  innocent 
liolder  of  negotiable  paper  may  transfer  the  same  for  value  to  one  with 
notice  of  defenses,  and  the  transferee,  where  he  is  not  himself  a  party 
to  any  fraud  or  illegality  affecting  the  paper,  will  take  it  free  from 
equities  and  defenses  to  the  extent  that  he  has  all  the  rights  of  and 
obtains  as  good  a  title  as  his  immediate  indorser  possessed. ^^  So,  un- 
der a  Louisiana  decision,  where  a  bona  fide  holder  who  took  the  note 
for  value,  in  good  faith,  before  maturity,  transfers  the  same,  and  the 
transferee  is  possessed  of  information  as  to  the  infirmity  of  the  origin 
of  the  note,  still  the  latter  acquires  as  good  a  title  as  his  immediate 
indorser  had,  who,  subsequently  to  becoming  possessed  of  the  note, 
learned  of  its  infirmities,  and  the  note  is  not  thereby  vitiated-.®^ 
But  a  payee  does  not,  by  repurchasing  paper  from  a  bona  fide  holder 
to  whom  he  had  sold  or  transferred  it,  obtain  any  better  title  or  rigiit 


**  Cochran  v.  Foxchase  Bank,  209 
Pa.  34,  58  Atl.  117. 

*^  United  States. — Gunnison  Coun- 
ty V.  E.  H.  Rollins  &  Sons,  173  U.  S. 
255.  19  Sup.  Ct.  390,  43  L.  Ed.  689, 
rev'g  80  Fed.  692,  49  U.  S.  App. 
399. 

Georgia. — Weil  v.  Carswell,  119 
Ga.  873,  47  S.  E.  217,  under  Civ. 
Code  1895,  §  3938.  See  this  case  also 
as  to  when  rule  not  applicable. 

Illinois. — Central  School  Supply- 
House  v.  Donovan,  70  111.  App.  208. 

Indiana. — Thomas  v.  Ruddell,  66 
Ind.  326. 

Iowa. — Riegel  v.  Ormsby,  111  Iowa 
10,  82  N.  W.  432. 

Kansas. — McFarland  v.  State  Bk., 
7  Kan.  App.  722,  52  Pac.  110. 

Louisiana. — Hillard  v.  Taylor,  114 
La.  883,  38  So.  594. 

Maryland. — Black  v.  First  Nat. 
Bank,  96  Md.  399,  54  Atl.  88. 

Massachusetts. — Symonds  v.  Riley, 
188  Mass.  470,  74  N.  E.  926. 

Missouri. — Griswold     v.     Bueckle, 


72  Mo.  App.  53;  Longford  v.  Varner, 
65  Mo.  App.  370. 

Nebraska. — Jones  v.  Wlesen,  50 
Neb.  243,  69  N.  W.  762. 

New  York. — Jennings  v.  Carlucci, 
87  N.  Y.  Supp.  475. 

Pennsylvania. — Liebig  Mfg.  Co.  v. 
Hill,  9  Pa.  Super.  Ct.  469,  16  Lane. 
L.  Rev.  121,  43  W.  N.  C.  497. 

Texas. — Hollimon  v.  Karger,  30 
Tex.  Civ.  App.  558,  71  S.  W.  299. 

Virginia. — Aragon  Coffee  Co.  v. 
Rogers  (Va.),  52  S.  E.  843.  See 
this  case  also  (noted  in  this  sec- 
tion) as  to  when  rule  does  not  ap- 
ply. 

Washington. — Donnerberg  v.  Op- 
penheimer,  15  Wash.  290,  46  Pac. 
254. 

Wisconsin. — Prentiss  v.  Strand, 
116  Wis.  647,  93  N.  W.  816. 

Canada. — Bellemare  v.  Gray,  16 
Rap.  Jud.  Que.  C.  S.  581. 

^"Hillard  v.  Taylor,  114  La.  883,38 
So.  594. 


§    489]  BONA    FIDE   HOLDERS    AND   RIGHTS    ON    TRANSFER.  628 

than  he  originally  possessed.®^  Nor  does  an  agent  of  the  payee,  by  be- 
coming the  transferee  of  a  holder  in  due  course,  take  free  from  equi- 
ties.^ ^ 

"Hoye  V.  Kalashian,    (R.   I.),   46        "'Battersbee  v.  Calkins,  128  Mich. 
Atl.  271;  Aragon  Coffee  Co.  v.  Rog-     569,   87   N.   W.   760,  8  Det.   Leg.  N. 
ers  (Va.),  52  S.  E.  843;  Andrews  v.     778. 
Robertson,   111  Wis.   334,   87   N.  W. 
190,  54  L.  R.  A.  673. 


II 


CHAPTER    XXII. 


WANT  OP  presentment;  presentment  for  acceptance. 


Sec. 

490.  "When     presentment    must     be 

made — Fixing     maturity     of 
instrument. 

491.  Agreement  as  to  acceptance  or 

presentment — Want  of  funds 
— Promise  to  accept. 

492.  Acceptance   not    refused — Time 

desired — Want  of  funds. 

493.  Presentment    after    refusal    to 

accept. 

494.  When      presentment     unneces- 

sary. 


Sec. 

495.  Effect    of     presentment     made 

unnecessarily  —  Presentment 
before  due. 

496.  Release  of  drawer  and  indorser 

— Presentment  or  negotiation 
in  reasonable  time. 

497.  Presentment      how      made — By 

whom. 

498.  Same  subject — Time  and  place. 

499.  Same  subject — To  whom. 

500.  Acceptance  of  order  on  commit- 

tee. 

501.  Where  presentment  is  excused. 


§  490.  When  presentment  must  be  made — Fixing  maturity  of 
instrument. — Presentment  for  acceptance  must  be  made:  where  the 
bill  is  payable  after  sight,  or  in  any  other  case  where  presentment  for 
acceptance  is  necessary  in  order  to  fix  the  maturity  of  the  instrument ; 
or  where  the  bill  expressly  stipulates  that  it  shall  be  presented  for 
acceptance;  or  where  the  bill  is  drawn  payable  elsewhere  than  at  the 
residence  or  place  of  business  of  the  drawee.  In  no  other  case  is  pre- 
sentment for  acceptance  necessary  in  order  to  render  any  party  to  the 
bill  liable.^  No  debt  accrues  upon  a  bill  payable  after  sight  until  a 
presentment  for  payment.^    And  where  a  bill  is  payable  at  a  certain 


^Negot.  Inst.  Law,  §  240;  Bills  of 
Exch.  Act,  §  39,  Appendix  herein. 

=  Holmes  v.  Kerrison,  2  Taunt.  323. 

It  is  necessary  to  have  bills  pay- 
able after  sight  presented  for  ac- 
ceptance to  give  them  a  date.  Cros- 
by V.  Morton,  7  La.  227,  13  La.  (O. 
S.)  357. 

A  promissory  note  made  in  the 
following  form:    "I  promise  to  pay 

62 


to  M.  A.  D.  or  bearer  on  demand  the 
sum  of  £16  at  sight,"  necessitates 
presentment  for  sight  before  an  ac- 
tion is  maintainable.  Dixon  v.  Nut- 
tall,  1  Crompt.  Mees.  &  Ros.  306,  4 
Tyrwh.  1013. 

Before  a  bill  payable  one  day 
after  sight  can  be  legally  protested 
for  non-payment  it  must  be  pre- 
sented for  acceptance,  then  one  day 
9 


§    491]  WANT    OF    I'RESENTMENT FOR   ACCEPTANCE.  G30 

time  after  date,  it  is  not  absolutely  necessary  to  have  it  accepted,  an 
acceptance  being  only  necessary  to  fix  the  period  of  payment  where 
a  bill  is  payable  at  sight,  or  at  so  many  days  after  sight  or  demand, 
or  after  a  certain  event.  It  will  suffice  that  a  demand  be  made  of  the 
drawees  at  maturity,  and  notice  given  to  the  drawer  in  case  of  their 
default.^  A  post-dated  draft,  purporting  to  be  payable  at  sight,  is 
for  all  the  legal  purposes  of  presentment,  demand,  protest  and  pay- 
ment, a  draft  payable  a  certain  time  after  date.  But  a  post-dated  bill 
differs  also  from  a  bill  payable  a  corresponding  number  of  days  after 
it  is  drawn,  and  although  the  question  of  the  right  to  days  of  grace 
might  be  settled  by  the  terms  of  the  bill  itself,  an  important  difference 
would  exist  in  this  that  the  time  bill  would  be  subject  to  be  forwarded 
for  acceptance  while  the  post-dated  bill  would  not.  The  latter  must 
rest  upon  the  drawer's  responsibility  until  the  time  of  date  arrives. 
It  could  not  be  dishonored  by  refusal  to  accept  it  before  its  date, 
because  the  drawer  does  not  undertake  to  have  funds  in  the  drawee's 
hands  to  meet  it  before  that  day  arrives;  and  the  drawee,  if  he  were 
in  funds  to  meet  it,  could  not  retain  them  for  the  purpose  as  against 
-/  other  bills  drawn  and  payable  before  the  date  arrived.^  Again,  if  in 
pursuance  of  an  agreement  that  insurance  premiums  are  to  be  paid 
by  sight  drafts,  a  draft  is  put  in  the  form  of  a  sight  draft,  and  the 
paper  is  to  every  legal  intent  a  draft  for  acceptance,  it  is  not  due 
until  the  expiration  of  days  of  grace  which  are  to  be  allowed  after 
presentment  and  acceptance,  as  the  time  of  payment  cannot  be  known 
until  acceptance,  so  that  presentment  for  acceptance  is  due  before 
default  in  payment  will  be  incurred.^ 

§  491.  Agreement  as  to  acceptance  or  presentment — ^Want  of 
funds — Promise  to  accept. — If  the  holder  of  a  bill  of  exchange,  at 
the  time  of  taking  the  bill,  knew  that  the  drawee  had  not  funds  in 
his  hands  belonging  to  the  drawer,  and  took  the  bill  on  the  promise  of 
the  drawee  to  accept  it,  expecting  to  receive  funds  from  the  drawer; 
the  promise  of  the  drawee  to  accept  the  bill  constitutes  a  valid  con- 
allowed  for  the  bill  to  mature,  after  Bank,  44  Mich.  344,  357,  358,  per 
it  was  shown  to  the  drawee,  and  Cooley,  J.,  citing  Godin  v.  Bank  of 
three  days  of  grace.  Craig  v.  Price,  Commonwealth,  6  Duer  (N.  Y.)  76, 
23  Ark.  633.  70  Pa.  St.  474,  476. 

^  Commercial  Bank  of  Natchez  v.  ^  Burrus  v.  Life  Insurance  Com- 
Perry,  10  Rob.  (La.)  61,  43  Am.  pany  of  Virginia,  124  N,  C.  9,  32  S. 
Dec.  168.  E.  323. 

*New  York  Iron  Mine  v.  Citizens' 


631 


WANT    OF    FUNDS PROMISE   TO    ACCEPT. 


[§  491 


tract  between  the  parties,  notwithstanding  the  failure  of  tlie  drawer 
to  place  funds  in  his  hands.  The  acceptance  of  the  drawee  of  a  bill, 
binds  him,  although  it  is  known  to  the  holder  that  he  has  no  funds 
in  his  hands.  It  is  sufficient  that  the  holder  trusts  to  such  accept- 
ance.® And  where  sight  drafts  were  purchased  under  an  agreement 
that  if  not  used  for  a  specified  purpose  they  could  be  returned  to  the 
bank  drawing  the  same  and  credit  given,  the  drafts  being  drawn  in 
April,  the  drawee  being  solvent  until  July  of  that  year,  but  no  pre- 
sentment was  made  at  any  time,  nor  any  offer  to  return  the  drafts 
to  the  bank  until  the  succeeding  December,  it  was  held  that  -as  the 
drafts  had  neither  been  presented  nor  returned  to  the  bank  in  a  rea- 
sonable time  the  holder  must  bear  the  loss.^  A  letter  written  to  the 
drawer  within  a  reasonable  time  before  or  after  the  date  of  a  bill  of 
exchange,  describing  it  in  terms  not  to  be  mistaken,  and  promising 
to  accept  it,  is,  if  shown  to  the  person  who  takes  the  bill  on  the  credit 
of  the  letter,  a  virtual  acceptance,  and  binds  the  person  who  makes  the 
promise,  even  though  there  are  no  funds  in  his  hands  belonging  to 
the  drawer,  if  the  bill  be  drawn  payable  at  a  fixed  time,  and  not  at 
or  after  sight.  If  in  such  case  the  bill  be  drawn  payable  at  or  after 
sight,  and  is  for  the  entire  amount  named  in  the  letter,  the  payee 
can  maintain  an  action  against  the  drawee  as  the  equitable  assignee 
of  the  fund ;  as  it  seems  in  such  case  the  drawee  would  not  be  liable 
as  acceptor,  unless  the  draft  was  drawn  in  precise  accordance  with  the 
terms  of  the  letter.^   But  where  one  indorsed  a  bill  of  exchange,  for 


•Townsley  v.  Sumrall,  2  Pet.  (U. 
S.)   170. 

'Collingwood  v.  The  Merchants' 
Bank,  15  Neb.  118. 

Agreement  to  accept — Payment  of 
debt  of  another. — If  a  person  under- 
take to  accept  a  bill,  in  considera- 
tion that  another  will  purchase  one 
already  drawn,  or  to  be  thereafter 
drawn,  and  as  an  inducement  to  the 
purchaser  to  take  it;  and  the  bill 
is  purchased  upon  the  credit  of 
such  promise  for  a  sufficient  consid- 
eration, such  promise  to  accept  is 
binding  upon  the  party.  It  is  an 
original  promise  to  the  purchaser, 
not  merely  a  promise  for  the  debt  of 
another;  and  having  a  sufficient 
consideration  to  support  it,  in  rea- 


son and  justice  as  well  as  in  law,  it 
ought  to  bind  him.  Townsley  v. 
Sumrall,  2  Pet.   (U.  S.)  170. 

'^  Nimocks  v.  Woody,  97  N.  C.  1,  2 
S.  E.  249,  2  Am.  St.  Rep.  268. 

Letter  promising  to  accept  draft 
to  be  drawn — Acceptance  to  fix  ma- 
turity— Necessity  of  presentment. — 
"It  must  be  admitted  that  there  is 
some  diversity  in  the  rulings  in 
England  and  in  this  country  as  to 
whether  a  promise  made  in  writing 
to  accept  and  pay  a  draft  for  a 
specified  amount,  yet  to  be  drawn, 
and  communicated  to  one  who,  upon 
the  faith  of  such  promise,  becomes 
the  payee  of  it,  when  drawn  for 
value,  is  an  acceptance  in  law,  so 
that  an  action  upon  it  can  be  main- 


491] 


WANT    OF   PRESENTMENT FOR  ACCEPTANCE, 


632 


the  accommodation  of  the  drawer,  who  negotiated  it  on  an  agreement, 
not  assented  to  nor  known  by  the  indorser,  that  it  should  not  be  pre- 
sented to  the  drawee  for  acceptance,  until  maturity,  and  it  was  ac- 


tained  by  the  latter.  In  the  case  of 
The  Bank  of  Ireland  v.  Archer,  11 
M.  &  W.  (Ex.)  383,  it  is  decided  that 
such  a  result  does  not  follow,  and 
there  are  decisions  in  some  of  the 
state  courts  to  the  same  effect.  But 
in  the  well-considered  and  elaborate 
opinion  of  Chief  Justice  Marshall 
in  Cooledge  v.  Payson,  2  Wheat.  63- 
75,  speaking  in  reference  to  the  dis- 
tinction between  the  cases  of  a  bill 
drawn  upon,  and  a  bill  drawn  after 
such  promise,  it  is  said:  'The  court 
can  perceive  no  substantial  reason 
for  this  distinction.  The  prevailing 
inducement  for  considering  a  prom- 
ise to  accept  as  an  acceptance  is 
that  credit  is  thereby  given  to  the 
bill.  Now,  this  credit  is  given  as 
■entirely  by  a  letter  written  before 
the  date  of  the  bill  as  by  one  writ- 
ten afterwards.'  The  general  rule 
is  then  declared  in  these  words: 
'Upon  a  review  of  the  cases  which 
are  reported,  the  court  is  of  opinion, 
that  a  letter  written  within  a  rea- 
sonable time  before  or  after  the 
date  of  a  bill  of  exchange,  describ- 
ing it  in  terms  not  to  be  mistaken, 
and  promising  to  accept  it,  is,  if 
shown  to  the  person  who  afterwards 
takes  the  bill  on  the  credit  of  the 
letter,  a  virtual  acceptance,  binding 
the  person  who  makes  the  promise.' 
The  same  doctrine  is  laid  down  in 
Townsley  v.  Sumrall,  2  Peters  170- 
185,  by  Justice  Story,  and  it  is  said 
to  prevail  when  there  are  no  funds 
of  the  drawer  in  the  drawee's  hands, 
and  the  action  may  be  brought,  says 
Wilson,  J.,  in  Cassell  v.  Davis,  1 
Black's  C.  C.  Reports,  by  any  one 
who    makes    advances    on    the    bill 


upon  such  assurance  of  payment. 
To  the  same  effect  is  1  Daniel  Neg. 
Instruments,  §§  559,  560,  561;  and 
1  Edw.  on  Bills,  Notes,  etc.,  §  567, 
and  following;  Plummer  v.  Leyman, 
49  Me.  229;  Stiman  v.  Harrison,  42 
Penn.  St.  49.  We  are  referred,  how- 
ever, to  §  562,  in  Mr.  Daniel's  first 
volume,  who  says:  'It  seems  ap- 
plicable (the  rule)  to  the  cases  of 
bills  payable  on  demand,  or  at  a 
fixed  time  after  date,  and  not  to 
bills  payable  at  or  after  sight,  for 
in  order  to  constitute  acceptance  in 
the .  latter,  a  presentment  is  indis- 
pensable, since  the  time  the  bill  is 
to  run  cannot  otherwise  be  ascer- 
tained.' This  may  be  true  in  a  strict 
sense,  an  actual  presentment  and  ac- 
ceptance being  necessary  to  deter- 
mine the  time  of  payment,  as  in  a 
single  draft,  days  of  grace  are  al- 
lowed; but  the  presentation  in  this 
case  has  been  made,  and  not  only 
acceptance  refused,  but  liability  de- 
nied altogether.  The  present  draft 
is  in  precise  accord  with  the  direc- 
tion in  the  letter,  and  the  plaintiff 
has  advanced  his  money  upon  the 
assurance  of  its  being  met,  and  the 
governing  general  rule  is,  that  the 
drawee  thereby  undertakes  the  ob- 
ligations of  the  acceptor,  and  we  see 
no  reason  why  it  should  not  be  so 
in  any  form  of  a  draft,  made  in 
pursuance  of  the  terms  of  the  prom- 
ise, though  in  the  exceptional  cases 
an  actual  presentation  may  be  nec- 
essary to  fix  the  time  of  payment 
and  authorize  the  action  upon  it  as 
an  acceptance."  Nimocks  v.  Woody, 
97  N.  C.  5,  6,  2  S.  E.  249,  2  Am.  St. 
Rep.  269,  per  Smith,  C.  J. 


I 


I 


[ 


633  ACCEPTANCE   NOT   REFUSED,  [§§    492-494 

cordingly  first  presented  to  the  drawee  at  maturity,  and  there  dis- 
honored; it  was  held  that  the  indorser  was  not  thereby  discharged.* 

§  492.  Acceptance  not  refused — Time  desired — ^Want  of  funds. — 
If  a  drawee  of  a  bill  of  exchange  does  not  refuse  acceptance,  but  desires 
time  to  examine  into  the  state  of  his  accounts  before  deciding,  he  is  held 
entitled  to  twenty-four  hours  for  that  purpose.^"  And  where  the 
drawee,  on  being  applied  to  by  the  holder  of  a  bill  on  the  day  be- 
fore it  became  due,  informed  such  holder  that  he  had  no  effects  of  the 
drawer's  in  his  hands,  but  that  they  would  probably  be  supplied  be- 
fore the  next  day,  and  on  the  next  day  the  drawer  informs  the  holder 
that  he  will  endeavor  to  provide  effects  and  will  call  upon  him  again, 
such  facts  do  not  supersede  the  necessity  of  a  presentment  on  that 
day." 

§  493.  Presentment  after  refusal  to  accept. — An  acceptance  being 
once  refused,  the  holder  need  not  present  the  bill  for  payment  at  the 
time  appointed  on  its  face  for  its  maturity ;  the  liability  of  the  par- 
ties is  already  fixed  by  the  non-acceptance  and  notice.^^  And  if  a 
bill  of  exchange,  payable  in  a  specified  length  of  time  after  date  or 
on  a  day  certain,  be  presented  for  acceptance  on  the  day  it  is  due, 
and  if  acceptance  is  then  refused,  no  further  demand  of  payment  is 
necessary  to  charge  the  drawer  or  indorser.^^ 

§  494.  When  presentment  unnecessary. — Presentment  for  accept- 
ance is  unnecessary  in  case  of  a  bill  of  exchange  payable  at  a  future 
time  on  a  day  certain  or  at  a  certain  period  or  given  time  after  date, 
but  payment  may  be  at  once  demanded  at  its  maturity.^*   In  a  Mary- 

»  Fall  River  Union  Bank  v.  Wil-  Georgia. — Davies  v.  Byrne,  10  Ga. 

lard,  5  Mete.  (Mass.)  216.  329.    (It  is  not  necessary  to  present 

^"Case  V.  Burt,  15  Mich.  82.  a  foreign  bill  for  acceptance,  when 

"Pjideaux  v.  Collier,  2  Stark.  57.  it  is  payable  at  a  time  certain.) 

'^ Evans  V.  Bridges,  4  Port.  (Ala.)  Illinois.— Taylor  v.   Bank  of   Illi- 

351.  nois,  7  T.  B.  Mon.  (Ky.)  576.    (A  bill 

"  Plato  V.  Reynolds,  27  N.  Y.  586.  payable   so   many   days   after   date, 

^*  United      States. — Townsley      v.  need  not  be  presented  till  due;   but 

Sumrall,  2  Pet.   (U.  S.)   170.    (Bills  if  presented   for  acceptance  before, 

of  exchange,  payable  at  a  given  time  and  dishonored,  there  must  be  im- 

after   date,   need    not   be    presented  mediate  notice.) 

for  acceptance  at  all;   and  payment  Missouri. — Harrison    v.   Copeland, 

may  at  once  be  demanded  at  their  8  Mo.  268. 

maturity.)  Pennsylvania. — House    v.    Adams 


§  495]  WAXT  or  presentment — for  acceptance.  634 

land  case  the  defendants  drew  a  bill  of  exchange,  payable  in  London, 
dated  the  22d  of  May,  1868,  at  sixty  days'  sight,  on  Joseph  and 
Charles  Sturge,  Birmingham ;  the  bill,  on  its  face,  was  drawn  against 
a  cargo  of  wheat  per  the  "Ocean  Belle ;"  on  the  day  of  the  date  of  the 
bill  the  drawers  sold  and  indorsed  it  to  the  plaintiffs,  and  on  the  same 
day,  by  letter  of  hypothecation,  lodged  the  bill  of  lading  for  the  cargo 
with  them,  as  collateral  security  for  the  acceptance  and  payment  of 
the  bill,  and  authorized  them,  in  case  they  thought  it  necessary,  to 
place  said  wheat  on  its  arrival  in  the  hands  of  their  brokers  for  im- 
mediate sale,  and  to  apply  the  proceeds  toward  the  payment  of  the 
bill.  The  drawees  declined  to  accept  the  bill,  unless  they  were  put 
in  possession  of  the  bill  of  lading  of  the  cargo  against  which  it  was 
drawn.  On  the  non-acceptance  of  the  bill,  the  cargo  was  sold  by  the 
London  agents  of  the  plaintiffs,  and  the  net  proceeds  were  applied 
toward  the  payment  of  the  bill,  but  being  insufficient,  suit  was  brought 
against  the  defendants  to  recover  the  deficiency  and  statutory  dam- 
ages, after  notice  to  them  of  all  the  facts,  and  demand  of  payment. 
It  was  held  that  the  drawees  were  not  bound  to  accept  the  bill  of  ex- 
change, without  the  delivery  to  them  of  the  bill  of  lading;  that  the 
defendants  gave  the  plaintiffs  the  legal  right  to  retain  the  bill  of  lad- 
ing until  the  maturity  of  the  bill  of  exchange;  and  the  defendants 
were  not  entitled  to  require  formal  presentment  of  the  bill  of  exchange 
for  acceptance,  and  notice  of  its  non-acceptance.^^ 

§  495.  Effect  of  presentment  made  unnecessarily — Presentment 
before  due. — Although  it  is  not  necessary  to  present  a  bill  made  pay- 
able at  a  given  time  after  date  l^efore  its  maturity,  yet  if  presentment 
is  made  and  acceptance  refused,  the  bill  must  be  protested  and  no- 
tice given  to  all  parties.^''    The  undertaking  of  the  parties  drawing 

&  Co.,  48  Pa.  St.  261,  266.  (Present-  is  not  bound  to  present  it  to  the 
ment  for  acceptance  is  not  necessary  drawee  for  acceptance  until  it  be- 
in   the   case   of  a   bill   of  exchange  comes  due.) 

payable   at   a   certain    period    after  Bills    of    exchange    payable   after 

date,     and     in     Pennsylvania     the  date   are    not    required    to    be   pre- 

drawer  is  not  discharged  for  want  sented  for  acceptance  as  between  the 

of    notice    of    non-acceptance    pro-  holders    and    indorsers.     Crosby    v. 

Tided  he  receives  notice  of  non-pay-  Morton,   7  La.   227,  13  La.    (O.   S.) 

ment.   Per  Read,  J.)  357. 

Yermont. — Bank     of     Bennington  ^^  Schuchardt  v.  Hall  &  Leoney,  36 

V.  Raymond,  12  Vt.  401.    (The  holder  Md.  590,  591. 

of  a  bill  of  exchange,  payable  at  a  '"  Carmichael  v.  Bank  of  Pennsyl- 

future  time,  and  on  a  day  certain,  vania,  4  How.  (Miss.)  567. 


■ 


635  RELEASE   OF   DRAWER   AXD   INDORSER.  [§    496 

and  indorsing  a  bill  of  exchange,  when  it  is  thrown  into  circulation,  is 
that  the  drawee  shall  both  accept  and  pay  it.  This  engagement  of 
the  drawer  and  indorsers  does  not  oblige  the  holder  to  present  it  for 
acceptance.  If,  however,  he  does  present  it,  and  acceptance  is  refused, 
it  is  considered  as  dishonored,  and  due  notice  must  be  given  to  all 
prior  parties  whom  it  is  desired  to  charge.^^  Though  the  holder  of  a 
bill  of  exchange,  payable  at  any  number  of  days  after  date,  is  not 
bound  to  present  the  bill  for  acceptance,  but  may  wait  until  it  be- 
comes due,  and  then  present  it  for  payment,  yet  if  he  does  present 
I  the  bill  for  acceptance,  and  acceptance  is  refused,  he  must  give  notice 
to  those  parties  to  whom  he  means  to  resort  for  payment,  or  they  will 
be  discharged  from  all  liability.^^ 

§  496.  Release  of  drawer  and  indorser — ^Presentment  or  negotia- 
tion in  reasonable  time. — Under  the  negotiable  instruments  law,  sub- 
ject to  the  exceptions  therein,  it  is  provided  that  the  holder  of  a  bill 
which  is  required  by  it  to  be  presented  for  acceptance  must  either  pre- 
sent it  for  acceptance  or  negotiate  it  within  a  reasonable  time ;  and  if 
he  fails  to  do  so  the  drawer  and  all  indorsers  are  discharged.^''  A  bill 
of  exchange  payable  at  sight,  or  a  certain  number  of  days  after  sight, 
must,  in  order  to  charge  the  drawer,  be  presented  for  acceptance 
within  a  reasonable  time  or  the  bill  should  be  negotiated  or  put  in 
circulation.  What  constitutes  a  reasonable  time  depends  upon  the 
circumstances  of  each  particular  case,  such  as  the  nature  of  the  bill, 
the  places  where  drawn  and  to  be  presented,  the  accessibility  of  the 
parties  or  place,  as  where  the  parties  are  when  the  bill  was  drawn, 
and  the  distance  between  the  place  of  drawing  the  bill  and  the  payee ; 
whether  the  payee  is  to  be  himself  the  bearer ;  delay  arising  from  the 
sickness  of  the  payee ;  the  political  condition  of  the  country ;  or  other 
accident  not  arising  from  his  own  misconduct,  and  various  other  cir- 
cumstances difficult  to  enumerate.  But  the  consideration  upon  which 
the  bill  arose  can  have  no  influence  upon  the  question  of  diligence.^" 

"Evans  v.  Bridges,  4  Port.  (Ala.)  entitled  to  days  of  grace,  and  a  de- 

350.  mand  of  payment,  and  notice  to  the 

'^  Harrison  v.  Copeland,  8  Mo.  268.  drawer,  without  a  previous  presenta- 

'"  Negot.    Inst.    Law,   §   241 ;    Bills  tion  for  acceptance,  are  insufficient 

of  Exch.  Act,  §  40,  Appendix  herein,  to  charge  him);  Dumont  v.  Pope,  7 

'"Aymar  v.  Beers,  17  Cow.  (N.  Blackf.  (Ind.)  367  (holding  that 
Y.)  705;  Hart  v.  Smith,  15  Ala.  807,  to  authorize  the  payee  to  recover 
50  Am.  Dec.  161  (holding  that  a  against  the  drawer  of  a  bill  of  ex- 
bill  of  exchange,  payable  at  sight,  is  change  in  which  no  time  for  pay- 


496] 


WANT    OF    PRESENTMENT FOR  ACCEPTANCE. 


636 


Where  a  bill  was  drawn  by  a  banker  in  the  country  on  a  banker  in  the 
town  in  favor  of  a  certain  person,  payable  after  sight,  and  he  indorsed 


ment  is  specified,  he  must  present 
the  bill  to  the  drawee  for  accept- 
ance or  payment  within  a  reason- 
able time  after  it  is  received.) 

See  Allen  v.  Luydam,  20  Wend. 
(N.  Y.)  321,  32  Am.  Dec.  655,  (hold- 
ing that  an  agent  receiving  for  col- 
lection before  maturity,  a  bill  pay- 
able on  a  particular  day  after  date, 
is  held  to  strict  vigilance  in  making 
presentment  for  acceptance;  and  if 
chargeable  with  negligence,  is  sub- 
ject to  the  payment  of  all  damages 
sustained  by  the  owner.) 

In  the  United  States  it  is  declared 
that  no  absolute  rule  can  be  laid 
down  as  to  the  time  within  which 
a  bill  payable  a  certain  number  of 
days  after  sight  must  be  presented 
for  acceptance,  the  only  rule  is  that 
it  must  be  presented  within  a  rea- 
sonable time  dependent  upon  the 
circumstances  of  the  particular  case. 
There  is  a  difference  between  the 
case  of  a  bill  of  exchange,  drawn 
payable  at  so  many  days  after  date, 
and  one  drawn  payable  at  so  many 
days  after  sight,  as  in  the  former 
case  it  must  be  presented  by  the 
period  of  its  maturity;  in  the  latter 
it  is  sufficient  if  it  be  presented  in 
a  reasonable  time.  "There  is  one 
other  limitation  or  rather  illustra- 
tion of  the  principle,  which  is  very 
material.  It  is  thus  that  the  holder 
is  not  at  liberty  to  lock  up  the  bill 
for  any  length  of  time  in  his  own 
possession;  but  he  may  put  it  into 
circulation,  and  though  it  may  re- 
main a  considerable  time  iu  circu- 
lation, if  there  be  no  unreasonable 
delay  in  any  of  the  successive  hold- 
ers of  presentment  for  acceptance 
is  not  fatal  to  the  party  in  case  of 
dishonor."      Wallace     v.     Agry,     4 


Mason  (U.  S.  C.  C.)  336,  345;  Fed. 
Cas.  No.  17,096,  per  Story,  J.,  citing 
Muilman  v.  D'Eguino,  2  H.  Bl.  565; 
Goupy  V.  Harden,  7  Taunt.  159; 
Field  V.  Nickerson,  13  Mass.  131; 
Kyd  on  Bills  117;  Bayley  on  Bills 
(2d  ed.)  60;  Chitty  on  Bills  (5th 
ed.)  208.  In  Alabama  a  bill  of  ex- 
change, whether  foreign  or  inland, 
payable  at  sight,  must  be  presented 
for  acceptance  within  a  reasonable 
time  before  payment  thereof  can  be 
demanded,  and  what  is  a  reasonable 
time  depends  upon  the  circum- 
stances of  each  particular  case. 
Knott  V.  Venable,  42  Ala.  186.  194. 
In  Illinois  it  has  been  declared  to 
be  a  general  rule  that  the  holder  of 
a  sight  draft  must  put  it  in  circula- 
tion or  present  it  for  payment  at 
furthest  the  next  business  day  after 
its  reception,  if  within  the  reach 
of  the  person  on  whom  it  is  drawn. 
Montelius  v.  Charles,  76  111.  303,  306. 
In  this  case  the  court  quotes  as  fol- 
lows from  Muilman  v.  D'Eguino,  2 
H.  Black.  565,  Eyre,  C.  J.,  said: 
"Courts  have  been  very  cautious 
in  fixing  any  time  for  an  inland 
bill,  payable  at  a  certain  period 
after  sight,  to  be  presented  for  ac- 
ceptance, and  it  seems  to  me  more 
necessary  to  be  cautious  in  respect 
to  foreign  bills  payable  in  that  man- 
ner. If,  instead  of  drawing  their 
foreign  bills,  payable  at  usances  in 
the  old  way,  merchants  choose,  for 
their  own  convenience,  to  draw 
them  in  this  manner,  and  make  the 
time  commence  when  the  holder 
pleases,  I  do  not  see  how  the  courts 
can  lay  down  any  precise  rule  on 
the  subject.  I  think,  indeed,  the 
holder  is  bound  to  present  the  bill 
in  a  reasonable  time,  in  order  that 


637 


RELEASE   OF   DRAWER   AKD   IKDORSER. 


[§  496 


it  to  the  defendants,  who  indorsed  it  to  the  plaintiffs  seven  days  after 
the  date  of  the  bill,  and  the  plaintiffs  delayed  presentment  for  four 


the  period  may  commence  from 
which  the  payment  is  to  take  place. 
The  question,  what  is  a  reasonable 
time,  must  depend  on  the  peculiar 
circumstances  of  the  case,  and  it 
must  always  be  for  the  jury  to  de- 
termine whether  laches  is  imputable 
to  the  plaintiff."  In  Louisiana  a  bill 
must  be  presented  in  a  reasonable 
time;  what  constitutes  such  time  de- 
pends upon  the  circumstances  of 
each  particular  case.  The  holder  of  a 
sight  draft  should  not  put  it  in  his 
pocket  and  delay  presentment  unnec- 
essarily, confiding  in  the  solvency  of 
the  drawee;  if  he  do  so,  and  there  is 
a  loss  in  consequence  thereof,  he 
must  bear  it,  and  the  drawer  will  be 
discharged.  But  the  bill  may  be  put 
in  circulation,  and  in  that  case  much 
time  may  elapse  whilst  it  is  passing 
from  hand  to  hand,  before  present- 
ment, without  releasing  the  drawer. 
Richardson  v.  Fenner,  10  La.  Ann. 
600.  In  Massachusetts  it  is  declared 
that  "The  draft  being  payable  at 
sight,  it  was  necessary  to  present  it 
within  a  reasonable  time  after  it 
was  received  from  the  indorser  by 
the  plaintiffs.  They  were  not  bound 
to  forward  it  immediately,  but  only 
to  use  reasonable  diligence  in  trans- 
mitting it.  If  guilty  of  no  unrea- 
sonable or  improper  delay  in  its 
presentation,  then,  upon  its  non- 
payment by  the  drawees,  they  had 
a  right  to  have  recourse  to  the  de- 
fendant as  indorser.  Byles  on  Bills 
139;  Mellish  v.  Rawdon,  9  Bing.  416, 
and  2  Moore  &  Scott  570;  Mullick 
V.  Radakissen,  9  Moore  P.  C.  66; 
Bridgeport  Bank  v.  Dyer,  19  Conn. 
136.  Ordinarily  the  question  whether 
a  presentment  was  within  a  reason- 
able  time   is   a   mixed   question   of 


law  and  fact,  to  be  decided  by  the 
jury  under  proper  instructions  from 
the  court.  And  it  may  vary  very 
much,  according  to  the  particular 
circumstances  of  each  case.  If  the 
facts  are  doubtful,  or  in  dispute,  it 
is  the  clear  duty  of  the  court  to 
submit  them  to  the  jury.  But  when 
they  are  clear  and  uncontradicted, 
then  it  is  competent  for  the  court 
to  determine  whether  the  reasonable 
time  required  by  law  for  the  pre- 
sentment has  been  exceeded  or  not. 
Gilmore  v.  Wilbur,  12  Pick.  124; 
Holbrook  v.  Burt,  22  Pick.  555; 
Spoor  V.  Spooner,  12  Met.  285."  Pres- 
cott  Bank  v.  Caverly,  7  Gray  (73 
Mass.)  221.  In  Michigan  a  draft 
payable  at  sight  should  be  presented 
for  payment  within  a  reasonable 
time,  and  a  court  cannot,  as  matter 
of  law,  say  that  any  delay  is  rea- 
sonable beyond  that  which  is  re- 
quired in  the  ordinary  course  of 
business  without  special  inconveni- 
ence to  the  holder;  or  by  the  spe- 
cial circumstances  of  the  particular 
case.  The  Phoenix  Ins.  Co.  v.  Allen, 
7  Cooley  (11  Mich.)  501.  In  Ne- 
braska it  is  said  that:  "A  bill  must 
be  presented  to  the  drawee  for  ac- 
ceptance within  a  reasonable  time, 
even  though  the  drawer  or  indorser 
has  sustained  no  actual  loss  by  the 
delay,  and  has  continued  solvent  up 
to  the  time  of  presentment."  Col- 
lingwood  V.  The  Merchants'  Bank, 
15  Neb.  118,  122,  per  Maxwell,  J.  In 
New  York  it  is  also  declared  that: 
"Though  it  does  not  clearly  appear 
whether  the  drawer  had  funds  of 
the  defendant,  at  the  time  of  the 
drawing  of  the  bill,  yet  he  had  a 
right  to  expect  that  his  bill  would 
be  accepted  and  paid;   and  it  is  in 


k 


49G] 


WAXT    OF    PRESENTMENT — FOR   ACCEPTANCE. 


638 


days,  the  question  of  unreasonable  delay  was  left  to  the  jury.  Lord 
Tenterden  saying  in  summing  up  that  it  might  be  reasonably  inferred 


evidence,  that  it  would  have  been 
paid,  on  sight,  if  it  had  been  pre- 
sented. Under  these  circumstances 
it  was  necessary  for  the  holders  of 
the  bill  to  present  it  for  acceptance 
within  a  reasonable  time,  and  to 
give  due  notice  of  its  dishonor  to 
the  drawer."  Elting  &  Shook  v. 
Brinkerhoff,  2  Hall  (N.  Y.)  459,  per 
Oakley,  J.  In  South  Carolina  when 
a  bill  is  drawn,  payable  within  a 
specified  time  after  sight,  it  is  nec- 
essary, in  order  to  fix  the  period 
when  the  bill  is  to  be  paid,  to  pre- 
sent it  to  the  drawee  for  acceptance. 
In  other  cases,  it  is  not  incumbent 
on  the  holder  to  present  it  before  it 
is  due.  (Chitty  on  Bills  67.)  The 
rule  in  relation  to  bills,  whether 
payable  at  sight  or  so  many  days 
after  sight,  or  in  any  other  manner, 
is,  that  due  diligence  must  be  used. 
The  holder  has  no  privilege  to  re- 
tain the  bill  in  his  possession  for 
such  a  length  of  time  as  may  occa- 
sion a  loss  to  the  drawer,  but  ought 
to  present  the  bill  as  soon  as  possi- 
ble, and  it  must  be  done  within  a 
reasonable  time.  What  is  reason- 
able time  depends  upon  the  par- 
ticular circumstances  of  the  case; 
and  it  is  for  the  jury  to  determine 
whether  any  laches  is  imputable  to 
the  holder.  As  it  was  incumbent 
upon  the  holder  of  this  bill  to  have 
presented  it  for  acceptance  within 
a  reasonable  time;  so  on  refusal  to 
accept,  notice  must  be  given  as  soon 
as  possible  to  the  persons  on  whom 
the  holder  means  to  resort  for  pay- 
ment, or  they  will,  in  general,  be 
totally  discharged  from  responsibil- 
ity. Fernandez  v.  Lewis,  1  McCord 
(S.  C.)  323.  In  Texas  it  is  said  that: 
"It  is  well  settled  that  in  case  of  a 


draft  drawn  at  sight,  or  so  many 
days  after  sight,  the  holder  must 
present  it  for  payment  within  a  rea- 
sonable time.  And  in  determining 
the  question  of  reasonable  time,  the 
courts  will  consider  all  the  circum- 
stances by  which  the  question  of 
diligence  can  be  affected,  as,  for  in- 
stance, the  distance  between  the 
place  of  residence  of  the  drawer 
and  the  place  of  residence  of  the 
drawee,  the  mail  facilities  of  the 
country,  etc.  The  general  usage  of 
the  country  in  respect  to  such  pa- 
per will,  also,  enter  into  the  con- 
sideration of  the  question.  It  is  also 
to  be  remarked  that  the  idea  of  rea- 
sonable time  is  opposed  to  the  idea 
of  great  diligence  or  promptitude. 
The  question  is  one  of  a  large  class 
which  frequently  produce  great  em- 
barrassment, from  the  extreme  diffi- 
culty in  many  cases  of  drawing  a 
line  by  which  reasonable  time  can 
be  separated  from  laches.  One 
period  of  time  is  pronounced,  with- 
out any  hesitation,  as  reasonable 
time  within  which  to  make  presenta- 
tion of  this  description  of  paper; 
with  as  little  hesitation,  a  delay  to 
make  presentation  for  another 
period  of  time,  will  be  pronounced 
laches;  and,  between  the  two  peri- 
ods, there  must  necessarily  be  a 
tract  of  time  which  will  fall  within 
the  idea  of  reasonable  diligence  or 
laches,  according  to  circumstances, 
and  as  to  which  the  law  must  some- 
times pronounce  its  decisions  some- 
what arbitrarily."  Nichols  v.  Black- 
more,  27  Tex.  587,  per  Bell,  J.  In 
West  Virgi7iia  it  is  the  duty  of  the 
holder  of  a  bill  of  exchange  payable 
at  sight  and  entitled  to  days  of 
grace  to  put  the  same  into  circula- 


639 


RELEASE   OF   DRAWER  AND   INDORSEE. 


[§  496 

that  it  was  neither  expected  or  considered  necessary  to  present  such 
a  bill  as  speedily  as  if  it  were  a  bill  of  any  private  party ;  that  bills  of 


tion  within  a  reasonable  time  or  pre- 
sent it  to  tlie  drawee  for  acceptance 
and  payment,  otherwise  the  drawer 
will    be    discharged    from    liability. 
Thornburg  &   Sons  v.  Emmons,   23 
W.  Va.  325.    The  court  said  in  this 
case:    "The  courts  have,  in  cases  of 
bills    payable    at   sight,    or   at   any 
given  time  after  sight,  declined  to 
lay  down  any  rule  prescribing  what 
is  a  reasonable  time  in  which  they 
must  be  presented    for   acceptance, 
leaving  the  question  in  every  case 
as  it  arises,  to  be  determined  by  its 
own  peculiar  circumstances,  and  if 
the  bill  be  not  presented  within  a 
reasonable  time,  the  drawer  is  dis- 
charged, although  the   parties   con- 
tinue solvent,  and  there  is  no  dam- 
age caused   by  the  delay.     Daniel's 
Neg.    Instruments,   §   465;    1   Wait's 
Actions  and  Defenses,  p.  619;  Chitty 
on  Bills  274;   1  Parsons'  Notes  and 
Bills,  pp.  263,  338,  383.    But  one  of 
the     circumstances     affecting     the 
question  of  what  is  reasonable  time 
in  such  case  is,  whether  the  bill  has 
been  put  in,  and  kept  in  circulation, 
for  if  it  has  been  kept  in  circula- 
tion,  the  delay  of  a  year  or  even 
more  would  not  necessarily  amount 
to  negligence.    But  if  the  holder  re- 
tains possession   of  the  bill  for  an 
unreasonable   time,   and   thus   locks 
it  up  from  circulation,  he  makes  it 
his  own,  and  will  have  no  remedy 
against  antecedent  parties  from  or 
through    whom     he     derived     title. 
Chitty   on    Bills    275;    Robinson    v. 
Ames,    20    Johns.    146;     Daniel    on 
Negot.   Inst.   434.    And   it  has  been 
held    that    a    sight    draft    on    New 
York,    indorsed    to   the    plaintiff    in 
Wisconsin,  and  not  mailed  to  New 
York  for  presentment  for  fourteen 


days,  was  prima  facie  evidence  of 
laches,     but     might     be     rebutted. 
Walsh  V.  Dart,  23  Wis.  334."   Thorn- 
burg V.  Emmons,  23  W.  Va.  325,  333, 
per    Woods,    J.     In    Wisconsin   un- 
reasonable delay  of  the  payee  of  a 
draft  to  present  it  to  the  drawee,  or 
to  notify  the  drawer  of  its  non-ac- 
ceptance or  non-payment,  or  to  re- 
turn it  to  the  drawer  as  refused  by 
the    payee,    makes    the    paper    the 
payee's    own,    and    discharges    the 
drawer.    Allan   v.    Eldred,   50   Wis. 
182.    In  England  "The  purchaser  of 
a  foreign  bill  of  exchange,  payable 
at  a  certain  time  after  sight,  which 
is  publicly   offered   for  negotiation, 
is  not  bound  to  send  it  by  the  earli- 
est opportunity  to  the  place  of  its 
destination.    There  is  no  fixed  time 
when  a  bill  drawn  payable  at  sight 
or  a  certain  time  after,  shall  be  pre- 
sented to  the  drawee.    But  it  must 
be    presented    within    a    reasonable 
time.    What  is  a  reasonable  time  is 
a  question   for   the   jury   to   decide, 
from  the  circumstances  of  the  case. 
But  if  the  holder  of  a  bill  so  pay- 
able, neither  presents  it  nor  puts  it 
in     circulation,     he     is     guilty     of 
laches,  and  cannot  recover  upon  it. 
It  is   sufficient,   if  notice  of  a  bill 
drawn  in   England   on  a  person   in 
the   East   Indies,   being   dishonored, 
is  sent  to  England  by  the  first  di- 
rect and   regular   mode   of   convey- 
ance, whether  it  be  by  an  English 
or  a  foreign  ship;  the  holder  is  not 
bound  to   send   such  notice  by  the 
accidental,    though    earlier    convey- 
ance of  a  foreign  ship  not  destined 
to      this      country."       Muilman      v. 
D'Eguino,   2  H.   Bl.  565.    A  foreign 
bill  of  exchange,  payable  after  sight, 
must   be   presented    for   acceptance 


§§   497,   498]  WANT    OF    PRESENTMENT FOR    ACCEPTANCE. 


640 


this  kind  were  considered  a  part  of  the  circulation  of  the  country,  and 
that  the  nature  of  the  bill  itself  as  well  as  the  time  the  ^defendants 
themselves  had  kept  it  unaccepted  were  to  be  considered  upon  the 
question  of  laches  or  unreasonable  delay."^ 

§  497.  Presentment,  how  made — ^By  whom. — Presentment  for  ac- 
ceptance must  be  made  by  or  on  behalf  of  the  holder. ^^  Where  the 
holder  of  an  indorsed  bill  of  exchange,  which  is  not  accepted  by  the 
drawee,  merely  informs  the  drawee  that  he  has  the  bill,  but  does  not 
actually  present  it  to  him  for  acceptance,  and  the  drawee  thereupon 
tells  him  that  the  bill  will  not  be  accepted  nor  paid,  the  indorser  is 
not  thereby  discharged,  though  no  notice  is  given  to  him  of  the 
drawee's  declarations.-^  If  the  holder  of  a  bill  of  exchange  transmits 
it  to  his  agent  for  presentment  to  the  drawee,  such  agent  has  no  right 
to  receive  anything  short  of  an  explicit  and  unequivocal  acceptance, 
without  giving  notice  to  the  holder,  as  in  case  of  non-acceptance ;  and 
he  will  be  liable  for  any  loss  the  holder  may  sustain  in  consequence  of 
his  neglect  so  to  do.^* 

§  498.  Same  subject — ^Time  and  place. — Presentment  for  accept- 
ance must  be  made  on  a  business  day  and  before  the  bill  is  over- 
due."   A  bill  of  exchange  payable  in  a  fixed  period  from  the  date. 


and  even  though  there  is  no  limited 
time  defined  by  statute  for  present- 
ment and  no  usage  of  trade  to  fix 
the  time,  still  such  bill  must  be  pre- 
sented within  a  reasonable  time. 
This  rule  has  been  adopted  for  want 
of  a  better  law  not  defining  the  time 
precisely.  How,  otherwise  than  by 
presentment,  can  the  time  a  bill  has 
to  run  be  fixed,  where  it  is  payable 
after  sight.  "The  court  assumed 
that  the  correct  principle  was  laid 
down  fully  in  the  cases  of  Mellish 
V.  Rawdon,  9  Bing.  416,  which  is  in 
accordance  with  the  prior  case  of 
Muilman  v.  D'Eguino,  2  H.  Bla.  565, 
and  Fry  v.  Hill,  7  Taunt.  397,  that 
in  determining  the  question  of  'rea- 
sonable time'  for  presentment,  not 
the  interests  of  the  drawer  only,  but 
those  of  the  holder  must  be  taken 
into   account;    that   the   reasonable 


time  expended  in  putting  the  bill 
into  circulation,  which  is  for  the 
interest  of  the  holder,  is  to  be  al- 
lowed; and  that  the  bill  need  not 
be  sent  for  acceptance  at  the  very 
earliest  opportunity,  though  it  must 
be  sent  without  improper  delay." 
Mulick  V.  Radakissen,  9  Moore  P.  C. 
46,  66,  67,  per  Baron  Parke. 

-'  Shute  V.  Robins,  3  Carr  &  P.  80. 

"Negot.  Inst.  Law,  §  242;  Bills 
of  Exch.  Act,  §  41,  Appendix  herein. 

=^Fall  River  Union  Bank  v.  Wil- 
lard,  5  Mete.  (Mass.)  216. 

"^  Walker  v.  Bank  of  State  of  New 
York,  9  N.  Y.  582. 

==  Negot.  Inst.  Law,  §  242;  Bills  of 
Exch.  Act.  §  41,  Appendix  herein. 

On  what  days  presentment  may 
be  made,  see  Negot.  Inst.  Law,  §  243, 
Appendix  herein. 

Presentment    where    time   insuffi- 


I 


641  PRESENTMENT,    HOW   MADE — TO    WHOM.  [§    499 

may  be  presented  for  acceptance' at  any  time  before  it  becomes  due.-* 
And  where  bills  payable  at  a  particular  time  were  enclosed  by  letter 
to  the  drawee,  before  they  were  due,  and  he  advised  his  correspondent 
that  they  were  not  accepted,  it  was  held  a  sufficient  presentment  and 
refusal  to  accept.-'  But  it  is  held  that  unless  it  is  shown  that  the 
drawer  of  an  order  or  inland  bill  sustained  injury  by  the  delay,  it  is 
sufficient  to  show  presentment  or  demand  at  any  time.^^  If  a  draft 
is  payable  at  no  particular  place  in  a  city  or  town  it  must  be  pre- 
sented at  the  maker's  residence  or  place  of  business,  if  he  has  such, 
and  if  he  has  not,  then  the  presence  of  the  instrument  in  the  place 
is  a  sufficient  presentation.-''  Where  a  draft  was  drawn  on  a  party 
having  a  place  of  business  in  a  town,  but  was  not  made  payable  at  any 
particular  place,  and  the  holder  protested  it  and  notified  the  drawer 
without  having  presented  it  to  the  acceptor,  who  had  funds  in  his 
hands  of  the  drawer  sufficient  to  have  paid  the  draft,  it  was  held 
that  the  drawer  was  discharged  from  liability  by  the  failure  of  the 
holder  to  present  the  draft  to  the  acceptor.^"^ 

§499.  Same  subject — To  whom. — Presentment  for  acceptance 
must  be  made  to  the  drawee  or  some  person  authorized  to  accept  or 
refuse  acceptance  on  his  behalf.^  ^  The  presentment  of  a  bill  for  ac- 
ceptance should  be  to  the  drawee  himself,  if  he  can  be  found.  If 
to  an  agent  or  other  person  authorized  to  accept,  the  fact  should 
appear.^^  "The  presentment  of  a  bill  of  exchange  or  draft  must  be 
made  to  the  drawee  or  acceptor,  or  to  an  authorized  agent.  A  per- 
sonal demand  is  not  always  necessary,  and  it  is  sufficient  to  make  the 
demand  at  the  residence  or  usual  place  of  business  of  the  drawee, 
where  the  presentment  is  for  payment.  This  draft  had  not  been  ac- 
cepted, and  therefore  the  presentment  first  to  be  made  by  the  bank  was 

cient,  see  Negot.   Inst.  Law,   §   244,  =•"  People's  Nat.  Bank  v.  Lutterloh, 

Appendix  herein.  95  N.  C.  495. 

As  to  reasonable  time,  see  §§  496,  '^  Negot.  Inst.  Law,  §  242;  Bills  of 

505-508  herein.  Exch.  Act,  §  41,  Appendix  herein. 

^''Bachellor  v.  Priest,  12  Pick.  (29  Presentment     to     two     or     more 

Mass.)  399.  drawees  who   are  not  partners,  see 

"Carmichael  v.  Bank  of  Pennsyl-  Negot.    Inst.    Law,    §    242;    Bills    of 

vania,  4  How.  (Miss.)  567.  Exch.  Act,  §  41,  Appendix  herein. 

^Tryon    v.    Oxley,    3    G.    Greene  Presentment  where   drawee   dead, 

(Iowa)   289.  or  bankrupt  or  insolvent,  see  Negot. 

^^  People's  Nat.  Bank  v.  Lutterloh,  Inst.    Law,    §    242;    Bills    of    Exch. 

95  N.  C.  495.  Act,  §  41,  Appendix  herein. 


^  Sharps  v.  Drew,  9  Ind.  281. 


Joyce   Defenses — 41. 


§§  500,  501]         WANT  or  presentment — for  acceptance.       642 

a  presentment  for  acceptance.  It  was  the  duty  of  the  bank  collector 
to  be  careful,  not  only  to  present  the  draft  at  the  usual  place  of  busi- 
ness, but,  if  the  plaintiff  was  not  in,  to  assure  himself  that  the  person 
to  whom  he  presented  the  draft  for  acceptance  was  the  authorized 
agent  of  the  plaintiff."^^ 

§  500.  Acceptance  of  order  on  committee. — An  order  drawn  upon 
a  committee  composed  of  several  persons  may  be  accepted  by  such 
persons  individually.^* 

§501.  Where  presentment  is  excused. — Presentment  for  accept- 
ance is  excused  and  a  bill  may  be  treated  as  dishonored  by  non-accept- 
ance in  either  of  the  following  cases :  ( 1 )  Where  the  drawee  is  dead 
or  has  absconded,  or  is  a  fictitious  person  or  a  person  not  having 
capacity  to  contract  by  bill;  (3)  where,  after  the  exercise  of  reason- 
able diligence,  presentment  cannot  be  made;  (3)  where,  although  pre- 
sentment has  been  irregular,  acceptance  has  been  refused  on  some 
other  ground.^^  A  delay  in  the  mail  constitutes  a  sufficient  excuse  for 
not  presenting  for  acceptance  immediately.^''  If,  however,  there  is  a 
delay  of  fourteen  days  in  mailing  a  sight  draft  for  presentment  for 
acceptance  and  payment,  and  it  miscarries,  such  delay,  without  suffi- 
cient excuse,  constitutes  laches,  as  ordinary  diligence  must  be  exer- 
cised in  such  cases,^^ 

'^Burrus  v.  Life  Insurance  Co.  of  it  will  be  a  good  acceptance  as  to 

Virginia,  124  N.  C.  9,  32  S.  E.  323.  them.   Byles  on  Bills  (Tth  Am.  Ed.) 

"^  Smith  v.  Milton,  133  Mass.  369,  188;    Bayley  on  Bills  (6th  Ed.)    58, 

C.  Allen,  J.,  said:    "But  it  does  not  181;    Owen  v.  Van  Uster,  10  C.   B. 

appear   that  the    committee    differs  318;   Tombeckbee  Bank  v.  Dumell,  5 

from  any  association  of  individuals;  Mason  (U.  S.  C.  C.)  56." 

and    an    order    drawn    upon    it    is  ^  Negot.  Inst.  Law,  §  245 ;  Bills  of 

drawn    upon   a  number   of   Individ-  Exch.    Act,    §    41,  Appendix   herein, 

uals  associated  together,  but  not  in-  See  §§  521,  522  herein, 

corporated   or '  co-partners.    In  such  =°  Walsh  v.  Blatchley,  6  Wis.  422. 

case,  although  a  bill  may  be  treated  =^  Walsh  v.   Dart,  23  Wis.  334.  99 

as  dishonored  if  not  accepted  by  all  Am.  Dec.  177. 
the  drawees,  if  accepted  by  a  part 


1 


CHAPTER  XXIII. 


WANT    OF    PRESENTMENT    CONTINUED — PRESENTMENT    FOR    PAYMENT. 


Sec. 

502.  Want  of  demand   on   principal 

debtor — When  presentment 
necessary  to  charge  drawer 
and  indorsers. 

503.  Same  subject  continued — Agent 

— Acceptor — Instances. 

504.  Sureties  and   guarantors — Par- 

ties primarily  liable — De- 
mand. 

505.  Time     of     presentment     where 

note  is  not  and  is  payable  on 
demand — Reasonable  time. 

506.  Same  subject,  continued. 

507.  Same    subject — Notes     payable 

with  or  without  interest. 

508.  Demand  note  and  demand  note 

bearing  interest,  distinctions 
abrogated  by  statute — Pre- 
sentment— Reasonable  time 
— Question  of  law  or  fact — 
Pleading — Burden  of  proof. 

509.  Time  of   maturity — Sunday  or 

holiday — Saturday. 

510.  Same  subject,  continued. 

511.  Sufficiency     of     presentment — 

By  whom  made — Time  when 
made. 


Sec. 
512. 


513. 


514. 
515. 

516. 

517. 
518. 


Sufficiency  of  demand — Bring- 
ing suit. 

Sufficiency  of  presentment — Ex- 
hibition and  delivery  up  of 
instrument. 

Place  of  presentment. 

Place  of  presentment,  contin- 
ued. 

Presentment — Instrument  pay- 
able at  bank. 

Same  subject,  continued. 

Same  subject,  continued — In- 
solvency or  suspension  of 
bank. 

519.  Presentment  to  whom — Person 

primarily  liable  dead. 

520.  Presentment     to      whom — Per- 

sons   primarily    liable — Part- 
ners— Joint  debtors. 

521.  Excuses   for   delay   in   present- 

ment. 

522.  Excuses — When        presentment 

dispensed  with — Drawer — In- 
dorser. 

523.  Same  subject,  continued. 

524.  Waiver  of  presentment  and  de- 

mand. 

525.  Same  subject,  continued. 


§  502.  Want  of  demand  on  principal  debtor — When  presentment 
necessary  to  charge  drawer  and  indorsers. — Tlic  negotiable  instru- 
ments statute  of  Washington/  which  is  the  same  as  that  of  New 
York/  specifically  declares  that  presentment  for  payment  is  not  neces- 
sary in  order  to  charge  persons  primarily  liable.    This  is,  however,  a 


'Sess.  Laws,  Wash.  1899,  p.   353,        =  Negot.  Inst.  Law,  §  130,  see  Ap- 
70.  pendix  herein. 

643 


502] 


WANT    OF    PRESENTMENT — FOR   PAYMENT. 


644 


mere  declaration  of  the  law.^  ISTo  demand  on  co-makers  is  neces- 
sary ;*  nor  upon  one  who  becomes  a  maker  or  original  promisor  by 
signing  his  name  upon  the  back  of  a  note  before  its  delivery  to  the 
payee  f  nor  upon  a  third  person  who  signs  his  name  on  the  face  of  tlie 
note."  The  statute  provides,  however,  that  "If  the  instrument  is,  by 
its  terms,  payable  at  a  special  place,  and  he  is  able  and  willing  to 
pay  it  there  at  maturity  and  has  funds  there  available  for  that  pur- 
pose, such  ability  and  willingness  are  equivalent  to  a  tender  upon  his 
part."^    It  is  further  as  specifically  declared  by  the  statute  that  pre- 


^  Galbraith  v.  Shepard  (Wash. 
1906),  86  Pac.  1114. 

See  also  as  to  maker  and  acceptor 
the  following  cases: 

Alabama. — Hunt  v.  Johnson,  96 
Ala.  130,  11  So.  387. 

California. — Jones  v.  NichoU,  82 
Cal.  32,  22  Pac.  878. 

Connecticut. — Jackson  v.  Packer, 
13  Conn.  342. 

Illinois. — Oxnaan  v.  Garwood,  80 
111.  App.  658;  YeatQn  v.  Burney,  62 
111.  61. 

Indiana. — McCullough  v.  Cook,  34 
Ind.  290. 

Kentucky. — Rice  v.  Hogan,  8 
Dana  (Ky.)  134. 

New  York. — Bush  v.  Gilmore,  61 
N.  Y.  Supp.  682,  45  App.  Div.  89; 
Wolcott  v.  Van  Santvoord,  17  Johns. 
(N.  Y.)   248. 

South  Carolina. — See  McNair  v. 
Moore,  55  S.  C.  435,  33  S.  E.  491. 

England. — Rhodes  v.  Gent,  5 
Barn.  &  Aid.  244. 

*Legg  V.  Vinal,  165  Mass.  555,  43 
N.  E.  518. 

^  Cherry  v.  Sprague,  187  Mass.  113, 
72  N.  E.  456,  67  L.  R.  A.  33. 

"Herrick  v.  Edwards,  106  Mo. 
App.  633,  81  S.  W.  466. 

■^  Negot.  Inst.  Law,  §  130,  see  Ap- 
pendix herein. 

Examine  further  as  to  maker  and 
acceptor  the  following  cases: 

United  States. — Wallace  v.  McCon- 
nell,  13  Pet.  (U.  S.)  136. 


Alabama. — Clark  v,  Moses,  50  Ala. 
326;  Montgomery  v.  Elliott,  6  Ala. 
701. 

Arkansas. — Pryor  v.  Wright,  14 
Ark.  189. 

Florida. — Greeley  v.  Whitehead,  35 
Fla.  523,  28  L.  R.  A.  286,  17  So.  643. 
48  Am.  St.  Rep.  258. 

Indiana. — Hartwell  v.  Chandler,  5 
Blackf.  (Ind.)  215. 

Louisiana. — Thiel  v.  Conrad,  21 
La.  Ann.  214. 

Maine. — Lyon  v.  Williamson,  27 
Me.  149.  See  Heslan  v.  Bergerson, 
94  Me.  395,  47  Atl.  896. 

Michigan. — Reeve  v.  Pack,  6  Mich. 
240. 

New  Hampshire. — Otis  v.  Barton, 
10  N.  H.  433. 

New  York. — Hills  v.  Place,  48  N. 
Y.  520. 

England. — Dickinson  v.  Bowes,  16 
East.  110;  Spindler  v.  Grellett,  1 
Exch.  384. 

"When  a  note  or  bill  is  payable 
at  a  particular  bank,  *  *  *  it  is 
well  known  that  according  to  the 
usual  course  of  business  the  note 
or  bill  is  usually  lodged  in  the  bank 
for  collection;  and  if  the  maker 
calls  to  take  it  up  when  it  falls  due, 
and  it  is  delivered  to  him,  and  he 
pays  the  amount  the  business  is 
closed;  but  if  he  does  not  find  the 
note  or  bill  at  the  bank,  he  can  de- 
posit the  money  to  meet  the  same 
when  it  shall  be  presented,  and  the 


645 


WAXT    OF   DEMAND   OX    TRIXCirAL   DEBTOR. 


[§  50^ 


sentment  for  payment  is  necessary  in  order  to  charge  the  drawer  and 
indorsers.®   This  is,  however,  a  well-settled  rule.'^ 


proof  of  such  tender  and  deposit,  in 
case  of  a  subsequent  suit  will  ex- 
onerate him  from  all  costs  and  dam- 
ages. Or  should  the  note  or  bill  be 
made  payable  at  some  other  place 
than  a  bank,  and  no  deposit  should 
be  made,  or  he  should  choose  to  re- 
tain the  money  in  his  own  posses- 
sion, an  offer  to  pay  at  the  time  and 
place  would  protect  him  against  in- 
terest and  costs  on  bringing  the 
money  into  court.  Rules  of  a  differ- 
ent character  have  sometimes  pre- 
vailed in  other  jurisdictions,  but  the 
principles  to  be  applied  in  such  a 
case  are  settled  by  this  court,  nor  is 
it  necessary,  where  the  note  or  bill 
is  payable  at  a  specified  time  and 
place,  to  aver  in  the  declaration  or 
prove  at  the  trial  that  a  demand 
was  made  at  that  place  in  order  to 
maintain  the  action,  the  established 
rule  being  that  if  the  maker  or  ac- 
ceptor was  at  the  place  at  the  time 
designated  and  was  ready  and  of- 
fered to  pay  the  money  it  is  a  mat- 
ter of  defense  to  be  pleaded  and 
proved."  Cox  v.  National  Bank,  100 
U.  S.  704,  714,  per  Clifford,  J.,  citing 
Wallace  v.  McConnell,  13  Pet.  (U. 
S.)  136,  150;  1  Daniel  Negot.  Se- 
curities (2d  Ed.),  §  643;  Edwards 
Bills  (2d  Ed.)  150;  Rowe  v. 
Young,  2  Bli.  391,  395. 

^Galbraith  v.  Shepard  (Wash. 
1906),  86  Pac.  1114;  Sess.  Laws 
Wash.  1899,  p.  353,  §  70;  Negot. 
Inst.  Law,  §  130,  see  Appendix 
herein.  English  Bills  of  Exch.  Act, 
§  45,  see  Appendix  herein. 

*  United  States. — Magruder  v. 
Union  Bank,  3  Pet.  (U.  S.)  87,  7  L. 
Ed.  612. 

Arkansas. — Winston  v.  Richard- 
son, 27  Ark.  34;  Jones  v.  Robinson, 


11  Ark.   504;   Ruddell  v.  Walker,  7 
Ark.  457. 

Illinois. — Kimmel  v.  Wiel,  95  111. 
App.  15  (Laws  1895,  p.  262,  adopts 
the  law  merchant  as  to  negotiable 
instruments  and  notes  payable  in 
money). 

Kansas. — Selover  v.  Snively,  24 
Kan.  672. 

Louisiana. — Otto  v.  Belden,  28  La. 
Ann.  302. 

Maryland. — Brandt  v.  Mickle,  28 
Md.  436. 

Massachusetts. — Browning  v.  Car- 
son, 163  Mass.  255,  39  N.  E.  1037. 

Missouri. — Westbay  v.  Stone,  112 
Mo.  App.  411,  87  S.  W.  34. 

New  Hampshire. — Piscataqua  Ex- 
change Bank  v.  Carter,  20  N.  H. 
246,  51  Am.  Dec.  217. 

New  York. — Parker  v.  Stroud,  98 
N.  Y.  379;  Pardee  v.  Fish,  60  N.  Y. 
265;  Merritt  v.  Todd,  23  N.  Y.  28; 
Cayuga  County  Bank  v.  Warden,  1 
N.  Y.  413;  Kelly  v.  Thiess,  72  N. 
Y.  Supp.  467,  65  App.  Div.  146; 
Filler  v.  Gallautcheck,  66  N.  Y. 
Supp.  509;  Smith  v.  Unangst,  46  N. 
Y.  Supp.  340,  29  Misc.  564,  aff'g  43 
N.  Y.  Supp.  1164,  19  Misc.  711; 
Berry  v.  Robinson,  9  Johns.  (N. 
Y.)  121,  6  Am.  Rep.  267;  Meise  v. 
Newman,  76  Hun  (N.  Y.)  341;  Wal- 
cott  V.  Van  Santvoord,  17  Johns.  (N. 
Y.)  248;  Johnson  v.  Haight,  13 
Johns.  (N.  Y.)  470;  Ferner  v.  Wil- 
liams, 37  Barb.  (N.  Y.)  10. 

Ohio. — House  v.  Vinton  Nat.  Bk., 
43  Ohio  St.  343,  54  Am.  Rep.  813,  1 
N.  E.  129;  Hudson  v.  Walcott,  4 
Ohio  Dec.  459,  2  Cleve.  L.  Rep.  194. 

Pennsylvania. — Duncan  v.  McCul- 
lough,  4  Serg.  &  R.  (Pa.)  180. 

Vermont. — Landon  v.  Bryant,  69 
Vt.  303,  37  Atl.  297. 


§    503]  WANT    OF    PRESEXTMEXT — FOR    PAYMENT.  646 

§  503.  Same  subject  continued — Agent — Acceptor — Instances. — 
Due  demand  is  not  dispensed  with  by  the  fact  that  the  indorser  is 
made  administrator  of  the  maker's  estate.^**  And  demand  is  not  ex- 
cused, although,  the  note  was  paid  before  its  purchase  by  the  indorsee.  ^^ 
So  where  a  party,  who  procures  the  note  to  be  discounted  and  volun- 
tarily takes  it  up  at  maturity,  fails  to  make  proper  demand,  the  in- 
dorser is  released.^^  Demand  is  also  necessary  to  fix  the  liability  of 
an  indorser  who  indorses  an  insolvent's  note  at  maturity,^^  as  demand 
is  necessary  to  charge  an  indorser  of  an  overdue  note.^*  But  if  pre- 
sentment is  made  in  a  reasonable  time  and  notice  of  dishonor  given, 
an  indorser  of  an  overdue  note  transferred  for  indorsement  will  be 
liable.^^  Again,  a  demand  must  be  made  within  a  reasonable  time 
after  indorsement,  in  order  to  fix  liability  under  an  agreement  to 
indorse  a  note  after  maturit}-.^*'  And  in  case  of  an  order  upon  a 
drainage  district  the  indorser  is  not  liable  thereon  in  the  absence  of 
requisite  diligence  shown  to  collect  such  order,  there  being  treasury 
assets  sufiicient  to  meet  the  demand. ^^  So  it  is  a  prerequisite  for  re- 
course to  the  drawer  of  an  order  on  another  for  a  sum  due  that  it 
should  be  duly  presented  for  payment.^*  It  is  also  held  that  all  drafts, 
whether  foreign  or  inland  bills,  must  be  presented  to  the  drawee 

"Magruder  v.  Union  Bank,  3  Pet.  Tennessee. — Rosson  v.  Carroll,  90 

(U.  S.)  87,  7  L.  Ed.  612.  Tenn.  90,  16  S.  W.  66. 

"Moore   v.    Stelgel,    50    Mo.   App.  See  Hampton  v.  Miller,  78  Conn. 

308.  267,    61    Atl.    952,    noted    in    §    506 

^  Martin  v.  Perqua,  20  N.  Y.  Supp.  herein. 

285,  47  N.  Y.  St.  R.  518,  66  Hun  225.  "  Bassenhorst   v.    Wilby,    45    Ohio 

^Hudson  V.  Walcott,  4  Ohio  Dec.  333,  13  N.  E.  75,  11  West.  Rep.  270. 

459,  2  Cleve.  L.  Rep.  194.  "  Sachs  v.  Fuller  Bros.  Toll.  Lum- 

"Landon  v.  Bryant,  69  Vt.  203,  37  her  &  Box  Co.,  69  Ark.  270,  62  S.  W. 

Atl.  397.   See,  also:  902. 

California. — Beer    v.     Clifton,    98  '^  First  National  Bank  v.  Drew,  93 

Cal.  323,  33  Pac.  204,  35  Am.  St.  Rep.  111.  App.  630,  aff'd  60  N.  E.  856.   Ex- 

172,  20  L.  R.  A.  580.  amine  Dennis  v.  Water  Co.,  10  Cal. 

Connecticut. — Bishop  v.  Dexter,  2  369;    Pease  v.   Cornish,  19  Me.  191. 

Conn.  419.  ^  Knott  v.  Whitfield,  99  N.  C.  76, 

Znriiana.— Novel  v.  Hittle,  23  Ind.  5  S.  E.   664.    See  Agee  v.  Smith,  7 

346.  Wash.    471,    35    Pac.    370.     Compare 

Iowa. — Graul  v.  Strutzel,  53  Iowa  Sinclair    v.    Johnson,    85    Ind.    527; 

712,  6  N.  W.  119,  36  Am.  Rep.  250.  Sweet  v.   Swift,  65   Mich.  90,  31  N. 

Maryland. — Dixon  v.  Clayville,  44  W.  767;   Brown  v.  Teague,  52  N,  C. 

Md.  573.  573.   See  §  522  herein. 

Xew  York. — Berry  v.  Robinson,  9 
Johns.  (N.  Y.)  121. 


647  WAXT    OF   DEMAXD   OX   PRIXCIPAL   DEBTOR.  [§    503 

within  a  reasonable  time  and  in  case  of  non-payment  notice  must 
be  promptly  given  to  the  drawer  to  charge  him.  What  is  a  rea- 
sonable time  depends  upon  the  peculiaT  facts  of  each  case.^°  And  a 
draft  on  a  third  person  given  to  settle  an  antecedent  debt  must  be  pre- 
sented by  the  holder  to  preserve  the  debt.-"  And  although  one  who  in- 
dorses as  collateral  security  is  held  entitled  to  demand,^ ^  still  it  is 
also  decided  that  a  damage,  injury,  prejudice  or  loss  must  be  sus- 
tained by  the  pledgor  to  render  one  liable  who  holds  the  note  as  such 
collateral  in  case  of  non-presentment,  and  even  then  the  liability  is 
limited  to  the  extent  of  the  loss.--  It  is  further  determined  that  hold- 
ers of  a  note  of  a  third  person  as  collateral  are  not  liable  for  delay 
which  does  not  amount  to  gross  negligence  and  that  they  need  to 
exercise  only  reasonable  diligence  in  collection.-^  And  where  a  note  is 
given  for  the  purpose  of  securing  an  antecedent  debt  of  the  maker  and 
to  enable  it  to  be  discounted  by  the  payee,  indorsers  before  delivery 
are  held  liable  as  joint  makers  without  any  demand  being  made.-*  In 
case  of  non-negotiable  notes  demand  is  not  necessary  to  charge  the  in- 
dorser.^^  Although  if  the  immediate  indorsee  writes  over  a  blank 
indorsement  of  a  non-negotiable  note  words  which  evidence  an  intent 
to  consider  the  signature  as  an  indorsement  on  negotiable  paper  the  in- 
dorser  will  be  entitled  to  demand.-®  Presentment  and  demand  is  not 
required  in  order  to  charge  the  acceptor  of  a  draft. ^^  And  where  one 
indorses  as  agent  and  the  principal  is  not  disclosed,  demand  on  the 
principal  will  not  be  sufficient  to  charge  the  indorser,  but  demand 
must  be  made  upon  the  agent.-* 

^*Montelius  v.  Charles,  76  111.  303,  =*Bank  of  Jamaica  v.  Jefferson,  92 

306.     Presentment   of    draft   to   the  Tenn.  537,  22  S.  W.  211,  36  Am.  St. 

drawee  must  be  made  in  a  reason-  Rep.  100.   See  Williams  v.  Baltimore 

able  time.    Fugitt  v.  Nixon,  44  Mo.  National  Bank,  70  Md.  343,  17  Atl. 

295.   See  §  496  herein.  382. 

*  Mauney  v.  Coit,  80  N.  C.  300,  30  =^  San  Diego  First  National  Bank 

Am.  Rep.  80.    See  Dayton  v.  Trull,  v.  Babcock,  94  Cal.  96,  29  Pac.  415; 

23  Wend.  (N.  Y.)  345.  Smith    v.    Cromer,    66    Miss.    157,    5 

"Nicholson  v.  Gouthit,  24  Bl.  609.  So.  619. 

See  Blanchard  v.  Boom,  40     Mich.  ="  Haber  v.   Brown,   101   Cal.   445, 

566;   Dayton  v.  Trull,  23  Wend.   (N.  35  Pac.  1035. 

Y.)  345.  ="  Hunt  v.  Johnson,  96  Ala.  130,  11 

'"Kennedy  v.  Rosier,  71  Iowa  671,  So.  387. 

33  N.  W.  226.  ^  Stinson  v.  Lee,  68  Miss.  113,  9 

''  Johnson,  Berger  &  Co.  v.  Down-  L.  R.  A.  830,  8  So.  272,  4  Bkg.  L.  J. 

ing  (Ark.),  88  S.  W.  825.  15. 


§§    504,    505J       WANT    OF    PRESENTMENT FOR   TAYMENT. 


648 


§  504.  Sureties  and  guarantors — Parties  primarily  liable — De- 
mand.— It  is  held  that  where  a  note  is  indorsed,  before  its  delivery 
to  the  payee,  by  one  as  surety  he  is  an  original  promisor,^'*  and  that 
he  is  primarily  liable.^"  And  he  has  not  the  rights  of  an  indorser  as 
to  presentment  and  demand  upon  the  principal  where,  although  ap- 
parently one  of  the  co-makers,  he  is  in  fact  a  surety  and  the  payee 
knows  him  to  be  a  surety.^^  So  sureties  are  nevertheless  liable,  even 
though  the  note  is  not  presented  to  the  principal  maker,  there  being 
no  extension  of  time  without  their  consent.^ ^  And  where  there  is  an 
absolute  guaranty  and  contract  to  pay  if  the  maker  does  not,  the 
guarantors  should  pay  without  demand  being  made.^^ 

§  505.  Time  of  presentment  where  note  is  not  and  is  payable  on 
demand — ^Reasonable  time. — The  negotiable  instruments  law  pro- 
vides that  where  the  instrument  is  not  payable  on  demand,  present- 
ment must  be  made  on  the  day  it  falls  due.^*   But  it  is  held  that  this 


^Treadway  v.  Antisdel,  86  Mich. 
82,  48  N.  W.  956. 

'"Rouse  v.  Wooten,  140  N.  C.  557, 
53  S.  E.  430;  Negot.  Inst.  Law 
(Chap.  54  Revisal),  §§  2213,  2219, 
2239,  3342  considered.  See  Beissner 
v.  Weekes,  21  Tex.  Civ.  App.  14,  50 
S.  W.  138. 

"  Chafoin  v.  Rich,  77  Cal.  476,  19 
Pac.  882.  See,  also,  Sibley  v.  Amer- 
ican Exch.  National  Bank,  97  Ga. 
126,  25  S.  E.  470;  Marion  National 
Bank  v.  Phillips,  16  Ky.  L.  Rep.  159, 
35  S.  W.  910.  Examine  First  Na- 
tional Bank  v.  Eureka  Lumber  Co., 
123  N.  C.  24,  31  S.  E.  348,  13  Am. 
&  Eng.  Corp.  Cas.  N.  S.  727,  15  Bkg. 
L.  J.  708. 

'=  Wallace  v.  Richards,  16  Utah  52, 
50  Pac.  804.  See  Eppens  v.  Forbes, 
82  Ga.  748,  9  S.  E.  723;  Newman  v. 
Kaufman,  28  La.  Ann.  865,  26  Am. 
Rep.  114;  First  National  Bank  v. 
Adamson,  25  R.  I.  73,  54  Atl.  930. 

'^  City  Savings  Bank  v.  Hopson,  53 
Conn.  453,  5  Atl.  601. 

See  further  as  to  sureties  and 
guarantors: 


Alabama. — Donley  v.  Camp,  22 
Ala.  695,  58  Am.  Dec.  274. 

Connecticut. — Tyler  v.  Wadding- 
ham,  58  Conn.  375,  20  Atl.  335,  8 
L.  R.  A.  657;  Bond  v.  Storrs,  13 
Conn.  412. 

Georgia. — Hunnicutt  v.  Perot,  100 
Ga.  312,  27  S.  E.  787. 

Illinois. — Guge  v.  Mechanics'  Na- 
tional Bank,  79  111.  62. 

Kansas. — Farrer  v.  People's  Trust 
Co.,  63  Kan.  881,  64  Pac.  1031. 

Louisiana. — Newman  v.  Kaufman, 
28  La.  Ann.  865,  26  Am.  Rep.  114. 

Maine. — Cooper  v.  Page,  24  Me.  73. 

Minnesota. — Hungerford  v.  O'- 
Brien, 37  Minn.  306,  34  N.  W.  161. 

New  York. — Allen  v.  Rightmere, 
20  Johns.  (N.  Y.)  365,  11  Am.  Dec. 
288. 

Ohio. — Castle  v.  Rickly,  44  Ohio 
St.  490,  9  N.  E.  136,  58  Am.  Rep. 
839. 

West  Virginia. — Miller  v.  Clen- 
denin,  42  W.  Va.  416,  26  S.  E.  512. 

=*  Negot.  Inst.  Law,  §  131;  Bills  ol 
Exch.  Act,  §  45,  Appendix  herein. 
See   Pendleton   v.   Insurance   Co.,   y 


()49  WANT    OF    DEMAND    OX    PRINCIPAL   DEBTOR.  [-§    506 

section  does  not  apply  so  as  to  prevent  recovery  on  subsequent  notes 
of  a  series  although  there  is  a  failure  to  present  the  same  after  dis- 
honor of  tlie  first,  and  even  though  it  is  stipulated  that  upon  failure 
to  pay  any  of  the  notes  the  subsequent  ones  shall  become  due  and 
payable  immediately.  =*^  And  a  bank  certificate  of  deposit  is  due  im- 
mediately, as  it  is  in  effect  a  promissory  note.  And  actual  demand 
need  not  be  made  in  order  to  enable  the  statute  of  limitations  to 
commence  running.^''  But  a  note  not  on  demand,  which  is  payable 
at  a  place  certain,  is  not  within  a  statute  precluding  recovery  on  a 
demand  note,  payable  at  a  certain  place,  unless  a  demand  at  that  place, 
prior  to  suit  brought,  is  proven  to  have  been  made."  Where  a  note 
is  payable  on  demand  presentment  must  be  made  within  a  reason- 
able time  after  its  issue,  except  that  in  case  of  a  bill  of  exchange, 
presentment  for  payment  will  be  sufficient  if  made  within  a  reason- 
able time  after  the  last  negotiation  thereof.^^  The  time  for  present- 
ment of  a  demand  note  is  the  same  under  the  Massachusetts  statute, 
which  also  provides  that  in  determining  what  is  a  reasonable  time 
regard  is  to  be  had  to  the  nature  of  the  instrument,  the  usage  of  trade 
with  respect  to  such  instruments  and  the  facts  of  the  particular  case, 
and  within  this  enactment  it  is  held  that  a  demand  made  seventy-four 
days  after  the  date  of  the  note  is  not  sufficient.^'' 

§  506.  Same  subject  continued. — Within  the  above  rule  there  must 
be  a  presentment  within  a  reasonable  time  after  date  of  a  note  pay- 
Fed.  238,  7  Fed.  169;  Groatman  v.  Islexo  Yorfc.— S  c  h  1  e  si  n  ge  r  v. 
Delheim,  6  Me.  476;  Garland  v.  Schultz,  96  N.  Y.  Supp.  383,  110  App. 
West,  68  Tenn.  315;  Wilson  v.  Sen-  Div.  356. 
ior,  14  Wis.  380.  Pennsylvania. — Harrisburg      Nat. 

^  Creteau  v.  Foote  &  T.  Glass  Co.,  Bank  v.  Moffitt,  3  Dauphin  Co.  Rep. 

57   N.   Y.   Supp.   1103,  40  App.   Div.  69,  10  Pa.  Dist.  R.  22. 

215.  Virginia. — Bacon  v.  Bacon,  94  Va. 

='°  Mitchell  V.  Easton,  37  Minn.  335,  686,  27  S.  E.  576,  14  Bkg.  L.  J.  495. 

33  N.  W.  910.  Canada. — Banque    du     Peuple    v. 

"  Heslan  v.  Bergeron,  94  Me.  395,  Denincourt,    Rap.    Jud.    Quebec,    10 

47  Atl.  896;   Rev.  Stat.  Ch.  32,  §  10.  C.  S.  428. 

=*Negot.  Inst.  Law,  §  131;  Bills  of  Examine   Weland   v.    Hibbard,    65 

Exch.   Act,   §    45,    Appendix   herein.  N.  Y.  Supp.  790,  32  Misc.  749. 

See,  also:  ™  Merritt  v.  Jackson,  181  Mass.  69, 

Connecticut. — Hampton  v.   Miller,  62  N.  E.  987,  Stat.  1898,  Ch.  533,  §§ 

78  Conn.  267,  61  Atl.  952.  71,  193.     Same  provision,  see  Negot. 

Michigan. — Home  Savings  Bank  v.  Inst.  Law,  §  4;    Bills  of  Exch.  Act, 

Hosie,  119   Mich.   116,  5  Det.  L.  N.  §  45   (2),  Appendix  herein. 
730,  77  N.  W.  625,  16  Bkg.  L.  J.  104. 


§    507]  WANT    OF    PRESENTMENT FOR    PAYMENT.  G50 

able  on  demand  after  date ;  and  in'  such  case  the  controlling  circum- 
stances upon  the  question  of  what  constitutes  a  reasonable  time  are 
held  to  be  limited  to  that  of  the  holder's  ability,  irrespective  of  credit 
or  indulgence  to  the  maker.**^  And,  notwithstanding  a  statute  making 
a  demand  note  overdue  and  dishonored  where  it  remains  unpaid  four 
months,  yet  if  the  indorser  understood  from  the  circumstances  that 
such  a  note  was  not  intended  to  be  paid  until  after  that  period  had 
expired  he  is  not  within  the  terms  of  the  statute  so  far  as  demand  is 
concerned,  but  is  entitled  thereto  within  a  reasonable  time  in  accord- 
ance with  the  common-law  rule.*^  If  a  note  is  indorsed  after  maturity 
it  is  also  held  to  be  within  the  rule  as  to  demand  notes  and  to  re- 
quire presentment  within  a  reasonable  time  after  due  in  order  to 
charge  the  indorser.*^*  And  the  insolvency  of  the  maker  of  a  demand 
note  constitutes  no  excuse  for  non-presentment  within  such  reason- 
able time,  although  the  question  whether  an  injury  or  loss  was  sus- 
tained by  want  of  demand  is  held  to  be  a  proper  one  for  consideration 
in  such  a  case.*^  Demand  for  payment  delayed  for  two  and  one-half 
years  where  the  parties  reside  within  the  same  city  is  such  an  un- 
reasonable delay  as  to  discharge  the  indorsers  of  a  demand  note.*^ 
So  a  delay  of  nearly  three  years  is  unreasonable  where  the  maker  is 
the  holder's  employe.**  And  a  delay  of  thirty-three  months  operates 
to  discharge  the  indorser.*^   And  ten  months'  delay  is  unreasonable.*® 

§  507.     Same  subject-^Notes  payable  with  or  without  interest. — 

Under  a  California  decision  the  fact  that  the  payee  fails  to  make  pre- 

**>  State,  Emerald  &  P.  Brewing  Co.         Louisiana. — Thielman    v.    Gueble, 

V.  Foley,  61  N.  J.  L.  428,  39  Atl.  650,  32  La.  Ann.  260,  36  Am.  Rep.  267. 
15  Bkg.  L.  J.  216.  Massachusetts. — Field    v.    Nicker- 

Examine    Hitchings    v.    Edmands,  son,  13  Mass.  131. 
132     Mass.     338;     Crim     v.     Stark-         New  Jersey. — Perry  v.   Green,   19 

weather,  88  N.  Y.  340,  42  Am.  Rep.  N.  J.  L.  61,  38  Am.  Dec.  536. 
250;    Merritt  v.  Todd,  23  N.  Y.   28,         New   Yorfc.— Merritt   v.    Todd,    23 

80  Am.  Dec.  243.  N.  Y.  28,  80  Am.  Dec.  243. 

*^  Hampton  v.  Miller,  78  Conn.  267,        Wisconsin. — Turner  v.  Iron  Chief 

61  Atl.  952.  Min.  Co.,  74  Wis.  355,  5  L.  R.  A.  533, 

«*  Kimmel  v.  Wiel,  95  111.  App.  15.  43  N.  W.  149. 

^  O'Neill    V.    Meighan,    66    N.    Y.         ■"  Banque  du  Peuple  v.  Denincourt 

Supp.  313,  32  Misc.  516.  Rap.  Jud.  Quebec,  10  C.  S.  428. 

*'  Home    Savings    Bank    v.    Hosie,         ^  Harrisburg  National  Bk.  v.  Mof- 

119  Mich.  116,  5  Det.  L.  N.  730,  77  fit,  3   Dauphin  Co.  Rep.  69,  10  Pa. 

N.  W.  625,  16  Bkg.  L.  J.  104.  Dist.   R.   22. 

Examine    Iowa. — Leonard    v.    01-        ^"Turner  v.   Iron  Chief  Min.  Co., 

son,  99  Iowa  162,  35  L.  R.  A.  381.  74  Wis.  355,  43  N.  W.  149,  5  L.  R. 

A.  533. 


651  WANT    OF   DEMAND   OX    PRINCIPAL   DEBTOR.  [§    507 

sentment  for  payment  after  apparent  maturity  of  a  note  payable  at 
sight  or  on  demand  with  interest  does  not  release  the  indorser  from 
liability.''^  In  Iowa  demand  must  be  made  within  a  reasonable  time 
to  render  the  indorser  liable,  whether  a  demand  note  does  or  does  not 
bear  interest,  and  a  demand  not  made  until  after  the  lapse  of  nearly 
ten  years  is  not  a  reasonable  time,  and  if  the  makers  have  removed 
from  the  state,  notice  of  that  fact  and  of  non-payment  must  be  given 
the  indorser  within  a  reasonable  time.*^  Under  a  Louisiana  decision 
the  fact  that  the  note  bears  interest  does  not  affect  the  indorser's  right 
to  notice  within  a  reasonable  time.*^  And  presentation  in  ten  days  of 
a  note  payable  to  order  on  demand  is  held  a  sufficient  presentment. **** 
Again,  although  a  note  payable  on  demand  bears  annual  interest,  de- 
mand should  not  be  unreasonably  delayed.^"  So  where  a  demand  note 
contains  no  stipulation  for  interest  and  it  is  given  partly  for  money 
due  and  partly  for  advances  to  be  made,  the  indorser  cannot  be  held 
where  demand  is  not  made  for  fourteen  months  after  the  last  advance- 
ment.^^ If  annual  interest  is  provided  for  and  the  note  is  payable  one 
day  after  date  but  the  prinicipal  is  to  be  paid  only  on  thirty  days'  no- 
tice, no  action  can  be  maintained  on  the  principal  until  demand  after 
thirty  days.^^  And  a  certificate  of  deposit  is  not  payable  on  demand 
but  six  months  after  date  where  it  is  to  ''be  left  six  months,  no  interest 
after  maturity."  In  such  a  case  demand  must  be  made  at  the  expiration 
of  six  months  and  on  the  last  day  of  grace.^^  If  a  note  is  intended  as  a 
continuing  security,  as  where  it  is  given  for  an  indebtedness  with  less 
than  statutory  interest,  it  is  neither  necessary  nor  unreasonable  to  fail 
to  immediately  demand  payment.^* 

^'Machado  v.   Fernandez,   74   Cal.  Fish,  60  N.  Y.  265,  19  Am.  Rep,  176; 

362,  16  Pac.  19.  Herrick  v.  Woolverton,  41  N.  Y.  581, 

^Leonard  v.  Olson,  99   Iowa  162,  1    Am.   Rep.    461;    Salmon   v.    Gros- 

35  L.  R.  A.  381,  61  Am.  St.  Rep.  230,  venor,  66  Barb.  (N.  Y.)  160;  Wethey 

68  N.  W.  677.  V.  Andrews,  3  Hill  (N.  Y.)  582;  Sice 

■"Thielman  v.  Gueble,  32  La.  Ann.  v.  Cunningham,  1  Cow.  (N.  Y.)  397; 

260,  36  Am.  Rep.  267.  Alexander  v.   Parsons,  3   Lans.    (N. 

«*  Schlesinger  v.  Schultz,  96  N.  Y.  Y.)    333,  disfg  Merritt  v.   Todd,   23 

Supp.  383,  110  App.  Div.  356.  N.  Y.  28,  80  Am.  Dec.  243. 

'"Verder  v.  Verder,  63  Vt.  38,  21  ''^  Massie  v.  Byrd,  87  Ala.   672,   6 

Atl.  611,  4  Bkg.  &  L.  J.  362,  under  So.  145. 

Vt.  R.  L.,  §  2013.  "■'  Towle  v.  Starz,  67  Minn.  370,  69 

"Wylie  v.  Cotter,  170   Mass.   356,  N.  W.  1098,  36  L.  R.  A.  463,  14  Bkg. 

49    N.   E.    746.     Examine   Parker  v.  L.    J.    141.     Case    not    within    Gen. 

Stroud,  98  N.  Y.   379,  50  Am.  Rep.  Stat.  1894,  §  2231. 

685;  Crim  v.  Starkweather,  88  N.  Y.  '*  Yates  v.  Goodwin,  96  Me.  90,  51 

339,   42   Am.    Rep.    250;    Pardee    v.  Atl.  804. 


§    508]  WANT    OF   PKESENTMEXT FOR   PAYMENT.  652 

§  508.  Demand  note  and  demand  note  bearing'  interest,  distinc- 
tions abrogated  by  statute — Presentment — Reasonable  time — Question 
of  law  or  fact — Pleading — Burden  of  proof. — The  negotiable  instru- 
ments law  in  effect  abrogates  the  distinction  between  bills  and  notes, 
payable  on  demand  and  bearing  interest,  and  those  payable  on  de- 
mand merely,  and  that  law  established  one  rule  applicable  to  all  cases, 
that  where  an  instrument  is  payable  on  demand  presentment  must  be 
made  in  a  reasonable  time  after  issue  and  no  distinction  is  made 
when  the  instrument  is  an  interest-bearing  obligation,  but  in  deter- 
mining the  question  of  reasonable  time  consideration  is  to  be  given 
to  the  nature  of  the  instrument  and  any  usage  of  trade  as  well  also  to 
the  particular  circumstances  of  each  case.  If  a  note  is  payable  on 
demand  it  may  be  demanded  at  any  time,  as  it  is  always  mature. 
What  constitutes  reasonable  time  cannot,  however,  rest  upon  any 
fixed  rules,  since  the  circumstances  may  evince  an  intention  as  to 
its  continuance.  The  question,  therefore,  whether  a  note  or  bill  has 
been  presented  in  a  reasonable  time,  under  the  statute,  and  after  its 
issue  is,  where  the  facts  are  ascertained  and  not  in  dispute,  a  question 
of  law  for  the  court,  but  the  question,  where  the  facts  are  in  dispute, 
unsettled  and  the  testimony  conflicting,  might  be  a  mixed  oiie  of  law 
and  fact  resting  upon  the  decision  of  the  jury  under  proper  instruc- 
tions as  to  the  law  by  the  court.  And  where  the  facts  were  not  in 
dispute  and  it  appeared  therefrom  in  an  action  upon  a  demand  note 
bearing  interest  that  the  indorsement  was  made  without  considera- 
tion and  for  the  maker's  accommodation ;  that  its  payment  was  secured 
by  the  deposit  of  certain  securities;  that  notwithstanding  that  some 
two  years  after  the  note  was  made  the  plaintiff  had  made  complaint 
to  the  indorser  as  to  its  non-payment,  and  twice  a  year  later  had 
written  that  the  maker  was  in  default  as  to  the  interest  but  no  steps 
were  taken  to  charge  the  indorser,  by  presentment  of  the  note  for 
payment  and  by  protest  for  non-payment,  until  after  the  lapse  of  more 
than  three  years  and  a  half  and  until  the  indorser  had  died  intestate 
and  after  the  appointment  of  an  administratrix  on  his  estate,  the  ques- 
tion of  reasonable  time  as  to  presentment  constitutes  one  of  law  for  the 
court  upon  such  ascertained  facts,  and  a  decision  of  the  trial  court, 
in  such  case,  that  the  note  was  not  presented  in  a  reasonable  time  for 
payment,  no  notice  of  dishonor  given  in  a  reasonable  time  will  be 
sustained.  And  the  defense  that  a  demand  interest-bearing  note  was 
not  presented  in  a  reasonable  time  need  not  be  specially  pleaded  to  be 
available  as  against  an  indorser,  as  the  question  of  presentment  of 
a  demand  note  within  a  reasonable  time  rests  upon  the  statute,  and 


G53      TIME   OF   MATUEITY- -SUNDAY   OR   HOLIDAY — SATURDAY'.     [§    509 

the  liability  of  an  indorser  to  make  good  the  maker's  contract,  un- 
like that  of  a  guarantor,  is  conditional  and  depends  upon  the  holder's 
having  made  a  case  under  the  statute  of  an  obligation,  which  he  has 
caused  to  mature  and,  by  appropriate  legal  steps,  to  become  an  in- 
debtedness of  the  parties.  The  burden  is  on  the  holder  of  a  note, 
when  seeking  to  charge  an  indorser,  to  prove  due  and  timely  present- 
ment and  the  giving  of  notice  of  its  dishonor  to  the  indorser.^^ 

§509.  Time  of  maturity — Sunday  or  holiday — Saturday. — Every 
negotiable  instrument  is  payable  at  the  time  fixed  therein  without 
grace.  When  the  day  of  maturity  falls  upon  Sunday,  or  a  holiday, 
the  instrument  is  payable  on  the  next  succeeding  business  day.  In- 
struments falling  due  or  becoming  payable  on  Saturday  are  to  be 
presented  for  payment  on  the  next  succeeding  business  day,  except 
that  instruments  payable  on  demand  may,  at  the  option  of  the  holder, 
be  presented  for  payment  before  twelve  o'clock  noon  on  Saturday 
when  that  entire  day  is  not  a  holiday.^"  If,  having  in  view  the  days 
of  grace,  the  presentation  for  payment,  protest,  and  notice  of  dishonor 
of  a  note  are  premature  no  action  lies  thereon  against  an  indorser.^^ 
And  where  a  note  was  given  while  a  statute  was  in  force  which  al- 
lowed days  of  grace,  a  presentation  is  premature  which  does  not 
make  allowance  therefor,  even  though  prior  to  presentment  days  of 
grace  are  abolished.^®    A  note  may  be  presented  on  the  last  day  of 

^"Commercial    Nat.    Bk.    of    Syra-  for  payment  on  the  following  Mon- 

cuse  v.  Zimmerman,  185  N.  Y.  210.  day."    Demelman  v.  Brazier    (Mass. 

^"Negot.    Inst.   Law,    §    145;    Bills  1907),  79  N.  E.  812,  per  Braley,  J. 

of  Exch.  Act,  §  14,  Appendix  herein.  Grace  abolished,  by  act  of  August 

"Demelman     v.     Brazier     (Mass.  7,  1903,  in  Georgia.    Patton  v.  Bank 

1907),   79   N.   E.   812.    See   Estes  v.  of  Lafayette,  124  Ga.  965,  53  S.  E. 

Tower,   102   Mass.    65,   3   Am.   Rep.  664.    A  question  in  this  case,  how- 

439.  ever,  of  computation  of  interest  and 

Days  of  grace.    "By  the  law  mer-  usury, 

chant,   which   is   part  of   our   com-  Days  of  grace  constitutes  part  of 

mon  law,  each  note  was  entitled  to  contract.      Usage     regulates.       See 

days  of  grace.     *     *     *     Grace  has  Bank  of  Washington  v.  Triplett,  1 

been  abolished  by  St.  1896,  c.  496,  Pet.    (U.    S.>    25;    Mills    v.    United 

now  Rev.   Laws,   c.    73,   §   103,  and  States  Bank,  11  Wheat.  (U.S.)  431; 

negotiable   paper   is   deemed    to    be  Renner    v.    Bank    of    Columbia,    9 

payable  at  the  time  named  therein.  Wheat.  (U.  S.)  581. 

unless  there  is  a  stipulation  for  de-  '^Wood  v.  Rosendale,  18  Ohio  Cir. 

lay,    and    when    falling    due    upon  Ct.  R.  247,  10  O.  C.  D.  66  abolished 

Saturday  may  be  legally  presented  March  12,  1896. 


§    510]  WAXT    OF    PRESENTMENT FOR   PAYMENT.  654 

grace.''^    Days  of  grace  have,  however,  been  abolished  in  many  states 
while  they  are  allowed  in  others. 

§  510.  Same  subject  continued. — Under  an  Alabama  decision,  if 
a  note  falls  due  on  Sunday  the  demand  for  payment  and  protest 
should  be  made  on  the  succeeding  business  day.''*^  And  this  is  so,  where 
the  next  day  is  not  a  legal  holiday,  under  the  Michigan  laws  of  1893, 
under  which  certain  holidays  and  Saturdays  after  twelve  o'clock  at 
noon  until  twelve  at  night  are  to  be  considered  as  Sundays,  public 
holidays  and  half-holidays  and  making  bills  and  checks  and  notes 
payable  on  such  days  presentable  for  acceptance  or  payment  on  the 
business  day  next  succeeding  and  such  rule  obtains  even  though  a 
bank  may  keep  open  on  Saturday  after  twelve  o'clock  if  it  so  votes 
by  its  directors.^^  In  Nebraska  it  is  held  that  where  a  bill  or  note, 
including  days  of  grace,  matures  on  Sunday  it  may  be  presented  on 
the  Monday  following,  and  that  if  any  of  the  public  holidays  occur 
on  Monday,  then  bills  or  notes  due  on  that  day  shall  be  payable  the 
succeeding  day.*^^  In  Kew  York,  under  the  provisions  of  a  statute 
making  Saturday  at  noon  a  legal  holiday,^^  the  holder  of  a  bill  due 
or  presentable  on  Saturday  ma}',  at  his  election,  rest  upon  a  demand 
and  presentment  made  before  noon  on  that  day,  and  if  he  does,  notice 
of  demand  and  protest  given  on  that  day  or  on  the  next  secular  day 
is  good ;  or  he  may  elect  to  make  a  demand  on  Monday,  and  if  pay- 
ment is  not  then  made,  in  order  to  hold  the  parties  entitled  to  no- 
tice, he  is  required  to  give  notice  of  dishonor  on  that  day,  and  so, 
if  there  was  a  failure  to  present  for  payment  on  Saturday,  as  the  draft 
was  presented  and  demand  made,  and  notice  of  protest  mailed  on 
Monday,  plaintiffs  were  not  chargeable  with  negligence  or  omission 
of  duty,  and  were  entitled  to  recover.®*  So  in  Texas  the  following 
Monday,  or  if  that  is  a  legal  holiday,  the  next  business  day  is  the  day 
on  which  a  note,  without  days  of  grace,  falling  due  on  Saturday  be- 
comes payable.®^    In  the  absence,  however,  of  statutory  provisions  to 

"'Guignon  V.  Union  Trust  Co.,  156  McAllester,   33   Neb.    646,   50  N.  W. 

111.   135,   40   N.  E.   556,  aff'g  53   111.  1040,  6  Bkg.  L.  J.  217;   Neb.  Comp. 

App.  581.  Stat,  Ch.  41,  §  8. 

^-Brennan    v.    Vogt,    97   Ala.    647,  "^  Laws  1887.  chap.  289. 

11  So.  893.  "^  Sylvester  v.   Crohan,   138   N.  Y. 

"'Hitchcock    v.    Hogan,    99    Mich.  494,  53  N.  Y.   St.   R.   113,  34  N.   E. 

124,  57  N.  W.  1095;  Mich.  Laws  1893,  273,  aff'g  63  Hun  509,  45  N.  Y.  St. 

Act  185.  R.  320,  18  N.  Y.  Supp.  546. 

'-  Hastings  First  National  Bank  v.  "  Hirshfield  v.  Ft.  Worth  National 


I 


655 


SUFFICIENCY    OF   PRESENTMENT. 


[§    511 


the  contrary  presentment  was  required  by  the  law  merchant  to  be 
made  on  the  preceding  day  of  a  bill  or  note  which  matured  on  Sunday 
or  a  holiday.*^*^ 

§  511.  SuflBiciency  of  presentment — By  whom  made — Time  when 
made. — Presentment  for  payment  to  be  sufficient  must  be  made  by 
the  holder  or  by  some  person  authorized  to  receive  payment  on  his 
behalf/''  or  on  behalf  of  his  estate.®^  And  one  is  a  holder  who  is  in 
possession  of  a  note  indorsed  to  himself  or  has  a  blank  indorsement, 
and  may  make  presentment.^®  So  a  presentment  by  any  person  in  pos- 
session of  a  bill  hona  fide  is  sufficient  to  charge  .the  parties  to  the  bill. 
Thus  where  a  bill  of  exchange  indorsed  in  blank  by  the  payees  but 
made  payable  to  a  particular  person  by  the  last  indorsement,  was  pre- 


Bank,  83  Tex.  452,  34  Cent.  L.  J. 
350,  15  L.  R.  A.  639,  18  S.  W.  743, 
29  Am.  St.  Rep.  660,  6  Bkg.  L.  J.  345. 
See  Carey-Lombard  Lumber  Co.  v. 
Ballinger  First  National  Bank,  86 
Tex.  299,  24  S.  W.  260,  10  Bkg.  L. 
J.  122. 

^  United  States. — Bussard  v.  Lev- 
ering, 6  Wheat.   (U.  S.)   102. 

Kentucky.— Of£ut  v.  Stout,  4  J.  J. 
Marsh.   (Ky.)   332. 

Maine. — Homes  v.  Smith,  20  Me. 
264. 

Massachusetts. — Farnum  v.  Fowle, 
12  Mass.  89,  7  Am.  Dec.  35. 

New  Jersey. — Reed  v.  Wilson,  41 
N.  J.  L.  29. 

New  York. — Jackson  v.  Richards, 
2  Caines  (N.  Y.)  343. 

•'^Negot.  Inst.  Law,  §  132;  Bills  of 
Exch.  Act,  §  45  (3),  Appendix  here- 
in.  See,  also: 

United  States. — United  States  v. 
Barker,  12  Wheat.  (U.  S.)  559. 

Illinois. — Ewen  v.  Wilbor,  99  111. 
App.  132. 

Iowa. — Mt.    Pleasant    Branch    of 

State    Bank    v.    McLeran,    26    Iowa 
306. 

Massachusetts. — Hartford  Bank  v. 
Barry,  17  Mass.  94. 

Wisconsin. — Blakeslee  v.  Hewett, 
76  Wis.  341,  44  N.  W.  1105. 


England. — Coove  v.  Callaway,  1 
Esp.  115. 

As  to  presentment  by  notary,  see 
United  States. — Nicholls  v.  Webb, 
8   Wheat    (U.   S.)    326;   Wiseman  v. 
Chiapella,  23  How.  (U.  S.)  368. 

Alabama. — Donegan  v.  Wood,  49 
Ala.  242. 

Louisiana. — Buckley  v.  Seymour, 
30  La.  Ann.  1341. 

Massachusetts. — Ocean  National 
Bank  v.  Williams,  102  Mass.  141. 

Missouri. — Clough  v.  Holden,  115 
Mo.  336,  37  Am.  St.  Rep.  393,  31  S. 
W.  1071,  rev'g  20  S.  W.  695. 

New  York. — Crim  v.  Starkweather, 
88  N.  Y.  339.  See  sections  herein  as 
to  protest. 

■«  White  V.  Stoddard,  11  Gray 
(Mass.)  258.  See  Yates  v.  Goodwin, 
96  Me.  90,  51  Atl.  804. 

"^  Ewen  V.  Wilbor,  99  111.  App.  132. 
Examine  Agnew  v.  Bank,  2  Har.  & 
G.  (Md.)  478;  Bachellor  v.  Priest, 
12  Pick.  (Mass.)  399;  Shed  v.  Brett, 
1  Pick.  (Mass.)  413,  11  Am.  Dec. 
209;  Sussex  Bank  v.  Baldwin,  17  N. 
J.  L.  487;  Porter  v.  Thom,  57  N.  Y. 
Supp.  479,  40  App.  Div.  34;  Bank  of 
Utica  V.  Smith,  18  Johns.  (N.  Y.) 
230. 


§    512]  WANT    OF   PRESENTMENT FOR    PAYMENT.  656 

sented  to  the  drawee  for  payment,  by  the  last  indorser,  who  was  in 
possession  of  the  bill  hona  fide,  the  presentment  was  held  sufficient  to 
charge  the  preceding  indorsers.'*^  But  if  a  person  is  wrongfully  in 
possession  and  is  not  the  lawfully  authorized  holder  of  the  instru- 
ment, presentment  by  him  will  be  ineffectual  to  charge  the  indorser.'^^ 
And  sub-contractors,  to  whom  checks  have  been  indorsed,  should 
present  the  same,  and  where  they  fail  to  do  so  within  a  reasonable 
time,  there  being  funds  in  the  bank  to  meet  the  obligation,  and  the 
maker  becomes  insolvent  during  such  delay  the  indorsers  are  dis- 
charged.'^- Presentment  should  also  be  made  at  a  reasonable  hour 
on  a  business  day.'^^  When  a  bill  or  note  is  not  payable  at  a  place 
where  there  are  established  business  hours,  a  presentment  for  payment 
may  be  made  at  any  reasonable  hour  of  the  day.  A  presentment  of  a 
bill  or  note  in  such  case,  however,  for  payment,  a  few  minutes  before 
twelve  at  night,  is  insufficient  and  unavailing,  unless  it  should  appear 
from  an  answer  made  to  the  demand  that  there  was  a  waiver  of  any 
objection  as  to  the  time,  or  that  payment  would  not  have  been  made 
upon  a  demand  at  a  reasonable  hour.'^'*  If  a  draft  is  to  be  considered 
as  an  inland  bill  of  exchange,  the  drawer  is  discharged  by  the  laches 
of  the  holder;  but  if  it  is  treated  as  a  mere  banker's  check,  then  a 
presentation  for  payment,  at  any  time  before  suit  brought,  will  be 
sufficient  unless  the  drawer  can  show  injury  from  the  delay.'^^ 

§  512.  Sufficiency  of  demand — ^Bringing'  suit. — The  bringing  of  a 
suit  constitutes  a  sufficient  demand  in  order  to  hold  the  maker  or  his 
estate  f^  nor  need  a  presentment  be  made  at  a  bank,  of  a  note  payable 

^"Bachellor  v.  Priest,  12  Pick.  (29  Massachusetts. — Estes    v.    Tower, 

Mass.)   399.  102  Mass.  65. 

^^Hofrichter    v.    Enyeart    (Neb.),  Missouri. — Clough  v.  Holden,  115 

99  N.  W.  658.  Mo.  336,  37  Am.  St.  Rep.  393,  21  S. 

^2  Brown  v.   Schintz,   202   111.   509,  W.  1071,  noted  in  §  514  herein. 

67  N.  E.  172,  aff' g  98  111.  App.  452,  New  York.— Salt  Springs  Bank  v. 

459.  Burton,  58  N.  Y.  430. 

"Negot.  Inst.  Law,  §  132;  Bills  of  Tennessee. — Union  Bank  v.  Fowl- 

Exch.  Act,  §  45  (3),  Appendix  here-  kes,  2  Sneed  (Tenn.)  555. 

in.  ^*Dana  v.  Sawyer,  22  Me.  244,  39 

Examine  the  following  cases:  Am.  Dec.  574. 

Kentucky. — Stivers  v.  Prentice,  3  "Elting  &  Shook  v.  BrinckerhofiE, 

B.  Mon.    (Ky.)   461.  2  Hall  (N.  Y.)  459. 

Louisiana. — Bank  of  Louisiana  v.  "  Stevenson    v.     Scofield,     70     111. 

Satterfield,  14  La.  Ann.  80.  App.     299;     Lamson     Consol.    Store 

Maine. — Dana  v.   Sawyer,  22   Me.  Service  Co.  v.  Conyngham,  32  N.  Y. 

244.  Supp.   129,  65  N.   Y.  St.  R.   271,  11 


II 


657  SUFFICIENCY    OF   PRESENTMENT.  [§    513 

there,  before  instituting  an  action  thereon ;"  nor  is  demand  necessary 
in  order  to  maintain  an  action  on  a  note  payable  on  call;''®  or  upon 
a  due-bill;''^  or  upon  a  promissory  note  extended  for  an  indefinite 
time  f^  or  upon  a  demand  jiote.**^  Again,  demand  at  a  specified  place 
of  payment  in  a  demand  note  is  not  a  prerequisite  to  a  suit  by  the 
payee  against  the  maker.®-  But  in  case  of  a  certificate  of  deposit  it  is 
held  that  demand  is  necessary  before  action  lies,  where  such  paper 
matures  on  a  certain  date.®^ 

§  513.  Sufficiency  of  presentment — Exhibition  and  delivery  up 
of  instrument. — The  instrument  must  be  exhibited  to  the  person  from 
whom  payment  is  demanded,  and  when  it  is  paid  must  be  delivered 
up  to  the  party  paying  it.®*  By  the  law  merchant  it  was  necessary 
to  exhibit  a  foreign  bill  when  demand  was  made  thereon.®^  Although 
it  is  held  not  necessary  that  the  drawee  or  his  agent  should  be  seen 
personally.®^  But  even  though  there  should  be  an  actual  exhibition 
of  a  bill  or  note  or  some  clear  indication  that  it  is  present,  in  making 
presentment  and  demand,  still  such  exhibition  may  be  waived,  as  where 
the  production  of  the  instrument  is  not  asked  for  or  its  non-exhibi- 
tion is  not  objected  to  at  the  time  or  payment  is  declined  on  other 
grounds.®^  Thus  where  a  note  was  payable  at  no  specific  place  and  the 

Misc.    428.      See    First   Nat.    Bk.    v.  Beardsley  v.  Weber,  104  Mich.  88,  62 

Bowner   (Tex.  Civ.  App.),  27  S.  W.  N.  W.  173;  note  to  Rapid  City  First 

698.  National  Bank  v.  Security  National 

"  Heslan  v.  Bergeron,  94  Me.  395,  Bank,  34  Neb.  71,  15  L.  R.  A.  386. 

47  Atl.  896.  '*  Negot.  Inst.  Law,  §  134,  Appen- 

"  Mobile  Savings  Bank  v.  McDon-  dix  herein.     See  Farmers'   Bank  v. 

nell,  83  Ala.  595,  4  So.  346.  Duvall,  7  Gill  &  J.   (Md.)  78;  Free- 

^Bonsted  v.  Cuyler,  116  Pa.  551,  man  v.  Boynton,  7  Mass.  483;  Fisher 

19  Week.  N.  C.  330,  8  Cent.  Rep.  128,  v.  Beckwith,  19  Vt.  31;   Hansard  v. 

8  Atl.  848.  Robinson,  7  Barn.  &  C.  90. 

*"  Finch  V.  Skilton,  29  N.  Y.  Supp.  "^  Musson  v.  Lake,  4  How.  (U.  S.) 

925,  79  Hun  531,  61  N.  Y.  St.  R.  544.  262. 

"Mumford  v.  Tolman  (111.  App.),  '"Wiseman  v.  Chiappella,  23  How. 
8  Nat. 'Corp.  Rep.  417;  Field  v.  Sib-  (U.  S.)  368.  See  Fisher  v.  Beck- 
ley,   77    N.   Y.    Supp.    252,   11   N.   Y.  with,  19  Vt.  31. 

Ann.  Cas.  187,  74  App.  Div.  81,  aff'd  Physical  presentation  of  note  pay- 

174  N.  Y.  514,  66  N.  E.  1108.  able  to   bearer.     See    Citizens'    Nat. 

«=Rigley  v.  Watts,  15  Ohio  C.  C.  Bank  v.  Brown,  45  Ohio  St.  39,  11 

645.  N.  E.  799,  10  West.  Rep.  485. 

''Young  V.  American  Bank,  89  N.  "Legg  v.  Vinal,  165  Mass.  555,  43 

Y.    Supp.    915,    44    Misc.    308.      But  N.  E.  518;  Porter  v.  Thorn,  57  N.  Y. 

compare  Hunt  v.  Divine,  37  111.  137;  Supp.  479,  40  App.  Div.  34,  aff'd  167 
Joyce  Defenses — 42. 


§  514] 


WANT    OF   PRESENTMENT-^FOR   PAYMENT. 


658 


maker,  having  no  place  of  business,  demand  was  made  upon  him  in 
the  street,  and  the  holder  had  the  note  with  him  but  there  was  no 
request  to  produce  the  paper,  it  was  decided  that  the  demand  was 
good  and  that  an  actual  exhibition  of  the  instrument  was  unneces- 
sary.®* 

§  514.  Place  of  presentment. — Presentment  for  payment  should  be 
made  at  the  place  of  payment  specified  in  the  instrument.  If  no 
place  of  payment  is  specified,  but  the  address  of  the  person  to  make 
payment  is  given  in  the  instrument  it  should  be  there  presented.  If 
no  place  of  payment  is  specified  and  no  address  is  given  the  instru- 
ment should  be  presented  at  the  usual  place  of  business  or  residence 
of  the  person  to  make  payment.  In  any  other  case  it  should  be  pre- 
sented to  the  person  to  make  payment  wherever  he  can  be  found,  or 
presented  at  his  last  known  place  of  business  or  residence.®^ 


N.  Y.  584,  60  N.  E.  1119;  Waring  v. 
Betts,  90  Va.  46,  17  S.  E.  739,  17  Va. 
L.  J.  370. 

«^King  V.  Crowell,  61  Me.  244,  14 
Am.  Rep.  560. 

^'Negot.  Inst.  Law,  §  133;  Bills  of 
Ex^h.  Act,  §  45,  Appendix  herein. 

See,  also,  United  States. — Cox  v. 
National  Bank,  100  U.  S.  704,  25  L. 
Ed.  739;  Wiseman  v.  Chiappella,  23 
How.  (U.  S.)  368,  16  L.  Ed.  466; 
Wallace  v.  McConnell,  13  Pet.  (U. 
S.)  136;  McGruder  v.  Bank  of 
Washington,  9  Wheat.    (U.  S.)    598. 

Alabama. — Isbell  v.  Lewis,  98  Ala. 
550. 

California. — Wild  v.  Van  Valken- 
burgh,  7  Cal.  166. 

Connecticut. — Hartford  Bank  v. 
Stedman,  3  Conn.  489. 

District  of  Columbia. — Wilkins  v. 
McGuire,  2  App.  D.  C.  448. 

Indiana. — Hartwell  v.  Candler,  5 
Blackf.  (Ind.)   215. 

Kentucky.  —  Germans'  National 
Bank  v.  Butchers'  Hide  &  T.  Co.  97 
Ky.  34. 

Louisiana. — H.  B.  Claflin  Co.  v. 
Feibelman,  44  La.  Ann.  518;  Moore 
V.  Britton,  22  La.  Ann.  64. 


Maine. — King  v.  Crowell,  61  Me. 
244,  14  Am.  Rep.  560. 

Maryland.  —  People's  Bank  v, 
Brooke,  31  Md.  7,  1  Am.  Rep.  11. 

Massachusetts.  —  Farnsworth  v. 
Mullen,  164  Mass.  112,  41  N.  E.  131. 

Michigan. — Holmes  v.  Roe,  62 
Mich.  199. 

Missouri. — Townsend  v.  Heer  Dry 
Goods  Co.,  85  Mo.  526;  Bailey  v. 
Sharkey,  29  Mo.  App.  518. 

Nebraska. — Nicholson  v.  Barnes, 
11  Neb.  452,  38  Am.  Rep.  373. 

New  Jersey.' — Freese  v.  Brownell, 
35  N.  J.  L.  285,  10  Am.  Rep.  239. 

New  York. — Bacon  v.  Hanna,  137 
N.  Y.  379,  50  N.  Y.  St.  R.  660,  33  N. 
E.  303,  aff'g  17  N.  Y.  Supp.  430,  43 
N.  Y.  St.  R.  906;  Myer  v.  Hibscher, 
47  N.  Y.  265;  Adams  v.  Leland,  30 
N.  Y.  309;  Nichols  v.  Goldsmith,  7 
Wend.  (N.  Y.)  160. 

North  Carolina. — Wittkowski  v. 
Smith,  84  N.  C.  671,  37  Am.  Rep.  632. 

Rhode  Island. — Hazard  v.  Spen- 
cer, 17  R.  I.  561. 

Tennessee. — Bynum  v.  Apperson, 
9  Heisk.  (Tenn.)   632. 

Virginia. — Waring  v.  Betts,  90  Va. 
46. 


■I 


659  PLACE    OF    PRESENTMENT.  [§    515 

§  515.  Place  of  presentment  continued. — If  a  note  is  payable  at  a 
particular  place,  presentment  or  demand  need  only  be  made  there,  as 
presentment  elsewhere  or  personal  demand  is  by  such  designation  im- 
pliedly dispensed  with  f^  as  it  is  sufficient  to  make  demand  at  the 
place  specified  as  that  of  payment  by  the  terms  of  the  instruments^ 
If  a  note  is  payable  at  a  specified  business  place,  it  is  not  a  sufficient 
presentment  for  the  notary  to  call  there  after  the  close  of  business 
hours  for  the  day  and  exercise  no  other  diligence  to  find  the  maker.®^ 
But  a  note  is  not  payable  at  a  place  certain  where  it  only  specifies  a 
town  as  the  place  payable  but  designates  no  particular  place  therein.®^ 
A  presumption  may,  however,  arise  as  to  a  subsequent  holder,  that  the 
maker  has  a  residence  at  a  certain  street  and  number  thereon  where 
they  are  written  upon  the  note,  before  maturity,  after  the  maker's 
name,  and  a  demand  at  such  specified  place  will  be  sufficient,  but  due 
diligence  is  required  in  making  presentment  in  such  case."*  If  a  par- 
ticular city  or  town  is  specified  as  the  place  of  payment  without  other 
specification  as  to  place,  the  instrument  is  to  be  deemed  and  treated 
as  payable  generally,  except  it  is  expressly  made  payable  at  that  city 
or  town  alone."^  And  where  no  particular  place  of  payment  in  a  city 
or  town  is  specified  in  a  draft,  then  presentment  should  be  made  at 
the  residence  or  place  of  business  of  the  maker,  but  if  he  has  none 
then  the  presence  of  the  paper  in  the  place  is  sufficient.^^  Presentation 
need  not,  however,  be  made  at  the  corner  of  certain  streets  where  they 
are  the  only  place  of  payment  specified."'^  Again,  where  the  note  is 
not  payable  at  any  particular  place,  and  the  maker  cannot  be  found  at 
the  place  where  the  note  is  dated,  then  presentment  must  be  made 
at  his  last  known  place  of  residence. ^^  Where,  however,  no  place  of 
payment  is  specified,  presentment  is  insufficient  if  it  is  made  only  at 

West  Virginia.— Peahody  Ins.  Co.  22  Atl.  165;  Me.  Rev.  Stat.,  Chap.  32, 

V.  Wilson,  29  W.  Va.  528.  §  10. 

""Ewen  V.  Wilbor,  99  111.  App.  132;  »*  Farnsworth  v.  Mullen,  164  Mass. 

Nelson  v.  Grondahl,  13  N.  Dak.  363,  112,  41  N.  E.  131. 

100  N.  W.  1093.     See  Leonard  v.  01-  "=  Leonard  v.  Olson,  99  Iowa  162, 

son,  99  Iowa  162,   67  Am.   St.   Rep.  67  N.   W.   677,  35   L.  R.   A.   381,  67 

230,  35  L.  R.  A.  381,  67  N.  W.  677.  Am.  St.  Rep.  230. 

°'  Gulgnon  v.  Union  Trust  Co.,  156  '"  National   Bank  v.   Lutterloh,  95 

111.   135,   40   N.   E.   556,   aff'g  53    111.  N.  C.  495. 

App.  581.  "^Wilkins  v.   McGuire,   2  App.   D. 

^'^  Clough  v.  Holden,  115  Mo.   336,  C.  448,  22  Wash.  L.  Rep.  155. 

37  Am.  St.  Rep.  393,  21  S.  W.  1071,  ■■"  Haber  v.  Brown,  101  Cal.  445,  35 

rev'g  20  S.  W.  695.  Pac.  1035. 

«'  Greenlief  v.  Watson,  83  Me.  266, 


§    516]  WANT    OF    PRESENTMENT FOR    PAYMENT.  GGO 

the  former  place  of  business  of  the  maker  without  any  inquiry  for  his 
residence  or  whereabouts,  and  the  indorser  will  not  be  bound  by  such 
a  demand."^  So  in  case  of  removal  of  the  maker's  place  of  business, 
demand  must  be  made  at  the  new  place  or  at  his  residence  where  it  is 
known  or  is  ascertainable  by  the  exercise  of  reasonable  diligence,  and 
a  demand  made  only  at  the  old  place  is  insufficient.^*"'  If  the  maker 
is  a  resident  of  the  state,  but  before  the  maturity  of  the  instrument 
he  removes  therefrom  and  takes  up  a  permanent  residence  in  another 
place,  a  presentment  is  sufficient  if  made  at  his  last  place  of  residence 
in  the  state  where  the  note  was  made.^"^  But  it  is  also  hejd  that  if  the 
maker  has  so  removed  from  the  state  before  maturity  of  the  note  and 
has  left  no  representative  there,  no  demand  is  necessary  in  order  to 
bind  the  indorser.^"^  Where  there  is  no  place  fixed  for  the  payment 
of  a  bill,  the  holder  must  make  a  diligent  search  for  the  drawee,  at  his 
residence,  or  within  the  realm  of  England;  but  here  drawee's  ab- 
sence from  the  state  excuses  this  duty.^^^  It  is  immaterial,  however, 
whether  the  place  of  demand  is  the  maker's  place  of  business  or  not, 
where  it  is  made  upon  him  personally  at  an  office  during  business 
hours,  and  the  notes  are  produced,  and  he  excuses  payment  upon  the 
ground  of  inability  to  pay,  and  does  not  object  to  the  place  of  de- 
mand.^*'* 

§  516.  Presentment — Instrument  payable  at  bank. — Where  the  in- 
strument is  payable  at  a  bank,  presentment  for  payment  must  be 
made  during  banking  hours,  unless  the  person  to  make  payment  has 
no  funds  there  to  meet  it  at  any  time  during  the  day,  in  which  case 
presentment  at  any  hour  before  the  bank  is  closed  on  that  day  is  suffi- 
cient.^"^  Presentment  at  the  particular  bank  specified  is  necessary  to 
warrant  a  recovery  against  the  indorser  and  presentment  to  the  cashier 
will  not  be  sufficient  unless  made  to  him  at  the  bank.^*"*    It  is  decided, 

""  Talbot  V.  National  Bank  of  the  Iowa  224,  41  Am.  Rep.  99.    Examine 

Commonwealth,    129    Mass.    67,    38  Salisbury    v.    Bartleson,    39    Minn. 

Am.  Rep.   302.     See  also  Trease  v.  365,  40  N.  W.  365. 

Haggin,  107  Iowa  458,  78  N.  W.  58.  "'  Taylor  v.  Bank  of  Illinois,  7  T. 

i^oReinke  v.  Wright,  93  Wis.  368,  B.  Mon.  (Ky.)  576. 

67  N.  W.  737.     See  Wood  v.  Rosen-  "'  Parker  v.  Kellogg,  158  Mass.  90, 

dale,  18  Ohio  C.  C.  247.  32  N.  E.  1038. 

101  Herrick   v.    Baldwin,    17    Minn.  "'^  Negot.  Inst.  Law,  §  135,  Appen- 

209,  10  Am.  Rep.  161.  dix  herein. 

"=  Leonard  v.  Olson,  99  Iowa  162,  i">°  Peabody  Ins.  Co.  v.  Wilson,  29 

35  L.  R.  A.  381,  67  Am.  St.  Rep.  230,  W.  Va.  528,  2  S.  E.  888.     See  Dailey 

67  N.  W.  677;   Whitely  v.  Allen,  56  v.  Sharkey,  29  Mo.  App.  518. 


GGl 


IXSTKUMENT    PAYABLE    AT    BAXK. 


[§  517 


however,  in  a  Mississippi  case,  that  because  a  note  is  made  payable  at 
a  particular  bank,  it  does  not  necessitate  a  demand  of  payment  there.^°^ 
A  demand,  however,  at  maturity  is.  sufficient  if  made  at  the  bank 
where  the  instrument  is  payable  ;^*'^  and  it  is  not  necessary  to  wait 
until  the  close  of  banking  hours,  but  the  demand  may  be  made  at  any 
time  during  such  hours.^"^  It  also  constitutes  a  sufficient  presentment 
and  demand  that  the  instrument  is  present  at  the  bank  where  pay- 
able,^ ^°  provided  it  is  known  to  be  physically  there  by  such  bank.^^°* 
So  where  the  cashier  of  the  bank  has  the  note  in  his  possession  it  shows 
that  he  is  authorized  to  receive  payment  and  it  is  unimportant  that  pre- 
sentment was  not  made  at  the  bank.^^^ 

§  517.  Same  subject  continued. — If  the  bank  is  closed  it  does  not 
necessitate  personal  demand  upon  the  debtor,  even  though  a  new  bank 
is  occupying  the  former  place  of  business  of  the  bank  where  the  paper 
is  payable. ^^^  A  presentment  may  be  good  where  admittance  is  ol> 
tained  after  the  bank  has  closed  and  payment  is  then  and  there  de- 
manded of  the  cashier.^^^   Again,  where  the  banlv  at  which  the  note  is 


'•"Hibernia  Bank  &  Trust  Co.  v. 
Smith  (Miss.,  1906),  42  So.  345. 

"It  was  not  necessary  to  present 
the  note  for  payment  at  the  Mobile 
Savings  Bank,  in  order  to  fix  the 
liability  of  the  maker,  although  it 
was  made  payable  there.  If  the 
maker  was  thei-e  in  readiness  to 
meet  his  obligation,  or  had  funds 
deposited  there  for  this  purpose, 
and  he  suffered  loss  by  reason  of 
the  failure  of  the  holder  to  make 
presentation  at  such  place  of  pay- 
ment, this  would  be  matter  of  de- 
fense, which  should  properly  be  set 
up  in  the  answer,  and  need  not  have 
been  anticipated  by  negative  alle- 
gations on  the  part  of  the  complain- 
ants in  their  bill.  Connerly  v. 
Planters',  &c..  Insurance  Co.,  6'6 
Ala.  432;  Montgomery  v.  Elliott,  6 
Ala.  701;  Conn  v.  Gano,  1  Ohio  4.83, 
13  Amer.  Dec.  639;  Weed  v.  Van 
Houten,  4  Halst.  (N.  J.)  489,  17 
Amer.  Dec.  468;"  Sims  v.  National 
Commercial  Bank,  73  Ala.  250. 


^"^Dailey  v.  Sharkey,  29  Mo.  App. 
518. 

"^  Evans  v.  George  D.  Cross  Lum- 
ber Co.,  21  Ohio  Cir.  Ct.  R.  80,  11 
O.  C.  D.  543. 

""  Dykman  v.  Northridge,  36  N.  Y. 
Supp.  962,  72  N.  Y.  St.  R.  64,  1  App. 
Div.  26. 

Presentment  by  notary  after  close 
of  bank  where  note  present  suffi- 
cient. See  Metropolitan  Bank  v. 
Engel,  72  N.  Y.  Supp.  691,  66  App. 
Div.  273. 

""*  Chicopee  Bank  v.  Philadelphia 
Bank,  8  Wall.  (U.  S.)  641. 

"^  Carrington  v.  Odom,  124  Ala. 
529,  27  So.  510. 

'^  Hutchison  v.  Crutcher,  98  Tenn. 
421,  39  S.  W.  725,  37  L.  R.  A.  89.  See 
Roberts  v.  Mason,  1  Ala.  373;  Spann 
V.  Baltzell,  1  Fla.  362,  46  Am.  Dec. 
346;  Berg  v.  Abbott,  83  Pa.  177,  24 
Am.  Rep.  158,  and  note  160. 

"'  Salt  Springs  National  Bank  v. 
Burton,  58  N.  Y.  430,  17  Am.  Rep. 
265. 


§    517]  WANT    OF    PRESENTMENT FOR    PAYMENT.  662 

payable  is  the  holder,  the  proper  officers  of  the  bank  may  hand  it  to 
the  notary  after  banking  hours,  informing  him  of  the  lack  of  funds 
to  meet  it,  and  it  constitutes  a  sufficient  presentment.^^*  And  in  such 
case  where  the  bank  is  the  holder  it  is  sufficient  to  make  demand  at 
the  bank,^^^  A  note  may  be  payable  at  the  place  of  delivery,  even 
though  signed  by  the  maker  at  his  place  of  residence,  as  where  it  is 
dated  at  the  place  where  it  is  to  be  indorsed  and  delivered  and  it  is 
there  placed  for  collection.  In  such  case  where  the  note  is  merely 
payable  at  bank  and  does  not  specify  any  particular  one  it  is  sufficient 
to  present  it  at  any  bank  in  the  place  of  delivery.^^®  If  the  specified 
bank,  at  which  the  note  is  made  payable,  is  erroneously  designated  as 
located  in  a  certain  town  and  state,  when  in  fact  it  is  located  in  an 
adjoining  state,  but  there  is  only  a  short  distance  between  the  place 
designated  and  the  actual  location  of  the  bank,  and  the  places  are  con- 
nected and  have  but  one  post  office,  it  is  sufficient  to  present  the  paper 
at  the  bank  specified  at  the  place  where  it  is  actually  located.^^^  A 
presentment  of  a  draft  may  also  be  good,  although  it  is  made  at  a 
bank  some  distance  from  the  drawee's  place  of  business  specified  in  the 
paper,  after  the  term  "via"  following  the  drawee's  name  and  place 
of  business.^ ^^  Presentment  may  also  be  properly  made  at  a  branch 
office  of  a  bank  at  which  the  instrument  is  payable.^ ^^  And  where 
agents  of  several  banks  meet  for  the  settlement  of  accounts  and  pre- 
sentment is  made  at  such  meeting  by  the  bank  holding  the  note  for 
collection  to  the  agent  of  the  bank  at  which  the  note  is  payable  and 
such  agent  presents  it  to  his  bank  during  banking  hours,  the  demand 
is  good.^^°  But  a  note  payable  at  any  bank  in  a  certain  place  does  not 
include  in  those  terms  a  loan  and  trust  corporation,  even  though  em- 
powered to  perform  acts  similar  to  those  of  banks  of  deposit  and 
issue.^-^  In  case  the  payee  transfers  a  note  as  collateral  to  another 
bank  than  that  specified  as  the  one  at  which  the  note  is  payable  and 
the  collateral  paper  becomes  due  before  the  principal  debt,  such  in- 
strument should  be  deposited  with  the  specified  bank  for  payment 

"* United  States  Bank  v.  Carneal,  "^Bartholomew  v.  First  National 

2  Pet.  (U.  S.)  543.  Bank,  18  Wash.  683,  52  Pac.  239. 

"^  Hildeburn    v.    Turner,    5    How,  "'*  Commercial  Bank   v.   Bissett,  7 

(U.    S.)    69;    United   States  v.   Car-  Manitoba  Rep.  586. 

neal,  2  Pet.  (U.  S.)  543.  ^=»  Martin  v.  Smith,  108  M-ich.  278, 

""  Hazard  v.  Spencer,  17  R.  I.  561,  2  Det.  L.  N.  841,  66  N.  W.  61. 

23  Atl.  729.  ^"^  Nash  v.  Brown,  165  Mass.  384, 

"■  Pawcatuck    National    Bank    v.  43  N.  E.  180. 
Barber.  22  R.  I.  73,  46  Atl.  1095. 


663  INSOLVEXCY   OR   SUSPEXSIOX   OF  BANK.  [§§    518,    519 

where  no  reason  to  doubt  its  solvency  exists.^^^  ^  demand  is  not  suffi- 
cient where  it  is  made  only  l)y  letter,  written  by  the  bank  at  which 
the  note  is  payable  in  the  absence  of  a  showing  that  there  were  any 
funds  of  the  maker  in  bank,  or  as  to  the  character  of  the  reply  made, 
if  any,  to  the  letter. ^-2*  If  presentment  is  made  during  banking  hours, 
hut  before  noon,  and  shortly  thereafter,  and  also  before  noon,  the 
maker  deposits  funds  for  payment,  but  the  note  is  not  again  pre- 
sented, although  it  was  the  custom  to  allow  until  three  o'clock  to  make 
payment,  and  the  maker  withdraws  his  funds,  he  is  nevertheless  liable 
at  the  suit  of  the  holder.  ^^^ 

§  518.     Same  subject  continued — Insolvency  or  suspension  of  bank. 

— If  the  bank  has  become  insolvent  and  the  bank  examiner  is  in  pos- 
session, demand  may  be  made  upon  him  •,^-*  or  it  must,  in  case  of  the 
insolvency  of  a  national  bank,  be  made  upon  the  receiver,  appointed 
by  the  comptroller  of  the  currency,  at  the  former's  location  in  the 
city,  where  such  location  is  known,  even  though  not  the  place  where 
the  bank  had  conducted  its  business.^-^  Where  the  bank  at  which  the 
instrument  is  payable  has  gone  out  of  existence,  thereby  precluding 
presentment  at  its  place  of  business  during  banking  hours,  the  note 
may  be  presented  to  the  residence  of  the  indorser  and  last  manager 
of  the  bank,  as  late  as  five  o'clock  in  the  afternoon,  and  the  present- 
ment is  good.^-*^  If,  however,  a  bank  has  become  insolvent  and  a  re- 
ceiver has  been  appointed  pendente  lite,  presentment  and  demand 
made  upon  him  will  not  be  sufficient  to  charge  an  indorser  of  a  ne- 
gotiable certificate  of  deposit  issued  by  the  bank.^-^ 

§519.     Presentment  to   whom — Person   primarily   liable  dead. — 

Where  the  person  primarily  lial)le  on  the  instrument  is  dead,  and  no 
place  of  payment  is  specified,  presentment  for  payment  must  be  made 

'"Mt.  Vernon  Bridge  Co.  v.  Knox  ^=' Hutchison      v.      Crutcher,      98 

County   Savings  Bank,  46   Ohio  St.  Tenn.  421,  39  S.  W.  725,  37  L.  R.  A. 

224,  20  N.  E.  339,  21  Ohio  L.  J.  168.  89.       But    compare    Schlesinger    v. 

'"*  National    Hudson   River   Bank  Schultz,  96  N.  Y.  Supp.  383,  110  App. 

V.  Moffett,  162  N.  Y.  623,  57  N.  E.  Div.  356. 

1118,   aff'g   45   N.   Y.    Supp.    588,   17  ""Waring  v.   Betts,  90  Va.   46,  17 

App.  Div.  232.  S.  E.  739,  17  Va.  L.  J.  370. 

^«  Hills  v.   Place,  48  N.  Y.   520,  8  "'Jackson    v.    Mclnnis,    33    Oreg. 

Am.  Rep.  568.  529,  43  L.  R.  A.  128,  15  Bkg.  L.  J. 

"*Auten     v.     Manistee     National  705,  54  Pac.  884,  55  Pac.  535. 
Bank,  67  Ark.  243,  54  S.  W.  337.  See 
note  61  L.  R.  A.  900. 


§§    520,    521]  WANT    OF    PRESENTMENT FOR   PAYMEN^T. 


6  64 


to  his  personal  representative,  if  such  there  be,  and  if,  with  the  exer- 
cise of  reasonable  diligence,  he  can  be  found.^-^ 

g  520.  Same  subject — Persons  primarily  liable — Partners — Joint 
debtors.— Where  the  persons  primarily  liable  on  the  instrument  are 
liable  as  partners,  and  no  place  of  payment  is  specified,  present- 
ment for  payment  may  be  made  to  any  of  them,  even  though 
there  has  been  a  dissolution  of  the  firm.^^g  wj^ere  there  are  several 
persons  not  partners,  primarily  liable  on  the  instrument,  and  no  place 
of  payment  is  specified,  presentment  must  be  made  to  them  all.^^* 
And  this  rule  is  held  to  apply  whether  the  form  of  the  note  is  joint 
or  joint  and  several.^^^ 

§  521.  Excuses  for  delay  in  presentment. — Delay  in  making  pre- 
sentment for  payment  is  excused  when  the  delay  is  caused  by  circum- 
stances beyond  the  control  of  the  holder  and  not  imputable  to  his 
default,  misconduct  or  negligence.  When  the  cause  of  delay  ceases  to 
operate,  presentment  must  be  made  with  reasonable  diligence.^^^  The 
matters  which  will  excuse  such  delay  are  various  and  difficult  to  enu- 
merate, as  they  may  be  personal,  as  in  case  of  serious  illness  under 
certain  conditions  and  surroundings,^^'^  or  public,  as  in  case  of  an 


^=^Negot.  Inst.  Law,  §  136;  Bills  of 
Exch.  Act,  §  45  (7),  Appendix  here- 
in. 

See  United  States. — Magruder  v. 
Union  Bank,  3  Pet.   (U.  S.)  87. 

Maine. — Gower  v.  Moore,  25  Me. 
16. 

Massachusetts. — Goodnow  v.  War- 
ren, 122  Mass.  79,  23  Am.  Rep.  289. 
New  York.— Reed  v.  Spear,  107  N. 
Y.  App.  Div.  1144. 

South  Carolina. — Price  v.  Young, 
1  Nott  &  McC.   (S.  C.)  438. 

i=»Negot.  Inst.  Law,  §  137.  See 
Brown  v.  Turner,  15  Ala.  832; 
Mt.  Pleasant  Branch  of  State  v.  Mc- 
Leran,  26  Iowa  306;  Fourth  Nat. 
Bk.  V.  Henschen,  52  Mo.  207. 

Dissoultion  by  bankruptcy — De- 
mand on  partnership.  See  Gates  v. 
Beecher,  60  N.  Y.  518,  19  Am.  Rep. 
207. 

Dissolution   of  firm  by  war.    See 


Hubbard  v.  Matthews,  54  N.  Y.  43, 
13  Am.  Rep.  502. 

^^"Negot.  Inst.  Law,  §  138;  Bills 
of  Exch.  Act,  §  45,  Appendix  herein. 
See  Closz  v.  Miracle,  103  Iowa  198, 
72  N.  W.  502;  Shutts  v.  Finger,  100 
N.  Y.  539;  Willis  v.  Green,  5  Hill 
(N.  Y.)  232. 

"1  Benedict  v.  Schmieg,  13  Wash. 
476,  43  Pac.  374,  36  L.  R.  A.  703. 
See  Harris  v.  Clark,  10  Ohio  6. 

i^Negot.  Inst.  Law,  §  141;  Bills 
of  Exch.  Act,  §  46,  Appendix  herein. 

Excuses  for  delay — Presentment 
to  acceptor  for  honor  or  referee  in 
case  of  need.  Negot.  Inst.  Law, 
§  288,  making  §  141  applicable;  Bills 
of  Exch.  Act,  §  67,  see  Appendix 
herein. 

1='^  See  Newbold  v.  Boraef,  155  Pa. 
St.  227,  26  Atl.  305;  Wilson  v.  Sen- 
ier,  14  Wis.  380. 


6C5  EXCUSES — PKESEXTMEXT   DISPENSED   WITH.  [§    522 

epidemic/^*  or  an  existing  war  ;"^  or  it  may  be  any  other  impediment 
or  obstruction  beyond  the  holder's  control  rendering  it  impossible  to 
make  such  presentment  or  demand  during  its  continuance  or  exist- 
ence.^^" Although  war  or  other  political  causes  may  constitute  an  ex- 
cuse for  not  making  a  demand  at  maturity,  yet  whenever  the  pre- 
venting cause  or  impediment  ceases  the  holder  must  act  promptly  and 
with  reasonable  diligence,  otherwise  secondary  parties  will  be  re- 
leased.^^^ 

§  522.  Excuses — Wlien  presentment  dispensed  with — Drawer — In- 
dorser. — Presentment  for  payment  is  dispensed  with  where,  after  the 
exercise  of  reasonable  diligence,  presentment  cannot  be  made;  or 
where  the  drawee  is  a  fictitious  person ;  or,  by  waiver  of  presentment, 
express  or  implied. ^^^  And  presentment  is  not  required  (a)  in  order 
to  charge  the  drawer  where  he  has  no  right  to  expect  or  require  that 
the  drawee  or  acceptor  will  pay  the  instrument;  (h)  in  order  to 
charge  an  indorser  where  the  instrument  was  made  or  accepted  for  his 
accommodation,  and  he  has  no  reason  to  expect  that  the  instrument 
will  be  paid  if  presented.  ^^^  If  the  holder  has  the  note  ready  for  pre- 
sentment at  the  place  where  dated  and  makes  diligent  inquiry  to  as- 
certain the  place  of  residence  or  business  of  the  maker  but  is  unsuc- 
cessful, demand  upon  the  maker  is  excused;^*''  for  the  holder  is  only 

^^Tunno  V.  Lague,  1  Johns.  Cas.  pends  commercial  intercourse;    (6) 

(N.  Y.)   1.  public     and     positive     interdictions 

"=Ray  v.  Smith,  17  Wall.   (U.  S.)  and  prohibitions  of  the  state  which 

411;  Peters  v.  Hobbs,  25  Ark.  67.  obstruct  or  suspend  commerce  and 

"Judge   Story,   in'  his   Commenta-  intercourse.'     And   in   §   356   of  the 

ries    on    the    Law    of    Promissory  same  work  the  learned  commentator 

Notes,     §      257,     has     enumerated,  enumerates  them  also  as  constitut- 

among    the    sulBcient    excuses    for  ing  sufficient  excuses  for  the  omis- 

non-presentment  and  demand  at  the  sion   of   due   and   regular  notice   of 

time  and  place  when  and  where  the  the  dishonor."     House  v.  Adams  & 

promissory  note  is  due  and  payable,  Co.,  48  Pa.  St.  267. 

the    following:     '(3)    The    presence  ""Violent    storm. — When    no    ex- 

of  political  circumstances,  amount-  cuse.     See  McDonald  v.  Mosher,  23 

ing   to   a   virtual    interruption   and  111.  App.  206. 

obstruction  of  the  ordinary  negotia-  "^  Burden  v.  Smith,  44  Miss.  548. 

tions  of  trade,  called  the  vis  tnajor ;  ^^As  to   waiver,  see  §§   524,   525, 

(4)    the   breaking   out   of    war   be-  herein. 

tween  the  country  of  the  maker  and  ^^  Negot.    Inst.    Law,    §§    139,   140, 

that  of  the  holder;    (5)   the  occupa-  142;  Bills  of  Exch.  Act,  §  46,  Appen- 

tion  of  the  country  where  the  par-  dix  herein. 

ties  live,  or  where  the  note  is  pay-  ""  Davis  v.  Eppler,  38  Kan.  629,  16 

able,  by  a  public  enemy  which  sus-  Pac.  793. 


§    523]  WANT    OF    PRESENTMENT FOR   TAYMENT.  6G6 

required  to  exercise  due  or  reasonable  diligence  to  present  or  attempt 
to  make  presentment,  and  demand  should  be  excused  where  he  has 
done  so  and  is  unable  to  find  the  maker.^*^  And  the  holder  has  used 
the  required  diligence  where  he  mails  a  note  for  collection  to  a  bank 
in  the  city  where  the  paper  is  payable  and  sends  it  in  ample  time,  and 
upon  its  return  by  the  postmaster  with  the  indorsement  that  the  bank 
had  failed  he  immediately  remails  it  to  another  agent  in  the  same 
city  and  he  at  once  makes  presentment,  although  the  note  was  past 
due  when  presented.^^^  ;But  due  diligence  is  not  exercised  where  the 
notary  making  presentment  failed  to  inquire  of  the  cashier  of  the 
bank  where  he  presented  the  paper  as  to  the  residence  of  the  maker, 
when  he  could  have  obtained  the  necessary  information  by  such  in- 
quiry."^ And,  although  the  holder  is  told  that  the  maker  has  ab- 
sconded and  his  place  of  business  is  found  closed,  such  facts  do  not 
excuse  presentment  and  demand.^**  And  presentment  is  not  dispensed 
with  by  the  fact  that  the  corporation  maker  has  transferred  its  prop- 
erty to  secure  the  indorser ;  unless  it  appears  that  such  corporation  has 
ceased  to  exist."^  But  demand  is  not  necessary  in  order  to  charge  the 
indorser  of  a  forged  bill.^*^ 

§523.  Same  subject  continued. — Under  the  California  code  pre- 
sentment of  a  bill  is  excused  where  there  is  no  reason  to  believe  that 
it  will  be  paid  by  the  drawee."^  This  is  substantially  similar  to  the 
rule  above  given ^^^  and  both  are  but  statements  in  different  forms 
of  the  well-settled  general  rule,  that  if  the  drawer  has  no  reasonable 
expectation  that  his  bill  will  be  honored  he  does  not  stand  in  the  same 
position  as  to  a  right  to  demand  and  notice  as  he  would  had  he  reason 
to  believe  that  his  paper  would  be  paid,  for  in  the  former  case  he 
cannot  suffer  by  want  of  presentment  and  notice  of  dishonor.  This 
point  is  involved  with  or  involves  that  of  drawing  without  funds  or 
authority  or  reasonable  expectation  of  funds,  and  applies  in  such  case, 
although  other  circumstances  may  exist  under  which  the  rule  would 

^"^  Hazlett  V.  Bragdon,  7  Pa.  Super.  "=  Moore   v.   Alexander,   68   N.   Y. 

Ct.  581.    See  §  503  herein.  Supp.  888,  33  Misc.  613. 

^"^  Pier  V.  Heinrichshoffen,  67  Mo.  ""  Hamer  v.  Brainard,  7  Utah  245, 

163,  29  Am.  Rep.  501.  26  Pac.  299,  5  Bkg.  L.  J.  144,  12  L. 

"'Sweet  V.  Powers,  72  Mich.  393,  R.  A.  434. 

40  N.  W.  471.  ""Cushman   v.   Harrison,   90  Cal. 

"*Glaser  v.  Rounds,  16  R.  I.  235,  297,  27  Pac.  283. 

14  Atl.  863,  6  N.  Eng.  Rep.  500.  "' §  522  herein  (a). 


667 


EXCUSES PRESENTMENT  DISPENSED   "WITH. 


[§   523 


also  be  applicable.^*"  Since,  therefore,  the  question  of  the  drawer's 
right  to  presentment  rests  upon  his  right  to  expect  or  require,  or  his 
reason  to  believe,  or  his  reasonable  expectation  that  the  paper  will  be 
paid,  then  if  he  has  such  right,  reason  or  expectation  it  ought  to  fol- 
low that  he  should  be  entitled  to  demand  and  notice  and  it  is  so  held.^''" 


"®  United  States. — Dickens  v.  Beal, 
10  Pet.  (U.  S.)  572,  9  L.  Ed.  538; 
Rekd  V.  Wilkinson,  Fed.  Cas.  No. 
11611;  Brown,  In.  re,  Fed.  Cas.  No. 
1985. 

Alabama. — Stewart  v.  Desha,  11 
Ala.  844;  Armstrong  v.  Gay,  1  Stew. 
(Ala.)  175. 

Arkansas. — McRae  v.  Rhodes,  22 
Ark.  315. 

Illinois. — Walker  v.  Rogers,  40  111. 
,  278,  89  Am.  Dec.  348;  Brower  v.  Ru- 
pert, 24  111.  182. 

Indiana. — Culver  v.  Marks,  122 
Ind.  554,  17  Am.  St.  Rep.  377,  23  N. 
E.  1086,  7  L.  R.  A.  489. 

Iowa. — Kimball  v.  Bryan,  56  Iowa 
632,  10  N.  W.  218. 

Kentucky. — Baxter  v.  Graves,  2  A. 
K.  Marsh.  (Ky.)  152. 

Louisiana. — Blum  v.  Bidwell,  20 
La.  Ann.  43;  English  v.  Wall,  12 
Rob.   (La.)   137. 

Maine. — Burnham  v.  Spring,  22 
Me.  495;  True  v.  Thomas,  16  Me.  36. 

Massachusetts.  —  Beuregard  v. 
Knowlton,  156  Mass.  395,  31  N.  E. 
389. 

Mississippi. — Carson  v.  Alexan- 
der, 34  Miss.  528. 

Missouri. — Merchants'  Bank  v. 
Easley,  44  Mo.  286,  100  Am.  Dec. 
287. 

New  York. — Mohawk  Bank  v. 
Broderick,  10  Wend.  (N.  Y.)  304; 
Healey  v.  Gilman,  1  Bosw.  (N.  Y.) 
235;  Franklin  v.  Vanderpool,  1  Hall 
(N.  Y.)  78.  Examine  Brush  v.  Bar- 
rett, 82  N.  Y.  400;  Eichner  v.  Bow- 
ery Bank,  20  Misc.  90;  Little  v. 
Phoenix  Bank,  2  Hill    (N.  Y.)   425; 


Murray  v.   Judah,   6  Cow.    (N.   Y.) 
490. 

North  Carolina. — Spear  v.  Atkin- 
son, 1  Ired.   (N.  C.)   262. 

Pennsylvania. — Callen  v.  Fawcett, 
58  Pa.  St.  113. 

South  Carolina. — Hubble  v.  Fo- 
gartie,  3  Rich.  (S.  C.)  413,  45  Am. 
Dec.  775. 

Tennessee. — Planters'  Bank  t. 
Keese,  7  Heisk.  (Tenn.)  200. 

Texas. — Armendiaz  v.  Serna,  40 
Tex.  291;  Kottwitz  v.  Alexander,  34 
Tex.  689. 

Wisconsin. — 'Mehlberg  v.  Tisher, 
24  Wis.  607. 

England. — Bailey  v.  Porter,  14 
Mees.  &  W.  44;  Cory  v.  Scott,  3 
Barn.  &  Aid.  619;  Crofton  v.  Crof- 
ton,  33  Gh.  Div.  612;  Dennis  v.  Mor- 
ris, 3  Esp.  158;  Heath,  Ex  parte,  2 
Ves.  &  B.  240;  Hill  v.  Heap,  1  Dowl. 
&  R.  N.  P.  517;  Kemble  v.  Mills,  1 
Man.  &  G.  757;  Legge  v.  Thorpe,  2 
Camp.  310;  Orr  v.  Maginnis,  7  East 
359;  Rogers  v.  Stephens,  2  Term. 
R.  713. 

^^  United  States. — Knickerbocker 
Life  Ins.  Co.  v.  Pendleton,  112  U.  S. 
696.  28  L.  Ed.  866,  5  Sup.  Ct.  314; 
Mackall  v.  Gozler,  Fed.  Cas.  No. 
8835;  Hopkirk  v.  Page,  Fed.  Cas.  No. 
6697.  See  French  v.  Bank  of  Co- 
lumbia, 4  Cranch  (U.  S.)  141,  2  L. 
Ed.  576;  Oklhausen  v.  Lewis,  Fed. 
Cas.  No.  10507. 

Alabama. — Sherrod  v.  Rhodes,  5 
Ala.  683;  Shirley  v.  Fellows,  9  Port. 
(Ala.)   300. 

Illinois. — Willetts  v.  Paine,  43  111. 
432.     See  Welch  v.   Taylor,   82   111. 


523] 


WANT    OF    PRESENT:\IENT FOR   PAYMENT. 


668 


It  is  declared  in  a  New  York  case  that :  "It  has  been  repeatedly  de- 
cided that  where  there  are  any  funds  in  the  hands  of  the  drawee,  so 
that  the  drawer  has  a  right  to  expect  the  bill  will  be  paid,  or  where 
there  are  not  any  funds,  yet  if  the  bill  was  drawn  under  such  circum- 
stances as  induced  the  drawer  to  entertain  a  reasonable  expectation 
that  the  bill  would  be  accepted  and  paid,  the  person  so  drawing  it  is 
entitled  to  notice ;  and  a  fortiori,  he  is  entitled  to  have  the  bill  duly 
presented."^^^  It  is  also  said  in  a  Mississippi  case  that :  "No  condition 
of  things  will  excuse  the  holder  from  his  duty  to  present  the  bill  for 
payment  if  it  be  practicable  for  him  to  do  so.  Causes  may  intervene, 
beyond  his  control  which  suspend  and  postpone  the  performance  of 
the  act,  but  do  not  dispense  with  it  when  it  becomes  practicable.  The 
want  of  funds,  the  absence  of  a  right  to  draw,  and  of  reasonable  ex- 
pectation of  payment,  absolve  from  the  necessity  of  giving  notice  to 
secondary  parties.  But  these  things  furnish  no  pretext  for  not  mak- 
ing demand  of  the  drawer  or  acceptor.  For  the  want  of  prompt  dili- 
gence in  making  the  demand  the  drawer  and  indorsers  are  dis- 
charged."^^^    The  fact,  however,  that  no  funds  were  at  the  bank  to 


574;  Walker  v.  Rogers,  40  111.  278, 
89  Am.  Dec.  348. 

Iowa. — Hamlin  v.  Simpson,  105 
Iowa  125,  74  N.  W.  906.  See  Kim- 
ball v.  Bryan,  56  Iowa  632,  10  N.  W. 
218. 

Kentucky. — Clark  v.  Castleman,  1 
J.  J.  Marsh.  (Ky.)  69. 

Louisiana. — Urquhart  v.  Thomas, 
24  La.  Ann.  95;  Lacoste  v.  Harper, 
3  La.  Ann.  385. 

Maine. — Campbell  v.  Pettingill,  7 
Me.  126. 

Maryland. — Orear  v.  McSinald,  9 
Gill  (Md.)  350,  52  Am.  Dec.  703. 

Massachusetts. — Stanton  v.  Blos- 
som, 14  Mass.  116,  7  Am.  Dec.  198. 

Missouri. — Commercial  Bank  v. 
Barksdale,  36  Mo.  563. 

New  Jersey. — United  States  Bank 
V.  Southard,  17  N.  J.  L.  473. 

New  York. — Schofield  v.  Bayard, 
3  Wend.  (N.  Y.)  488;  Robinson  v. 
Eames,  20  Johns.  (N.  Y.)  146,  11 
Am.  Dec.  259.  See  Cruger  v.  Arm- 
strong, 3  Johns.  Cas.  (N.  Y.)  5, 


North  Carolina. — Austin  v.  Rod- 
man, 1  Hawks  (N.  C.)  194,  9  Am. 
Dec.  630. 

Ohio. — ^Miser  v.  Trovinger,  7  Ohio 
St.  281. 

Texas. — Cole  v.  Wintercost,  12 
Tex.  118. 

England. — Cory  v.  Scott,  3  Barn. 
&  Aid.  619;  Robins  v,  Gibson,  3 
Camp.  334;  Rucker  v.  Hiller,  16 
East  43;  Walwyn  v.  St.  Quintin,  2 
Esp.  515;  Wilson,  Ex  parte,  11  Ves. 
411. 

'"Robinson  v.  Ames,  20  Johns. 
(N.  Y.)  146,  149,  per  Spencer,  Ch. 
J.  The  court  also  says:  "The  rule 
is  correctly  laid  down  in  Claridge  v. 
Dalton,  4  Maule  &  Selw.  229,  by 
Lord  Ellenborough.  The  principle 
which  has  been  stated  is  very  ably 
supported  by  Chief  Justice  Marshall 
in  French  v.  The  Bank  of  Columbia, 
4  Cranch  (U.  S.)  153,  where  the 
principal  authorities  are  reviewed." 

^''-Durden  v.  Smith,  44  Miss.  548, 
555,  556,  per  Simrall,  J. 


669  WAIVER   OF   PEESENTMEXT   AND   DEMAXD,  [§    524 

meet  payment  of  other,  notes  b}'  the  same  maker  and  first  indorser 
constitutes  no  excuse  for  non-presentment. ^^^  And  the  fact  that  an- 
other maker  states  that  the  maker  of  the  note  could  not  make  pay- 
ment does  not  do  away  with  the  necessity  of  making  demand  ;^°*  nor 
is  the  requirement  of  making  a  demand  excused  by  the  statement  of 
the  drawer  to  the  payee  tliat  the  drawee  could  not  pay  but  that  he, 
the  drawer,  would,  where  such  information  is  not  in  conformity  with 
the  statute.^^'^  If  the  bill  is  drawn  on  the  cashier  of  a  bank  without 
funds,  or  his  authority,  the  bank  holding  the  bill  is  not  prejudiced 
by  sending  the  cashier  abroad,  so  that  the  demand  could  not  be  made 
of  him  in  person.^^°  Again,  a  demand  is  not  necessary  in  the  case  of 
an  indorser  of  a  bill  or  note  where  such  paper  is  given  for  his  ac- 
commodation merely. ^^■^  But  accommodation  indorsers  for  the  maker 
are  within  the  general  rule  as  to  presentment  being  necessary.^^®  Nor 
does  the  maker's  insolvency  of  itself  alone  operate  as  a  legal  excuse 
for  failure  to  make  presentment  and  demand,^^''  And  this  rule  applies 
to  a  corporation  maker  of  paper,^''"  and  to  a  note  payable  on  de- 
mand ;^*'^  and  the  acceptor's  insolvency  does  not  excuse  presentment 
and  demand.^ ^^ 

§  524.     Waiver   of   presentment    and    demand. — Presentment   for 
payment  is  dispensed  with  by  waiver  of  presentment,  express  or  im- 

'" Manning    v.    Lyon,     24    N.    Y.  ""Leonard  v.  Olson,  99  Iowa  162, 

Supp.  265,  54  N.  Y.  St.  R.  6.  61  Am.  St.  Rep.  230,  35  L.  R.  A.  381, 

'=*Closz  V.  Miracle,  103   Iowa  198,  68  N.  W.  677;    Farwell  v.   St.   Paul 

72  N.  W.  502.  Trust  Co.,   45  Minn.   495,  48  N.   W. 

^""^Los  Angeles  National   Bank   v.  326;    Bassenhorst  v.  Wilby,  45  Ohio 

Wallace,  101  Cal.  478,  36  Pac.  197;  St.  333,  13  N.  E.  75,  11  West.  Rep. 

Cal.  Civ.  Code,  §  3156.  270;   Reinke  v.  Wright,  93  Wis.  368, 

^■-"'Taylor  v.  Bank  of  Illinois,  7  T.  67  N.  W.  737. 

B.  Mon.   (Ky.)    577.  i""  Moore    v.   Alexander,    68    N.    Y. 

"'Shriner  v.  Keller,  25  Pa.  St.  61;  Supp.  888,  33  Misc.  613,  aff'd  71  N. 

American  National  Bank  v.  Lumber  Y.  Supp.  420,  63  App.  Div.  100. 

&  Mfg.  Co.,  94  Tenn.  624,  30  S.  W.  "^  O'Neill    v.    Meighan,    66    N.    Y. 

753.     See  Mayer  v.  Thomas,  97  Ga.  Supp.  313,  32  Misc.  51. 

772,  25  S.  E.  761.  '"-  Hawley  v.  Jette,  10  Oreg.  31.  45 

'=' Perry  v.  Friend,  57  Ark.  437.  Am.  Rep.  129. 
See  Moody  v.  Keller,  127  Ala.  630,  As  between  the  holder  of  negotia- 
29  So.  68;  Thielman  v.  Gueble,  32  ble  paper  and  the  prior  parties 
La.  Ann.  260,  36  Am.  Rep.  267.  The  thereto,  the  insolvency  or  bank- 
note in  this  case  was  payable  on  ruptcy  of  the  maker  or  acceptor  will 
demand  and  bore  interest,  and  a  constitute  no  excuse  for  want  of 
delay  of  four  years  was  held  unrea-  presentment  or  demand.  Fugitt  v. 
sonable.  Nixon,  44  Mo.  295. 


524] 


WANT    OF    PRESENTMENT FOR   PAYMENT. 


670 


plied ;^*'^  as  where  the  note  stipulates  for  a  waiver;^''*  or  has  an  in- 
dorsement thereon  waiving  presentment  and  demand  f^^  and  such  an 
indorsement  waives  all  legal  steps  required  to  charge  the  indorser;"" 
so  the  words  "protest  waived"  or  "waiver  of  protest"  or  a  waiver  of 
notice  and  protest  by  the  indorsers  of  a  note  include  a  waiver  of  de- 
mand.^^^  Again,  an  indorser  who  signs  a  note  underneath  a  waiver 
written  upon  the  back  thereof  is  bound  thereby.^®*  And  this  includes 
all  the  indorsers  so  signing. ^^'^  The  same  rule  applies  where  the  agree- 
ment of  waiver  is  stamped  on  the  back  of  the  instrument,""  even 
though  the  blanks  in  such  waiver  are  not  filled  out  and  a  direction  to 
pay  the  indorsee  separates  the  signatures  therefrom."^  The  rule  also 
applies  where  the  waiver  appears  in  the  body  of  the  note,  where  the  in- 
dorsement is  not  qualified,"'  or  where  the  terms  of  the  waiver  are  that 


^^^Negot.  Inst.  Law,  §  142;  Bills 
of  Exch.  Act,  §  46,  Appendix  herein. 

>"  Leeds  v.  Hamilton  Paint  &  G. 
Co.  (Tex.  Civ.  App.),  35  S.  W.  77. 
See  State,  Parks  v.  Hughes,  19  Ind. 
App.  266,  49  N.  E.  393. 

^^  Blanc  V.  Mutual  National  Bank, 

28  La.  Ann.  921,  26  Am.  Rep.  119; 
Hammett  v.  Trueworthy,  51  Mo. 
App.  281;  Seymour  v.  Francisco,  4 
Ohio  Dec.  12,  1  Cleve.  Law  Rec.  9. 

^°°  Hammett  v.  Trueworthy,  51 
Mo.  App.  281.  See  Wheeler  v.  Asher, 
2  Mo.  App.  Rep'r  1236. 

^"'Kansas. — Baker  v.  Scott,  29 
Kan.  136,  44  Am.  Rep.  628. 

Louisiana. — Harvey  v.  Nelson,  31 
La.  Ann.  434,  33  Am.  Rep.  222. 

Massachusetts. — Johnson  v.  Par- 
sons, 140  Mass.  173,  1  N.  Eng  381, 
4  N.  B.  196. 

Minnesota. — Wolford  v.  Andrews, 

29  Minn.  250,  43  Am.  Rep.  201. 
Mississippi. — Timberlake  v.  Thay- 
er, 76  Miss.  76,  23  So.  767. 

North  Carolina. — Shaw  v.  Mc- 
Neill, 95  N.  C  535. 

Washington. — Wilkie  v.  Chandon, 
1  Wash.  355,  25  Pac.  464. 

But  compare  Sprague  v.  Fletcher, 
8  Oreg.  367,  34  Am.  Rep.  587. 

See  further  the  following  cases: 


Alabama. — Montgomery  v.  Cros- 
thwaite,  90  Ala.  553,  12  L.  R.  A.  140. 

California. — San  Diego  First  Na- 
tional Bank  v.  Falkenhan,  94  Cal. 
141,  29  Pac.  866,  7  Bkg.  L.  J.  105. 

District  Columbia.  —  Portsmouth 
Savings  Bank  v.  Wilson,  5  App.  D. 
C.  8. 

Illinois. — Dunnigan  v.  Stevens, 
122  111.  396,  13  N.  E.  651. 

Missouri. — Hammett  v.  True- 
worthy,  51  Mo.  App.  281. 

"**  Farmers'  Exchange  Bank  v.  Al- 
tura  Gold  Mill  &  Mining  Co.,  129 
Cal.  263,  61  Pac.  1077;  Savings  Bank 
V.  Fisher  (Cal.),  41  Pac.  490;  Parsh- 
ley  V.  Heath,  69  Me.  90,  31  Am.  Rep. 
246. 

^'''  Farmers'  Exchange  Bank  v.  Al- 
tura  Gold  Mill  &  Mining  Co.,  129 
Cal.  263,  61  Pac.  1077. 

™  Savings  Bank  v.  Fisher  (Cal.), 
41  Pac.  490;  Loveday  v.  Anderson, 
18  Wash.  322,  51  Pac.  463,  15  Bkg. 
L.  J.  100. 

"^  Loveday  v.  Anderson,  18  Wash. 
322,  51  Pac.  463,  15  Bkg.  L.  J.  100. 
See  Farmers'  Bank  of  Kentucky  v. 
Ewing,  78  Ky.  264,  39  Am.  Rep.  231. 
''-Portsmouth  Savings  Bank  v. 
Wilson  (D.  C),  22  Wash.  L.  Rep. 
817. 


671  WAIVER   OF   PRESENTMENT    AND   DEMAND.  [§    525 

"each,  of  us,  whether  principal,  surety  or  indorser,  waive  demand," 
etc.  ;"^  nor  is  any  new  consideration  necessary  where  the  waiver  was 
made  on  the  day  of  maturity  of  the  note.^'*  One  signing  an  indorse- 
ment and  waiving  demand  waives  it  as  an  indorser,  even  though  he 
is  also  a  guarantor.  ^^=^  If  an  indorser  of  a.  note,  when  he  signed  a 
waiver,  knew  the  facts  which  released  him,  his  ignorance  of  its  legal 
effect  will  not  relieve  him  from  the  consequences  of  his  waiver  ;^^® 
although  an  indorser's  knowledge  of  the  facts  which  release  him 
from  liability  are  held  to  be  necessary.^"  But  it  is  held,  however, 
that  even  though  the  terms  of  the  waiver  expressly  cover  all  notice  of 
presentment,  dishonor  and  protest,  nevertheless  the  president  of  the 
corporation  maker  does  not,  as  indorser,  by  such  waiver  include  pre- 
sentment and  demand. ^^^  And  waiver  of  presentment  does  not  result 
from  the  indorser's  knowledge  of  the  maker's  insolvency."''  An  exten- 
sion of  the  time  of  payment,  granted  at  the  request  of  the  indorser, 
who  agrees  that  his  name  may  remain  on  the  note,  operates  as  a 
waiver.""  But  a  mere  request  not  to  force  payment  as  against  the 
maker,  made  after  the  lapse  of  the  time  for  presentment  and  demand, 
does  not  constitute  a  waiver;"^  nor  does  a  mere  request  not  to  sue 
during  the  absence  of  payee.^^- 

§  525.     Same  subject  continued. — If  there  has  been  no  presentment 
or  demand,  and  the  indorser  unconditionally  acknowledges  his  lia- 

Examine  Illinois.— Beering  v.  Wi-  Co.,   93   N.   Y.    Supp.   449,   105   App. 

ley,  56  111.  App.  309.  Div.  21. 

Indiana.— Pool   v.    Anderson,    116  ^~'>  Kimmell  v.  Wiel,  95  111.  App.  15. 

Ind.  88,  1  L.  R.  A.  712.  ^«»Cady    v.    Bradshaw,    116    N.    Y. 

Iowa.— Iowa  Valley  State  Bank  v.  188,   26   N.   Y.   St.   R.   518,  22  N.  E. 

Sigstad,  96  Iowa  491,  65  N.  W.  407.  371,  5  L.  R.  A.  557,  2  Bkg.  L.  J.  84. 

Kentucky. — Bryant  v.   Merchants'  Examine    Glaze    v.    Ferguson,    48 

Bank,  8  Bush  (Ky.)  43.  Kan.  157,  29  Pac.  396;  Ross  v.  Hurd, 

Minnesota.— Bryant    v.    Lord,    19  71  N.  Y.  14,  14  Am.  Rep.  1;  Sheldon 

Minn.  396.  v.  Horton,  43  N.  Y.  93,  3  Am.  Rep. 

Missouri.— Jacohs    v.    Gibson,    77  669;   Bassenhorst  v.  Wilby,  45  Ohio 

Mo.  App.  244,  2  Mo.  A.  Rep'r  6.  St.  499,  13  N.  E.  75,  11  West.  Rep. 

"'Woodward  v.  Cowry,  74  Ga.  148.  274;    McMonigal  v.  Brown,  45  Ohio 

"*  Delsman     v.      Friedlander,      40  St.  333,  15  N.  E.  860,  14  West.  Rep. 

Oreg.  33,  66  Pac.  297.  147;    Burnham,  H.   M.  &  Co.  v.  Mc- 

™  First  National  Bank  v.   Adam-  Cornick,  18  Utah  42,  55  Pac.  77. 

son,  25  R.  I.  73,  54  Atl.  930.  '"'  Whittier  v.  Collins,  15  R.  I.  44, 

""Toole   V.   Crafts    (Mass.,    1906),  1  N.  Eng.  135,  23  Atl.  39.     See  Brit- 

78  N.  E.  775.  ton  v.  Milsom,  19  Ont.  App.  96. 

"'Closz  V.  Miracle,  103  Iowa  198,  '*- Button    v.    Bratt    (Ky.),    11    S. 

72  N.  W.  502.  W.  821. 

"^  Hayward  v.  Empire  State  Sugar 


§  525] 


WANT    OF    PRESENT:\IEXT FOR    PAYMENT. 


672 


bility,  or  makes  a  binding  promise  to  pay  the  note,  or  makes  a  partial 
payment,  and  at  the  time  he  has  full  knowledge  of  the  laches  and  of 
all  the  material  facts,  he  waives  presentment  and  cannot  afterward 
defend  for  want  thereof .^"^  It  is  essential,  however,  in  order  to  consti- 
tute a  waiver  and  make  binding  the  promise  to  pay,  that  the  indorser 
should  have  at  the  time  such  full  knowledge  of  the  laches  and  of  all 


"^  United  States.  —  Sigerson  v. 
Mathews,  20  How.  (U.  S.)  496,  15  L. 
Ed.  989;  Thornton  v.  Wynn,  12 
Wheat.  (U.  S.)  183,  6  L.  Ed.  595; 
Donaldson  v.  Means,  4  Dall.  (U.  S.) 
109. 

Alabama.  —  Alabama  National 
Bank  v.  Rivers,  116  Ala.  1,  22  So. 
580. 

Arkansas. — Hazard  v.  White,  26 
Ark.  155. 

California. — Curtis  v.  Sprague,  51 
Cal.  239. 

Illinois. — Givens  v.  Merchants' 
National  Bank,  85  111.  442;  Tobey  v. 
Berley,  26  111.  426. 

Iowa. — Davis  v.  Miller,  88  Iowa 
114,  55  N.  W.  89;  Cheshire  v.  Tay- 
lor, 29  Iowa  492;  Hughes  v.  Bowen, 
15  Iowa  446. 

Louisiana. — Hart  v.  Long,  1  Rob. 
(La.)    83. 

Maine. — Thomas  v.  Mayo,  56  Me. 
40. 

Maryland. — Turnbull  v.  Maddux, 
68  Md.  579;  Beck  v.  Thompson,  4 
Harr.  &  J.  (Md.)  531. 

Massachusetts. — Glidden  v.  Cham- 
berlin,  167  Mass.  486,  46  N.  E.  103; 
Rindge  v.  Kimball,  124  Mass.  209. 
See  Hobbs  v.  Straine,  149  Mass.  212, 
21  N.  E.  365. 

Michigan. — Parsons  v.  Dickinson, 
23  Mich.  56. 

Minnesota. — Amor  v.  Stoeckele,  76 
Minn.  180,  78  N.  W.  1046. 

Missouri. — State  Bank  v.  Bartle, 
114  Mo.  276,  21  S.  W.  816;  Working- 
men's  Banking  Co.  v.  Blell,  57  Mo. 
App.  410. 


Montana. — Quaintance  v.  Good- 
row,  16  Mont.  376,  41  Pac.  76. 

New  Hampshire.  —  Rogers  v. 
Hackett,  21  N.  H.  100. 

New  York. — Ross  v.  Hurd,  71  N. 
Y.  14,  27  Am.  Rep.  1.  See  Cady  v. 
Bradshaw,  116  N.  Y.  188,  22  N.  E. 
371,  26  N.  Y.  St.  R.  518.  See  Lin- 
thicum  V.  Caswell,  160  N.  Y.  702,  57 
N.  E.  1115,  aff'g  19  App.  Div.  541,  46 
N.  Y.  Supp.  610. 

North  Carolina. — Shaw  v.  Mc- 
Neill, 95  N.  C.  535. 

Oregon. — Smith  v.  Lownsdale,  6 
Oreg.  78. 

Pennsylvania. — Oxnard  v.  Var- 
num,  111  Pa.  193,  56  Am.  Rep.  255; 
Morgan  v.  Wolstencroft,  1  Super. 
Ct.  13,  37  Wkly.  N.  C.  293,  52 
Phila.  Leg.  Int.  495.  See  Sieger  v. 
Allentown'  Second  National  Bank, 
132  Pa.  307,  19  Atl.  217,  2  Bkg.  L. 
J.  335. 

South  Carolina. — Hall  v.  Freeman, 
2  Nott  &  McC.  479,  10  Am.  Dec.  621. 

Tennessee. — Bogart  v.  McClung, 
11  Heisk.  (Tenn.)  105,  27  Am.  Rep. 
737.  See  People's  National  Bank  v. 
Dibrell,  91  Tenn.  301,  18  S.  W.  626. 

Texas. — Stone  v.  Smith,  30  Tex. 
138,  94  Am.  Dec.  299. 

Vermont. — Blodgett  v.  Durgin,  32 
Vt.  361. 

Virginia. — Tardy  v.  Boyd,  26 
Gratt.  (Va.)   637. 

But  compare  Huntington  v.  Har- 
vey, 4  Conn.  124;  Sebree  Deposit 
Bank  v.  Moreland,  96  Ky.  150,  28 
S.  W.  153,  29  L.  R.  A.  305. 


673 


WAIVER   or    PRESENTIMENT    AND   DEMAND, 


[§  525 


the  material  facts.^^*  An  ind®rser's  promise  to  pa}^,  if  the  maker  does 
not,  made  by  letter  after  maturity  of  the  paper,  is  held  to  be  a  waiver 
of  demand  and  to  raise  the  presumption  of  knowledge  on  the  part 
of  such  indorser  that  the  note  had  not  been  protested.^^^  There  is 
also  a  waiver  where  the  promise  is  to  pay  whenever  the  holder  shall 
require  payment  where  such  promise  is  an  unconditional  one;^^® 
or  where  the  promise  is  to  pay  at  maturity  after  days  of  grace,  fol- 
lowed by  subsequent  promises  and  requests  for  delay  ;^'^^  or  where  there 
is  an  agreement  after  maturity  to  reduce  the  amoimt  of  the  note  by 
the  application  of  certain  assets.^'^^  So  the  sufficiency  of  the  notice 
of  demand  is  admitted  by  the  indorser  by  a  promise  to  pay,  made  after 
seeking  counsel's  advice  and  being  advised  that  such  notice  was  in- 
sufficient.^®'^ Again,  a  request  by  the  indorser  for  a  renewal,  coupled 
with  part  payment  are  not  such  acts  as  amount  to  a  waiver  where  he 
has  no  knowledge  of  material  facts  which  discharge  him.^""    So  there 


"*  United  States. — Thornton  v. 
Wynn,  12  Wheat.  (U.  S.)  183,  6  L. 
Ed.  595;  Martin  v.  Winslow,  Fed. 
Cas.  No.  9172. 

Alabama. — Kennon  v.  M'Rea,  7 
Port.   (Ala.)  175. 

Illinois. — Walker  v.  Rogers,  40  111. 
278,  89  Am.  Dec.  348. 

Kentucky. — Bank  of  United  States 
V.  Leathers,  10  B.  Mon.   (Ky.)   64. 

Louisiana. — James  v.  Wade,  21 
La.  Ann.  548. 

Maryland. — Lewis  v.  Brehme,  33 
Md.  412,  3  Am.  Rep.  190. 

Massachusetts. — Parks  v.  Smith, 
155  Mass.  26,  28  N.  B.  1044;  Lan- 
drum  V.  Trowbridge,  2  Mete. 
(Mass.)    281. 

Mississippi. — Baskerville  v.  Har- 
ris, 41  Miss.  535. 

New  Hampshire. — Norris  v.  Ward, 
59  N.  H.  487. 

New  Jersey. — United  States  Bank 
V.  Southard,  17  N.  J.  L.  473,  35  Am. 
Dec.  521. 

New  York. — Meyer  v.  Hibsher,  47 
N.  Y.  265;  O'Rourke  v.  Hanchett, 
35  N.  Y.  Supp.  328,  69  N.  Y.  St.  R. 
717. 

Joyce  Defenses — 43. 


North  Carolina. — Lilly  v.  Pette- 
way,  73  N.  C.  358. 

Ohio. — City  National  Bank  of 
Dayton  v.  Clinton  County  National 
Bank,  49  Ohio  St.  351,  30  N.  E.  958, 
27  Ohio  L.  J.  325,  6  Bkg.  L.  J.  515. 

Rhode  Island. — Glaser  v.  Rounds, 
16  R.  L  235,  14  Atl.  863. 

South  Carolina. — Fotheringham  v. 
Price,  1  Bay  (S.  C.)  291,  1  Am.  Dec. 
618. 

Tennessee. — See  Carnegie  Steel 
Co.  V.  Chattanooga  Const.  Co.  (Tenn. 
Ch.  App.),  38  S.  W.  102. 

Wisconsin. — Schiel  v.  Baumel,  75 
Wis.  75,  43  N.  W.  724. 

See  McFatridge  v.  Williston,  25 
N.  S.  11. 

"=  Davis  V.  Miller,  88  Iowa  114,  55 
N.  W.  89. 

^'"  State  Bank  v.  Bartle,  114  Mo. 
276,  21  S.  W.  816. 

^"  Quaintance  v.  Goodrow,  16 
Mont.  876,  41  Pac.  76. 

^"'^  Brown  v.  Mechanics'  &  T.  Bank, 
44  N.  Y.  Supp.  645,  16  App.  Div.  207. 

^^^  Peoples'  National  Bank  v.  Dib- 
rell,  91  Tenn.  301,  18  S.  W.  626. 

^  Carnegie    Steel    Co.    v.    Chatta- 


§  525J 


"WANT    OF    PRESENTMENT — FOR   PAYMENT. 


67-i 


may  be  an  implied  waiver  of  presentment  consequent  upon  an  under- 
standing between  the  indorser  and  the  holder  in  pursuance  of  which 
an  assignment  is  made  before  maturity  of  the  note.^®^  And  any  lan- 
guage which  is  intended  to  and  does  induce  the  holder  not  to  make  de- 
mand, as  in  case  of  a  promise  to  pay  the  note  when  due  and  a  request 
not  to  protest  it,  constitutes  a  waiver.^^-  So  directions,  given  by  the 
indorser,  that  nothing  shall  be  done  with  the  instrument  in  case  of 
default  in  payment,  will  be  a  waiver  ;"^  as  will  also  a  statement  by  the 
indorser  to  the  holder  that  it  will  be  useless  to  make  demand/''* 
And  there  may  be  a  waiver  where  interest  is  paid  on  the  note  after  it 
is  due."^  Again,  although  the  drawee  procures  and  indorses  a  dupli- 
cate check,  after  laches  of  the  indorsee  in  presentment  of  the  original 
check,  indorsed  by  the  drawee,  and  the  loss  thereof,  such  act  of  the 
drawee  does  not  constitute  a  waiver."'^  Under  a  Ehode  Island  decision 
the  taking  of  security  by  the  indorser  from  the  maker  is  not  a 
waiver. ^"^  A  partner  may  waive  demand,  after  the  co-partnership  is 
dissolved,  of  a  note  which  is  indorsed  by  and  discounted  for  the  firm."^ 


nooga  Const.  Co.  (Tenn.  Ch.  App.), 
38  S.  W.  102. 

'»!  Swift,  In  re,  106  Fed.  65. 

"-  Seldner  v.  Mt.  Jackson  National 
Bank,  66  Md.  488,  6  Cent.  Rep.  478, 
8  Atl.  262.  See  Souther  v.  McKenna, 
20  R.  I.  645,  40  Atl.  736,  15  Bkg.  L. 
J.  541. 

^"^Markland  v.  McDaniel,  51  Kan. 
350,  32  Pac.  1114. 

1**  Seldner  v.  Mt.  Jackson  National 
Bank,  66  Md.  488,  8  Atl.  262,  6  Cent. 
Rep.  478. 

^5  Greeley  v.  Whitehead,  35  Fla. 
523,  17  So.  643,  28  L.  R.  A.  286,  48 
Am.  St.  Rep.  258. 

^^"Eebi  V.  Bank  of  Evansville,  124 
Wis.  73,  102  N.  W.  329. 

"^Whittier  v.  Collins,  15  R.  I.  44, 
23  Atl.  39.    See: 

Alabama. — Carlisle  v.  Hill,  16  Ala. 
19. 

Maine. — Marshall  v.  Mitchell,  34 
Me.  227- 


Maryland. — Walters  v.  Munroe,  17 
Md.  154,  77  Am.  Dec.  328. 

Massachusetts. — Creamer  v.  Perry, 
17  Pick.  (Mass.)  332,  27  Am.  Dec. 
297. 

New  Hampshire. — Woodman  v. 
Eastman,  10  N.  H.  359. 

Ne^v  York. — Spencer  v.  Harvey,  17 
Wend.   (N.  Y.)  489. 

North  Carolina. — Denny  v.  •  Pal- 
mer, 27  N.  C.  710. 

Pennsylvania. — Kramer  v.  Sand- 
ford,  4  Watts.  &  S.  (Pa.)  328. 

See  Selby  v.  Brinkley  (Tenn.),  17 
S.  W.  479. 

Compare  Stephenson  v.  Primrose, 
8  Port.  (Ala.)  155,  33  Am.  Dec.  281. 

Beard  v.  Westerman,  32  Ohio  St. 
29. 

"'Seldner  v.  Mount  Jackson  Na- 
tional Bank,  66  Md.  488,  8  Atl.  262. 
6  Cent.  Rep.  478.  Compare  Presbrey 
V.  Thomas,  1  App.  D.  C.  171,  21 
Wash.  L.  Rep.  659. 


CHAPTER  XXIV. 


PROTEST   AND   WANT   OP   PROTEST. 


Sec. 

526.  Protest  defined. 

527.  In  what  cases  protest  necessary. 

528.  In  what  cases  protest  unneces- 

sary. 

529.  Same  subject,  continued. 

530.  How  made — Form,  contents  and 

sufficiency  of. 

531.  Same  subject — Signature. 

532.  Same    subject — Instances — Cer- 

tificate. 

533.  By  whom  made. 

534.  When  to  be  made. 


Sec.  I 

535.  Where  made. 

536.  When  protest  dispensed  with — 

Excuses. 

537.  Waiver  of  protest  generally. 

538.  Same  subject. 

539.  Same     subject — What     is     in- 

cluded. 

540.  Same  subject — Decisions, 

541.  Same  subject — Parties. 

542.  Certificate      of      protest  —  Evi- 

dence. 

543.  Same  subject. 


§  526.  Protest  defined. — There  are  numerous  definitions  of  the 
term  "protest,"^  but  in  a  recent  case  it  has  been  defined  as  "a  formal 
statement  in  writing  that  the  described  instrument  was,  on  a  certain 
day,  presented  for  payment  or  acceptance,  and  that  such  payment  or 
acceptance  was  refused.  It  is  a  formal  declaration  executed  by  a  no- 
tary which  in  its  popular  sense  means  all  the  steps  and  acts  accom- 
panying the  dishonor  of  a  bill  or  note  necessary  to  charge  an  indorser. 
The  word  signifies  to  'testify  before.'  As  said  by  Daniel,^  the  testi- 
mony before  the  notary  that  proper  steps  were  taken  to  fix  the  drawer's 
liability  is  the  substance  of  the  certificate  of  the  notary,  the  formal 
evidence,  to  which  the  term  'protest'  is  legally  applicable.  The  same 
idea  is  suggested  by  the  language  of  the  statute^  which  calls  the  writ- 
ing made  by  the  notary  the  'instrument  of  protest.'  *  *  *  The  ob- 
ject of  protest  is  to  fix  the  liability  of  indorsers."*   And  where  an  in- 


^See  Vol.  6  of  "Words  and 
Phrases,"  pp.  5742-5745. 

-2  Daniel  Neg.  Inst.  (5th  Ed.), 
§  929. 

=  Rev.  Laws  Minn.  1905,  §  2663. 

*  Peabody  v.  Citizens'  State  Bank 


of    St.    Charles    (Minn.    1906),    108 
N.  W.  272,  275,  per  Elliott,  J. 

Protest  "in  a  given  case  may  in- 
clude all  the  acts  which  by  law  are 
necessary  to  charge  an  indorser  on 
such    (commercial)   paper.    *     *     * 


675 


537]' 


PROTEST  AND  WAXT   OF   PROTEST. 


67Q 


dorser  writes  "upon  a  note  an  acknowledgment  of  receipt  of  notice  of 
protest  the  word  "protest"  comprises  all  the  acts  necessary  to  charge 
indorsers  and  it  has  the  legal  effect  to  dispense  with  demand  and  no- 
tice on  the  part  of  the  holder.^ 

§■  527.  In  what  cases  protest  necessary. — Where  a  foreign  bill,  ap- 
pearing on  its  face  to  be  such,  is  dishonored  by  non-acceptance,  it  must 
be  duly  protested  for  non-acceptance,  and  where  such  a  bill  has  not 
previously  been  dishonored  by  non-acceptance  is  dishonored  by  non- 
payment, it  must  be  duly  protested  for  non-payment.  If  it  is  not  so 
protested,  the  drawer  and  indorsers  are  discharged.^  Under  the  gen- 
eral law  merchant  protest  is  only  necessary  on  a  foreign  bill.^  So,  un- 
der the  Negotialile  Instruments  Law,  where  any  negotiable  instru- 
ment has  been  dishonored  it  may  be  protested  for  non-acceptance  or 
non-payment,  as  the  case  may  be ;  but  protest  is  not  required,  except 
in  the  case  of  foreign  bills  of  exchange.*  A  bill  drawn  in  one  of  the 
states  of  the  union  upon  a  resident  of  another  is  a  foreign  bill  requir- 
ing protest.^     So,  unless  protest  is  waived,  an  indorser  before  delivery 


With  business  men  includes  all  the 
steps  necessary  to  charge  an  in- 
dorser. Demand  of  payment  of  a 
note  in  proper  form  and  at  a  proper 
time;  and  in  case  of  non-payment, 
due  and  reasonable  notice  to  the  in- 
dorsers, by  any  suitable  person.  In 
the  popular  sense,  includes  demand 
of  the  maker  and  notice  of  non-pay- 
ment to  indorsers.  *  *  *  Protest 
includes,  in  a  popular  sense,  all  the 
steps  taken  to  fix  the  liability  of  a 
drawer  or  indorser."  Anderson's 
Diet,  of  Law  "Protest." 

^  City  Savings  Bank  v.  Hopson,  53 
Conn.  453,  2  N.  Eng.  556,  5  Atl.  601. 
As  to  waiver  generally,  see  §§  524, 
525  herein. 

"Negot.  Inst.  Law,  §  260;  Bills  of 
Exch.  Act,  §  51  (2),  Appendix  here- 
in. 

Alabama. — Cullum  v.  Casey,  9 
Port.   (Ala.)  131. 

Kentucky. — Plner  v.  Clarey,  17  B. 
Mon.  (Ky.)  645. 

New  York. — Amsinck  v.  Rogers, 
93  N.  Y.  Supp.  87,  103  App.  Div.  428. 


North  Carolina. — Shaw  v.  McNeill, 
95  N.  C.  535. 

England. — Orr  v.  Maginnis,  7  East 
49. 

^  Burke  v.  McKay,  2  How,  (U.  S.) 
66.  See  United  States  v.  Bank  of 
United  States,  5  How.  (U.  S.)  382, 
under  Maryland  Statute  17815. 

8  Negot.  Inst.  Law,  §  189.  See  Bills 
of  Exch.  Act,  §  51,  Appendix  herein. 
See  §  528  herein. 

"Nelson  v.  First  National  Bank, 
69  Fed.  798,  32  U.  S.  App.  554,  16 
C.  C.  A.  425,  12  Bkg.  L.  J.  672. 

As  to  such  bills  being  foreign 
bills  see  Armstrong  v.  American  Ex- 
change Bank,  133  U.  S.  433,  33  L. 
Ed.  747,  10  Sup.  Ct.  450;  Bank  of 
United  States  v.  Daniel,  12  Pet.  (U. 
S.)  32;  Mason  v.  Donsay,  35  111.  424, 
85  Am.  Dec.  368;  American  Express 
Co.  V.  Haire,  21  Ind.  4,  83  Am.  Dec. 
334;  Commercial  Bank  of  Kentucky 
V.  Varnum,  49  N.  Y.  269,  rev'g  3 
Lans.  86. 

A  bill  drawn  in  one  state  upon  a 
resident  of  another,  is  a  foreign  bill. 


677  WHEN"   PROTEST    UNNECESSARY.  [§    528 

of  the  note  is  entitled  to  notice  of  protest,  and  it  must  be  given  in 
order  to  hold  him  liable.^"  Xotice  of  protest  must  also  be  given  in  a 
reasonable  time  to  indorsers  for  accommodation  or  value  of  a  note 
payable  at  bank.^^  And  protest  is  required  to  render  an  indorser  liable, 
even  though  the  note  was  paid  before  its  purchase  by  the  indorsee.^- 
But  protest  and  notice  of  protest  do  not  charge  an  indorser  where  no 
demand  upon  or  attempt  to  collect  from  the  maker  is  made,^^ 

§  528.  In  what  cases  protest  unnecessary. — Where  a  bill  does  not 
appear  on  its  face  to  be  a  foreign  bill,  protest  thereof  in  case  of  dis- 
honor is  unnecessary.^*  Protest  is  not  necessary  by  the  law  merchant 
to  fix  the  liability  of  the  parties  to  an  inland  bill.^^  So  that,  in  the 
absence  of  a  statute  to  the  contrarv',  protest  of  an  inland  bill  or  of 
•a  domestic  draft,  operating  entirely  within  the  state,  is  not  neces- 
sary; a  presentation  or  demand  of  acceptance  or  payment  and  notice 
of  non-payment  are  sufficient. ^°  So  it  is  held  that  protest  in  the  case 
of  inland  bills  is  only  necessary  to  enable  damages  to  be  recovered,  as 
the  indorser  of  such  paper  is  liable  to  the  holder  for  the  amount  and 
the  interest  upon  proof  of  default  and  notice."  A  bill  of  exchange 
in  form  drawn  on  one  government  by  another  is  not  subject  to  protest 
and  consequential  damages. ^^    And  where  a  drawee  of  a  bill  has  ac- 

and  the  failure  on  the  part  of  the  i=  Knott  v.   Venable,   42   Ala.   186, 

holder  to  have  it  protested  for  non-  194. 

payment     is     a    discharge    of    the  '"  People's  National  Bank  v.  Lut- 

drawer,   unless  the   drawer   had   no  terloh,  95  N.  C.  495;   Knott  v.  Ven- 

funds  in  the   hands  of  the   drawee  able,    42    Ala.    186,    194.     See,    also, 

and  no  authority  to   draw  the  bill.  Burke   v.    McKay,    2    How.    (U.    S.) 

Aborn  v.  Pardon  Bosworth,  1  R.   I.  66;   Union  Bank  v.  Hyde,  6  Wheat. 

401.  (U.    S.)     572;    Young    v.    Bryan,    6 

>°  Burke  v.  Shreve,  2  N.  J.  L.  92;  Wheat.  (U.  S.)  146;  Murphy  v.  Citi- 

Carnegie   Steel    Co.    v.    Chattanooga  zens'  Savings  Bank,  22  Ky.  L.  Rep. 

Const.  Co.    (Tenn.  Ch.  App.),  38  S.  1672,  61   S.  W.    25,   62   S.  W.   1028; 

W.  102.  Shaw  V.  McNeill,  95  N.  C.  535. 

"  Apple  V.  Lesser,  93   Ga.  749,  21  Protest  made  necessary  by  statute 

S.  E.  171.  in  case  of  inland  bill.    Ewen  v.  Wil- 

'=  Moore    v.    Steigel,    50    Mo.    App.  bor,  99    111.   App.    132,  aff'd   208   111. 

308.  492,  70  N.  E.  575. 

"Williams  v.  Planters'  &  M.  Na-  '' Wanzer  v.  Tupper,  8   How.    (U. 

tional' Bank,  91  Tex.  651,  45   S.  W.  S.)    234;    Bailey  v.   Dozier,   6   How. 

690,  15  Bkg.  L.  J.  346,  rev'g  44  S.  W.  (U.  S.)  23. 

617.  's  United  States  v.  Bank  of  United 

"Negot.  Inst.  Law,  §  260;  Bills  of  States,  5  How.  (U.  S.)  382. 
Exch.  Act,  §  51  (2),  Appendix  here- 
in.   See  §  527  herein. 


§    529]  PROTEST   AXD   WAXT   OF   PROTEST.  678 

cepted  it  he  is  not  entitled  to  notice  of  protest.^^  If  the  person  pre- 
senting a  bill  agrees  to  present  it  again,  no  protest  can  be  made  with- 
out a  new  demand.-"  No  formal  protest  of  a  promissory  note  is  re- 
quired, such  note  not  being  within  the  rules  of  the  law  merchant. ^^ 
An  exception  has  been  made,  however,  where  the  note  is  made  by  a 
resident  of  one  state  payable  to  a  resident  of  another.^^ 

§  529.  Same  subject  continued. — A  note  payable  at  a  bank  in  In- 
diana need  not  be  protested  for  non-payment ;  all  that  is  required,  un- 
der a  decision  in  that  state,  to  fix  the  liability  of  those  secondarily 
liable  is  a  demand  of  payment  and  notice  of  non-payment.-^  Again, 
protest,  or  notice  of  protest,  is  unnecessary  in  case  of  a  mere  surety 
on  a  note  payable  at  a  chartered  bank.-^  And  where  the  signatures  of 
third  parties,  who  indorse  a  note  by  a  creditor  to  his  debtor,  are  ob- 
tained under  an  agreement  for  an  extension  of  time,  such  indorsers 
are  sureties  and  not  entitled  to  notice  of  protest.^^  Nor  is  protest  neces- 
sary in  case  of  an  indorsee  who  is  not  the  payee,  and  whose  signature 
is  obtained  at  the  inception  of  the  note,  as  such  person's  liability  is 
that  of  surety  or  original  promisor.^®  So  an  indorser  is  liable  without 
protest  where  he  indorses  as  surety  before  delivery  of  the  note.^'^ 
And  where  a  note  is  indorsed  before  delivery  and  the  payee  elects  to 

"  Garden   City   National   Bank  v.  not  necessary.    Leeds   v.   Hamilton 

Fitler,  155  Pa.  210,  26  Atl.  372.  Paint  &  G.  Co.   (Tex.  Civ.  App.),  35 

"°  Case  V.  Burt,  15  Mich.  82.  S.  W.  77. 

-^Alabama. — Knott  v.  Venable,  42  =^ Brown  v.  "Wilson,  45  S.  C.  519, 

Ala.  186.  23  S.  E.  630.    See  Bay  v.  Church,  15 

Georgia. — Pattillo     v.     Alexander,  Conn.    15;    Louisville    Banking    Co. 

96  Ga.  60,  22  S.  E.  646.  v.   Asher,   23  Ky.   L.   Rep.   1180,   65 

Illinois.— Bond  v.  Bragg,  17  111.  69.  S.  W.  133,  23  Ky.  L.  Rep.  1661,  65 

Indian  Territory. — Waples-Painter  S.  W.  831. 

Co.  v.  Bank  of  Commerce  (Ind.  Ty.  "Green  v.  Louthain,  49  Ind.  139, 

1906),  97  S.  W.  1025.  decided  1874.    See,  also,  Pritchard  v. 

Kentucky. — Louisville        Banking  Smith,  77  Ga.  463. 

Co.  V.  Asher,   23   Ky.  L.  Rep.  1180,  "  Sibley    v.    American    Exchange 

65  S.  W.  133,  23  Ky.  L.  Rep.  1661,  National  Bank,  97  Ga.  126,  25  S.  E. 

65  S.  W.  831.  170.     See    Hunnicutt   v.    Perot,    100 

South    Carolina.— Brown    v.    Wil-  Ga.  312,  27  S.  E.  787. 

son,  45  S.  C.  519,  23  S.  E.  630.  ==Eppens  v.  Forbes,  82  Ga.  748,  9 

Compare    Hinsey    v.     Studebaker  S.  E.  723. 

Bros.  Mfg.  Co.,  73  111.  App.  278,  15  ="  Beissner.  v.  Weekes,  21  Tex.  Civ. 

Nat.  Corp.  Rep.  805;  Merchants'  Na-  App.  14,  50  S.  W.  138. 

tional  Bank  v.  Standard  Wagon  Co.,  "'  Tredway    v.    Antisdel,   86    Mich. 

6  Ohio  N.  P.  264.  82,  48  N.  W.  956. 

Protest  "or"  suit;  protest  and  suit 


II 


679  HOW    MADE FORM,    CONTEXTS,    SUFFICIENCY.  [§    530 

hold  the  indorser  as  a  guarantor  or  joint  maker  no  protast  is  re- 
quired.^^  Again,  where  the  indorsement  is  made  before  delivery,  upon 
a  note  executed  for  an  antecedent  debt,  for  the  purpoee  of  obtaining 
its  discount  and  as  additional  security,  such  indorser  is  a  joint  maker 
and  protest  is  unnecessary.'^  Protest  is  also  no-t  required  to  charge 
the  indorser  of  a  non-negotiable  instrument,^**  or  of  a  note  sent  for 
"collection."^! 

§  530.  How  made — Form,  contents  and  sufficiency  of. — The  pro- 
test must  be  annexed  to  the  bill,  or  must  contain  a  copy  thereof,  and 
must  be  under  the  hand  and  seal  of  the  notary  making  it,  and  must 
specify:  the  time  and  place  of  presentment;  the  fact  that  present- 
ment was  made  and  the  manner  thereof ;  the  cause  or  reason  for  pro- 
testing the  bill,  and  the  demand  made  and  the  answer  given,  if  any, 
or  the  fact  that  the  drawee  or  ax^ceptor  could  nat  be  found.^^  Ordi- 
narily the  protest,  or  notice  of  protest,  need  not  follow  any  particular 
or  precise  form  of  words,  but  it  is  sufficient  where,  as  a  whole,  it  con- 
veys a  knowledge  of  the  particular  note  by  a  true  description  or 
designation,  clearly  indicating  what  note  is  intended  and  showing 
its  due  presentment  and  dishonor,  to  whom  it  was  presented,  and  that 
the  holder  looks  for  payment  to  the  indorser.  The  paper  should,  how- 
ever, be  sufficient  to  put  the  holder  upon  inquiry  and  should  not  be 
such  that  he  is  misled  thereby.^^  If  the  notice  sets  out  a  copy  of  the 
bill,  but  erroneously  states  by  whom  there  was  an  acceptance,  it  is 
nevertheless  sufficient.^*  So  where  the  certificate  recites  that  "the 
above"  is  a  complete  and  true  copy  and  also  refers  again  to  such  copy, 
and  states  that  presentment  has  been  made  and  refused,  and  that  the 
note  has  been  protested  and  notice  thereof  served  through  the  mail 

=»  Miller  v.  Clendenin,   42  W.  Va.  11  Wheat.  (U.  S.)  431,  6  L.  Ed.  514; 

416,  26  S.  E.  512.    See  Rhett  v.  Poe,  Rudd    v.    Deposit    Bank,    20   Ky.   L. 

2  How.  (U.  S.)  457.  Rep.    1276,    49    S.    W.    207,    aff'd    20 

='Bank  of  Jamaica  v.  Jefferson,  92  Ky.  L.  Rep.  1497,  49  S.  W.  971;  Wit- 

Tenn.  537,  22  S.  W.  211,  36  Am.  St.  kowski  v.  Maxwell,  69   Miss.  56,  10 

Rep.  100.  So.    453;    Glicksman    v.    Earley,    78 

'"Kampmann  v.  Williams,  70  Tex.  Wis.  223,  47  N.  W.  272,  4  Bkg.  L.  J. 

568,  8  S.  W.  310.  58.      See     Bank    of    Alexandria     v. 

"Waddell's  Succession,  In  re,  44  Swan,    9    Pet.    (U.    S.)    33;    Second 

La.  Ann.  361,  10  So.  808.  National   Bank   v.    Smith,   118   Wis. 

==Negot.    Inst.    Law,    §    261;    Bills  18,  94  N.  W.  664. 

of  Exch.  Act,  §  52,  Appendix  herein.  ^'  Dennistown  v.  Stewart,  17  How. 

^^  Mills  V.  Bank  of  United  States,  (U.  S.)  606. 


§§    531,    532]  PROTEST    AXD    WANT    OF    PROTEST.  680 

upon  the  indorsers,  such  certificate  is  sufficient.^ ^  The  requirement  of 
a  seal  of  the  notary  upon  the  protest  must  rest  upon  statutory  provi- 
sions, at  least  it  seems  to  he  the  rule  that  none  is  necessary  unless  the 
statute  so  provides,  although  it  is  decided  in  an  Alabama  case,  where 
a  bill  was  protested  in  a  state  where  the  law  merchant  was  presumed 
to  prevail,  and  the  notarial  certificate  contained  only  an  illegible  mark 
made  by  some  instrument  in  place  of  a  seal,  that  such  mark  was  not 
a  sufficient  seal  and  that  the  protest  did  not  bind  the  indorser.  Other 
points,  however,  entered  into  the  decision,  such  as  insufficiency  of  pre- 
sentment and  demand,  the  want  of  authority  of  the  notary,  his  in- 
ability to  perform  his  duty  by  a  deputy,  and  the  insufficient  service  of 
notice.^® 

§  531.  Same  subject — Signature. — The  signature  to  the  protest 
need  not  necessarily  be  in  writing  and  it  may  be  appended  by  a  prop- 
erly authorized  clerk.^^  And  the  fact  that  the  suffix  "Jr."  to  the  no- 
tary's name  in  the  body  of  the  certificate  is  omitted  from  his  signa- 
ture does  not  warrant  the  implication  that  they  are  different  officials.^® 

§  532.  Same  subject — Instances — Certificate. — The  protest  should 
state  where  the  note  was  presented  and  not  merely  that  it  was  pre- 
sented, and  should  show  that  every  requisite  has  been  complied  with 
and  performed  to  authorize  the  demand  upon  the  indorser.^^  The  cer- 
tificate, in  order  to  be  sufficient,  should  state  that  the  place  to  which 
the  notice  was  addressed  was  the  indorser's  residence  or  postoffice.*^ 
It  must  also  contain  a  statement  showing  not  only  the  place  where,  but 
also  to  what  person  the  presentment  was  made  and  the  manner  of  mak- 
ing it  ;*^  although  it  is  determined  that  a  certificate  need  not  show  that 

^^  Second  National  Bank  v.  Smith,  See  Second  National  Bank  v.  Smith, 

118    Wis.    18,    94    N.    W.    664.     See  118  Wis.  18,  94  N.  W.  664. 

§  542  herein.  ^  Guianon  v.  Union  Trust  Co.,  156 

'•'Donegan  v.  Wood,   49  Ala.    242,  111.   135,   40  N.   E.   556,  aff'g  53    111. 

20  Am.  Rep.  275.    See  Bank  of  Roch-  App.  581. 

ester  v.   Gray,   2   Hill    (N.  Y.)    227.  '=' People's  Bank  v.  Brooke,  31  Md. 

But  compare  Bank  of  Kentucky  v.  7,  1   Am.   Rep.   11.    See   McLean  v. 

Pursley,   3    T.   B.    Mon.    (Ky.)    238;  Ryan,  55  N.  Y.  Supp.   232,  36  App. 

Lambeth  v.  Caldwell,  1  Rob.    (La.)  Div.  281,  16  Bkg.  L.  J.  102. 

61;    Carter  v.  Burley,  9  N.  H.  558;  '"  Peabody  Ins.   Co.  v.  Wilson,   29 

§  542  herein.  W,  Va.  528,  2  S.  E.  888. 

"  See    Fulton    v.    Maccracken.    18  "  Union    National    Bank    v.    Wil- 

Md.  528,  81  Am.  Dec.  620;   Bank  of  liams  Milling  Co.,  117  Mich.  535,  76 

Cooperstown  v.  Woods,  28  N.  Y.  545.  N.  W.  1,  15  Bkg.  L.  J.  523,  5  Det. 

L.  N.  336. 


G81  '  BY  WHOM   MADE.  [§   533 

demand  was  made  of  any  individual  where  it  appears  therefrom  that 
demand  of  payment  was  made  at  the  bajik  where  the  note  was  payable 
and  that  payment  was  refused."*^  It  is  also  decided  that  the  place  where 
presented  and  the  inability  to  make  presentment,  by  reason  of  such 
place  being  closed,  and  to  find  any  person  to  whom  the  paper  could  be 
presented,  sufficiently  appear  from  the  statement  that  the  bill  was 
duly  presented.*^  Under  another  decision,  if  a  certificate  fails  to  desig- 
nate the  person  to  whom  the  draft  was  presented,  such  deficiency  may 
be  obviated  by  the  testimony  of  the  notary,  and  he  may  state  orally 
what  the  fact  is.**  A  certificate  which  is  otherwise  sufficient  is  not 
.  rendered  insufficient  by  the  fact  that  the  statement  as  to  notice  is 
separated  from  the  body  of  the  certificate  and  is  written  below  the 
official  seal.*^  Again,  it  is  held  that,  if  the  protest  conform  to  the  law 
and  practice  of  the  place  where  made,  the  notary  is  protected,**' 

§  533.  By  whom  made. — Protest  may  be  made  by  a  notary  public ; 
or  by  any  respectable  resident  of  the  place  where  the  bill  is  dishon- 
ored, in  the  presence  of  two  or  more  credible  witnesses.*''  Under  a 
Texas  decision  a  notary  public  may,  upon  the  maker^s  non-appearance, 
protest  a  note,  payable  at  a  certain  city  without  more  specific  designa- 
tion of  the  place,  where  such  maker  has  no  residence  or  place  of  busi- 
ness in  th&t  city.*^  In  Mississippi  it  is  decided  that  the  notar}^  who 
fills  up  and  certifies  the  protest  must  present  the  bill  himself,  as  it 
cannot  be  done  by  an  agent.*''  Again,  the  indirect  pecuniary  interest 
of  a  notary  in  a  note  does  not  render  him  incompetent  to  protest  it 
for  non-payment.^"  And  it  is  also  held  that  where  a  bank  holds  a  note 
or  bill,  its  cashier  and  stockholder,  who  is  a  notary  public,  has  the 
legal  right  to  protest  such  an  instrument  as  the  relation  sustained  by 

"Douglas  V.  Bank  of  Commerce,  "  Negot.  Inst.  Law,  §  262,  Appen- 

97    Tenn.    133,    36    S.    W.    874.     See,  dix  herein. 

also,     Witkowski     v.     Maxwell,     69  *"*  Williams  v.  Planters'  &  M.   Na- 

Miss.  56,  10  So.  453.  tional   Bank,  91  Tex.  651,  45  S.  W. 

"Brown  v.  Jones,  125  Ind.  375,  25  690,  15  Bkg.   L.  J.  346,  rev'g  44  S. 

N.  E.  452,  3  Bkg.  L.  J.  442.  W.  617. 

"  Cook     V.     Merchants'     National  *"  Carmichael  v.  Bank  of  Pennsyl- 

Bank,  72   Miss.  982,   18   So.   481,   13  vania,    4    How.    (Miss.)    567.     "The 

Bkg.  L.  J.  32.  sufficiency  of  such  presentment  and 

'^Jordan  v.  Long,  109  Ala.  414,  19  noting    seems    to    be    a    matter    of 

So.  843.  doubt    in    England."     Id.    569,    per 

'•'Musson  V.  Lane,  4  How.  (U.  S.)  Sharkey,  C.  J. 

262;     Wiseman     v.     Chiappella,     23  ™  Patton  v.  Bank  of  Lafayette,  124 

How.  (U.  S.)  368.  Ga.  965,  53  S.  E.  664. 


534] 


PROTEST  AND  "WANT  OF  PROTEST. 


682 


him  to  the  hank  is  not  a  disqualifying  interest,^^  A  person  not  law- 
fully authorized  by  the  owner  or  holder  or  one  who  is  wrongfully  in 
possession  cannot  make  a  valid,  binding  protest.^^ 

§  534.  When  to  he  made. — ^When  a  bill  is  protested,  such  protest 
must  be  made  on  the  day  of  its  dishonor,  unless  delay  is  excused  as 
provided  by  law.  When  a  bill  has  been  duly  noted,  the  protest  may  be 
subsequently  extended  as  of  the  date  of  the  noting.^^  The  formal  pro- 
test need  not  be  made  at  the  time  of  the  presentment  of  the  bill  for 
pa}Tnent.^*  In  cases  where  the  paper  carries  days  of  grace  the  in- 
dorser  is  not  charged  by  a  protest  of  the  note  before  the  expiration  of 
such  days  of  grace,^^  as  a  bill  may  be  prematurely  protested  where 
allowance  is  not  made  therefor.^"  But  in  such  case  the  protest  is  not 
premature  when  made  on  the  third  day  of  grace  ;^'^  and  the  protest 
may  be  made  on  the  last  day  thereof.^^  If  an  instrument  entitled  to 
days  of  grace  matures  on  a  Sunday  protest  must  be  made  within  three 
days  thereafter.^^  And  where,  under  a  statute,  paper  is  to  be  pro- 
tested according  to  the  custom  and  usage  of  merchants,  protest  on  the 
third  day  of  grace  is  sufficient  without  waiting  until  the  next  day.*^" 


"Moreland  v.  Citizens'  Savings 
Bank,  97  Ky.  211,  17  Ky.  L.  Rep. 
88,  30  S.  W.  637,  16  Ky.  L.  Rep.  860, 
30  S.  W.  19;  Nelson  v.  First  Na- 
tional Bank,  69  Fed.  798,  32  U.  S. 
App.  554,  16  C.  C.  A.  425,  12  Bkg.  L. 
J.  672. 

^=  Hof ricMer  v.  Enyeart  (Neb.), 99 
N.  W.  658. 

=^  Negot.  Inst.  Law,  §  263 ;  Bills  of 
Exch.  Act,  §  51,  Appendix  herein. 

"Bailey  v.  Dozier,  6  How.  (U.  S.) 
23.    See: 

Iowa. — Chatham  Bank  v.  Allison, 
15  Iowa  357. 

Kentucky. — Mattingly  v.  Bank  of 
Commerce,  21  Ky.  1029,  53  S.  W. 
1043. 

Mississippi. — Grimball  v.  Mar- 
shall, 3  Smedes  &  M.  (Miss.)  359. 

Neio  York. — First  National  Bank 
V.  Crittenden,  2  Thomp.  &  C.  (N. 
Y.)  118. 

Texas. — Lombard   Lumber  Co.  v. 


First  National  Bank,  86  Tex.  300, 
24  S.  W.  260. 

^  Cruger  v.  Lindheim  (Tex.  App.), 
16  S.  W.  420. 

^•'Bell  V.  First  National  Bank  of 
Chicago,  115  U.  S.  373,  29  L.  Ed. 
409,  6  Sup.  Ct.  105. 

"  Cary-Lombard  Lumber  Co.  v. 
Ballinger  First  National  Bank  (Tex. 
Civ.  App.),  24  S.  W.  702,  86  Tex. 
299,  24  S.  W.  260,  10  Bkg.  L.  J.  122. 

'^  Guignon  v.  Union  Trust  Co.,  156 
111.  135,  40  N.  E.  556,  aff'g  53  111. 
App.  581.  See  Fenwick  v.  Sears,  1 
Cranch  (U.  S.)  259. 

»"  Morris  v.  Bailey,  10  S.  Dak.  507, 
74  N.  W.  443.  So  held,  notwithstand- 
ing statute  (Comp.  Laws  S.  Dak., 
§  4492)  as  to  paper  being  due  next 
business  day  where  it  matures  on  a 
holiday. 

'^°  Cary-Lombard  Lumber  Co.  v. 
Ballinger  First  National  Bank,  86 
Tex.  299,  10  Bkg.  L.  J.  122,  24  S.  W. 
260;  Rev.  Stat.  Tex.,  Art.  273. 


683  WHERE   MADE.  [§    535 

But  a  protest  made  on  the  fourth  day  of  grace  is  held  to  be  insuffi- 
cient in  the  absence  of  usage  justifying  it.**^  And  it  is  held  that  the 
indorser  is  liable,  even  though  protest  is  not  made  and  notice  given 
until  the  third  day  after  that  on  which  the  note  is  by  its  terms  to  be 
paid,  and  although  days  of  grace  are  abolished  by  statute,  it  appear- 
ing that  the  note  bore  date  before,  but  was  not  made  until  after  the 
statute  was  enacted."^  If  a  note  is  indorsed  when  overdue  a  second 
or  subsequent  demand  and  protest  are  of  no  force  where  protest  was 
not  made  or  notice  given  after  the  first  demand.*'^  In  case  of  a  de- 
mand note,  the  day  of  its  maturity  cannot  be  fixed  by  a  request  for 
payment  on  a  certain  future  date,  made  by  letter  from  the  bank  where 
the  note  is  payable,  so  as  to  necessitate  protest.*'*  Again  it  may  prop- 
erly be  left  to  the  jury  whether  the  refusal  of  the  drawee  to  accept  was 
within  or  after  business  hours  so  that  the  bill  could  be  put  in  the  no- 
tary's hands  on  that  day  or  not  until  the  next  day.^^ 

§  535.  Where  made. — A  bill  must  be  protested  at  the  place  where 
it  is  dishonored,  except  that  when  a  bill,  drawn  payable  at  the  place 
of  business  or  residence  of  some  person  other  than  the  drawee,  has 
been  dishonored  by  non-acceptance  it  must  be  protested  for  non-pay- 
ment at  the  place  where  it  is  expressed  tO'  be  payable,  and  no  further 
presentment  for  payment  to,  or  demand  on,  the  drawee  is  necessary.®^ 
Protest  may  be  made  b}^  the  notary  wpon  finding  the  doors  of  the  ac- 
ceptor's usual  place  of  business  closed  where  presentment  has  been 
made  there  dviring  proper  hours  of  the  day,  as  in  such  a  case  he  is  not 
obligated  to  make  further  inquiries  at  the  acceptor's  residence  or  other 
effort  to  locate  him.*''^  And  an  indorser  may  be  treated  in  a  protest 
as  continuing  his  residence  in  the  place  where  he  lived  when  he  in- 
dorsed the  note,  where  his  name  still  remains  in  the  city  directory  and 
his  sign  is  retained  at  his  former  place  of  business,  although  he  had 
removed  from  the  city,  but  of  that  fact  the  notary  was  ignorant.'^® 

"Adams    v.    Otterback,    15    How.  «=  Nelson    v.    Fotteral,     7    Leigh. 

(U.  S.)  539.  (Va.)  179. 

"=  Button    v.    Belding,    48    N.    Y.  «» Negot.  Inst.  Law,  §  264;  Bills  of 

Supp.  981,  22  App.  Div.  618.  Exch.  Act,  §  51,  Appendix  herein. 

"'•'  Rosson  V.   Carroll,  90  Tenn.  90,  "^  Sulzbacher    Bros.     v.     Bank    of 

16  S.  W.  66,  43  Alb.  L.  J.  493.  Charleston,  86  Tenn.  201,  6  Am.  St. 

**  National  Hudson  River  Bank  v.  Rep.  228,  6  S.  W.  129. 

Kinderhook  &  H.  R.  Co.,  45  N.  Y.  ^'^  Reier  v.  Strauss,  54  Md.  278,  39 

Supp.  588,  17  App.  Div.  232,  14  Bkg.  Am.  Rep.  390. 
L.  J.  383. 


I 


§§    536,    537]  PROTEST  AND   WANT   OF    mOTEST.  684 

If  a  note  is  payable  in.  one  city  but  it  is  protested  in  another,  such 
protest  is  insufficient.^'' 

§536.  When  protest  dispensed  with — Excuses. — Protest  is  dis- 
pensed with  by  any  circumstances  which  would  dispense  with  notice 
of  dishonor.  Delay  in  noting  or  protesting  is  excused  when  delay  is 
caused  by  circumstances  beyond  the  control  of  the  holder  and  not 
imputable  to  his  default,  misconduct,  or  negligence.  When  the  cause 
of  delay  ceases  to  operate,  the  bill  must  be  noted  or  protested  with  rea- 
sonable diligence.'^"  Substantially  tlie  same  rule  as  that  above  stated 
in  the  first  clause  is  held  in  Alabama  to  be  the  rule  applicable  to  for- 
eign bills.'^^  And  excuses  applicable  in  cases  of  notice  of  dishonor  will 
also  generally  apply  in  cases  of  protest.'^-  If  the  drawer  has  failed  to 
meet  his  obligation  and  the  indorser  obtains  knowledge  thereof  on  the 
day  of  maturity  his  liability  becomes  fixed  without  protest.'^^  Protest 
is  unnecessary  as  to  the  acceptor.'^*  But  an  indorser  of  a  forged  bill 
may  be  liable  to  a  subsequent  holder,  even  though  the  bill  is  not  pro- 
tested, and  the  bill  is  paid  and  the  money  subsequently  refunded. '^^ 

§  537.  Waiver  of  protest  generally. — It  may  be  generally  stated 
that  whatever  constitutes  waiver  of  notice  of  dishonor  as  to  inland 
bills  is  also  applicable  in  determining  whether  there  is  a  waiver  of 
protest,  in  so  far  as  an  indorser  of  a  foreign  bill  is  concerned.""  If 
the  conduct  of  the  indorser  is  such  as  is  calculated  to  put  the  holder, 
when  acting  with  reasonable  prudence,  off  his  guard,  and  to  induce 
him  not  to  insist  upon  his  rights  and  to  omit  the  step  of  protest,  he  is 
thereby  relieved  of  the  necessity  of  a  protest.'^'^  So  where  the  holder 
is  misled  to  his  injury  by  the  indorser's  act  in  writing  over  the  in- 

'"H.  B.  Claflin   Co.  v.  Feibleman,  '^-y^ells  F.  &  Co.  v.  Simpson  Na- 

44  La.  Ann.  518,  10  So.  862.  tional  Bank,  19  Tex.  Civ.  App.  636, 

'"Negot.  Inst.  Law,  §  267;  Bills  of  47  S.  W.  1024,  16  Bkg.  L.  J.  35. 

Exch.  Act,  §  49   (9),  Appendix  here-  ™  Alabama  National  Bank  v.  Riv- 

in.    See  §  570,  et  seq.,  herein.  ers,  116  Ala.  1,  22  So.  580. 

^1  Alabama  National  Bank  v.  Riv-  "Boyd  v.  Bank  of  Toledo,  32  Ohio 

ers,  116  Ala.  1,  22  So.  580.  St.  526,  30  Am.  Rep.,  624.    See  Seld- 

'-  Alabama  National  Bank  v.  Riv-  ner  v.  Mt.  Jackson  National  Bank, 

ers,  116  Ala.  1,  22  So.  580.  66  Md.  488,  8  Atl.  62,  6  Cent.  Rep. 

"Mutual  National  Bank  v.  Rotge,  478.    As   to   principle    involved   see 

28  La.  Ann.  933,  26  Am.  Rep.  126.  Bank  of  Richland  v.  Nicholson,  120 

'^Gillespie  v.  Planters   Oil-Mill   &  Ga.  622,  48  S.  E.  240. 
Mfg.  Co.,  76  Miss.  406,  24  So.  900. 


€85  WAIVER   OF    PROTEST.  [§    538 

dorsement  a  waiver  of  protest,  the  latter  is  estopped  thereby,  even 
though  the  question  of  forgery  of  the  indorsement  is  raised,  but  the 
evidence  thereon  is  conflicting.'''*^  Protest  may  be  expressly  waived, 
or  the  circumstances  may  be  such  after  the  lapse  of  time  as  to  justify 
an  inference  of  waiver. '^^  So  there  may  be  a  conditional  waiver  of 
protest,  not  binding  where  the  terms  and  conditions  thereof  are  not 
fulfilled.^" 

§  538.  Waiver  of  protest,  continued. — If  an  indorser  has  knowl- 
edge of  the  laches  in  not  taking  the  prerequisite  legal  steps,  and  also 
of  all  material  facts,  and  he  subsequently  promises  to  pay,  he  waives 
such  laches  and  becomes  bound.** ^  But  want  of  knowledge  as  to  the 
legal  effects  of  the  facts  will  not  release  him  from  the  obligation  of  the 
waiver.^-  And  the  promise  must,  it  is  held,  be  a  new  and  valid  one;^^ 
although  it  is  also  decided  that  no  new  consideration  is  required  for  a 
waiver  of  protest  by  an  indorser  on  an  overdue  note.**  And  it  is  de- 
termined in  Pennsylvania  that  from  the  nature  of  an  indorser^s  con- 
tract a  new  consideration  is  not  required  to  support  a  waiver  of  pro- 
test before  or  after  the  maturity  of  the  paper.  Thus  where  the  in- 
dorser, eighteen  months  after  the  maturity  of  a  note,  with  knowledge 
that  no  demand  for  the  payment  of  it  had  been  made,  and  no  notice 
of  its  dishonor  had  l^een  given,  without  any  new  consideration,  in- 
dorses on  the  note  a  waiver  of  protest,  he  will  be  bound  by  the  waiver 
and  be  liable  on  the  note.***  If  the  note  or  the  body  thereof  contains  a 

''  Robinson  v.  Barnett,  19  Fla.  670,        ***  Burgettstown  National  Bank  v. 

45  Am.  Rep.  24.  Nill,  213  Pa.  456,  63  Atl.  186.    In  tliis 

'"Murphy     v.     Citizens'     Savings  case    Mr.    Justice    Mestrezat    said: 

Banlt,  22  Ky.  L.  Rep.  1872,  62  S.  W.  "The    indorser    may    waive    protest 

1028,  61  S.  W.  25.  after   the   date   of   maturity   of   the 

^^  Lititz   National   Bank   v.    Siple,  note    with    like    effect    as    if    done 

145  Pa.  49,  222  Atl.  208,  5  Bkg.  L.  J.  prior     to     that     date.      Barclay     v. 

140.  Weaver,    19    Pa.    396;     Hoadley    v. 

*^  Alabama  National  Bank  v.  Riv-  Bliss,  9  Ga.  303;   Sheldon  v.  Horton 

ers,    116    Ala.    1,    22    So.    580.     See  (N.   Y.),   3   Am.   Rep.   669;    Ross  v. 

§§  524,  525  herein.  Hurd     (N.    Y.),    27    Am.    Rep.    1 

«=  Toole  v.  Crafts  (Mass.  1906),  78  Rindge  v.   Kimball,   124   Mass.    209 

N.  E.  775.  1   Parsons  on  Bills  and  Notes  594 

"White  V.  Keith,  97  Ala.  668,  12  2   Randolph  on   Commercial   Paper, 

So.  611.  §  1456.    In  Barclay  v.  Weaver,  this 

"  Lockwood  V.  Bock,  50  Minn.  142,  court    said     (p.     401):      'It    seems, 

52  N.  W.  391.    See  Delsman  v.  Fried-  therefore,  that  the  duty  of  demand 

lander,  40  Oreg.  33,  66  Pac.  297.  and  notice,  in  order  to  hold  an  in- 


^ 


538] 


PROTEST  AND   WANT  OF  PROTEST. 


686 


dorser,  is  not  a  part  of  the  contract, 
but  a  step  in  the  legal  remedy,  that 
may  be  waived  at  any  time  in  ac- 
cordance with  the  maxim  quilibet 
potest  renunciare  juri  pro  se  intro- 
ducto.'  In  some  jurisdictions  it  is 
held  that  the  waiver,  when  made 
after  the  maturity  of  the  note,  must 
be  with  full  knowledge  of  the  in- 
dorser's  laches  and  that  it  requires 
a  new  consideration.  But  it  is  set- 
tled by  numerous  American  author- 
ities that  a  waiver  of  protest  need 
not  be  supported  by  a  new  consider- 
ation. Neal  v.  Wood,  23  Ind.  523; 
Hughes  v.  Bowen,  15  Iowa  446; 
Cheshire  v.  Taylor,  29  Iowa  492; 
Sheldon  v.  Horton  (N.  Y.),  3  Am. 
Rep.  669;  Tebbetts  v.  Dowd,  23 
Wend.  379;  Wall  v.  Bry,  1  La.  Ann. 
312;  Lane  v.  Steward,  20  Me.  98. 
We  know  of  no  decision  in  this 
court  holding  that  such  waiver  must 
be  supported  by  a  new  considera- 
tion. The  contrary  rule,  however,  is 
distinctly  recognized  in  Barclay  v. 
Weaver,  19  Pa.  396.  In  that  case 
Mr.  Justice  Lowrie,  in  construing 
the  contract  of  an  indorser  of  ne- 
gotiable paper,  says  (p.  400):  'The 
most,  therefore,  that  can  be  said  of 
an  indorsement  of  negotiable  paper 
is,  that  from  it  there  is  implied  a 
contract  to  pay,  on  condition  of  the 
usual  demand  and  notice;  and  that 
this  implication  is  liable  to  be 
changed  on  the  appearance  of  cir- 
cumstances inconsistent  with  it, 
whether  those  circumstances  be 
shown  orally  or  in  writing.  But  it 
may  well  be  questioned  whether  the 
condition  of  demand  and  notice  is 
truly  part  of  the  contract,  or  only 
a  step  in  the  legal  remedy  upon  it. 
If  it  is  part  of  the  contract,  how 


can  it  be  effectually  dispensed  with 
without  a  new  contract  for  a  suffi- 
cient consideration,  especially  after 
the  maturity  of  the  note?  Yet  there 
are  decisions  without  number  that 
a  waiver  of  it  during  the  currency, 
or  after  the  maturity  of  the  note, 
will  save  from  the  consequences  of 
its  omission.  This  could  not  be  if 
it  was  a  condition  of  the  contract, 
for  then  the  omission  of  it  would 
discharge  the  indorser  both  morally 
and  legally;  and  no  new  promise 
afterwards,  even  with  full  knowl- 
edge of  the  facts,  could  be  of  any 
validity.  If,  however,  an  indorse- 
ment without  other  circumstances 
be  regarded  as  an  implied  contract 
to  pay,  provided  the  holder  use  such 
diligence  that  the  indorser  loses 
nothing  by  his  negligence  or  in- 
dulgence, then  it  accords  with  all 
these  decisions.  Then  the  law,  and 
not  the  contract,  declares  the  usual 
demand  and  notice  to  be  in  all  cases 
conclusive,  and  in  some  cases  neces- 
sary evidence  of  such  diligence. 
*  *  *  It  (the  law)  therefore,  is 
perfectly  consistent  in  declaring 
that  an  indorser  is  bound  by  a  new 
promise,  after  he  knows  of  the  omis- 
sion of  demand  and  notice,  for  this 
is  an  admission  that  he  was  not  en- 
titled to  it,  or  has  not  suffered  for 
want  of  it.  It  declares  demand  and 
notice  necessary,  in  some  cases,  to 
save  the  indorser  from  loss  and  it 
declares  that  his  own  admission  may 
be  submitted  for  them.'  It  is  mani- 
fest, therefore,  that  from  the  na- 
ture of  the  indorser's  contract,  a 
new  consideration  is  not  required 
to  support  a  waiver  of  protest  be- 
fore or  after  maturity  of  the  paper." 


I 


687 


WAIVER   OF    PROTEST. 


[§   539 


waiver  of  protest,  persons  indorsing  the  note  are  bound  thereby.^^ 
And  indorsers  who  write  on  the  note  a  waiver  are  likewise  bound;®* 
and  an  indorser  in  blank  is  also  obligated  by  a  waiver  of  protest 
placed  over  his  name.®'^  Protest  may  also  be  waived  by  indorsing  a 
note  on  the  back  of  which  is  a  printed  waiver  thereof,  even  though 
the  name  is  not  in  juxtaposition  as  to  the  memorandum;*^  and  all 
the  indorsers  who  sign  a  stamped  waiver  on  the  back  of  a  note  will  be 
held  thereby .®° 

§  539.     Waiver    of    protest    continued — ^What    is    included. — A 

waiver  of  protest,  whether  in  the  case  of  a  foreign  bill  of  exchange  or 
other  negotiable  instrument,  is  deemed  to  be  a  waiver  not  only  of  a 
formal  protest,  but  also  of  presentment  and  notice  of  dishonor.^** 
Again,  protest  may  be  waived  by  a  guaranty  to  a  bank,^^   So  a  written 


^=  Woodward  v.  Lowry,  74  Ga.  148; 
Iowa  Valley  State  Bank  v.  Sigstad, 
96  Iowa  491,  65  N.  W.  407;  Jacobs 
V.  Gibson,  77  Mo.  App.  244,  2  Mo. 
A.  Rep.  6.  See  Portsmouth  Savings 
Bank  v.  Wilson  (D.  C.  App.),  22 
Wash.  L.  Rep.  817;  German-Amer- 
ican Savings  Bank  v.  Hanna  (Iowa), 
100  N.  W.  57. 

^^  Blanc  V.  Mutual  National  Bank, 
28  La.  Ann.  921,  27  Am.  Rep.  119. 

^'  Dunnigan  v.  Stevens,  122  111. 
396,  13  N.  E.  651;  Davis  v.  Eppler, 
38  Kan.  629,  16  Pac.  793. 

*^  Farmers'  Bank  of  Kentucky  v. 
Ewen,  78  Ky.  264,  39  Am.  Rep.  231; 
Loveday  v.  Anderson,  18  Wash.  322, 
51  Pac.  463,  15  Bkg.  L.  J.  100.  See 
Savings  Bank  v.  Fisher  (Cal.),  41 
Pac.  490. 

^^  Farmers'  Exchange  Bank  v.  Al- 
tura  Gold  Mill  Mining  Co.,  129  Cal. 
263,  61  Pac.  1077. 

~Negot.  Inst.  Law,  §  182,  Appen- 
dix herein. 

See  also  the  following  cases: 

California. — San  Diego  First  Na- 
tional Bank  v.  Falkenhan,  94  Cal. 
141,  29  Pac.  866,  7  Bkg.  L.  J.  105. 

Kansas. — Baker  v.  Scott,  29  Kan. 
136,  44  Am.  Rep.  628. 


Louisiana. — Harvey  v.  Nelson,  31 
La.  Ann.  434,  33  Am.  Rep.  222. 

Massachusetts. — Johnson  v.  Par- 
sons, 140  Mass.  173,  4  N.  E.  196,  1 
N.  Eng.  181. 

Minnesota. — Wolford  v,  Andrews, 
29  Minn.  250,  43  Am.  Rep.  201. 

Mississippi. — T  imberlake  v. 
Thayer,  76  Miss.  76,  23  So.  767, 

Missouri. — Bradley  v.  Asher,  65 
Mo.  App.  589;  Hammett  v.  True- 
worthy,  51  Mo.  App.  281;  Johnson 
County  Savings  Bank  v.  Lowe,  47 
Mo.  App.  151;  Wheeler  v.  Asher,  2 
Mo.  App.  Rep'r.  1236.  See  Richards 
V.  Harrison,  71  Mo.  App.  224. 

North  Carolina. — Shaw  v.  McNeill, 
95  N.  C.  535. 

Ohio. — Seymour  v.  Francisco,  4 
Ohio. Dec.  12,  1  Cleve.  Law  Rec.  9. 

Washington. — Wilkie  v.  Chandon, 
1  Wash.  355,  25  Pac.  464. 

But  compare  Blatchford  v.  Harris, 
115  111.  App.  160;  Wilkins  v.  Gillis, 
20  La.  Ann.  538;  Hay  ward  v.  Em- 
pire State  Sugar  Co.,  93  N.  Y.  Supp. 
499,  105  App.  Div.  21;  Sprague  v. 
Fletcher,  8  Oreg.  367,  34  Am.  Rep. 
587. 

"^  First  National  Bank  of  Lancas- 
ter V.  Hartman,  110  Pa.  St.  196,  1 
Atl.  271. 


§    540]  PROTEST  AND   WANT  OF   PROTEST.  688 

agreement,  made  by  the  indorser,  to  become  responsible  for  the  amount 
of  the  note,  is  a  waiver  of  protest,  such  agreement  being  made  the  day 
after  maturity.^^ 

§  540.  Waiver  of  protest  continued — Decisions. — Protest  may  be 
waived  by  an  agreement  for  or  by  an  extension  of  time  for  payment;®^ 
or  by  an  offer,  before  maturity,  of  a  renewal  note  f^  or  by  an  indorse- 
ment, before  maturity,  of  such  a  note.°^  But  a  mere  request  for  re- 
newal and  a  partial  payment,  without  knowledge  that  protest  had 
been  made  and  notice  given  to  all  other  parties,  is  not  a  waiver.^®  And 
the  indorsement  of  a  subsequent  note  for  a  sum  equal  to  the  balance 
due  on  a  prior  note  is  not  a  sufficient  evidence  of  waiver  of  protest, 
even  though  the  indorsement  was  made  on  the  same  day  on  which  the 
unpaid  note  matured,  where  there  is  no  evidence  of  knowledge  on  the 
part  of  the  indorser  as  to  the  intent  in  giving  such  second  note.^'^ 
Again,  there  may  be  a  waiver  consequent  upon  a  telegram  to  a  collect- 
ing bank  to  pay  and  not  protest  and  to  draw  on  the  sender  of  the 
message,  who  was  one  of  the  partners  of  a  firm,''®  If  a  letter,  ambigu- 
ous in  its  terms,  is  claimed  to  constitute  a  waiver  of  protest,  it  must 
have  been  intended  by  the  indorser  to  so  operate.^^  Where  an  indorser 
permitted  a  note  to  become  overdue  and  he  by  letter  requested  that 
no  costs  be  incurred  on  another  note  and  offered  security,  and  there- 
after wrote  asking  if  payment  had  been  made,  it  was  held  that  there 
was  no  waiver.^****  And  an  indorser's  express  waiver  of  protest  will  not 
bind  him  where  it  is  sent  to  a  person  not  then  holding  or  owning  the 
note,  although  it  subsequently  comes  into  such  person's  possession  for 
collection,  but  it  does  not  appear  that  the  indorsee  who  had  indorsed 
the  note  for  collection  knew  of  such  waiver.^"^  The  payment  of  inter- 

"^McLaurin  v.   Seguin,  Rap.  Jud.  nooga  Const.  Co.   (Tenn.  Ch.  App.), 

Quebec,  12  C.  S.  63.  38  S.  W.  102. 

"^  Glaze  v.  Ferguson,  48  Kan._  157,  "'  R.  &  W.  Jenkinson  Co.  v.  Eggers, 

29   Pac.   396;    McMonigal   v.   Brown,  28  Pa.  Super.  Ct.  151. 

45  Ohio  St.  499,  15  N.  E.  860;   Bas-  "'^  Seldner  v.  Mt.  Jackson  National 

senhorst  v.  Wilby,  45  Ohio  St.  333,  Bank,  66  Md.  488,  8  Atl.  262,  6  Cent. 

13  N.  E.  75,  11  West.  Rep.  274.  Rep.  478. 

^  Jenkins  v.  White,  147  Pa.  303,  23  "^  First  National  Bank  v.  McCord 

Atl.  556.  (Tex.  Civ.  App.),  39  S.  W.  1003. 

"^  First  National  Bank  v.  Weston,  ^~  Martin  v.  Perqua,  20  N.  Y.  Supp. 

49  N.  Y.  Supp.  542,  25  App.  Div.  414.  285,    47    N.    Y.    St.    R.    518,    65    Hun 

See  Hudson  River  National  Bank  v.  225. 

Reynolds,  10  N.  Y.  Supp.  669,  32  N.  '"'  National    Bank    of   Poultney   v. 

Y.  St.  R.  124.  Lewis,  50  Vt.  622,  28  Am.  Rep.  514, 

^i"  Carnegie    Steel    Co.    v.    Chatta- 


689  WAIVER  OF  PROTEST.  [§§  541,  543 

est  on  a  note  after  its  maturity  will  not  constitute  a  waiver  where  it 
does  not  appear  that  the  indorser  knew  of  the  want  of  protest."^ 
Again,  an  express  waiver  of  protest  of  a  note  payable  a  certain  time 
after  demand  made  operates  to  dispense  with  demand  and  notice.^°^ 

§  541.  Waiver  of  protest — Parties. — The  fact  that  the  indorser  of 
a  note  payable  at  a  chartered  bank  is  a  president  and  also  director 
does  not  dispense  with  the  necessity  of  notice  and  protest  to  charge 
the  indorser.  The  relation  which  the  indorser  sustains  to  the  bank 
does  not  amount  to  a  waiver  of  his  right  to  such  notice.^"*  But  pro- 
test of  a  bill  drawn  and  indorsed  by  a  copartnership  may  be  waived 
by  one  of  its  members,  even  though  he  is  cashier  of  the  bank  which 
has  discounted  such  bill;^^^  although  a  settling  partner,  after  disso- 
lution of  the  firm,  has  no  power  to"  waive  protest  of  a  draft  then  given 
to  pay  a  partnership  debt,  and  so  bind  a  former  dormant  partner.^"" 
In  case  of  notes  indorsed  by  a  corporation  it  is  decided  that  its  secre- 
tary may  make  a  binding  agreement  to'  waive  protest. ^"^^  And  a 
maker's  general  waiver  of  protest  as  to  his  paper  in  a  bank  is  suffi- 
cient to  justify  recovery  on  an  unprotested  instrument  held  by  such 
bank,  notwithstanding  other  paper  held  by  that  bank  had  been  pro- 
tested.^"^ Protest  of  a  note  of  an  insolvent  indorser  may  also  l)e 
waived  by  the  curator. ^°^  But  diligence  must,  it  is  held,  nevertheless 
be  exercised  in  l^ringing  action  against  the  maker,  even  though  protest 
of  a  non-negotiable  note  has  been  waived  by  the  assignor.^^'^  xA.nd 
although  there  is  no  protest  or  waiver  of  protest  as  to  other  indorsers, 
still  a  first  indorser  may  orally  waive  protest  and  insist  upon  contri- 
bution if  held  liable  and  forced  to  pay.^^^ 

§542.  Certificate  of  protest — Evidence. — It  is  declared  that  it  is 
not  disputed  that,  by  the  general  custom  of  merchants  in  the  United 

102  "vVerr  v.  Kohles,  71  N.  Y.  Supp.  "'  Ludington  v.  Thompson,  38   N. 

713,  64  App.  Div.  117.  Y.  Supp.  768,  4  App.  Div.  117. 

^"=  Cooke  V.  Pomeroy,  65  Conn.  466,  '"*  Valley  National  Bank  v.  Urich, 

32  Atl.  935.  191  Pa.  556,  43  Atl.  354,  16  Bkg.  L. 

"*Ennis  v.   Reynolds    (Ga.   1906),  J.  406. 

56  S.  E.  104.    See  §  533  herein.  """  Boutin,  In  re.  Rap.  Jud.  Quebec, 

"=  Hays  V.  Citizens*  Savings  Bank,  12  C.  S.  186. 

101  Ky.   201,  40   S.   W.   573,  19   Ky.  ""  Burke  v.  Ward  (Tex.  Civ.  App.), 

L.  Rep.  367,  14  Bkg.  L.  J.  327.  32  S.  W.  1047. 

""  Mauney  v.  Coit,  80  N.  C.  300,  30  '"  Sloan  v.  Gibbes,  56  S.  C.  480,  35 

Am.  Rep.  80.  S.  E.  408. 
Joyce  Defenses — 44. 


542] 


PROTEST  AND   WANT  OF   PROTEST. 


690 


States,  bills  of  exchange,  drawn  in  one  state  on  another  state,  are,  if 
dishonored,  protested  by  a  notary ;  and  the  iDroduction  of  such  protest 
is  the  customary  document  of  dishonor. "^  The  question,  however,  of 
evidence  and  the  force  and  effect  thereof  in  cases  of  notarial  certifi- 
cates of  protest  is  regulated  to  a  great  extent  by  statutory  provisions. 
A  properly  attested  and  valid  certificate  of  protest  affords  presump- 
tive or  pi-ima  facie  evidence  of  the  facts  stated  therein,^^^  and  this 
applies  as  well  to  an  inland  as  to  a  foreign  bill;^^*  but  it  is  held  to  be 
only  prima  facie  or  presumptive  evidence.^^^  The  seal  of  a  notary 
makes  the  certificate  of  protest  at  least  presumptive  evidence  of  the 
truth  of  the  facts  recited,^"  and  entitles  it,  so  it  is  held,  to  full  faith 
and  credit.^ ^^  A  certificate  is  held  to  be  presumptive  evidence  that 
presentment  tO'  a  banlv  was  made  during  banking  hours  where  it  con- 
tains a  statement  that  the  note  was  presented  for  payment  on  a  cer- 
tain day  and  that  the  bank  was  found  closed.^^^  In  Wisconsin  such 
certificate  is  not  only  prima  facie  or  presumptive  evidence,  but  when 
properly  made  is  sufficient  proof  of  notice.^^''  Under  a  Xew  York 
decision  a  notarj-'s  certificate,  made  in  Pennsylvania,  where  such  cer- 


'"  Townsley  v.  Sumrall,  2  Pet.  (U. 
S.)  170. 

"^  Arkansas. — Fletcher  v.  Ar- 
kansas National  Bank,  62  Ark.  265, 
35  S.  W.  228. 

Georgia. — Patton  v.  Bank  of  La- 
fayette, 124  Ga.  965,  53  S.  E.  664. 

Kentucky. — Mattingly  v.  Bank  of 
Commerce,  21  Ky.  1029,  53  S.  W. 
1043. 

Maryland. — People's  Bank  v. 
Brooke,  31  Md.  7,  1  Am.  Rep.  11. 

Massachusetts. — Legg  v.  Vlnal,  165 
Mass.  555,  48  N.  E.  518. 

Xeiv  York. — Bank  of  United 
States  V.  Davis,  2  Hill  (N.  Y.)  551; 
Bell  V.  Lent,  24  Wend.  (N.  Y.)  230; 
De  Wolf  V.  Murray,  2  Sandf.  (N. 
Y.)  166;  Townsend  v.  Auld,  31  N. 
Y.  Supp.  29,  63  N.  Y.  St.  R.  418,  24 
Civ.  Proc.  181,  10  Misc.  343,  rev'g 
28  N.  Y.  Supp.  746,  59  N.  Y.  St.  Rep. 
274.  See  McAndrew  v.  Radway,  34 
N.  Y.  511;  Union  Bank  v.  Gregory, 
46  Barb.   (N.  Y.)   98;   Bank  of  Ver- 


gennes  v.  Cameron,  7  Barb.  (N.  Y.) 
143. 

North  Dakota. — Ashe  v.  Beasley, 
6  N.  Dak.  191,  69  N.  W.  188. 

See  Sims  v.  Hundley,  6  How.  (U. 
S.)  1;  McAfee  v.  Doremus,  5  How. 
(U.  S.)  53;  Brandon  v.  Loftus,  4 
How.  (U.  S.)  127. 

^"Ashe  V.  Beasley,  6  N.  Dak.  191, 
69  N.  W.  188. 

'"Mattingly  v.  Bank  of  Com- 
merce, 21  Ky.  1029,  53  S.  W.  1043; 
Meise  v.  Newman,  76  Hun  (N.  Y.) 
341;  Townsend  v.  Auld,  31  N.  Y. 
Supp.  29,  24  Civ.  Proc.  181,  63  N.  Y. 
St.  R.  418,  10  Misc.  343,  rev'g  28 
N.  Y.  Supp.  746,  59  N.  Y.  St.  R.  274. 

"•^  Second  National  Bank  v.  Smith, 
118  Wis.  18,  94  N.  W.  664. 

"'  Pierce  v.  Indseth,  106  U.  S.  546, 
1  Sup.  Ct.  418.  See  Dickins  v.  Beal, 
10  Pet.  (U.  S.)  572. 

"'  Schlesinger  v.  Schultz,  96  N.  Y. 
Supp.  383,  110  App.  Div.  356. 

"''  Second  National  Bank  v.  Smith, 
118  Wis.  18,  94  N.  W.  664. 


I 


G91  CERTIFICATE    OF   PROTEST — EVIDEXCE.  [§    543 

tificates  are  evidence,  may  be  admitted  in  an  action  in  the  former  state 
to  prove  non-payment  and  notice.^-"  In  a  Minnesota  case  the  certifi- 
cate is  held  to  be  competent  to  prove  the  statements  therein,  where  it 
is  admitted  without  objection  except  as  to  the  signatures.^-^  Under  a 
Mississippi  decision  the  certificate  evidences  the  fact  of  presentment 
and  that  it  was  made  in  the  manner  set  forth  therein.^--  And  in 
Xorth  Dakota  it  is  held  sufficient  evidence  of  a  like  fact  and  also  that 
demand  was  made.^-^  So  the  receipt  of  notice  of  protest  is  sufficiently 
evidenced,  under  a  ISTew  York  decision,  by  a  certificate  stating  that  it 
was  mailed,  there  being  no  affidavit  of  denial  of  the  fact.^^*  Again, 
in  a  federal  supreme  court  case  it  is  declared  that  a  notarial  protest 
is  of  itself  sufficient  proof  of  dishonor  of  a  foreign  bill.^-^ 

§  543.  Same  subject. — If  the  certificate  of  protest  is  exclusively 
relied  on,  it  should  sufficiently  set  forth  the  doing  of  every  essential 
act.^^''  Under  a  Pennsylvania  decision  a  certificate  of  protest  is  not 
conclusive  evidence  and  has  merely  the  force  of  a  deposition.^-'^  If 
the  notary's  testimony  can  be  given,  such  certificate  is  held,  in  the 
absence  of  a  statute,  not  to  be  even  prima  facie  evidence  of  a  statement 
therein  that  notice  of  dishonor  was  served,  as  the  law  merchant  makes 
it  no  part  of  the  notary's  duty  to  give  such  notice.^^^  So  it  is  also 
determined  that  the  certificate  of  protest  of  an  inland  bill  is  not 
evidence  of  any  fact  stated  therein. ^2''  Where  it  does  not  appear  from 
the  certificate  that  notice  of  protest  was  given,  i|;  is  not  evidence  of 
that  fact,  even  though  it  contains  a  recital  that  protest  was  made.^^'' 

^"Persons    v.    Kruger,    60    N.    Y.  eign  bills  of  exchange,  the  notarial 

Supp.  1071,  45  App.  Div.  187,  7  N.  certificate    of    protest    is,    of    itself, 

Y.  Ann.  Cas.  100.  sufficient   proof   of  the   dishonor   of 

^^Herrick   v.    Baldwin,    17    Minn,  a    bill,    without    any    auxiliary    evi- 

209,  10  Am.  Rep.  161.  dence. 

'-Witkowski  v.  Maxwell,  69  Miss.  ^"Berg  v.  Abbott,  83   Pa.   St.   17, 

56,  10  So.  453.  24  Am.  Rep.  158.    See  Mason  v.  Kil- 

^^Ashe  V.  Beasley,  6  N.  Dak.  191,  course,  71  N.  J.  472,  59  Atl.  21. 

69  N.  W.  188.  ^--'  Farmers'      National      Bank      v. 

"*  McLean  v.  Ryan,  55  N.  Y.  Supp.  Marshall,   9   Pa.    Super.   Ct.    621,   44 

232,  36  App.  Div.  281,  aff'd  165  N.  Y.  W.  N.  C.  68. 

620,  59   N.   E.   1126.     See   First  Na-  ^-^  Schofield   v.    Palmer    (U.    S.    C. 

tional   Bank   v.   Briggs,  70  Vt.   599,  C.)  134  Fed.  753. 

41  Atl.  586,  16  Bkg.  L.  J.  40.  '-"  Union  Bank  v.  Hyde,  6  Wheat. 

"'Townsley  V.  Sumrall,  2  Pet.  (U.  (U.    S.)     572;    Young    v.    Bryan,    6 

S.)  170,  where  it  is  declared  that  it  Wheat.  (U.  S.)  146. 

is  admitted,  that  in  respect  to  for-  '=' Hobbs     v.     Chemical     National 


§    543]  PROTEST  AXD   WANT  OF   PROTEST.  693 

A  certificate  may  be  attacked  and  impeached  by  proper  and  sufficient 
evidence  contradicting  a  material  fact  recited  therein.^^^  If  the  facts 
certified  to  are  disputed  by  oral  testimony,  as  in  case  of  a  recital  that 
the  bank  where  the  presentment  was  made  was  closed,  the  question  is 
one  for  the  jury.^^^ 

Bank,  97  Ga.  524,  25  S.  E.  348.    See  Am.  St.  Rep.  828.   In  this  case,  how- 

Peabody  Insurance  Co.  v.  Wilson,  29  ever,  the  evidence  was  held  insuffi- 

W.  Va.  528,  2  S.  E.  888.  cient. 

"iSulzbacher       v.       Charlestown  ^^=  Berg  v.  Abbott,  83  Pa.  St.  177, 

Bank,  86  Tenn.  201,  6  S.  W.  129,  6  24  Am.  Rep.  158. 


I 


CHAPTER   XXV. 


WANT  OF  NOTICE  OF   PROTEST  AND  DISHONOR. 


Sec.  Sec. 

544.  To    whom    notice    of    dishonor     558. 

must  be  given — Discharge  of 
drawer  or  indorser. 

545.  Same  subject. 

546.  Notice    to    all    other    parties —     559. 

Necessary    after    non-accept- 
ance at  holder's  election,  not-     560. 
withstanding   subsequent   ac-    561. 
ceptance.  562. 

547.  To  whom  notice  may  be  given.     563. 

548.  Same    subject — Notice    of    pro- 

test. 564. 

549.  By  whom  given. 

550.  Effect   of   notice   given   on   be-     565. 

half  of  holder  or  by  party  en- 
titled to  give  notice. 

551.  When    notice    sufficient — Form     566. 

of   notice — Notice   personally 
or  by  mail. 

552.  Form,  contents  and  sufficiency    567. 

of  notice,  continued. 

553.  Manner    or    mode — Oral,    writ-    568. 

ten,  and  personal  notice. 

554.  Manner   or   mode,   continued — 

Notice  by  mail. 

555.  Manner   or    mode,    continued —    569. 

Sufficiency    of    address    and     570. 
mailing. 

556.  Manner   or    mode,    continued — 

What  is  included  in  the  term     571. 
mailing.  572. 

557.  Manner    or    mode,    continued — 

Mailing  notice — Usage  or  cus- 
tom. 573. 


Manner  or  mode,  continued — • 
Mailing  notice — When  suffi- 
cient and  insufficient — In- 
stances. 

To  whom  notice  given — Where 
party  dead. 

Notice  to  partners. 

Notice  to  persons  jointly  liable. 

Notice  to  bankrupt. 

Time  within  which  notice  must 
be  given. 

Same  subject,  continued — Dili- 
gence— Reasonable  time. 

Same  subject,  continue  d — 
Where  parties  reside  in  same 
place. 

Same  subject,  continue  d — 
Where  parties  reside  in  dif- 
ferent places. 

Time  of  notice  —  Subsequent 
and  antecedent  parties. 

Same  subject — Notice  received 
on  Saturday — Form  of  notice 
sent  by  last  indorser — Plead- 
ing. 

Where  notice  must  be  sent. 

When  notice  is  dispensed  with 
— Drawer  —  Indorser  —  Ex- 
cuses. 

Same  subject. 

Delay  in  giving  notice — Ex- 
cuses— Circumstances  beyond 
holder's  control. 

Waiver  of  notice. 


§  544.     To  whom  notice  of  dishonor  must  be  given — Discharge  of 
drawer  or  indorser. — Except  as  otherwise  provided  by  statute,  when  a 
negotiable  instrument  has  been  dishonored  by  non-acceptance  or  non- 
693 


5W] 


WANT    OF    XOTICE   OF    FROTEST    AND   DISHONOR. 


694 


payment,  notice  of  dishonor  must  be  given  to  the  drawer  and  to  each 
indorser,  and  any  drawer  or  indorser  to  whom  such  notice  is  not  given 
is  discharged.^  The  holder  is  not  required  to  notify  all  the  parties 
liable,  but  he  may  do  so,  or  may  give  notice  to  any  of  them,  but  those 
not  notified  will  not  be  bound  ;^  although  it  is  also  held  that  an  in- 
dorsee is  entitled  to  serve  notice  of  protest  only  upon  those  indorsers 
whom  he  intends  and  desires  to  hold  liable.^  Under  an  Ohio  decision 
any  one  of  the  successive  indorsers  may  be  given  notice  ;*  and  under  a 
Michigan  case  the  indorsee  need  only  notify  the  immediate  indorser.^ 
It  is  decided  in  Georgia  that  where  notes  are  payable  at  a  chartered 
bank  and  indorsed  by  the  payee,  it  is  immaterial  whether  he  is  an  in- 
dorser for  value  or  for  accommodation.  He  is  entitled  to  notice  of  dis- 
honor and  can  only  be  held  liable  as  indorser  in  the  event  such  notice  is 
given;  not  only  the  indorsers  for  value,  but  all  other  persons  whose 
indorsement  is  essential  to  a  due  transmission  of  title,  as  distinguished 


^Negot.  Inst.  Law,  §  160,  Appen- 
dix herein.  See  §§  490  et  seq.,  502 
et  seq.  herein. 

See  also  the  following  cases: 

United  States. — Mitchell  v.  De- 
grand,  1  Mason  (U.  S.  C.  C.)  176, 
180. 

Delaware. — Standard  Sewing  Ma- 
chine Co.  v.  Smith,  1  Marv.  (Del.) 
330,  40  Atl.  1117. 

Florida. — See  Robinson  v.  Aird, 
43  Fla.  30,  29  So.  633. 

Georgia. — Ennis  v.  Reynolds,  (Ga. 
1906),  56  S.  E.  104;  Apple  v.  Lesser, 
93  Ga.  749,  21  S.  E.  171. 

Illinois. — I  ndustrial  Bank  v. 
Bowes,  165  111.  70,  46  N.  E.  10,  rev'g 
64  III.  App.  300,  1  Chic.  L.  J.  Wkly. 
455;  Kimmel  v.  Wiel,  95  111.  App. 
15. 

Kentucky. — See  Murphy  v.  Citi- 
zens' Savings  Bank,  22  Ky.  L.  Rep. 
1672,  61  S.  W.  25,  62  S.  W.  1028. 

Massachusetts. — Browning  v.  Car- 
son, 163  Mass.  255,  39  N.  E.  1037. 

Missouri. — Westby  v.  Stone,  112 
Mo.  App.  411,  87  S.  W.  34.  See  Glas- 
gow, Harrison  v.  Copeland,  8  Mo. 
268. 

New  York. — Kelly  v.  Theiss,  72  N. 


Y.  Supp.  467,  65  App.  Div.  146.  See 
Lawrence  v.  Miller,  16  N.  Y.  235. 

North  Carolina. — National  Bank 
V.  Bradley,  117  N.  C.  526,  23  S.  E. 
455. 

Pennsylvania. — L  i  t  i  t  z  National 
Bank  v.  Siple,  10  Pa.  Co.  Ct.  391, 
aff' d  22  Atl.  208,  5  Bkg.  L.  J.  140. 

Tennessee. — Carnegie  Steel  Co.  v. 
Chattanooga  Const.  Co.  (Tenn.  Ch. 
App.),  38  S.  W.  102. 

Washington. — Galbraith  v.  Shep- 
ard  (Wash.  1906),  86  Pac.  1114; 
Sess.  Laws  1899,  §  89,  p.  356. 

■  Standard  Sewing  Machine  Co.  v. 
Smith,  1  Marv.  (Del.)  330,  40  Atl. 
1117. 

^  Lyddane  v.  Owensboro  Banking 
Co.,  21  Ky.  L.  Rep.  320,  51  S.  W. 
453. 

*  City  National  Bank  of  Dayton  v. 
Clinton  County  National  Bank,  49 
Ohio  St.  351,  30  N.  E.  958,  27  Ohio 
L.  J.  325,  6  Bkg.  L.  J.  515.  There 
was  also  a  point  in  this  case  as  to 
effect  of  giving  notice  to  earlier  in- 
dorser as  to  time  and  immediate  in- 
dorser. 

=  Wood  V.  Callaghan,  61  Mich.  402, 
1  Am.  St.  Rep.  597,  28  N.  W.  162. 


695 


DISCHARGE   OF  DRAWER   OR   INDORSEE. 


[§   545 


from  mere  sureties  by  indorsement,  are  entitled  to  notice  of  non-pay- 
ment and  protest." 

§  545.  Same  subject. — ISTotice  of  non-acceptance  must  be  given  in 
the  case  of  a  bill  of  exchange,  especialy  so  where  it  is  payable  at 
sight.'^  So  the  holder  is  bound  to  give  notice  to  the  drawer  of  non- 
acceptance,  without  which  tlie  original  payee,  to  whom  the  bill  is 
returned,  cannot  recover  against  the  drawer.^  Again,  the  rule  requir- 
ing notice  of  dishonor  in  order  to  render  the  indorser  liable  has  been 
applied  to  a  note  payable  in  annual  installments;®  to  one  who  sends 
paper  for  collection,  irrespective  of  the  fact  of  indorsement  ;^°  to 
demand  notes  ;^^  to  indorsers  of  overdue  notes  ;^2  to  an  order  for  the 
payment  of  money  ;^^  to  notes  of  a  series  ;^*  to  one  who  indorses  after 
its  maturity  the  notes  of  an  insolvent ;^^  to  co-makers;^®  and  to  in- 
dorsers whose  names  are  necessary  in  order  to  transmit  title  to  a  note 
which  it  is  purposed  to  negotiate  at  a  chartered  bank  or  which  is 
there  payable.^^    Where  the  other  requisites  exist  notice  of  non-pay- 


"Ennis  v.  Reynolds  (Ga.  1906), 
56  S.  E.  104.  See,  also,  Apple  v. 
Lesser,  93  Ga.  749,  21  S.  E.  171. 

''  Smith  V.  Unangst,  46  N.  Y.  Supp. 
340,  20  Misc.  564,  aff'g  45  N.  Y.  Supp. 
1164,  19  Misc.  711. 

«Orr  v.  Maginnis,  7  East.  359. 

"Reed  v.  Spear,  94  N.  Y.  Supp. 
1007,  107  App.  Div.  144. 

"Rosson  V.  Carroll,  90  Tenn.  90, 
16  S.  W.  66,  43  Alb.  L.  J.  493. 

"Leonard  v.  Olson,  99  Iowa  162, 
61  Am.  St.  Rep.  230,  68  N.  W.  677, 
35  L.  R.  A.  381;  Harrisburg  National 
Bank  v.  Moffitt,  3  Dauph.  Co.  Rep. 
69,  10  Pa.  Dist.  R.  22. 

^Beer  v.  Clifton,  98  Cal.  323,  33 
Pac.  204,  35  Am.  St.  Rep.  172,  20 
L.  R.  A.  580;  Kimmel  v.  Wiel,  95 
111.  App.  15;  Landon  v.  Bryant,  69 
Vt.  203,  37  Atl.  297.  See  Bassen- 
horst  v.  Wilby,  45  Ohio  St.  333,  13 
N.  E.  75,  11  West.  Rep.  270. 

Agreement  after  maturity  to  in- 
dorse notice  necessary.  Sachs  v. 
Fuller  Bros.  Toll  Lumber  &  Box  Co., 
69  Ark.  270,  62  S.  W.  902. 


"Agee  V.  Smith,  7  Wash.  471,  35 
Pac.  370. 

"Galbraith  v.  Shepard  (Wash. 
1906),  86  Pac.  1114.  In  this  case 
there  was  no  evidence  at  the  trial 
in  support  of  the  allegation  that  the 
first  note  was  at  maturity  presented 
to  the  makers  with  demand  for  pay- 
ment followed  by  notice  to  the  in- 
dorser of  its  dishonor.  This  was 
held  necessary  in  order  to  charge 
respondent  as  indorser,  unless  he 
had  waived  such  presentment,  de- 
mand, and  notice.  See  Bank  of 
Edgefield  v.  Farmers'  Cooperative 
Mfg.  Co.,  52  Fed.  98,  2  U.  S.  App. 
282,  2  C.  C.  A.  637,  18  L.  R.  A.  201. 

^^  Hudson  V.  Walcott,  4  Ohio  Dec. 
459,  2  Cleve.  L.  Rep.  194. 

'"  Legg  V.  Vinal,  165  Mass.  555,  43 
N.  E.  518.  Under  Mass.  Pub.  Stat, 
Chap.  77,  §  15.  But  compare  Bank 
of  Jamaica  v.  Jefferson,  92  Tenn. 
537,  36  Am.  St.  Rep.  100,  22  S.  W. 
211. 

"  Sibley  v.  American  Exchange 
National  Bank,  97  Ga.  126,  25  S.  E. 
470. 


545] 


WANT   OF  NOTICE   OF    PROTEST   AND   DISHONOR. 


696 


ment  renders  the  indorsers  or  drawee  of  an  inland  bill  liable  ;^^  and 
if  the  drawer  of  a  domestic  bill  is  misled  by  statements  of  the  holder, 
and  he  sustains  a  financial  loss  by  reason  thereof,  he  will  be  dis- 
charged to  the  extent  of  such  loss  or  injury.^^  But  want  of  notice  to 
an  indorser  who  has  satisfied  the  note  is  not  available  to  the  maker  as 
a  defense  in  an  action  against  him  by  such  indorser.^''  A  surety  on  a 
note  is  not  discharged  from  liability  by  reason  of  the  fact  that  he  was 
not  given  notice  of  dishonor,  as  the  liability  of  a  surety  is  primary 
and  he  is  absolutely  required  by  the  terms  of  the  instrument  to  pay 
the  same.^^  Nor  is  a  mere  surety  entitled  to  notice,  even  though  the 
note  is  payable  at  a  bank.^^  It  is  also  decided  that  a  guarantor  of  a 
note  is  not  entitled  to  notice  of  dishonor,^^  where  the  guaranty  is 
unqualified  and  an  absolute  contract.-*  So  it  is  determined  that  a 
guarantor  must  prove  damage  sustained  by  failure  to  make  demand 
and  give  notice,  and  even  in  such  case  he  is  discharged  only  to  the 
amount  of  the  damage  sustained ;  and  that  in  case  of  a  guaranty  on  a 
separate  contract  the  rule  as  to  notice  is  not  so  strict.^^  Notice  of  dis- 
honor need  not  be  given  the  maker  of  a  note;^^  nor  to  a  third  party 
who  becomes  a  maker  or  original  promisor  by  indorsing  paper  before 


^^  Waples-Painter  Co.  v.  Bank  of 
Commerce  (Ind.  Ty.  1906),  97  S.  W. 
1025;  Peoples'  National  Bank  v. 
Lutterloh,  95  N.  C.  495. 

^^  Bank  of  Richland  v.  Nicholson, 
120  Ga.  622,  48  S.  E.  240;  Stafford 
V.  Yeates,  18  Johns.  (N.  Y.)  327. 

="  Stanley  v.  McElrath,  86  Cal.  449, 
22  Pac.  673,  10  L.  R.  A.  545. 

"Rouse  V.  Wooten,  140  N.  C.  557, 
53  S.  E.  430;  Negot.  Inst.  Law 
(Chap.  54,  Revisal),  §§  2213,  2219, 
2239,  2342  considered. 

"Hunnicut  v.  Perot,  100  Ga.  312, 
27  S.  E.  787;  Sibley  v.  American 
Exchange  National  Bank,  97  Ga. 
126,  25  S.  E.  470. 

-=  Farrar  v.  Peoples'  Trust  Co.,  63 
Kan:  881,  64  Pac.  1031. 

"  City  Savings  Bank  v.  Hopson, 
53  Conn.  455,  2  N.  Eng,  556,  5  Atl. 
601. 

Guarantor  "necessity  of  notice  and 
default. — While  there,  is   some  con- 


flict among  the  authorities,  the  gen- 
erally accepted  doctrine  seems  to  be, 
that  in  case  of  an  absolute  and  un- 
conditional guaranty  the  guarantor 
becomes  liable  upon  default  of  the 
principal,  without  demand  and  no- 
tice of  non-payment.  And  this  rule 
is  generally  recognized  whether  the 
instrument  guaranteed  is  negotiable 
or  not.  *  *  *  A  different  doctrine 
appears  to  prevail  in  some  jurisdic- 
tions, at  least  in  case  of  a  guaranty 
of  negotiable  instruments.  *  *  * 
Where  a  person  gives  a  continuing 
guaranty,  or  a  guaranty  relating  to 
future  transactions,  demand  and  no- 
tice seem  necessary  to  charge  him." 
Note  105  Am.  St.  Rep.  516-518. 

-=Rhett  V.  Poe,  2  How.  (U.  S.) 
457. 

■'^  Guignon  v.  Union  Trust  Co.,  156 
111.  135,  40  N.  E.  556,  aff'g  53  111. 
App.  581. 


«l 


697  TO    WHOM    NOTICE   MAT   BE   GIVEN.  [§§    546-548 

its  delivery.-"  So^  in  a  case  where  such  a  person  placed  the  -word 
indorser  after  his  name  upon  the  face  of  the  note  it  was  held  that 
notice  need  not  be  given  to  him.-^ 

§  546.  Notice  to  all  other  parties  necessary  after  non-acceptance 
at  holder's  election,  notwithstanding  subsequent  acceptance. — If  a 

bill  is  payable  at  so  many  days  after  sight  and  the  holder  presents  the 
bill  for  acceptance  and  elects  to  consider  that  there  has  been  a  non- 
acceptance,  even  though  what  passes  on  presentment  shows  an  accept- 
ance, and  the  bill  is  protested  for  non-acceptance,  the  holder  is  bound 
by  such  election  as  to  all  the  other  parties  to  the  bill  and  must  give 
them  notice  of  dishonor  or  they  will  be  discharged,  and  a  subsequent 
acceptance  the  next  day  will  not  be  sufficient  to  charge  the  drawer,  in 
case  no  such  notice  is  given,  and  the  drawee  fails  before  the  day  of 
payment.  "When  once  a  bill  is  dishonored  the  right  of  the  other  par- 
ties to  notice  immediately  and  absolutely  attaches,  and  no  subsequent 
acts  between  the  holder  and  drawee  can  vary  that  right.  Whatever  is 
afterwards  done  by  the  holder  is  at  his  own  peril,  and  cannot  change 
the  responsibility  of  others.  A  holder  cannot  elect  to  treat  a  bill  as 
dishonored,  and  afterwards  as  duly  honored.  The  consequences  of  such 
a  doctrine  would  l^e  most  mischievous  to  the  commercial  world."-^ 

§547.  To  whom  notice  may  be  given. — jSTotice  of  dishonor  may 
be  given  either  to  the  party  himself  or  to  his  agent  in  that  behalf.^'* 
It  is  held  that  it  must  be  shown  that  the  agent  upon  whom  notice  was 
served  had  authority  or  was  empowered  to  receive  it.^^    . 

§  548.  Same  snbject — Notice  of  protest. — A  notice  of  protest  is 
sufficiently  served  when  such  service  is  made  upon  an  agent  of  the 
indorser,  where  such  agent  not  only  has  a  power  of  attorney,  but  also 
general  supervision  and  authority,  and  has  been  accustomed  to  exer- 
cise the  same,  in  negotiations  concerning  drafts  and  notes  and  the 
transfer,  indorsement,  acceptance  and  discounting  thereof  in  his 
principal's  dealings  with  the  plaintiff  bank.^-     So  service  may  be 

"Cherry    v.    Sprague,    187    Mass.  of   Exch.   Act,   §   49    (8),   Appendix 

113,  72  N.  E.  456,  67  L.  R.  A.  33.  herein.     See    §§    497,    499,    503,    517 

^  Herrick    v.    Edwards,    106    Mo.  herein. 

App.  633,  81  S.  W.  466.  ""  Robinson  v.  Aird,  43  Fla.  30,  29 

="  Mitchell    V.    Degrand,    1    Mason  So.  633. 

(U.  S.  C.  C.)  176,  180,  per  Story,  J.  ^''Persons    v.    Kruger,    60    N.    Y. 

^'Negot.    Inst.    Law,    §    168;    Bills  Supp.  1078,  45  App.  Div.  184,  7  N. 


§    549]  "WANT   or    NOTICE   OF   PROTEST   AND   DISHONOR.  698 

made  upon  an  indorser  and  a  person  signing  as  attorney.^ ^  And 
where  an  agent  of  a  non-resident  indorses  an  indorsed  note  of  the 
latter,  sent  to  such  agent  for  delivery  to  another,  if  a  certain  agree- 
ment can  be  made,  he  is  sufficiently  authorized  to  receive  notice  of 
dishonor,  so  that  notices  of  protest  sent  him,  including  notice  for  the 
non-resident,  whose  address  was  unknown  to  the  holder,  are  sufficiently 
served."* 

§  549.  By  whom  given. — The  notice  may  be  given  by  or  on  behalf 
of  the  holder,  or  by  or  on  behalf  of  any  party  to  the  instrument  who 
might  be  compelled  to  pay  it  to  the  holder,  and  who,  upon  taking  it 
ujj,  would  have  a  right  to  reimbursement  from  the  party  to  whom  the 
notice  is  given.  Such  notice  may  also  be  given  by  an  agent,  either  in 
his  own  name  or  in  the  name  of  any  party  entitled  to  give  notice, 
whether  that  party  be  his  principal  or  not.  Where  the  instrument 
has  been  dishonored  in  the  hands  of  an  agent,  he  may  either  himself 
give  notice  to  the  parties  liable  thereon,  or  he  may  give  notice  to  his 
principal.  If  he  give  notice  to  his  principal,  he  must  do  so  within 
the  same  time  as  if  he  were  the  holder,  and  the  principal,  upon  the 
receipt  of  such  notice,  has  himself  the  same  time  for  giving  notice  as 
if  the  agent  had  been  an  independent  holder.^^  Notice  of  dishonor 
must  be  given  by  the  holder  of  a  bill  in  order  to  charge  the  drawer 
where  acceptance  or  payment  has  been  refused  ;^^  it  may  also  be  given 
by  an  agent  or  subagent  holding  that  instrument  for  collection.^^  But 
it  cannot  be  given  by  one  acting  without  lawful  authority  or  one 
vsTongfully  in  possession.^'*   Although  makers,  who  are  members  of  a 

Y.    Ann.    Cas.    100,    aff'd   Kruger   v.  (Harris  v.  Robinson,  4  How.  [U.  S.] 

Persons,    66    N.    Y.    Supp.    1135,    52  336;    Standard   Sewing  Machine  Co. 

App.  Div.  635.  V.  Smith,  1  Marv.  [Del.]  330,  40  Atl. 

==J.   H.  Mohlman  Co.  v.  McKane,  1117;    Lawrence  v.  Miller,  16  N.  Y. 

69   N.  Y.   Supp.   1046,   60   App.   Div.  235),   or  by   the  latter   in   his   own 

546.  name   (Drexler  v.  McGlynn,  99  Cal. 

=*Billings'  Estate,  In  re    (Minn),  143,  33  Pac.  773). 

85  N.  W.  162.  '"  Morehouse      &     Wells      Co.      v. 

^''Negot.    Inst.    Law,    §§    161,    162,  Schwaber,  118  111.  App.  44. 

165;    Bills  of  Exch.   Act,   §    49,   Ap-  =^Ashe  v.  Beasley,  6  N.  Dak.  191, 

pendix  herein.    See  SafEord  v.  Wyck-  69    N.    W.    188.     See   note   to   §    550 

off,  1  Hill  (N.  Y.)  11;  Bank  of  Utica  herein, 

v.  Smith,  18  Johns.    (N.  Y.)   230.  ^s  jjofrichter    v.    Enyeart    (Neb.), 

Notice    by    holder    or    agent.     Al-  99    N.    W.    658.     Examine    Viets    v. 

though  notice  need  not  be  given  by  Union  National  Bank,  101  N.  Y.  563, 

the  holder   personally,   still   it  may  5  N.  E.  457,  rev'g  31  Hun  454. 
be   given   by   him   or   by   his  agent 


699  NOTICE    SUFFICIENT — FOIi:M   OF   NOTICE.        [§§    550,    551 

firm  and  in  the  position  of  subsequent  indorsers,  are  not  entitled  to 
give  a  valid  notice  of  protest  to  another  partner,  who  is  an  accommo- 
dation indorser,  still  they  may  act  in  behalf  of  the  holder  as  his  agent 
and  forward  by  mail  to  such  partner  a  notice  inclosed  to  them  by  the 
notary.^^  Under  a  Kentucky  decision,  a  statute,  which  imposes  upon 
notaries  the  duty  to  give  notice  of  dishonor  to  parties  entitled  to 
notice  by  law  in  order  to  bind  them,  does  not  change  the  law  merchant 
as  to  an  indorsee's  right  to  give  notice  of  protest  to  certain  indorsers.*'' 
In  a  federal  case  it  is  declared  that  a  notary  is  not  bound  under  the 
law  merchant  to  give  to  the  indorser  notice  of  dishonor  in  protesting 
a  note.'*^  It  is  also  held  that  notice  that  a  notan-  public  had  protested 
an  inland  bill  of  exchange  is  not  equivalent  to  notice  of  the  dishonor 
of  the  bill,  and  is  insufficient.*^ 

§  550.  Effect  of  notice  given  on  behalf  of  holder  or  by  party  en- 
titled to  give  notice. — Where  notice  is  given  by  or  on  behalf  of  the 
holder,  it  enures  for  the  benefit  of  all  subsequent  holders  and  all  prior 
parties  who  have  a  right  of  recourse  against  the  party  to  whom  it  is 
given.  Where  notice  is  given  by  or  on  behalf  of  a  party  entitled  to 
give  notice,  it  enures  for  the  benefit  of  the  holder  and  all  parties  sub- 
sequent to  the  party  to  whom  notice  is  given.*^ 

§  551.  When  notice  sufficient — Form  of  notice — Notice  personally 
or  by  mail. — A  written  notice  need  not  be  signed,  and  an  insufficient 
written  notice  may  be  supplemented  and  validated  by  verbal  communi- 
cation.   A  misdescription  of  the  instrument  does  not  vitiate  the  notice 

*"  Traders' National  Bank  V.  Jones,  B.      Men.      (Ky.)      576.       Examine 

■93  N.   Y.   Supp.   768,   104   App.   Div.  Smedes  v.  Bank  of  Utica,  20  Johns. 

433.  (N.  Y.)    372,  aff'd   3   Cow.    (N.   Y.) 

"  Lyddane  v.  Owensboro  Banking  662. 
Co.,   21   Ky.  L.  Rep.   320,  51    S.   W.         "  Negot.    Inst.   Law,   §§    163,   164; 

423;  Ky.  Stat,  §  3725.  Bills  of  Exch.  Act,  §   49,  Appendix 

^^  Schofield    v.    Palmer,    134    Fed.  herein.  Examine  Beale  v.  Parish,  20 

753.  N.  Y.  407. 

Bankers    as     collecting    agents —        Notice    of    dishonor    given    by    a 

Notary  as  public  officer — Bank's  re-  proper  party  may  be  availed  of  by 

sponsibility    for    acts    of,    and    also  every  party  entitled  at  the  time  to 

duties  and   liabilities  of  bank   con-  a  like  notice,  as  it  enures  to  such 

sidered,  see  Britton  v.  Niccolls,  104  party's  benefit.    Ashe  v.  Beasley,   6 

U.  S.  757;   Bird  v.  Louisiana  State  N.  Dak.  191,  69  N.  W.  188.   Examine 

Bank,  93  U.  S.  96.  Swayze  v.  Britton,  17  Kan.  627. 

*=  Taylor  v.  Bank  of  Illinois,  7  T. 


553]  WAXT   OF   NOTICE   OF   PROTEST   AND   DISHONOR. 


roo 


unless  the  party  to  whom  the  notice  is  given  is  in  fact  misled  thereby. 
The  notice  may  be  in  writing  or  merely  oral,  and  may  be  given  in  any 
terms  which  sufficiently  identify  the  instrument,  and  indicate  that  it 
has  been  dishonored  by  non-acceptance  or  non-payment.  It  may  in 
all  cases  be  given  by  delivering  it  personally  or  through  the  mails,^* 
A  notary  may  be  authorized  to  sign  the  notice,  even  though  the  de- 
mand was  made  by  the  holder."^  If  the  notice  is  unsigned  by  the 
notary  sending  it,  it  is  held  to  be  insufficient.*^ 

§  552.  Same  subject. — A  notice  of  dishonor  should  so  sufficiently 
describe  the  instrument  as  to  identify  and  show  with  reasonable  cer- 
tainty what  paper  is  referred  to  and  intended.*^  No  particular  form, 
however,  is  necessary.*^  The  notice  should  indicate  in  clear  terms,  at 
least  sufficiently  so  as  to  put  the  indorser  on  inquiry,  that  the  instru- 
ment was  presented  and  dishonored,  and  that  the  holder  will  resort  to 
the  indorser  for  paATuent."  But  it  is  sufficient  if  such  notice  recites 
a  demand,  a  refusal  to  pay,  the  dishonor  and  protest,  and  an  intention 
to  so  resort  to  the  person  to  whom  it  is  sent;^''  although  the  indorser 
will  be  charged,  notwithstanding  the  intent  to  look  to  him  for  pay- 
ment is  not  stated  in  express  and  exact  terms  or  words.^^  It  is  also 
held  to  be  sufficient  to  describe,  in  the  notice,  the  bill  by  its  date,  the 
date  of  its  maturity,  tlie  drawer's  name  and  the  amount."  The  notice 
is  not  invalidated  where  the  indorser  is  not  misled  thereby,  even 
though  the  amount  is  not  correctly  stated  and  there  are  other  indorsers 

**Negot.   Inst.   Law,   §§   166,   167;  Bank  v.  Warden,  6  N.  Y.  19;  Donner 

Bills  of  Exch.  Act,  §  49,  Appendix  v.  Renier,  23  Wend.   (N.  Y.)   670. 

herein.    See  §§  552-558  herein.  ""  Standard  Sewing  Machine  Co.  v. 

Notice  may  be  in  writing.    Stand-  Smith,  1  Marv.    (Del.)   330,  40  Atl. 

ard  Sewing  Machine  Co.  v.  Smith,  1  1117. 

Marv.   (Del.)   330,  40  Atl.  1117.  « Witkowski  v.  Maxwell,  69  Miss. 

^'-Meise  V.  Newman,  29  N.  Y.  Supp.  56,  10  So.  453. 

201,    78    Hun   428,   60   N.   Y.    St.   R.  °» Legg  v.  Vinal,  165  Mass.  555,  43 

756,   rev'g   27   N.   Y.    Supp.    708,   76  N.  E.  518. 

Hun  341,  59  N.  Y.  St.  R.  143.  "  Nelson  v.  First  National  Bank, 

*«  People's  National  Bank  v.   Dib-  69  Fed.  798,  32  U.  S.  App.  554,  16  C. 

rell,  91  Tenn.  301,  18  S.  W.  626.  C.  A.  425,  12  Bkg.  L.  J.  672;    Salo- 

*•  Dodson  V.  Taylor,  56  N.  J.  L.  11,  mon  v.  Pfeister  &  V.  Leather  Co.  (N. 

28  Atl.  316;  Gates  v.  Beecher,  60  N.  J.),  31  Atl.  602. 

Y.   518;    Artisans'  Bank  v.   Backus,  "Brown  v.  Jones,  125  Ind.  375,  25 

36  N.  Y.  100,  107;   Cayuga  County  N.  E.  452,  3  Bkg.  L.  J.  442. 


701  MANNER    OR    MODE ORAL    AND    WRITTEN    NOTICE.       [§    553 

in  the  state  to  wliicli  it  is  sent.^^  Xor  will  a  misdescription  of  the  note 
void  the  notice  where  the  indorser  is  not  misled  as  to  the  identity  of 
the  paper. ^*  Nor  is  the  notice  vitiated  hy  its  not  stating  the  holder 
of  the  bill,  nor  by  the  designation  of  the  date  in  consecutive  figures  in- 
tended to  represent  the  month,  day  and  year.'^^  And  a  mistake  as  to 
the  date  will  not  make  the  notice  insufficient  where  it  conveys  the  neces- 
sary information  as  to  the  instrument  intended. ^"^  So  a  notice  is  suf- 
ficient where  it  sets  forth  that  a  certain  note  was  indorsed  by  the  per- 
son to  whom  it  was  sent  and  also  by  his  wife,  with  a  statement  that  it 
has  matured,  that  no  surplus  exists  and  that  the  note  has  not  been 
renewed  and  also  requests  that  a  check  be  sent  for  discount. ^'^  Mere 
knowledge,  obtained  by  the  indorser  through  the  maker,  of  the  note's 
dishonor  does  not  constitute  notice  as  it  should  come  from  the  party 
who  intends  to  resort  to  the  former  for  payment.^ ^  A  notice  of  dis- 
honor is  a  sufficient  and  valid  one  where  a  letter,  properly  addressed 
and  mailed,  describes  the  note,  states  its  non-payment,  and  that  the 
indorser  will  be  looked  to  for  payment.^'' 

§553.     Manner  or  mode — Oral,  written  and  personal  notice. — It 

is  held  that  notice  of  protest  or  dishonor  may  be  given  orally  to  the 
indorser;''"  so  notice  may  be  given  orally  or  in  writing  where  the 
parties  reside  in  the  same  to^wn,  or  written  notice  may  be  left  at  the 
residence  or  place  of  business  f^  although  personal  notice  should  ordi- 

^'King  V.  Hurley,  85  Me.   525,  27  «>  Kelly  v.  Theiss,  78  N.  Y.  Supp. 

Atl.  463.  1050,  12  N.   Y.  Annot.   Cas.   206,  77 

"Northup    V.    Cheney,    50    N.    Y.  App.  Div.  81. 

Supp.  389,  27  App.  Div.  418.  See   Alabama. — Martin  v.  Brown, 

"Brown  v.  Jones,  125  Ind.  375,  25  75  Ala.  422. 

N.  E.  452,  3  Bkg.  L.  J.  442.     Dates  California.— Fierce  v.  Schaden,  55 

were  represented  by  figures,  such  as  Cal.  406. 

3-15-1884.  Delaware. — Standard   Sewing  Ma- 

=»  Mills  V.  Bank  of  United  States,  chine  Co.  v.  Smith,  1  Marv.   (Del.) 

11    Wheat.    (U.    S.)    431;    Bank    of  330,  40  Atl.  1117. 

Alexandria  v.  Swann,  9  Pet.  (U.  S.)  Iowa. — McKewer   v.    Kirtland,    33 

33.  Iowa  348. 

"  Counsell   v,   Livingston,    2   Ont.  Maine. — Ticonic    Bank    v.    Stack- 
Law  Rep.  582.  pole,  41  Me.  321,  66  Am.  Dec.  246. 

'^^  Jagger     v.     National     German-  Compare    Union    Bank   v.    Fonte- 

American  Bank,  53  Minn.  386,  55  N.  neau,  12  Rob.   (La.)   120. 

W.  545.     See  State  Bank  v.  Postal,  "'Bowling  v.  Harrison,  6  How.  (U. 

34  N.  Y.  Supp.   18,  67  N.  Y.  St.  R.  S.)  248;  Williams  v.  Bank  of  United 

873.  12  Misc.  546.  States,  2  Pet.   (U.  S.)  96. 

="  Cromer  v.  Piatt,  37  Mich.  132,  26 
Am.  Rep.  503. 


§    553]  WAXT    OF   NOTICE   OF    PROTEST   AND   DISHONOR.  702 

narily  be  given  where  the  holder  and  indorser  reside  in  the  same  town.®- 
And  under  a  West  Virginia  decision  the  notice  is  required  to  be  per- 
sonal or  left  at  the  residence  or  place  of  busLaess  of  the  indorser  if 
he  resides  in  the  same  place  where  the  demand  of  payment  is  made.*'* 
So  in  Virginia  it  is  held  that  a  surety  is  entitled  to  personal  service 
of  the  notice,  even  though  he  resides  outside  the  city  limits  and  is 
absent  therefrom,  it  appearing  that  he  is  located  very  near  such 
limits,*'*  But  it  is  also  decided  that  personal  service  of  a  notice  of 
protest  is  not  necessary,  even  though  the  note  is  payable  at  the  same 
town  in  which  the  indorser  resides,  where  such  paper  is  held  for  col- 
lection by  the  bank  at  which  it  is  payable  but  the  owner  resides  in 
another  place  and  all  notices  are  sent  to  him,  and  in  such  case  it  is 
sufficient  if  he  sends  such  notice  by  mail.®^  It  is  held  sufficient,  how- 
ever, although,  the  parties  reside  in  the  same  place,  that  the  notice  is 
actually  received  in  time,  whether  a  personal  delivery  or  notice  by 
mail  would  or  would  not  be  otherwise  sufficient.^®  And  if  the  notice 
is  actually  received  in  proper  time  by  the  indorser,  there  is  a  suffi- 
cient service  when  made  at  his  store  upon  his  wife,  who  was  his 
assistant  there.®^  So,  where  a  notice  is  duly  and  properly  sent  by 
mail  and  is  delivered  to  the  indorser's  wife  at  his  residence,  it  is 
sufficiently  served.*'®  Again,  service  by  mail  may  be  equivalent  to 
personal  service,  irrespective  of  place  of  residence.*'^  But  a  notice  is 
not  sufficiently  served  by  delivering  it  at  the  window  of  the  cashier  of 
a  hotel  corporation,  where  it  does  not  appear  that  the  attention  of 
any  proper  person  was  called  thereto,  or  that  any  such  party  had 
received  the  same.""    Nor,  it  is  held,  is  personal  service  on  the  in- 

«=  John  v.  City  National  Bank  of  1120;  First  National  Bank  of  North 

Selma,  62  Ala.  529,  34  Am.  Rep.  35.  Bennington  v.  Wood,  51  Vt.  473,  33 

"^Peabody    Insurance   Co.    v.    Wil-  Am.  Rep.  692;  Glicksman  v.  Earley, 

son,  29  W.  Va.  528,  2  S.  E.  838.  78  Wis.  223,  47  N.  W.  272,  4  Bkg.  L. 

^  Brown  v.  Bank  of  Abington,  85  J.  58. 

Va.  95,  7  S.  E.  357.  «'  Reed  v.   Spear,   94  N.  Y.   Supp. 

•"Big    Sandy    National    Bank    v.  1007,  107  App.  Div.  144. 

Chilton,  40  W.  Va.  491,  21  S.  E.  774.  *'  Stanley  v.  McElrath,  86  Cal.  449, 

«"  Carter  v.  Odom,  121  Ala.  162,  25  26  Pac.  800,  25  Pac.  161,  10  L.  R.  A. 

So.  774;  M.  V.  Monarch  Co.  v.  Farm-  549,  545. 

ers'  &  D.  Bank,  20  Ky.  L.  Rep.  1351,  ^  Glicksman    v.    Earley,    78    Wis. 

49  S.  W.  317,  16  Bkg.  L.  J.  160;    20  223,  47  N.  W.  272,  4  Bkg.  L.  J.  58. 

Ky.  L.  Rep.  1275,  49  S.  W.  310.     See  ™  American     Exchange     National 

Reed  v.  Spear,  94  N.  Y.  Supp.  1007,  Bank    v.    American    Hotel    Victoria 

107  App.  Div.  144;  Chapman  v.  Og-  Co.,  92  N.  Y.  Supp.  1006,  103  App. 

den,  56  N.  Y.  Supp.  73,  37  App.  Div.  Div.  372. 
355,  aff'd  165  N.   Y.    642,   59   N.   E. 


703  JIAXXER   OR   MODE — NOTICE   BY   MAIL.       [§§    554,    555 

dorser,  who  lived  in  the  same  city  as  the  notary  by  whom  it  was  pro- 
tested, evidenced  by  proof  of  mailing  the  notice. '^^ 

§  554.  Same  subject. — Notice  by  mail. — Xotice  is  sufficient  to 
fix  the  indorser's  liability  if  the  certificate  of  notice  of  protest  is 
served  by  mail,  it  being  regular  and  valid  in  other  respects.'^^ 
Such  service  by  mail  is  valid  and  binding  where  notice  is  received, 
even  though  personal  service  might  have  been  otherwise  required  ;'^^ 
and  if  the  indorser  receives  such  notice  through  the  mail  it  cures  an 
omission  to  address  the  notice  itself.''*  Again,  a  notice  is  properly 
given  when  sent  by  mail  to  an  indorser  residing  in  a  city  having  a 
free  postal  delivery.'^ 

§  555.    Same    subject — Sufficiency    of    address    and    mailing. — 

Where  notice  of  dishonor  is  duly  addressed  and  deposited  in  the 
postoffice,  the  sender  is  deemed  to  have  given  due  notice,  notwith- 
standing any  miscarriage  in  the  mails. '^^  The  notice  should  be 
sufficiently  addressed  to  the  proper  postoffice  of  the  indorser,'"  al- 
though if  the  town  or  place  is  a  small  one  it  may  be  directed  to  the 
postoffice  there;"  and  if  no  specific  address  is  given  by  the  indorser, 
it  may  properly  be  directed  to  the  city  in  which  he  resides.'^''    If  the 

"  C.  C.  Thompson  &  W.  Co.  v.  Ap-  Wisconsin. — Glicksman  v.  Earley, 

pleby,  5  Kan.  App.  680,  48  Pac.  933.  78  Wis.  223,  47  N.  W.  272,  4  Bkg.  L. 

"  German-American  Bank  v.  Mills,  J.  58. 

91  N.  Y.  Supp.  142,  99  App.  Div.  312.  '^  Carter  v.  Odom,  121  Ala.  162,  25 

See,     also,     Alabama. — Carter     v.  So.  774;  M.  V.  Monarch  Co.  v.  Farm- 

Odom,    121    Ala.    162,    25    So.    774;  ers'  &  D.  Bank,  20  Ky.  L.  Rep.  1351, 

Brennan  v.  Vogt,  97  Ala.  647,  11  So.  1275,  49  S.  W.  319,  317,  16  Bkg.  L. 

893.  J.  160;  Chapman  v.  Ogden,  56  N.  Y. 

Kentucky. — M.  V.  Monarch  Co.  v.  Supp.  73,  37  App.  Div.  355,  aff'd  165 

Farmers'  &  D.  Bank,  20  Ky.  L.  Rep.  N.  Y.  642,  59  N.  E.  1120. 

1351,  1275,  49  S.  W.  319,  317,  16  Bkg.  "'  Glicksman    v.    Earley,    78    Wis. 

L.  J.  160.  223,  47  N.  W.  272,  4  Bkg.  L.  J.  58. 

New  Jersei/.— Salomon  v,  Pfeister  '=  Brennan  v.  Vogt,  97  Ala.  647,  11 

(N.  J.),  31  Atl.  602.  So.  893. 

Isfew  Yorfc.— J.  H.  Molman  Co.  v.  '"  Negot.  Inst.  Law,  §  176,  Appen- 

McKane,  69   N.  Y.  Supp.   1046;    Mc-  dix  herein. 

Lean  v.  Ryan,  55  N.  Y.  Supp.  232,  36  "  Northwestern  Coal   Co.  v.   Bow- 

App.    Div.    281,    16   Bkg.    L.   J.    102,  man,  69  Iowa  150. 

aff'd  165  N:  Y.  620,  59  N.  E.  1126.  "  Morse  v.  Chamberlain,  144  Mass. 

Pennsylvania. — See     Newbold     v.  406,  11  N.  E.  560,  4  N.  Eng.  211. 

Boraef,  155  Pa.  227,  26  Atl.  305.  "Webber    v.    Gotthold,    28    N.    Y. 

Tennessee.— First   National   Bank  Supp.   763,   59   N.  Y.   St.   R.   416,  8 

v.  Reid  (Tenn.),  58  S.  W.  1124.  Misc.  503. 


§    555J  WANT   OF   NOTICE  OF  -PROTEST   AXD    DISIIOXOR.  704 

envelope  or  cover  containing  the  proper  notice  is  correctly  addressed, 
postage  prepaid  and  duly  deposited  in  tlie  mail,  it  is  ordinarily  suffi- 
cient,®°  even  though  it  is  never  received  by  the  indorser,  as  the  holder 
cannot  be  held  chargeable  for  miscarriage  of  the  mail.^^  If  notice  is 
received  in  due  time,  it  is  sufficient,  even  though  improperly  ad- 
dressed.^2  So  the  fact  that  a  notice  properly  addressed  was  received 
by  another  having  the  same  name  does  not  prevent  the  notice  being 
eifectual.^^  And  even  though  a  notice  of  protest  is  not  received  by 
an  indorser,  it  is  sufficient  where  it  is  remailed  to  him  by  another 
indorser  residing  in  the  same  place  to  whom  both  notices  were  sent 
under  one  cover.^*  Again,  a  notice  of  protest  is  properly  given,  even 
though  it  is  not  received  by  the  indorser  and  she  has  changed  her 
residence  before  it  is  mailed,  where  it  appears  that  the  notary,  acting 
upon  information  received  as  to  her  residence,  sent  the  notice  to  that 
place  by  mail  in  care  of  the  maker,  although  there  was  no  postoffice 
at  such  place,  and  her  residence  had  in  fact  been  at  another  place, 
and  she  had  been  accustomed  to  receive  her  mail  at  the  postoffice 
nearest  to  that  to  which  the  notice  was  sent  and  to  which  it  was  the 
duty  of  the  postal  agent  to  forward  mail  in  such  cases. ^^  If,  how- 
ever, the  notary  of  a  bank  to  which  notes  are  sent  for  collection  mis- 
directs, the  notice  of  protest,  and  in  consequence  thereof  it  is  not 
received,  and  the  indorser  is  not  notified,  no  liability  ensues.^^  Ad- 
s' Glicksman  v.  Earley,  78  "Wis.  0 Tito.— Walker  v.  Stetson,  14  Ohio 
223,  47  N.  W.  272,  4  Bkg.  L.  J.  58.  St.  89,  84  Am.  Dec.  362. 
See,  also,  Manchester  v.  Van  Brunt,  Examine  Apple  v.  Lesser,  93  Ga. 
40  N.  Y.  St.  R.  56,  and  cases  cited  749,  21  S.  E.  171. 
in  the  first  note  to  §  533  herein.  ^-  Bank  of  United   States  v.   Cor- 

'^  Liggett  V.  Wing,  1  Ohio  Dec.  277,     coran,  2  Pet.  (U.  S.)  121. 
31  Ohio  L.  J.  85 ;    Cook  v.  Forker,        ^  Morse  v.  Chamberlain,  144  Mass. 
193  Pa.  St.  461,  44  Atl.  560.  406,  11  N.  E.  560,  4  N.  Eng.  211. 

See  the  following  cases:  »*Van  Brunt  v.  Vaughn,  47  Iowa 

Maine.— Lord  v.  Appleton,  15  Me.     145,  29  Am.  Rep.  468. 
270.  ^Central    National    Bank  v.    Ad- 

Massachusetts.— Morse    v.    Cham-     ams,  11  S.  C.  452,  32  Am.  Rep.  495. 
herlain,  144  Mass.  406,  11  N.  E.  560,        *"  Davey  v.   Jones,  13  Vroom    (N. 
4  N.  Eng.  211;  Munn  v.  Baldwin,  6     J.)  28,  36  Am.  Rep.  505. 
Mass.  316.  Not  mailing  to  correct  address. — 

Mimiesota.— Wilson  v.  Richards,  See,  also.  Hart  v.  McLellan,  80  Me. 
28  Minn.  337,  9  N.  W.  872.  95,  13  Atl.  272,  6  N.  Eng.  138;   Al- 

Mississippi.— Ellis  v.  Commercial  bany  Trust  Co.  v.  Frothingham,  99 
Bank  of  Natchez,  7  How.  (Miss.)  N.  Y.  Supp.  343,  50  Misc.  598;  How- 
294,  40  Am.  Dec.  63.  ard  v.  Van  Gieson,  61  N.  Y.  Supp. 

349,  46  App.  Div.  77. 


705  MANNER   OR    MODE NOTICE   BY    MAIL.         [§§'    556-558 

dressing  the  notice  to  personal  representatives  or  executors  as  "admin- 
istrators" does  not  invalidate  it.^^  If  due  diligence  is  exercised  in 
sending  notice,  another  notice  is  not  required,  even  though  the  exact 
address  is  ascertained.^^  Again,  testimony  of  the  notary  that  he 
deposited  the  notice  in  the  postoffice  constitutes  sufficient  proof  of 
notice.^'* 

§  556.     Same  subject — ^What  is  included  in  the  term  mailing. — 

The  right  to  deposit  a  notice  in  the  postoffice  is  not  limited,  but  ex- 
tends to  all  kinds  of  proper  places  f°  so  that  a  notice  may  be  deposited 
in  a  mailing  or  postoffice  box  on  the  street,  and  it  is  effectual  where 
such  box  is  part  of  the  mailing  or  delivery  system.^^  A  notice  of  pro- 
test properly  inclosed,  addressed  and  stamped  may  also  be  delivered  to 
a  letter-carrier  on  his  route  discharging  his  duty  of  delivering  and 
collecting  mail.^- 

§  557.     Same    subject — Mailing   notice — Usage    or  custom. — The 

mode  of  giving  notice  may  be  affected  by  the  usage  of  the  bank  at 
which  the  note  is  payable,  and  such  usage  may  justify  and  make  suf- 
ficient and  binding  a  notice  sent  through  the  postoffice  to  indorsers 
residing  in  the  place  where  the  bank  is  located."^  Again,  even  though 
the  holder  and  indorser  reside  in  the  same  town,  if  it  is  customary  to 
give  notice  of  protest  by  mail  it  is  sufficient,  it  appearing  that  such 
notice  was  received  by  the  indorser.^* 

§  558.  Same  subject — Mailing  notice — ^When  sufficient  and  in- 
sufficient— Instances. — A  notice  of  protest  is  sufficient  if  sent  by  mail 
to  the  indorser  at  his  place  of  residence,  even  though  he  was  absent 
at  a  temporary  summer  residence  at  another  place,  where  the  indorser 
had    given    instructions    to    address    mail    to   him    at    the    former 

"  Drexler  v.  McGlynn,  99  Cal.  143,  v.  Callaghan,  61  Mich.  402,  28  N.  W. 

33  Pac.  773.  162,  1  Am.  St.  Rep.  597;  Manchester 

^^  Lambert  V.  Ghiselin,  9  How.  (U.  v.   Van   Brunt,   40   N.   Y.   St.   R.   56. 

S.)   552.  See,  also,  Negot.   Inst.  Law,   §   177, 

^  Dickins  v.  Beal,  10  Pet.   (U.  S.)  Appendix  herein. 

572.  °=Pearce    v.    Langfit,   101    Pa.    St. 

^  Morse  v.  Chamberlain,  144  Mass.  507,  47  Am.  Rep.  737. 

406,  11  N.  E.  560.  «' Carolina  National  Bank  v.  Wal- 

"^Casco    National   Bank   v.    Shaw,  lace,  13  S.  C.  347,  36  Am.  Rep.  694. 

79  Me.  376,  10  Atl.  67,  4  N.  Eng.  673;  "'Carter  v.  Odom,  121  Ala.  162,  25 

Johnson   v.   Brown,   154   Mass.    105,  So.  774.    See  Isbell  v.  Lewis,  98  Ala. 

27  N.  E.  994,  5  Bkg.  L.  J.  84;  Wood  550,  13  So.  335. 
Joyce  Defenses — 45. 


§    558]  WANT    OF   NOTICE   OF    PROTEST   AND   DISHONOR.  706 

place. ^^  Such  a  notice  is  also  properly  given  and  is  sufficient  where 
on  the  day  of  maturity  it  is  mailed  to  the  indorser  to  his  former 
residence  and  on  the  day  following  it  is  forwarded  to  him  by  the  same 
mail  and  is  received  by  him  at  his  residence. ^^  And  prior  indorsers 
are  bound  where  the  manifests  of  protest  are  forwarded  to  them  by 
the  last  indorser,  in  due  time  after  receiving  all  the  notices  from  the 
notary,  who  had  sent  them  all  to  him  for  the  reason  that  the  notary 
did  not  know  the  residence  or  place  of  business  of  any  of  the  prior 
indorsers.''^  But  if  notices  are  thus  sent  to  the  last  indorser,  and  he 
fails  to  perform  his  duty  in  forwarding  to  a  prior  indorser  one  of  the 
notices  so  received,  the  latter  is  not  bound,  where  no  notice  is  served 
upon  him  in  any  other  manner.^^  A  notice  is,  however,  sufficient 
when  mailed  to  the  indorser  and  to  a  person  who  signed  the  indorse- 
ment as  her  attorney  and  addressed  to  them  at  the  town  where  the 
note  was  dated,  and  at  the  time  of  sending  such  notice  the  defend- 
ant's residence  had  not  been  changed.^^  And  where  it  appears  from 
the  notarial  certificate,  that  the  notice  was  mailed  to  the  indorser,  a 
proper  service  thereof  upon  him  is  shown. ^°°  But  where  a  surety  is 
entitled  to  personal  service  of  a  notice  of  protest,  a  drop-letter  mailed 
to  him  at  the  same  town,  there  being  no  mail  carriers  there,  is  insuffi- 
cient.^"^ If  a  note  is  received  by  a  bank  and  forwarded  by  it  for  col- 
lection, and  it  neglects  or  fails  to  forward  notices  of  protest  sent  to  it 
by  a  notary,  and  the  indorsers  are  thereby  discharged,  such  bank  will 
be  responsible  to  the  holder  for  loss  so  sustained  by  him.^°-  It  is 
sufficient,  if  the  evidence  shows  that  the  letter  was  mailed,  for  the 
proof  to  be  submitted  to  the  jury.^"^  It  is  also  evidence  of  notice 
that  an  insolvent  indorser  specifies  the  bill  as  part  of  his  indebted- 
ness. ^''^ 

'=  Lowell   Trust  Co.   v.   Pratt,   183  ^°°  McLean  v.  Ryan,  55  N.  Y.  Supp. 

Mass.   379,  67  N.  E.  363,  under  St.  232,  36  App.  Div.  281,  16  Bkg.  L.  J. 

1881,  Ch.  77,  §  16,  p.  428.    See,  also,  102,  aff'd   165   N.   Y.   620,    59   N.   E. 

First      National      Bank      v.      Reid  1126.     See  Peabody  Insurance  Co.  v. 

(Tenn.),  58  S.  W.  1124.  Wilson,  29  W.  Va.  528,  2  S.  E.  888. 

»° First    National    Bank   of    North  '"Brown  v.  Bank  of  Abington,  85 

Bennington  v.  Wood,  51  Vt.  473,  33  Va.  95,  7  S.  E.  357. 

Am.  Rep.  692.  ^"^  Bird  v.    Louisiana   State   Bank, 

"  Metropolitan  Bank  v.  Engel,  72  93  U.  S.  96. 

N.  Y.  Supp.  691,  66  App.  Div.  273.  "'  Lindenberger  v.  Beal,  6  Wheat. 

»» Henry  v.    Spengler,   12  Ohio   C.  (U.  S.)   104. 

C.  153,  1  Ohio  C.  D.  362.  '»*  Hyde  v.  Stone,  20  How.  (U.  S.) 

^''J.   H.   Mohlman   Co.  v.  McKane,  170. 
69   N.  Y.   Supp.   1046,   60  App.   Div. 
"546. 


V07  TO   WHOM   NOTICE   GIVEN — PARTY   DEAD.      [§§    559,    5G0 

§  559.  To  whom  notice  given — Where  party  dead. — When  any 
party  is  dead,  and  his  death  is  known  to  the  party  giving  notice,  the 
notice  must  be  given  to  a  personal  representative,  if  there  be  one,  and 
if  with  reasonable  diligence  he  can  be  found.  If  there  be  nO'  personal 
representative,  notice  may  be  sent  to  the  last  residence  or  last  place 
of  business  of  the  deceased."^  It  is  held  that  in  case  the  indorser  is 
dead,  notice  of  protest  may  be  given  to  his  executors  or  personal 
representatives,  even  before  they  are  appointed."^  And  if,  on  the 
death  of  the  person  primarily  liable,  no  personal  representative  has 
been  appointed,  and  no  place  of  payment  is  specified,  reasonable  dili- 
gence has  been  exercised  in  making  presentment  and  giving  notice  of 
dishonor,  in  the  required  manner  and  mode,  the  indorser  will  be 
charged."^  But  the  required  degree  of  diligence  should  be  exercised 
in  giving  notice  to  known  personal  representatives,  and  in  case  none 
is  known  or  can  be  found,  then  the  notice  may  be  sent  to  the  indorser's 
last  known  place  of  residence. ^''^  It  is  also  decided  that  notice  of 
protest  must  be  given  to  the  executor  of  an  indorser  who  dies  before 
the  note  matures,  even  though  the  maker  is  such  executor."^  If  the 
holder  and  notary  have  no  knowledge  of  the  death  of  the  indorser 
who  had  died  a  short  time  prior  to  the  note's  maturity,  and  the  notice 
of  protest  is  sent  to  his  address,  such  notice  is  sufficient  to  charge  his 
estate  where  one  of  the  heirs  and  the  administrator  actually  receive 
the  notice.^^° 

§'560.  Notice  to  partners. — Where  the  parties  to  be  notified  are 
partners,  notice  to  any  one  partner  is  notice  to  the  firm,  even  though 
there  has  been  a  dissolution.^"     So,  upon  the  question  of  protest  and 

'"^Negot.   Inst.  Law,   §   169;    Bills  of  Port  Jefferson  v.  Darling,  36  N. 

of  Exch.  Act,  §  49,  Appendix  herein.  Y.  Supp.  153,  91  Hun  236,  72  N.  Y. 

^""Drexler  v.  McGlynn,  99  Cal.  143,  St.  R.  54. 
33  Pac.  773.  "i  Negot.  Inst.  Law,  §  170,  Appen- 

^"Reed  v.   Spear,  94  N.  Y.   Supp.  dix  herein.     See  Maspero  v.  Pedes- 

1007,  107  App.  Div.  144.  claux,  22  La.  Ann.  227,  2  Am.  Rep. 

'"^Dodson  V.   Taylor,  56   N.  J.   L.  727;  Bank  of  America  v.  Shaw,  142 

11,  28  Atl.  316.     See  this  case,  also,  Mass.   290,   2  N.  Eng.   572,  7  N.   E. 

as  to  sufficiency  of  notice.  779;  Gates  v.  Beecher,  60  N.  Y.  518; 

""Carolina  National  Bank  v.  Wal-  Hubbard  v.  Matthews,  54  N.  Y.  43; 

lace,  13  S.  C.  347,  36  Am.  Rep.  694.  Bank   of   Vergennes   v.   Cameron,    7 

""Maspero   v.    Pedesclaux,    22   La.  Barb.   (N.  Y.)  143. 
Ann.  227,  2  Am.  Rep.  727.     See,  also,         That  protest  and  notice  of  protest 

Bank  of  Ravenswood  v.  Wetzel  (W.  may  be  given  to  one  of  partners  in 

Va.),  50  S.  E.  886.     Examine  Bank  case  of  dissolution,  see  Fourth  Na- 


561] 


"WAXT   OF    NOTICE   OF    PROTEST   AXD   DISHONOR. 


708 


notice  in  case  of  a  partnership,  such  notice  is  properly  left  at  the 
residence  of  one  of  the  firm  or  at  its  place  of  business  with  some  one 
there  in  charge.^^^  If  a  bank  holds  a  foreign  bill  and  has  notice  of  its 
non-payment,  the  fact  that  its  cashier  is  one  of  the  members  of  a  firm 
which  drew  and  indorsed  the  paper  renders  protest  of  such  bill  un- 
necessary to  charge  the  partners.^^^ 

§  561.  Notice  to  persons  jointly  liable. — jSTotice  to  joint  parties 
who  are  not  partners  must  be  given  to  each  of  them,  unless  one  of  them 
has  authority  to  receive  such  notice  for  the  others.^^*  And  where  by 
the  state  law  the  same  notice  should  be  given  to  joint  makers  as  to 
indorsers  the  former  are  nevertheless  entitled  to  notice,  even  though 
their  names  are  on  a  corporation's  note  as  such  makers  and  they  also  are 
directors  thereof  and  are  a  majority  of  the  board.^^^  But  notice  need 
not  be  given  to  joint  makers  who  are  sureties.^^®  And  it  has  been 
decided  that  where  one  of  the  joint  makers  has  knowledge  that  the  note 
is  unpaid,  the  fact  that  the  other  maker  of  the  bill  has  not  been  noti- 
fied of  the  non-payment  will  not  operate  to  release  him  from  liability, 
even  though  the  former's  name  is  not  signed  to  the  paper.^^^ 


tional  Bank  v.  Altheimer,  91  Mo. 
190,  8  West.  Rep.  562,  3  S.  W.  858; 
Myer  v.  Withman,  41  Mo.  App.  397. 
Notice  may  be  directed  to  partner 
by  individual  name.  United  States 
National  Bank  v.  Burton,  58  Vt.  426, 

2  N.  Eng.  206,  3  Atl.  756. 

Notice  to  drawers  unnecessary 
where  drawer  and  acceptor  are 
firms  with  common  partner.  New 
York  &  Alabama  Contracting  Co.  v. 
Selma  Savings  Bank,  51  Ala.  305, 
23  Am.  Rep.  552. 

Effect  of  waiver  by  one  partner 
and  holder's  notice  of  fraud  and 
want  of  authority  and  necessity  of 
notice  of  protest.  See  Presbrey  v. 
Thomas,  1  App.  D.  C.  171,  21  Wash. 
L.  Rep.  659. 

^^  Fourth  National  Bank  v.  Alt- 
heimer, 91  Mo.  190,  8  West.  Rep.  562, 

3  S.  W.  858. 

"*  Hays  V.  Citizens'  Savings  Bank, 
101  Ky.  201,  19  Ky.  L.  Rep.  367,  14 
Bkg.  L.  J.  327,  40  S.  W.   573.     See 


Citizens'  Savings  Bank  v.  Hays,  16 
Ky.  L.  Rep.  505,  29  S.  W.  20. 

"*Negot.  Inst.  Law,  §  171;  Bills 
of  Exch.  Act,  §  49,  Appendix  herein. 
See  Bowie  v.  Hume,  13  App.  D.  C. 
286  (citing  Shepard  v.  Hawley,  1 
Conn.  368,  6  Am.  Dec.  244;  People's 
Bank  v.  Keech,  26  Md.  521,  90  Am. 
Dec.  118;  Willis  v.  Green,  5  Hill  (N. 
y.)  232,  40  Am.  Dec.  351;  Bank  of 
United  States  v.  Beirne,  1  Gratt. 
(Va.)  234,  42  Am.  Dec.  551);  Jarni- 
gen  V.  Stratton,  95  Tenn.  619,  32  S. 
W.  625,  30  L.  R.  A.  495. 

"'  Phipps  V.  Harding,  70  Fed.  468, 
34  U.  S.  App.  148,  17  C.  C.  A.  203, 
30  L.  R.  A.  513. 

""Marion  National  Bank  v.  Phil- 
lips, 16  Ky.  L.  Rep.  159,  35  S.  W. 
910. 

^^"  Citizens'  Savings  Bank  v.  Hays, 
16  Ky.  L.  Rep.  505,  29  S.  W.  20.  See 
Hays  v.  Citizens'  Savings  Bank,  101 
Ky.  201,  19  Ky.  L.  Rep.  367,  14  Bkg. 
L.  J.  327,  40  S.  W.  573. 


I 


709  NOTICE  TO  BAXKRUPT.  [§§  562,  563 

§  562.  Notice  to  bankrupt. — Where  a  party  has  been  adjudged  a 
bankrupt  or  an  insolvent,  or  has  made  an  assignment  for  the  benefit 
of  creditors,  notice  may  be  given  either  to  the  party  himself  or  to  his 
trustee  or  assignee.  ^^®  So  notice  is  held  sufficient  where  received  by 
the  trustee  or  assignee  at  an  insolvent  firm's  former  place  of  busi- 
ness."^ And  notice  to  parties  secondarily  liable  is  necessary  notwith- 
standing tlie  insolvency  of  the  drawee  and  acceptor  of  a  draft. ^^" 

§  563.  Time  within  which  notice  must  be  given. — The  negotiable 
instruments  law  provides  that  notice  may  be  given  as  soon  as  the  in- 
strument is  dishonored;  and  unless  delay  is  excused  as  provided  by 
that  enactment,  it  must  be  given  within  the  times  fixed  by  the  act.^^^ 
It  is  held  that  after  demand  made  for  payment  and  refusal,  notice 
should  be  immediately  given^-^  without  delay,  even  though  the  in- 
dorser  lives  in  the  place  where  the  draft  is  presented  for  payment  •,^^^ 
and  where  demand  is  made  on  the  third  day  of  grace  notice  given 
to  the  indorser  on  the  same  day  is  sufficient. ^^^  But  it  is  also  decided 
that  notice  of  dishonor  may  properly  be  given  on  the  day  after  ma- 
turity as  evidenced  by  the  actual  date  of  the  note  and  not  by  the  date 
of  its  delivery.^25  g^  ^^  jg  (determined  in  another  case  that  notice  sent 
by  mail  the  next  day  after  dishonor  is  sufficient.  ^-°  Immediate  notice 
must  be  given  after  demand  and  refusal,  to  an  indorser  after  ma- 
turity of  negotiable  paper.^"  A  notice  to  the  indorser  on  the  last  day 

"'Negot.   Inst.  Law,  §  172;    Bills  ^^^  Negot.   Inst.   Law,   §   173;    Bills 

of  Exch.  Act,  §  49,  Appendix  herein,  of  Exch.  Act,  §  49,  Appendix  herein. 

See,  also,  Callahan  v.  Bank  of  Ken-  ^"German-American    Bank   v.    At- 

tucky,    82    Ky.    231;    American    Na-  water,  165  N.  Y.  36,  58   N.  E.   763, 

tional  Bank  v.  Junk  Bros.  Lumber  aff'g  53  N.  Y.  Supp.  1104.   See  Bowes 

6  Mfg.  Co.,  94  Tenn.  624,  30  S.  W.  v.  Industrial  Bank,  64  111.  App.  300, 
753,  28  L.  R.  A.  492,  40  Cent.  L.  J.  1  Chic.  L.  J.  wkly.,  rev'd  165  111.  70, 
450.  46  N.  E.  10. 

Notice  of  protest— To  whom  given  ^^  Manning   First   National    Bank 

after   receiver  appointed.    See  note  v.  Farneman,  93  Iowa  161,  61  N.  W. 

61  L.  R.  A.  900.  424,  12  Bkg.  L.  J.  73. 

""  Case  National  Bank  v.  Shaw,  79  ^-*  Lindenberger  v.  Beall,  6  Wheat. 

Me.  376,  10  Atl.  67,  4  N.  Eng.  673;  (U.  S.)   104. 

Importers'  National  Bank  v.  Shaw,  ^  Meyer  v.  Foster,  147  Cal.   166, 

144   Mass.   421,   11   N.   E.   666,   4    N.  81  Pac.  402. 

Eng.  344.     See  Bank  of  America  v.  '=«  Bank  of  Alexandria  v.  Swann, 

Shaw,  142  Mass.  290,  2  N.  Eng.  572,  9  Pet.   (U.  S.)  33. 

7  N.  E.  779.  1-"-  Graul  v.  Strutzel,  53  Iowa  712, 
""National   Bank  v.  Bradley,   117  36  Am.  Rep.  250. 

N.  C.  526,  23  S.  E.  455.  Time   for   notice   where   indorsed 


§    564]  WAXT    OF    NOTICE   OF    PROTEST   AND    DISHOXOR.  710 

of  grace  is  not  premature.^-^  And  although  a  notice  bears  a  date  of 
the  day  preceding  its  service  it  is  insufficient  when  such  service  is  made 
personally  or  by  mail  on  the  second  day  after  maturity. ^^^  If  a  bank 
receives  for  collection  a  bill  sent  to  it  by  another  and  branch  bank, 
which  had  also  received  it  for  collection,  the  bank  last  receiving  the 
bill  gives  due  notice  of  dishonor  where  it  directs  such  notice  to  the 
sending  bank  at  a  still  different  branch  on  the  day  following  dishonor, 
and  also  sends  a  telegram  to  the  sending  bank  on  the  day  next  there- 
after.i^'" 

§564.     Same  subject,  continued — Diligence — Reasonable  time. — A 

party  upon  whom  falls  the  duty  to  give  notice  of  dishonor  is  bound 
to  use  due  diligence.^^^  "The  time  of  giving  notice  is  affected  by  differ- 
ent conditions  and  circumstances.  If  the  residence  of  the  party  is 
unknown  of  course  notice  is  an  impossibility.  But  in  such  case  it  is 
incumbent  upon  the  holder,  and  all  other  parties  who  are  bound  to 
give  notice,  to  use  reasonable  diligence  and  make  due  inquiries  as  to 
the  actual  residence  of  the  party  so  entitled  to  notice.  What  will  be 
due  and  reasonable  diligence  in  this  respect  must  depend  upon  the 
circumstances  of  the  particular  case,  for  no  invariable  or  definite  rule 

after    maturity    same    as    when    in-  gence  in  ascertaining  place  of  resi- 

dorsed    before.     Rosson    v.    Carroll,  dence    of    indorser    and    to    inform 

90  Tenn.  90,  16  S.  W.  66,  43  Alb.  L.  notary.     Hazlett  v.  Bragdon,  7   Pa. 

J.   493.  Super.  Ct.  581. 

'^^  King  V.  Crowell,  61  Me.  244,  14         Diligence — Sundays,  holidays  and 

Am.  Rep.  560.  Saturdays.   See  Hitchcock  v.  Hogan, 

^  Hirt  V.  Vincent,  29  N.  Y.  Supp.  99  Mich.  124,  57  N.  W.  1095,  10  Bkg. 

61,  59  N.  Y.  St.  R.  687,  9  Misc.  87,  L.  J.  292;    Sylvester  v.  Crohan,  138 

rev'g  27  N.  Y.   Supp.   258,   58   N.  Y.  N.  Y.  494,  53  N.  Y.  St.  R.  113,  34  N. 

St.  R.  36,  7  Misc.  237.  E.   273,  aff'g  63  Hun  509,  18  N.   Y. 

^'"Fielding  v.  Corry,  67  L.  J.  Q.  B.  Supp.  546,  45  N.  Y.  St.  R.  320;  Len- 

N.  S.  7  [1898],  1  Q.  B.  268   (C.  A.),  hart   v.   Ramey,    2    Ohio    C.    D.    77; 

77  Law  T.  Rep.  453.  Newbold  v.  Boraef,  155  Pa.  227,  26 

"'  Bank  of  Columbia  v.  Lawrence,  Atl.  305.     See  §  568  herein. 
1  Pet.    (U.  S.)    578;    Hart  v.  McLel-         Notary — Negligence  in  not  giving 

Ian,  80  Me.  95,  13  Atl.  272,  6  N.  Eng.  sufficient  notice   of  dishonor  of   in- 

138;  Billings  Est.,  In  re  (Minn.),  85  land    draft    not    chargeable    to    col- 

N.   W.    162;    Hazlett  v.    Bragdon,   7  lecting    bank,    of    which    notary    is 

Pa.  Super.  Ct.  581.     See  Lambert  v.-  assistant  cashier,  even  though  part 

Ghiselin,   9   How.    (U.   S.)    52;   Uni-  of   a  notary's  official  duty   to   give 

versity  Press,  John  Wilson  &  Son  v.  such    notices.      See    First    National 

Williams,    59    N.    Y.    Supp.    817,    28  Bank    v.    German    Bank,    107    Iowa 

Misc.  52.  543,  44  L.  R.  A.  133,  78  N.  W.  195,  16 

Duty   of   holder    to   use   due    dili-  Bkg.  L.  J.  220. 


I 


711 


WHERE    PARTIES    EESIDE   IX    SAME   PLACE. 


[§  565 


can  be  laid  down ;  and  what  would  be  due  and  reasonable  diligence  in 
one  case  might  fall  far  short  in  another."^^^  Where  a  note  was  pro- 
tested and  notice  was  not  received  by  the  indorser  for  about  three 
months  after  protest,  it  having  been  sent  to  a  place  which  was  not 
the  last  known  address  of  defendant  and  the  plaintiff  not  having  exer- 
cised reasonable  diligence  to  ascertain  the  actual  address  it  was  held 
that  no  recovery  could  be  had  by  the  payee  against  the  indorser.^^^  A 
delay  of  thirty-three  months/^*  of  more  than  ten  months/ ^^  and  of 
four  and  a  half  months  is  unreasonable.^^''  So  a  delay  of  two  weeks  will 
discharge  the  indorsers.^^^ 

§  565.     Same  subject,   continued — ^Where  parties  reside  in  same 

place. — Where  the  j^erson  giving  and  the  person  to  receive  notice  re- 
side in  the  same  place,  notice  must  be  given  within  the  following 
times:  (1)  If  given  at  the  place  of  business  of  the  person  to  receive 
notice,  it  must  be  given  before  the  close  of  business  hours  on  the  day 
following;  (2)  if  given  at  his  residence,  it  must  be  given  before  the 
usual  hours  of  rest  on  the  day  following;  (3)  if  sent  by  mail,  it  must 
be  deposited  in  the  postoffice  in  time  to  reach  him  in  usual  course 
on  the  day  following.^^®    A  notice  of  dishonor  must  be  given  in  con- 


"=  Fugitt  V.  Nixon,  44  Mo.  295,  299, 
citing  Story  on  Prom.  Notes,  §  335. 

Notice  must  be  given  in  reason- 
able time.  Apple  v.  Lesser,  93  Ga. 
749,  21  S.  E.  171;  Industrial  Bank  v. 
Bowes,  165  111.  70,  46  N.  B.  10,  rev'g 
64  111.  App.  300,  1  Chic.  L.  J.  Wkly. 
455;  Leonard  v.  Olson,  99  Iowa  162, 
68  N.  W.  677,  35  L.  R.  A.  381,  61 
Am.  St.  Rep.  230.  See  Hart  v.  Mc- 
Lellan,  80  Me.  95.  13  Atl.  272,  6  N. 
Eng.  138;  Saco  National  Bank  v. 
Sanborn,  63  Me.  340,  18  Am.  Rep. 
224;  New  York  Belting  &  P.  Co.  v. 
Ela,  61  N.  H.  352. 

Notice  to  indorser  of  demand  note 
must  be  given  in  reasonable  time. 
Harrisburg  National  Bank  v.  MofRtt, 
10  Pa.  Dist.  R.  22,  3  Dauph.  Co.  Rep. 
69. 

Notice  received  on  following  day 
is  in  reasonable  time  where  in- 
dorser resided  but  a  short  distance 


from  the  place  where  note  payable. 
Phelps  V.  Stocking,  21  Neb.  443. 

Reasonable  time  question  for  jury. 
See  Bank  of  North  America  v.  Pet- 
tit,  4  Ball.  (U.  S.)  127;  Ball  v.  Den- 
niston,  4  Ball.  (U.  S.)  163.  But 
compare  Watson  v.  Terpley,  18  How. 
(U.  S.)   517. 

"^  Albany  Trust  Co.  v.  Frothing- 
ham,  99  N.  Y.  Supp.  343. 

"^  Harrisburg  National  Bank  v. 
Moffitt,  10  Pa.  Bist.  R.  22,  3  Bauph. 
Co.  Rep.  69. 

""  Turner  v.  Iron  Chief  Mining 
Co.,  74  Wis.  355,  43  N.  W.  149,  5  L. 
R.  A.  533. 

""  Pattillo  V.  Alexander,  96  Ga.  60, 
22  S.  E.  646,  29  L.  R.  A.  616. 

""  German-American  Bank  v.  At- 
water,  165  N.  Y.  36,  58  N.  E.  763, 
aff'g  53  N.  Y.  Supp.  1104. 

"^Negot.  Inst.  Law,  §  174;  Bills 
of  Exch.  Act,  §  49,  Appendix  herein. 


§   566]  WANT   OF   NOTICE  OF   PROTEST   AND   DISHONOR.  71S 

fon^iity  with  a  statutory  requirement,  and  where  the  time  is  thereby 
limited  to  the  close  of  business  hours  on  the  day  following  dishonor 
if  it  is  given  thereafter  it  is  not  in  time.^^''  But  it  is  held  that  the 
holder  has  all  the  day  following  that  of  dishonor  within  which  to  give 
notice,""  and  if  such  notice  is  received  on  the  first  business  day  after 
protest  it  is  sufficients*^  So  where  custom  warrants  sending  such 
notice  by  mail,  and  it  is  sent  in  time,  and  the  indorser  receives  it,  it  is 
sufficient,  even  though  he  resides  in  the  same  town.^*^  Again,  it  is  a 
sufficient  notice  where  it  is  mailed  immediately  after  protest  to  the 
city  residence  of  the  indorser,  even  though  she  was  away  at  a  tempo- 
rary summer  residence.^*^' 

§  566.  Same  subject,  continued — ^Where  parties  reside  in  different 
places. — Where  the  person  giving  and  the  person  to  receive  notice  re- 
side in  different  places,  the  notice  must  be  given  within  the  following 
times:  (1)  If  sent  by  mail,  it  must  be  deposited  in  the  postoffice  in 
time  to  go  by  mail  the  day  following  the  day  of  dishonor,  or  if  there 
be  no  mail  at  a  convenient  hour  on  that  day,  by  the  next  mail  there- 
after. (2)  If  given  otherwise  than  through  the  postoffice,  then  within 
the  time  that  notice  would  have  been  received  in  due  course  of  mail, 
if  it  had  been  deposited  in  the  postoffice  within  the  time  specified  in 
the  last  subdivision.^**  Where  the  parties  to  a  bill  reside  at  a  distance 
and  the  ordinary  mode  of  communication  is  by  the  general  post,  the 
universal  rule  seems  to  be  that  the  holder  or  party  to  give  the  notice 
must  forward  it  by  the  post  of  the  next  day  after  the  dishonor,  or  after 
he  received  notice  of  such  dishonor ;  and  if  there  be  no  post  on  such 
next  day,  then  he  must  send  off  notice  by  the  very  next  post  that  oc- 
curs after  that  day;  but  he  is  not  legally  bound  on  account  of  there 
being  no  post  on  the  day  after  he  receives  notice,  to  forward  it  on  the 
very  day  he  receives  it.  If  the  notice  be  placed  in  the  proper  post- 
office  in  due  time  it  is  legal  diligence ;  the  holder  or  party  to  give  no- 
tice not  being  responsible  for  the  irregularities  of  the  mail.^*^    It  is 

See,  as  to  mailing,  §§  551,  553-558  tional  Bank,  25  Neb.  127,  41  N.  W. 

herein.  133. 

^■'"Solomon    v.    Cohen,    94    N.    Y.  "=  Carter  v.  Odom,  121  Ala.  162,  25 

Supp.  502.  So.    774.      See    Cassidy   v.    Kreamer 

"» Marks  v.  Boone,  24  Fla.  177,  4  (Pa.),  13  Atl.  744,  12  Cent.  Rep.  286. 

So.  532.  "=  First    National    Bank    v.    Reid 

i"M.  V.  Monarch  Co.  v.  Farmers'  (Tenn.  Ch.  App.),  58  S.  W.  1124. 

&  D.  Bank,  20  Ky.  L.  Rep.  1351,  1275,  ^"Negot.   Inst.  Law,   §    175;    Bills 

49  S.  W.  319,  317,  16  Bkg.  L.  J.  160.  of  Exch.  Act,  §  49,  Appendix  herein. 

See    Hendershot    v.    Nebraska    Na-  "=  Knott  v.  Venable,  42  Ala.  186, 


I 


713  TIME    OF    XOTICE.  [§    567 

held  that  where  the  parties  did  not  reside  in  the  same  place,  and  the 
bankers  who  held  the  note  for  collection  mailed  the  notice  of  protest, 
on  the  day  such  protest  was  made,  to  the  owners,  who,  on  receiving 
the  same,  mailed  it  to  the  indorser  at  another  place,  such  notice  is 
valid  and  proper  diligence  is  exercised,  even  though  several  days 
elapse  between  the  date  of  protest  and  the  date  when  the  notice  is  re- 
ceived by  the  indorser,  and  although  there  is  a  daily  mail  between  his 
place  and  the  place  where  the  bank  is  located,  and  the  residence  of  the 
indorser  was  known  to  the  parties  but  not  to  the  notary.^**' 

§  567.     Time    of   notice — Subsequent    and    antecedent    parties. — 

Where  a  party  receives  notice  of  dishonor,  he  has,  after  the  receipt  of 
such  notice,  the  same  time  for  giving  notice  to  antecedent  parties  that 
the  holder  has  after  the  dishonor. ^^'^  Notice  sent  on  the  same  day  on 
which  it  is  received  is  sufficient.^^®  And  if  notice  is  sent  to  his  prior 
indorser  by  each  successive  indorser  the  day  after  the  latter  receives 
such  notice  it  is  transmitted  in  time;^*"  and  it  is  held  that  notice  in 
such  case  must  be  sent  not  later  than  the  following  day.^^"  Again  no- 
tices may  be  served  upon  prior  indorsers  whosei:  residences  are  un- 
known by  sending  all  notices  to  the  last  indorser  whose  duty  in  such 

195,  196,  per  Judge,  J.  (citing  Craw-  North    Carolina. — National    Bank 

ford   v.   Branch   Bank  at  Mobile,  7  v.  Bradley,  117  N.  C.  526,  23  S.  E. 

Ala.     206;     Whitman     v.     Farmers'  455. 

Bank  of  Chattanoochee,  8  Port.  West  Virginia. — Peabody  Ins.  Co. 
(Ala.)  258;  Lord  v.  Appleton,  3  v.  Wilson,  29  W.  Va.  528,  2  S.  E.  888. 
Shep.  (Me.)  270;  Bell  v.  Hagers-  Notice  by  mail  where  parties  re- 
town  Bank,  7  Gill  (Md.)  216;  Ellis  side  in  different  places.  See  Car- 
v.  Commercial  Bank,  7  How.  (Miss.)  rington  v.  Odom,  124  Ala.  529,  27  So. 
294;  Bray  v.  Hadman,  5  Maule  &  S.  510;  Sharpe  v.  Drew,  9  Ind.  281; 
68;   Chitty  on  Bills,  M.  p.  486.  Wood  v.  Rosendale,  18  Ohio  Cir.  Ct. 

See  the  following  cases:  R.   247,   10   0.   C.   D.   66;    see,   also. 

United  States. — Bussard  v.  Lever-  §§  551,  553-558  herein, 

ing,  6  Wheat.   (U.  S.)   102;   Alexan-  "« Seaton  v.   Scovill,  18  Kan.  433, 

dria  Bank  v.  Swann,  9  Pet.   (U.  S.)  26  Am.  Rep.  779. 

33.  "^Negot.   Inst.  Law,   §   178;    Bills 

Indiana. — Brown     v.     Jones,     125  of  Exch.  Act,  §  49    (14),  Appendix 

Ind.  375,  21  Am.  St.  Rep.  227,  25  N.  herein. 

E.  452.  '^  Smith  v.  Poillon,  87  N.  Y.  590, 

Maine. — Goodman    v.    Norton,    17  41  Am.  Rep.  402. 

Me.  381.  "'  Standard    Sewing   Machine    Co. 

IVe&rasfca.— Phelps  v.  Stocking,  21  v.  Smith,  1  Marv.  (Del.)  330,  40  Atl. 

Neb.  443,  32  N.  W.  217.  1117. 

New  York. — Robinson  v.  Ames,  20  ''"Wolf    v.     Hostetter     (Pa.),     13 

Johns.  (N.  Y.)  146,  11  Am.  Dec.  259.  Lane.  L.  Rev.  201. 


§    568]  WANT   OF   NOTICE  OF   PROTEST   AND   DISHONOR.  714 

case  is  to  forward  tliem.^^^  And  although  the  last  indorser  is  only 
an  agent  for  collection,  notice  is  sufficient  if  sent  to  him  by  the  first 
mail  and  one  additional  day  should  be  allowed  him  in  which  to  notify 
his  immediate  indorser,^^^  But  an  immediate  indorser  is  not  charged 
by  notice,  where  a  bank,  which  had  discounted  the  paper  and  had  re- 
ceived notice  of  its  dishonor  the  day  following  such  dishonor,  sends 
notice  at  the  close  of  business  hours  on  that  day  by  drop  letter,  at  a 
place  having  no  letter  carrier  system,  so  that  such  notice  is  not  received 
until  the  next  following  day,  making  the  time  of  receiving  the  notice 
the  second  day  after  the  bank  had  received  it.^^^ 

§568.  Same  subject — Notice  received  on  Saturday — Form  of  no- 
tice sent  by  last  indorser — Pleading. — In  an  important  case  decided 
in  Nebraska  it  is  held  that  notice  of  dishonor  of  a  promissory  note  is 
sufficient  if  sent  to  the  last  indorser  by  the  first  mail  of  the  day  fol- 
lowing dishonor,  even  though  such  indorser  is  an  agent  for  collection, 
merely,  and  he  is  entitled  to  one  additional  day  to  notify  the  in- 
dorser immediately  preceding  him.  It  is  also  decided  that  where  such 
last  indorser  receives  the  notice  of  dishonor  on  Saturday,  his  notice  to 
the  next  prior  indorser  is  timely  if  served  on  the  following  Monday. 
It  is  further  determined  that  the  notice  served  by  the  last  indorser 
need  not  be  actually  prepared  by  him,  but  he  may  adopt  and  utilize  for 
that  purpose  a  notice  sent  him  by  the  protesting  officer,  addressed  to 
the  next  prior  indorser ;  and  that  in  an  action  on  a  note,  an  averment 
by  the  holder  that  he  caused  due  notice  of  dishonor  to  be  served  on  the 
last  indorser  but  one,  is  sufficient,  in  the  absence  of  a  motion  to  make 
more  specific,  to  admit  evidence  that  the  notice  was  given  to  the  last 
indorser  and  by  him  transmitted  to  the  one  next  prior.^^* 

1=1  Metropolitan  Bank  v.  Engel,  72  cuted   and   delivered  by  one  U.   O. 

N.  Y.  Supp.  691,  66  App.  Div.  273;  Anderson,  of  Seward,  Nebraska,  to 

Henry  v.   Spengler,   12   Ohio   C.   C.  defendant  in  error,  who  is  a  resi- 

153,  1  Ohio  C.  D.  362.  dent   of   Lincoln,   and   who,   before 

1==  Oakley  v.  Carr,  66  Neb.  751,  92  maturity  of  the  note,  indorsed  it  in 

N.  W.  1000,  60  L.  R.  A.  431.  blank    and    sold    it    to    plaintiff    in 

1"  Shelburne  Falls  National  Bank  error.    By  its  terms  the  note  became 

v.  Townsley,  102  Mass.  177,  3  Am.  due    December    5,    1899,    the    three 

Rep.  445.  days  of  grace  expiring  on  December 

1"  Oakley  v.  Carr,  66  Neb.  751,  92  8.      Some    time    before    the    first- 

N.  W.  1000,  103  Am.  St.  Rep.  739.  named    date    it   was    deposited    for 

The  opinion  in  this  case  is  as  fol-  collection   with   the   First  National 

lows:     "Lobingier,    C. — This    is    an  Bank  of  Lincoln,  which  forwarded 

action   on   a   promissory   note  eze-  it  to  a  correspondent  bank  at  Sew- 


715 


"WHERE    NOTICE    MUST   BE   SENT. 


[§  569 


§  569.     Where  notice  must  be  sent. — Where  a  party  has  added  an 
address  to  his  signature,  notice  of  dishonor  must  be  sent  to  that  ad- 


ard,  having  first  indorsed  as  fol- 
lows: 'Pay  any  bank  or  banker  or 
order.  First  National  Bank,  Lin- 
coln, Neb.  H.  S.  Freeman,  Cashier.' 
On  the  last  day  of  grace  a  notary 
employed  by  the  Seward  bank  pre- 
sented the  note  for  payment  at  the 
maker's  ofiice  and  residence,  and, 
not  finding  him  at  either  place,  the 
note  was  duly  protested.  On  the 
same  day  the  notary  mailed  a  notice 
of  protest  to  the  maker  at  Seward, 
another  to  the  First  National  Bank 
at  Lincoln,  and  a  third  directed  as 
follows:  'John  Carr,  Lincoln,  Nebr., 
care  of  First  National  Bank,' — all 
of  these  notices  being  deposited  in 
the  Seward  postoffice  not  later  than 
the  evening  of  December  8.  The 
first  mail  from  Seward  to  Lincoln, 
if  on  time,  was  delivered  at  the 
Lincoln  postoffice  about  11  o'clock, 
and  there  was  a  regular  delivery  by 
carriers  about  12  o'clock.  The  mail 
of  the  First  National  Bank,  how- 
ever, was  delivered  by  its  own  spe- 
cial messenger,  and  the  letter  ad- 
dressed to  Carr  was  by  this  messen- 
ger carried  with  the  bank's  other 
mail,  and  appears  to  have  reached 
the  bank  some  time  after  noon  of 
the  9th,  which  was  Saturday.  The 
cashier  of  the  bank  testifies  that 
before  2  o'clock  on  that  day  a  notice 
of  dishonor  from  the  Lincoln  bank 
was  mailed  to  defendant  in  error, 
but  the  latter  testifies  that  he  never 
received  it.  The  notice  from  the 
notary  at  Seward,  however,  was 
given  to  the  messenger  of  the  Lin- 
coln bank  and  by  him  delivered  to 
defendant  in  error  on  Monday  fore- 
noon at  10:40,  one  of  the  clerks 
having  previously  noted  in  pencil 
on  tlie  envelope  defendant  in  error's 


address,  '52  Brownell  Block.'  This 
action  is  brought  against  the  in- 
dorser  alone,  and  the  sole  defense 
is  that  the  notice  of  dishonor  was 
not  served  in  time.  There  was  a 
trial  to  the  court,  a  jury  being 
waived,  and  a  judgment  for  defend- 
ant, of  which  plaintiff  now  seeks  a 
reversal  by  error  proceedings.  At 
common  law,  by  weight  of  author- 
ity, the  indorser  of  a  dishonored 
note  or  bill  was  entitled  to  notice 
thereof  on  the  day  following  the 
dishonor,  if  he  resided  in  the  same 
town  with  the  maker;  and  if  he 
resided  elsewhere,  the  notice  was 
required  to  be  posted  by  the  first 
seasonable  mail  sent  on  the  day 
following  dishonor.  The  rule  was 
not  universal.  In  Bank  of  North 
America  v.  McKnight,  1  Yeates 
(Pa.)  145,  an  indorser  living  in  the 
same  city  with  the  maker  was  held, 
though  not  notified  until  the  second 
day  after  dishonor.  Moreover,  we 
have  in  this  state  a  statute  govern- 
ing such  cases,  which  provides  that 
'notice  of  non-payment  or  non-ac- 
ceptance thereof  to  the  indorser 
within  a  reasonable  time  shall  be 
adjudged  due  diligence.'  Compiled 
Statutes,  Ch.  41,  §  3;  Cobbey's 
Annot.  Stat.,  §  8902.  Whether  this 
statute  enlarges  the  common  law 
liability  of  the  indorser  and  re- 
stricts his  rights  as  to  notice,  or 
whether  it  is  intended  merely  to 
re-enact  the  rule  of  the  lex  merca- 
toria,  is  a  question  which  we  need 
not  here  determine,  because,  as  we 
view  it,  the  case  at  bar  is  governed 
by  a  different  principle,  presently 
to  be  discussed.  Suffice  it  to  say 
that  the  cases  relied  upon  in  the 
able    and    ingenious    argument    for 


569] 


"WAXT  OF   XOTICE   OF   PROTEST   AND   DISHONOR. 


71b' 


dress ;  but  if  lie  has  not  given  such  address,  then  the  notice  must  be 
sent  as  follows:    (1)    Either  to  the  post  office,  nearest  to  his  place  of 


defendant  in  error  were  decided  in 
jurisdictions  which  are  without 
such  a  statute  as  ours.  But  the 
same  law  merchant  which  required 
the  notice  of  dishonor  to  be  given 
or  sent  on  the  day  following  non- 
payment also  limited  the  duty  of 
the  holder  or  protesting  officer  in 
this  regard  to  notifying  the  last  in- 
dorser,  who  in  turn  was  allowed  an 
additional  day  to  send  notice  to  the 
indorser  Immediately  preceding 
him,  and  so  on  until  all  had  been 
notified.  2  Randolph  Commercial 
Paper,  §  1261.  Thus,  in  the  case 
before  us,  the  notary  was  not  legally 
bound  to  notify  Carr  at  all.  It 
would  have  been  sufl5cient  had  he 
simply  sent  the  one  notice  to  the 
First  National  Bank,  which  was  the 
last  indorser,  and  the  latter  would 
have  had  until  the  following  busi- 
ness day  to  notify  Carr.  As  the 
bank  received  its  notice  on  Satur- 
day, it  would,  under  this  rule,  have 
until  the  following  Monday  to  send 
its  notice  to  defendant  in  error,  for 
in  such  cases  the  intervening  Sun- 
day is  not  to  be  counted.  Eagle 
Bank  v.  Chapin,  3  Pick.  (Mass.) 
180;  Agnew  v.  Bank,  2  H.  &  G. 
(Md.)  478,  and  many  cases  cited  in 
Century  Digest,  Vol.  7,  §  1169.  It 
is  claimed,  however,  that  this  doc- 
trine should  not  be  applied  to  a 
case  like  this,  where  the  last  in- 
dorser had  received  and  indorsed 
the  note  simply  for  collection.  It 
will  be  remembered  that  the  in- 
dorsements themselves  were  not 
such  as  to  disclose  that  the  Lincoln 
bank  was  an  indorsee  for  collection 
only.  Carr  had  indorsed  the  note 
in  blank  and  the  Lincoln  bank  had 
indorsed  it  merely  so  that  its  corre- 


spondent might  collect,  and  there 
was  nothing  to  indicate  to  the 
notary  but  that  the  Lincoln  bank 
was  the  holder  as  well  as  the  last 
indorser.  But  aside  from  this,  no 
authority  is  cited  for  the  exception 
contended  for  by  plaintiff  in  error 
in  the  case  of  indorsers  who  hold 
for  collection  only.  On  the  other 
hand,  there  is  ample  support  for  the 
proposition  that  it  is  sufficient  to 
notify  such  indorsers  in  the  same 
way  as  other  last  indorsers  are  noti- 
fied, and  that  prior  indorsers  may 
be  held  by  virtue  of  the  usual  notice 
from  them.  Carmena  v.  Bank  of 
Louisiana,  1  La.  Ann.  369;  Eagle 
Bank  v.  Hathaway,  5  Met.  (Mass.) 
212;  Brown  v.  Ferguson,  4  Leigh 
(Va.)  37,  24  Am.  Dec.  707;  Linn  v. 
Horton,  17  Wis.  151;  2  Randolph 
Commercial  Paper,  §§  1241,  1262. 
Boyer  v.  Richardson,  52  Neb.  156, 
cited  by  defendant  in  error,  in  no 
way  conflicts  with  the  foregoing. 
The  court  there  was  simply  consid- 
ering the  effect  of  an  indorsement 
for  collection  on  the  title  to  a  note, 
and  held  that  such  an  indorsee  ac- 
quired no  right  of  action  against  a 
prior  indorser.  But  it  is  contended 
that  the  First  National  Bank  has 
never  so  notified  Carr.  'They  sim- 
ply attended  to  the  courtesy  of  see- 
ing that  Carr  eventually  got  a  letter 
that  was  sent  to  him  in  their  care 
without  even  knowing  its  contents.' 
If  it  had  developed  that  the  letter 
which  the  bank  delivered  to  Carr 
by  its  messenger  was  not  in  fact  a 
liotice  of  dishonor,  and  none  other 
had  been  sent,  he,  of  course,  would 
have  been  released  from  liability. 
In  taking  the  course  it  did,  the 
bank    might    have    been    assuming 


II 


7ir 


WHERE   XOTICE   MUST   BE   SENT. 


[§   5G9 


residence,  or  to  the  postoflfice  where  he  is  accustomed  to  receive  his 
letters;  or  (2)  if  he  live  in  one  place,  and  have  his  place  of  business 


some  risk,  though  it  must  be  re- 
membered that  its  agent  claimed  to 
have  mailed  a  separate  letter  to 
Carr,  and  testified  that  it  was  their 
custom,  out  of  ample  caution,  to 
adopt  in  such  cases  both  methods 
of  notification.  But  since  the  letter 
delivered  to  Carr  was  complete  and 
sufficient  notice  of  dishonor,  we  are 
unable  to  see  how  it  can  profit  de- 
fendant in  error  that  it  was  not 
actually  prepared  by  the  clerks  or 
officers  of  the  Lincoln  bank.  The 
latter  had  a  right  to  employ  such 
agencies  as  it  saw  fit,  both  in  the 
preparation  and  delivery  of  the 
notice;  among  others,  it  had  a  right 
to  adopt  and  utilize  the  work  of  the 
notary  employed  by  its  correspond- 
ent bank  at  Seward.  The  form  of 
the  notice  and  the  time  of  its  de- 
livery are  the  important  elements. 
Who  may  have  prepared  it,  pro- 
vided it  was  done  by  authority,  we 
deem  unimportant.  It  seems  to  us, 
therefore,  that  this  letter  from  the 
notary,  received  by  the  Lincoln 
bank  in  the  due  course  of  mail  and 
sent  by  it  with  a  notation  of  his 
office  address  to  defendant  in  error 
on  the  next  business  day,  was  a 
sufficient  compliance  with  the  rules 
of  the  law  merchant  as  well  as  with 
the  requirements  of  our  statute. 
But  it  is  urged  that  plaintiff  in 
error  did  not,  in  the  trial  court,  rely 
upon  this  so-called  doctrine  of  the 
'sequence  of  notices,'  but  claimed  to 
have  notified  Carr  directly.  What 
plaintiff  in  error's  counsel  may  have 
urged  in  his  argument  below  we 
have  no  means  of  knowing,  nor  do 
we  deem  it  material.  In  the  peti- 
tion, which  is  our  only  guide  in 
determining  what  was  the  cause  of 


action,  it  is  alleged,  after  setting 
forth  the  non-payment  of  the  note, 
that  plaintiff  'caused  due  notice  of 
such  demand  and  non-payment  to 
be  forthwith  served  upon  said  de- 
fendant, said  John  Carr,  and  he 
duly  received  such  notice.'  It  will 
be  seen  that  this  is  not  an  aver- 
ment that  plaintiff  notified  Carr 
directly,  but  merely  that  she 
'caused  due  notice  *  *  *  to  be 
served';  and  it  would  seem  to  con- 
stitute a  sufficient  compliance  with 
§  129  of  the  code,  requiring  the 
facts  'which  fix  liability'  to  be 
stated.  Whether  the  allegation 
might  not  have  been  open  to  a  mo- 
tion to  make  it  more  specific  by 
stating  the  manner  and  means  of 
service,  we  need  not  now  inquire, 
for  no  motion  of  the  kind  was 
made;  and,  in  its  absence,  the  aver- 
ment was  certainly  sufficient  to  per- 
mit the  introduction  of  evidence 
that  the  notice  was  served  by  an 
agent  for  collection  employed  by 
the  plaintiff.  At  any  rate,  no  ob- 
jection was  made  to  the  admission 
of  such  evidence,  and  we  are  unable 
to  see  how  the  alleged  variance  in 
the  theory  of  recovery,  even  if  it 
existed,  could  now  avail  defendant 
in  error.  The  conclusions  at  which 
we  have  arrived  might,  we  think, 
be  reached  in  another  way  and  still 
satisfy  the  strict  requirements  of 
the  law  merchant.  Under  that  law, 
where  a  note  or  bill  is  sent  by  the 
holder  to  an  agent  in  another  town 
for  presentment  to  the  maker,  the 
agent  is  allowed  one  day  to  post 
the  notice  of  dishonor  to  his  prin- 
cipal, and  the  latter  is  entitled  to 
an  additional  day  to  send  notice  to 
the  last  indorser,  and  the  agent  is 


569] 


WAXT   OF   NOTICE   OF   PROTEST   AXD   DISHONOE. 


718- 


in  another,  notice  may  be  sent  to  either  place;  or  (3)  if  he  is  so- 
journing in  another  place,  notice  may  be  sent  to  the  place  where  he  is 
sojourning.  But  where  the  notice  is  actually  received  by  the  party 
within  the  time  specified  in  this  act,  it  will  be  sufficient,  though  not 
sent  in  accordance  with  the  requirements  of  this  section. ^^^  Notice 
may  be  sent  to  the  residence^^*'  last  known,^^^  although  changed  ;^^* 


not  required  to  notify  the  indorser 
directly,  though  this  would  afford 
him  earlier  notice.  Ellis  v.  Com- 
mercial Bank,  7  How.  (Miss.)  294, 
40  Am.  Dec.  63;  Lawson  v.  Farmers' 
Bank,  1  Ohio  St.  206;  Church  v. 
Barlow,  9  Pick.  (Mass.)  547;  United 
States  Bank  v.  Goddard,  5  Mason 
(U.  S.  C.  C.)  366,  Fed.  Cas.  No.  917; 
State  Bank  v.  Ayres,  7  N.  J.  L.  130, 
11  Am.  Dec.  535;  2  Randolph  Com- 
mercial Paper,  §  1262.  If,  therefore, 
in  the  case  at  bar,  the  notary  had 
sent  the  notice  of  dishonor  directly 
to  plaintiff  in  error,  and  she  had  re- 
ceived it  in  due  course  of  mail  and 
had  presented  her  notice  to  defend- 
ant in  error  by  the  time  the  bank's 
messenger  reached  him,  she  would 
have  been  within  the  letter  of  the 
lex  viercatoria.  Can  it  make  any 
legal  difference  that  her  place  in 
the  transaction  was  taken  by  her 
agent,  the  First  National  Bank? 
The  Seward  notary  might  well  have 
thought  that  he  was  complying  with 
this  rule  in  sending  the  notice  to 
the  Lincoln  bank,  for  the  indorse- 
ments were  such  as  to  indicate  that 
it  was  the  holder.  And,  as  was  well 
stated  by  Ross,  J.,  in  First  Nat. 
Bank  v.  Wood,  51  Vt.  471,  31  Am. 
Rep.  692,  where  a  notice  of  dis- 
honor, sent  to  the  wrong  address, 
and  thence  forwarded,  was  held  suf- 
ficient: 'All  the  rules  requiring  the 
holder  to  use  diligence  to  ascertain 
the  residence  of  the  indorser,  and  to 
leave  notice  at  his  place  of  business 
or  residence,  when  they  reside  in 
the  same  town,  or  to  mail  notice  as 


soon  as  the  day  following  the  day  of 
the  maturity  of  the  note,  addressed 
to  him  at  his  place  of  residence, 
when  they  reside  in  different  towns, 
are  made  and  enforced  that  the  in- 
dorser may  be  informed  that  his 
liability  on  the  note  has  not  been 
discharged  by  the  party  whose  duty 
it  was  to  pay  the  note  at  maturity. 
When,  therefore,  the  indorser  in 
fact  receives  notice  in  due  season 
that  the  note  has  been  duly  pre- 
sented for  payment  and  protested, 
the  purpose  of  the  law  has  been  ac- 
complished, although  the  holder  of 
the  note  has  not  complied  with  one 
of  the  established  rules  in  regard  to 
the  use  of  diligence  in  giving  no- 
tice?' It  seems  to  us  that  in  this 
case  both  the  purpose  and  the  let- 
ter of  the  law  have  been  complied 
with,  and  we  are  forced  to  the  con- 
clusion that  the  learned  trial  judge 
erred  in  finding  for  the  defendant. 
We  recommend  that  the  judgment 
be  reversed  and  the  cause  remanded 
for  further  proceedings  according  to 
law." 

^^Negot.  Inst.  Law,  §  179,  Appen- 
dix herein. 

^^''Bank  of  Columbia  v.  Lawrence, 
1  Pet.  (U.  S.)  578;  Cornett  v.  Hafer, 
43  Kan.  60,  22  Pac.  1015,  2  Bkg.  L. 

"^  Cornett  v.  Hafer,  43  Kan.  60,  22 
Pac.  1015,  2  Bkg.  L.  J.  233. 

^=«  Cornett  v.  Hafer,  43  Kan.  60,  22 
Pac.  1015,  2  Bkg.  L.  J.  233;  Import- 
ers &  T.  National  Bank  v.  Shaw, 
144  Mass.  421,  11  N.  E.  666,  4  N.  Bng. 
344. 


719 


NOTICE    DISPENSED   WITH — DRAWER — EXCUSES. 


[§  570 


and  the  circumstances  may  be  such  as  to  show  that  a  change  of  resi- 
dence was  contemplated.^^^  Notice  may  also  be  sent  to  the  indorser's 
place  of  business  ;^^'*  or  to  his  address  at  the  time  the  note  was  is- 
sued ;^'^^  or  it  may  be  left  in  his  office  when  he  is  absent  ;^®^  or  at  a 
room  used  as  a  place  of  business  ;^^^  or  it  may  be  directed  to  the  in- 
dorser's proper  postoffice  ;^'^*  or  to  the  postoffice  at  the  place  where  the 
note  was  dated  and  indorsed  ;^''^  or  to  the  indorser's  customar}'  or 
principal  place  of  receiving  his  mail;^^*'  or  to  the  place  where  it  is 
found  by  the  exercise  of  due  and  reasonable  diligence  that  he  will 
be  most  likely  to  receive  it.^*'^  If  the  indorser  resides  in  a  place  where 
the  bank  at  which  the  note  is  payable  is  located,  but  the  maker  does 
not  reside  there  and  such  bank  goes  out  of  existence  it  is  sufficient  and 
proper  to  protest  the  note  at  the  successor  bank's  place,  that  being  the 
only  one  in  business  in  that  town.^^^ 

§  570.     When  notice  dispensed  with — Drawer — Indorser — Excuses. 

— Notice  of  dishonor  is  dispensed  with  when,  after  the  exercise  of 


J.  233;  Morse  v.  Chamberlain,  144 
Mass.  406,  11  N.  E.  560,  4  N.  Eng. 
211;  Bank  of  America  v.  Shaw,  142 
Mass.  290,  2  N.  Eng.  "^72. 

"Residence"  not  strictly  construed 
and  may  include  permanent,  tem- 
porary or  constructive  residence. 
Wachusett  National  Bank  v.  Fair- 
brother,  148  Mass.  181,  19  N.  E.  345, 
5  R.  R.  &  Corp.  L.  J.  354. 

Notice  to  permanent  residence, 
though  temporary  removal  is  suffi- 
cient. Isbell  v.  Lewis,  98  Ala.  550, 
13  So.  335. 

Notice  left  with  servant  having 
charge  of  house  in  Confederate  lines 
when  not  sufficient.  See  Alexandria 
Savings  Inst.  v.  McVeigh,  84  Va.  41, 

3  S.  E.  885. 

150  Wood  V.  Rosendale,  18  Ohio  Cir. 
Ct.  R.  247,  10  Ohio  C.  D.  66. 

^'^  Morse  v.  Chamberlain,  144  Mass. 
406,  11  N.  E.  560,  4  N.  Eng.  211; 
Bank  of  America  v.  Shaw,  142  Mass. 
290,  2  N.  Eng.  572. 

'"  Importers  &  T.  National  Bank 
v.  Shaw,  144  Mass.  421,  11  N.  E.  666, 

4  N.  Eng.  344. 


1^=  Hobbs  V.  Straine,  149  Mass.  212, 
21  N.  E.  365,  under  Mass.  Pub.  Stat., 
Chap.  77,  §  16. 

^•^  Lamkin  v.  Edgerly,  151  Mass. 
348,  24  N.  E.  49. 

^°*  Northwestern  Coal  Co.  v.  Bow- 
man, 69  Iowa  150. 

"5  Davis  V.  Eppler,  38  Kan.  629, 
16  Pac.  793. 

1°"  Wachusett  National  Bank  v. 
Fairbrother,  148  Mass.  181,  19  N.  E. 
345,  5  R.  R.  &  Corp.  L.  J.  354;  Burke 
V.  Shreve,  2  N.  J.  Law  J.  92.  Ex- 
amine Citizens'  National  Bank  v. 
Cade,  73  Mich.  449,  41  N.  W.  500 
(under  How.  Mich.  Stat,  §  1586); 
Phillip  &  William  Ebling  Brewing 
Co.  V.  Reinheimer,  66  N.  Y.  Supp. 
458,  32  Misc.  594;  University  Press 
V.  Williams,  62  N.  Y.  Supp.  986,  48 
App.  Div.  188,  rev'g  59  N.  Y.  Supp. 
817,  28  Misc.  52. 

"'Bank  of  America  v.  Shaw,  142 
Mass.  421,  2  N.  Eng.  572. 

^•^Texarkana  First  National  Bank 
V.  Wever  (Tex.),  15  S.  W.  41,  11 
L.  R.  A.  295,  4  Bkg.  L.  J.  181. 


^0] 


WANT   OF   NOTICE   OF    PROTEST   AND  DISHONOR. 


720 


reasonable  diligence,  it  cannot  be  given  to  or  does  not  reach  the  par- 
ties sought  to  be  charged.^*^^  And  notice  of  dishonor  is  not  required 
to  be  given  to  the  drawer  in  either  of  the  following  cases :  ( 1 )  Where 
the  drawer  and  drawee  are  the  same  person.  (2)  Where  the  drawee 
is  a  fictitious  person  or  a  person  not  having  capacity  to  contract. 
(3)  Where  the  drawer  is  the  person  to  whom  the  instrument  is  pre- 
sented for  payment.  (4)  Where  the  drawer  has  no  right  to  expect  or 
require  that  the  drawee  or  acceptor  will  honor  the  instrument. 
(5)  Where  the  drawer  has  countermanded  payment.  Again,  notice 
of  dishonor  is  not  required  to  be  given  to  an  indorser  in  either  of  the 
following  cases:  (1)  Where  the  drawee  is  a  fictitious  person  or  a 
person  not  having  capacity  to  contract,  and  the  indorser  was  aware  of 
the  fact  at  the  time  he  indorsed  the  instrument.  (2)  Where  the  in- 
dorser is  the  person  to  whom  the  instrument  is  presented  for  payment. 
(3)  Where  the  instrument  was  made  or  accepted  for  his  accommo- 
dation.^'^" We  have  considered  the  points  stated  in  the  preceding  sec- 
tion.^'^^  And  it  would  seem  that  the  same  facts  which  would  dispense 
with  or  excuse  presentment  for  acceptance  or  for  payment,  or  protest 
would  ordinarily  operate  in  a  like  manner  as  to  notice  of  dishonor.^'^^ 


i-^Negot.  Inst.  Law,  §  183;  Bills 
of  Exch.  Act,  §  50,  Appendix  herein. 
See  §§  544,  564  herein. 

See  the  following  cases: 

United  States. — Harris  v.  Robin- 
son, 4  How.  (U.  S.)  345,  11  L.  Ed. 
1004. 

Alabama. — Isbell  v.  Lewis,  98  Ala. 
550,  13  So.  335. 

Indiana. — Palmer  v.  Whitney,  21 
Ind.  58. 

Louisiana. — Franklin  v.  Verbois,  6 
La.  727. 

Maine. — National  Shoe  &  L.  Bank 
v.  Gooding,  87  Me.  337,  32  Atl.  967. 

Maryland. — Staylor  v.  Ball,  24  Md. 
183. 

Missouri. — Shepard  v.  Citizens' 
Ins.  Co.,  8  Mo.  272. 

New  Jersey. — Burke  v.  Shreve,  2 
N.  J.  Law  J.  42. 

New  York. — Albany  Trust  Co.  v. 
Frothingham,  99  N.  Y.  Supp.  343; 
Holtz  v.  Boppe,  37  N.  Y.  634;  Bank 


of  Utica  V.  Bender,  21  Wend.  (N. 
Y.)  645,  34  Am.  Dec.  28L 

Pennsylvania. — Hazlett  v.  Brag- 
don,  7  Pa.  Super.  Ct.  58. 

South  Carolina. — Central  National 
Bank  v.  Adams,  11  S.  C.  452,  32  Am. 
Rep.  495. 

Tennessee. — Ratcliffe  v.  Planters' 
Bank,  2  Sneed    (Tenn.)   425. 

Wisconsin. — Turner  v.  Iron  Chief 
Mining  Co.,  74  Wis.  355,  43  N.  W. 
149,  5  L.  R.  A.  533. 

™Negot.  Inst.  Law,  §§  185,  186; 
Bills  of  Exch.  Act,  §  50,  Appendix 
herein. 

"'See  §§  490,  494,  495,  501,  522, 
523,  536  herein. 

"=See  Hull  v.  Myers,  90  Ga.  674, 
16  S.  E.  653. 

That  accommodation  indorser  en- 
titled to  notice,  see  French  v.  Bank 
of  Columbia,  4  Cranch  (U.  S.)  141; 
Ennis  v.  Reynolds  (Ga.  1906),  56 
S.  E.  104;  Aldine  Manufacturing  Co. 


721 


NOTICE   DISPENSED   WITH DRAWER — EXCUSES.  [§    570 


If  the  drawer  has  a  right  to  expect  that  his  bill  will  be  honored  he  is 
entitled  to  notice.^'^^  And  it  is  no  excuse  for  not  giving  notice  of  non- 
acceptance  that  the  drawer  had  no  effects  in  the  drawee's  hands  at  the 
time  the  bill  was  refused  acceptance  or  afterward,  if  he  had  some  ef- 
fects, to  whatever  amount,  in  the  drawee's  hands  when  the  bill  was 
drawn.^^*  It  is  also  decided  that  even  though  the  drawer  has  no  effects 
in  the  drawee's  hands  the  indorser  is  entitled  to  notice. ^'^^  And  it  is 
held  that  want  of  funds  in  the  hands  of  the  drawee  of  an  accommo- 
dation inland  bill,  is  no  excuse  for  not  giving  notice  to  an  indorser 
entitled  to  recover  on  the  drawer.^^°  But,  as  above  stated,  a  drawer 
is  not  entitled  to  notice  where  he  is  without  funds,  is  not  authorized 


v.  Warner,  96  Ga.  370,  23  S.  E.  404; 
St.  Charles  First  National  Bank  v. 
Hunt,  25  Mo.  App.  170;  Carter  v. 
Flower,  16  Mees.  &  W.  751.  Compare 
Hull  V.  Myers,  90  Ga.  674,  16  S.  E. 
653;  Boutin,  In  re,  Rap.  Jud.  Que- 
bec, 12  C.  S.  186. 

Accommodation  maker — Indorser 
as  principal  debtor — Note  for  his  ac- 
commodation not  entitled  to  notice, 
see  Carlton  v.  White,  99  Ga.  384,  27 
S.  E.  704;  Mayer  v.  Thomas,  97  Ga. 
772,  25  S.  E.  761;  McFetrich  v.  Wood- 
row,  67  N.  H.  174,  38  Atl.  18;  With- 
erow  V.  Slayback,  158  N.  Y.  647,  53 
N.  E.  681;  Be^le  v.  Parrish,  20  N. 
Y.  407.  See  National  Bank  v.  Brad- 
ley, 117  N.  C.  526,  23  S.  E.  455. 

Notice  is  case  of  collateral  secur- 
ity, see  the  following  cases: 

United  States. — Rhett  v.  Poe,  2 
How.  (U.  S.)  457. 

Iowa. — Kennedy  v.  Rosier,  71 
Iowa  671,  33  N.  W.  226. 

Maryland. — Williams  v.  Baltimore 
National  Bank,  70  Md.  343,  17  Atl. 
382. 

Missouri. — Wright  v.  Andrews,  70 
Mo.  86,  35  Am.  Rep.  308.  Holding 
that  if  the  payment  of  the  note  is 
fully  secured  by  money  appropri- 
ated and  pledged  therefor,  notice  is 
unnecessary. 

Pennsylvania. — Holmes  v.  Briggs, 
Joyce  Defenses — 46. 


131  Pa.  233, '47  Leg.  Int.  188,  25  W.' 
N.  C.  255,  20  Pitts.  L.  J.  N.  S.  301, 
18  Atl.  928,  18  Wash.  L.  Rep.  310. 

Notice  unnecessary  where  note 
non-negotiable  (San  Diego  Bank  v. 
Babcock,  94  Cal.  96,  29  Pac.  415), 
unless  circumstances  evidence  that 
signature  deemed  an  indorsement  of 
negotiable  paper.  Haber  v.  Brown, 
101  Cal.  445,  35  Pac.  1035. 

That  insolvency  of  maker  does  not 
excuse  failure  to  give  notice,  see 
Phipps  v.  Harding,  70  Fed.  468,  34 
U.  S.  App.  148,  17  C.  C.  A.  203,  30 
L.  R.  A.  513;  Moore  v.  Alexander, 
68  N.  Y.  Supp.  888,  33  Misc.  613, 
aff'd  71  N.  Y.  Supp.  420,  63  App. 
Div.  100.  See  Hull  v.  Myers,  90 
Ga.  674,  16  S.  E.  653. 

That  insolvency  of  drawee  and  ac- 
ceptor does  not  excuse  failure  to 
give  notice,  see  National  Bank  v. 
Bradley,  117  N.  C.  526,  23  S.  E.  455; 
Hawley  v.  Jette,  10  Oreg.  31,  45  Am. 
Rep.  129. 

173  prench  v.  Bank  of  Columbia,  4 
Cranch  (U.  S.)  141. 

1-4  Orr  V.  Maginnis,  7  East  359. 

"^Glasgow,  Harrison  v.  Copeland, 
8  Mo.  268.  See  Manning  v.  Lyon,  24 
N.  Y.  Supp.  265,  54  N.  Y.  St.  R.  6. 

^'»  Taylor  v.  Bank  of  Illinois,  7  T. 
B.  Mon.  (Ky.)  577. 


§    571]  WANT   OF    NOTICE  OF    PROTEST  AND   DISHONOR,  722 

to  draw/'^^  and  has  no  reasonable  belief  or  expectation,  or  right  to 
expect  or  require  that  the  instrument  will  be  honored.^^* 

§  571.  Same  subject. — If  a  bill  is  payable  upon  certain  conditions 
and  the  drawer  prevents  their  fulfillment  he  forfeits  his  right  to  no- 
tice ;^^®  and  if  the  drawer  has  discharged  the  maker  by  a  release  he  is 
not  entitled  to  notice.^®"  Again,  it  is  held  that,  in  an  action  brought 
by  the  holder  of  a  domestic  bill  discounted  at  a  bank,  it  need  not  be 
shown,  in  order  to  render  the  drawer  liable,  that  notice  of  dishonor  was 
given  him ;  and  that,  in  the  case  of  the  drawer  of  such  a  bill,  the  in- 
jury sustained  by  him  determines  the  extent  of  his  release  and  lia- 
bility, his  contract,  with  this  exception,  being  similar  to  or  in  the 
nature  of  one  of  suretyship.^ ^^  In  an  English  case  the  following  facts 
appear.  In  pursuance  of  a  contract  for  the  supply  of  bunker  coal, 
made  between  the  owners  of  a  steamship,  as  buyers,  and  the  agents  of 
the  suppliers  of  the  coal  at  Colombo,  as  sellers,  the  defendant,  the 
master  of  the  steamship,  drew  a  bill  of  exchange  on  the  owners  of  the 
vessel  in  favor  of  the  suppliers,  concluding  with  the  words  "value  re- 
ceived on  three  hundred  tons  of  coal  and  disbursements  *  *  *  sup- 
plied to  my  vessel  to  enable  her  to  complete  this  voyage  from  Mel- 
bourne to  Hull,  for  which  I  hold  my  vessel,  owners,  and  freight  re- 
sponsible.'' The  bill  was  duly  accepted  in  London,  but  on  presentation 
for  payment  at  maturity  on  a  Saturday  was  dishonored.  The  plain- 
tiffs, holders  of  the  bill,  learned,  through  their  bankers  on  Mon- 
day, that  the  bill  was  not  paid,  and,  having  communicated  with  the 
agents  of  the  suppliers  of  the  coal,  ascertained  that  the  vessel  had  ar- 
rived in  the  Tyne;  but  not  knowing  definitely  the  whereabouts  of  the 
vessel  they  made  further  inquiries  without  obtaining  further  informa- 
tion, and  on  the  following  Thursday  sent  the  defendant  notice  of 
dishonor  by  registered  letter,  addressing  him  as  master  of  the  vessel 
at  Newcastle-on-Tyne,  and  that  letter  was  actually  delivered  by  the 
post-office  on  board  the  vessel  and  reached  the  master  the  second  fol- 
lowing day :  It  was  held  that  the  defendant  was  liable  as  drawer,  for 
the  wording  of  the  bill  did  not  by  implication  relieve  him  of  that  lia- 

"^  Dickens  V.  Beal,  10  Pet.  (U.S.)  i""  Cashman  v.   Harrison,   90   Cal. 

572;   Rhett  v.  Poe,  2  How.    (U.  S.)  297,  27  Pac.  283. 

457.  1^  Burke  v.  McKay,  2  How.  (U.  S.) 

"« Cashman   v.    Harrison,    90    Cal.  66.   Compare  Ray  v.  Smith,  17  Wall. 

297,  27  Pac.  283.    See  Blendermann  (U.  S.)  411. 

V.  Price,  50  N.  J.  L.  296,  12  Atl.  775,  '"'  Bank  of  Richland  v.  Nicholson^ 

11  Cent.  Rep.  349.   See  §  523  herein.  120  Ga.  622,  48  S.  E.  240, 


733       DELAY   IN   GIVING   NOTICE — WAIVER   OF    NOTICE.        [§§    572,    573. 

bility;  it  was  also  held  that  he  was  not  discharged  by  reason  of  the 
delay  in  giving  notice  of  dishonor,  as  the  special  circumstances  ex- 
cused that  delay  within  the  meaning  of  the  Bills  of  Exchange  Act, 
1882.^*^  Notice  to  an  indorser  is  not  excused  by  the  fact  of  destruc- 
tion by  fire  of  the  place  of  business  of  the  bank  holding  the  note  for 
collection  and  that  its  business  was  carried  on  only  in  a  tentative  way 
in  a  temporary  structure.^ ^^ 

§572.  Delay  in  giving'  notice — Excuses — Circumstances  beyond 
holder's  control. — Delay  in  giving  notice  of  dishonor  is  excused  when 
the  delay  is  caused  by  circumstances  beyond  the  control  of  the  holder 
and  not  imputable  to  his  default,  misconduct  or  negligence.  When  the 
cause  of  delay  ceases  to  operate,  notice  must  be  given  with  reasonable 
diligence.^^*  The  cessation  of  mails  and  commercial  intercourse  be- 
tween two  states  by  reason  of  the  blockade  of  one  of  the  places  by  au- 
thority of  one  of  the  belligerents  during  a  civil  war  constitutes  a 
sufficient  excuse  for  the  omission  of  due  and  regular  notice  of  the  dis- 
honor of  a  bill  of  exchange  drawn  by  a  firm  in  one  place  on  one  in 
the  other  and  the  question  then  remains  whether  such  notice  is  given 
in  a  due  and  reasonable  time  after  the  removal  of  the  impediment.^ ®^ 

§  573.  Waiver  of  notice. — Notice  of  dishonor  may  be  waived 
either  before  the  time  of  giving  notice  has  arrived  or  after  the  omis- 
sion to  give  due  notice,  and  the  waiver  may  be  express  or  implied. 
Where  the  waiver  is  embodied  in  the  instrument  itself,  it  is  binding 
upon  all  parties ;  but  where  it  is  written  above  the  signature  of  an  in- 
dorser, it  binds  him  only.^^*^    Oral  or  written  statements  or  circum- 

^'-The  Elmville  (1904),  Prob.  Div.  kirk  v.  Page,  2  Brockenbroughs  20. 

319,  73  L.  J.  P.  104,  91  L.  T.  R.  N.  S.  See,  also,  §  536  herein. 

151.      Gorell     Barnes,     J.     Bills    of  ^'°  Negot.   Inst.   Law,  §§   180,   181; 

Exch.    Act  1882   (45  and  46  Vict,  c.  Bills  of  Exch.  Act,  §  50,  Appendix 

61).    §§    48,    49,    sub-s.    12;     §    50,  herein.     See    §§    511,    513,    524,    525, 

sub-s.  1.  536-541  herein. 

"^Merchants'  State  Bank  v.  State  Waiver  of  notice  may  be  express 

Bank,  94  Wis.  444,  69  N.  W.  170,  14  or  implied  or  inferred  from  circiim- 

Bkg.  L.  J.  80,  held  not  an  unavoid-  stances.     Murphy    v.    Citizens'    Sav- 

able  calamity.  ings  Bank,  22  Ky.  L.  Rep.  1872,  62 

^"*Negot.    Inst.   Law,   §   184;    Bills  S.    W.    1028.     See    Dunham    v.    De- 

of  Exch.  Act,  §  50,  Appendix  herein,  raismes,  52  N.  Y.  Supp.  871,  31  App. 

"=  House  v.  Adams  &  Co.,  48  Pa.  Div.    627,    51    N.    Y.    Supp.   1097,   29 

St.     261,     considering     Patience     v.  App.    Div.    432,    the   latter   rev'g   50 

Townley,  3  Smith's  Rep.  224;    Hop-  N.  Y.  Supp.  742,  22  Misc.  568. 


§  573] 


WANT   OF    NOTICE  OF    PROTEST   AND   DISHONOR. 


724 


stances  may  be  of  such  a  character  as  to  constitute  a  waiver  of  no- 
tice.^^^  So  waiver  of  presentment  waives  notice.^^^  But  it  may  be 
stated  that  ordinarily  the  statements,  conversations,  chiimed  admis- 
sions, acts  or  circumstances  relied  on  to  establish  a  waiver  of  notice 
must  clearly  and  unequivocally  show  such  waiver,  otherwise  the  in- 
dorser  will  not  be  held  to  have  waived  his  rights  to  notice.^^^  So  an 
acknowledgment  of  liability  must,  to  operate  as  a  waiver,  be  made 
with  knowledge  by  the  indorser  of  the  laches  in  failing  to  give  no- 


Waiver  of  notice  on  express  terms 
on  note;  how  construed.  See  Lock- 
wood  V.  Bock,  50  Minn.  142,  52  N. 
W.  391. 

Notice  may  be  waived  by  terms  of 
note.  State,  Parks  v.  Hughes,  19  Ind. 
App.  266. 

Waiver  of  notice  embodied  in  note 
binds  indorser. 

District  of  Columbia. — Portsmouth 
Savings  Bank  v.  Wilson,  (App 
D.  C),  22  Wash.  L.  Rep.  817. 
Binds  maker  and  indorser. 

Georgia. — Woodward  v.  Lowry,  74 
Ga.  148. 

Iowa. — Iowa  Valley  State  Bank  v. 
Sigstad,  96  Iowa  491,  65  N.  W.  407. 
See  Phillips  v.  Dippo,  93  Iowa  35, 
61  N.  W.  216. 

Minnesota. — See  Bryant  v.  Lord, 
19  Minn.  396. 

Missouri. — Jacobs  v.  Gibson,  77 
Mo.  App.  244,  2  Mo.  App.  Rep'r  6. 

Texas. — Leeds  v.  Hamilton  Paint 
&  G.  Co.  (Tex.  Civ.  App.).  35  S.  W. 
77.  See  Smith  v.  Pickham,  8  Tex. 
Civ.  App.  326. 

Indorsement  of  waiver  of  notice 
binds  indorser. 

Alabama. — Montgomery  v.  Cros- 
thwait,  90  Ala.  558,  12  L.  R.  A.  140, 
8  So.  498. 

California. — Farmers'  Exchange 
Bank  v.  Altura  Gold  Mill  &  Mining 
Co.,  129  Cal.  263,  61  Pac.  1077;  Sav- 
ings Bank  v.  Fisher  (Cal.),  41  Pac. 
490. 

Illinois. — Duningan     v.      Stevens, 


122  111.  396,  11  West.  Rep.  371,  13 
N.  E.  651. 

Kansas. — Davis  v.  Eppler,  38  Kan. 
629,  16  Pac.  793. 

Washington. — Loveday  v.  Ander- 
son, 18  Wash.  322,  51  Pac.  463,  15 
Bkg.  L.  J.  100. 

That  no  new  consideration  neces- 
sary for  waiver  by  indorser,  see 
Lockwood  V.  Bock,  50  Minn.  142,  52 
N.  W.  391;  Delsman  v.  Friedlander, 
40  Oreg.  33,  66  Pac.  297.  See  §  538 
herein. 

^"  Markland  v.  McDaniel,  51  Kan. 
350,  32  Pac.  1114,  20  L.  R.  A.  96; 
Seldner  v.  Mt.  Jackson  National 
Bank,  66  Md.  488,  8  Atl.  262,  6  Cent. 
Rep.  478. 

i^Furth  V.  Baxter,  24  Wash.  608, 
64  Pac.  798. 

^^  California. — Wright  v.  Liesen- 
feld,  93  Cal.  90,  28  Pac.  849. 

Massachusetts.— G\\d.^eia.  v.  Cham- 
berlin,  167  Mass.  486,  46  N.  E.  103. 

New  York. — Congress  Brewing  Co. 
V.  Habenicht,  82  N.  Y.  Supp.  481,  83 
App.  Div.  141,  13  N.  Y.  Ann.  Cas. 
144;  Porter  v.  Thorn,  57  N.  Y.  Supp. 
479,  40  App.  Div.  34,  aff' d  167  N.  Y. 
584,  60  N.  E.  1119. 

Rhode  Island. — Whittier  v.  Col- 
lins, 15  R.  I.  44,  23  Atl.  39,  1  N.  Eng. 
135. 

Tennessee. — Rosson  v.  Carroll,  90 
Tenn.  90,  16  S.  W.  66,  43  Alb.  L.  J. 
493. 

Canada.— Bvitton  v.  Milsom,  19 
Ont.  App.  96. 


■I 


735 


WAIVER  OF   NOTICE. 


[§  573 


tice."°  And  it  is  held  that  merely  taking  or  requiring  security  is  not 
a  waiver.^**^  But  it  is  decided  that  notice  to  an  indorser  is  waived  by 
him  by  giving  his  note  for  his  debt  in  a  case  where  he  had  transferred 
the  note  of  a  third  person  as  collateral  security.^'-'-  Notice  of  dishonor 
to  the  drawer  is  waived  where  he  gives  an  order  to  the  drawees  not  to 
pay  the  bill  if  presented  but  it  constitutes  no  excuse  for  non-present- 
ment for  payment. ^''^  Again,  a  valid,  absolute  and  unconditional  prom- 
ise to  pay,  subsequently  and  clearly  made,  with  a  full  knowledge  of 
the  holder's  laches  and  of  all  material  facts  constitutes  a  waiver  of 
such  want  of  notice. ^^*  Where  a  second  or  renewal  note  was  indorsed 
and  sent  before  maturity  to  the  maker  of  the  first  note  by  a  party  who 
was  one  of  the  accommodation  indorsers  and  payees  thereof  and  the 
maker  had  inserted  his  name  as  one  of  the  payees  and  had  discounted 
the  second  note  and  thereby  had  taken  up  the  first  note  after  maturity, 
and  until  that  time  the  discounting  bank  was  without  knowledge  of 
the  fact  of  indorsement  of  the  second  note,  it  was  held  that  such  in- 


i^oRosson  V.  Carroll,  90  Tenn.  90, 
16  S.  W.  66,  43  Alb.  L.  J.    493. 

"iWhlttier  v.  Collins,  15  R.  I.  44, 
23  Atl.  39,  1  N.  Eng.  135;  Selby  v. 
Brinkley     (Tenn.),    17    S.    W.    479. 

^"^  Johnson-Berger  &  Co.  v.  Down- 
ing, 76  Ark.  128,  88  S.  W.  825. 

"=  Hill  v.  Heap,  1  Dowl.  &  Ry.  57. 

"*  United  States. — Yeager  v.  Far- 
well,  13  Wall.  (U.  S.)  6;  Donaldson 
V.  Means,  4  Dall.  (U.  S.)  109. 

Alabama. — Alabama  National 
Bank  v.  Rivers,  116  Ala.  1,  22  So. 
580.  See  White  v.  Keith,  97  Ala.  668, 
12  So.  611. 

Iowa. — Davis  v.  Miller,  88  Iowa 
114,  55  N.  W.  89. 

Maryland. — Schwartz  v.  Wilmer, 
90  Md.  136,  44  Atl.  1059.  See  Seld- 
ner  v.  Mt.  Jackson  National  Bank, 
66  Md.  488,  6  Cent.  Rep.  478,  8  Atl. 
262. 

Massachusetts. — Glidden  v.  Cham- 
berlin,  167  Mass.  486,  46  N.  E.  103; 
Hobbs  V.  Straine,  149  Mass.  212,  21 
N.  E.  365. 

Minnesota. — Amor  v.  Stoeckle,  76 
Minn.  180,  78  N.  W.  1046,  16  Bkg. 
L.  J.  407. 


Missouri. — State  Bank  v.  Bartle, 
114  Mo.  276,  21  S.  W.  816. 

Montana. — Quaintance  v.  Good- 
row,  16  Mont.  376,  41  Pac.  76. 

New  York. — Linthicum  v.  Caswell, 
160  N.  Y.  702,  57  N.  E.  1115,  aff'g 
46  N.  Y.  Supp.  610,  19  App.  Div.  541. 

North  Carolina. — Shaw  v.  McNeill, 
95  N.  C.  535. 

Pennsylvania. — Sieger  v.  Allen- 
town  Second  National  Bank,  132  Pa. 
307,  19  Atl.  217,  2  Bkg.  L.  J.  335; 
Oxnard  v.  Varnum,  111  Pa.  St.  193, 
2  Atl.  224,  2  Cent.  Rep.  53. 

Rhode  Island. — Souther  v.  Mc- 
Kenna,  20  R.  I.  645,  15  Bkg.  L.  J. 
541,  40  Atl.  736. 

Tennessee. — People's  National 
Bank  v.  Dibrell,  91  Tenn.  301,  18 
S.  W.  626. 

Indorser's  knowledge  that  effect 
of  want  of  notice  was  to  release 
him  does  not  change  rule.  Glidden 
V.  Chamberlin,  167  Mass.  486,  46  N. 
E.  103. 

No  waiver  where  offer  conditional 
and  not  accepted.  Isbell  v.  Lewis, 
98  Ala.  550,  13  So.  335. 


573] 


WANT   or    NOTICE   OF    TROTEST   xVXU   DISHONOR. 


;26 


dorser  had  not  waived  notice  of  dishonor  of  the  first  note  by  indors- 
ing before  its  maturity.^^^  But  there  may  be  a  waiver  of  notice  by  ex- 
tending the  time  of  payment  or  a  request  for  such  extension.^^^ 


195  First  National  Bank  of  Brook- 
lyn V.  Gridley,  112  App.  Div.  398, 
98  N.  Y.  Supp.  445.  In  this  case  the 
court  said:  "Prior  to  the  negotiable 
instruments  law,  the  decisions  in 
this  state  were  to  the  effect  that  de- 
mand and  notice  were  unnecessary 
where  the  indorser  was  himself  the 
principal  debtor,  where  he  had  taken 
a  general  assignment  of  the  maker's 
property,  where  the  indorser  had  ex- 
pressly or  by  implication  waived  de- 
mand and  notice,  and  where  the  fail- 
ure to  make  demand  and  give  no- 
tice to  the  indorser  could  not  possi- 
bly operate  to  his  injury.  Mechanics' 
Bank  of  New  York  v.  Griswold,  7 
"Wend.  166;  Commercial  Bank  of  Al- 
bany V.  Hughes,  17  Wend.  94;  Shel- 
don V.  Horton,  43  N.  Y.  93,  3  Am. 
Rep.  669;  Ross  v.  Hurd,  71  N.  Y.  14, 
27  Am.  Rep.  1;  Cady  v.  Bradshaw, 
116  N.  Y.  188,  22  N.  E.  371,  5  L.  R. 
A.  557;  National  Hudson  River 
Bank  v.  Reynolds,  57  Hun  307,  10 


N.  Y.  Supp.  669;  Smith  v.  Miller, 
52  N.  Y.  545.  "Waiver,  however,  will 
not  be  implied  from  doubtful  or 
equivocal  acts  or  language  (Ross  v. 
Hurd  and  Cady  v.  Bradshaw,  supra), 
and  injury  will  be  presumed  until 
it  is  made  to  appear  that  no  dam- 
age could  have  resulted  (Commer- 
cial Bank  of  Albany  v.  Hughes  and 
Smith  V.  Miller,  supra) ;  and  where 
excuse  for  non-presentment  and 
failure  to  give  notice  is  relied  upon, 
the  facts  furnishing  such  excuse 
must  be  alleged  and  proved  (Clift 
V.  Rodgers,  25  Hun  39)." 

""Glaze  V.  Ferguson,  48  Kan.  157, 
29  Pac.  396;  Cady  v.  Bradshaw,  116 
N.  Y.  188,  26  N.  Y.  St.  R.  518,  22 
N.  E.  371,  2  Bkg.  L.  J.  84,  5  L.  R.  A. 
557;  McMonigal  v.  Brown,  45  Ohio 
St.  499,  15  N.  E.  860,  14  West.  Rep. 
147.  See  Bassenhorst  v.  Wilby,  45 
Ohio  St.  333,  13  N.  E.  75,  11  West. 
Rep.  274;  Burnham  H.  M.  &  Co.  v, 
McCormick,  18  Utah  42,  55  Pac.  77. 


I 


CHAPTER  XXVI. 


CHECKS. 


Sec. 

574.  Presentment — Reasonable  time 

— Diligence. 

575.  Same  subject  continued. 

576.  Same    subject    continued — Mail 

— Collection  through  bank. 

577.  "When  presentment  is  made. 

578.  Substituted       check  —  Present- 

ment— Want  of  diligence. 

579.  Substituted      presentment      by 

copy  or  description. 

580.  Substituted   checks — Local  cus- 

tom of  banks. 

581.  Effect    of    certification — Opera- 

tion of  check  as  assignment 
or  lien. 


Sec. 

582.  Necessary  that  drawer  sustain 
actual  loss  or  injury  from 
laches  in  presentment. 

Where  drawee  becomes  insol- 
vent or  bankrupt — Collection 
through  bank. 

Surety. 

Indorser. 

Reasonable  expectation  that 
check  will  be  honored — Want 
of  funds. 

587.  Protest. 

588.  Notice  of  non-payment. 

589.  Waiver  of  presentment  for  pay- 

ment. 


583. 


584. 
585. 
586. 


§  574.  Presentment — Reasonable  time — Diligence. — A  check  should 
be  presented  within  a  reasonable  time  after  its  issue.  What  constitutes 
such  time  must  depend  upon  the  attendant  circumstances  of  the  par- 
ticular case,  principally  such  as  the  nature  and  purpose  of  the  check, 
locality,  distance,  the  relations  of  the  parties,  the  mode  and  time  of 
receiving  the  check,  the  nearness  of  a  place  for  depositing  or  receiv- 
ing mail,  the  regularity  or  infrequency  of  mails,  and  various  other 
circumstances   difficult  to  enumerate.^    This  rule  especially  applies 

^  Tomlin  v.  Thornton,  99  Ga.  585,       Illinois. — Industrial  Bank  v.  Bowes, 


27  S.  E.  147;  Parker  v.  Roddick,  65 
Miss.  249,  3  So.  575,  7  Am.  St.  Rep. 
646;  Grange  v.  Reigh,  93  Wis.  552, 
67  N.  W.  1130,  13  Bkg.  L.  J.  564; 
Gifford  V.  Hardell,  88  Wis.  538,  60 
N.  W.  1064,  43  Am.  St.  Rep.  925,  12 
Bkg.  L.  J.  29;  Legare  v.  Arcand,  9 
Quebec,  Rap.  Jud.  122. 

See  the  following  cases: 

Alabama. — Morris  v.  Eufaula  Na- 
tional Bank,  122  Ala.  580,  25  So. 
499. 


165  111.  70,  46  N.  E.  10;  North- 
western Iron  and  Metal  Co.  v.  Na- 
tional Bank,  70  111.  App.  245. 

Iowa. — Northwestern  Coal  Co.  v. 
Bowman,  69   Iowa  150. 

Massachusetts. — Shawmut  Nation- 
al Bank  v.  Manson,  168  Mass.  425, 
47  N.  E.  196,  14  Bkg.  L.  J.  378. 

Michigan. — Holmes  v.  Roe,  62 
Mich.  199,  28  N.  W.  664. 

Missouri. — Farmers'  National 
Bank  v.  Dreyfus,  82  Mo.  App.  399. 


727 


§  575]  CHECKS.  728 

where  the  person  to  -whom  the  check  is  given  warns  tlie  drawer  that 
the  bank  may  suspend  payment.-  If  no  time  of  payment  is  specified 
the  check  is  deemed  payable  on  demand  and  the  rule  as  to  presentment 
in  a  reasonable  time  applies.^  The  question  of  diligence  in  making 
presentment  of  a  customer's  bank  check  rests  upon  the  circumstanccL 
and  the  dispatch  requisite  should  be  consistent  therewith  as  well  as 
with  that  used  in  commercial  transactions,*  And  ordinarily  a  check 
should  not  be  unreasonably  delayed  in  its  presentment  and  due  dili- 
gence should  be  exercised.^  It  is  immaterial,  in  so  far  as  the  question 
of  negligence  is  concerned,  whether  a  check  is  sent  by  a  direct  or  in- 
direct route  where,  by  allowing  the  full  time  for  mailing,  it  reaches 
the  proper  place  as  soon  in  the  latter  case  as  in  the  first.*'  It  is  de- 
cided in  a  federal  case  that  the  doctrine  of  reasonable  time  does  not 
impose  any  obligation  upon  the  holder  in  the  matter  of  presentment, 
in  so  far  as  the  drawer  is  concerned,  in  the  absence  of  injury,  or  loss 
of  the  fund  by  the  drawee's  insolvency.^* 

§  575.  Same  subject,  continued. — It  is  held  in  a  case  in  Arkansas 
that  it  is  necessary  that  a  check  be  presented  for  payment  within  a 
reasonable  time  which  depends  upon  attendant  circumstances.  This 
is  held  to  be  dependent  upon  the  location  of  the  bank,  if  in  the  same 
place  with  the  payee  then  the  next  following  business  day  constitutes 
reasonable  time ;  or  in  cases  of  different  localities,  then  the  day  after 

JVew  York. — Carroll  v.  Sweet,  128  *  Western  Wheeled  Scraper  Co.  v. 
N.  Y.  19,  37  N.  Y.  St.  Rep.  868,  Sadilck,  50  Neb.  105,  69  N.  W.  765, 
27  N.  E.  763,  rev'g  25  N.  Y.  St.  14  Bkg.  L.  J.  139. 
356,  5  N.  Y.  Supp.  572,  57  Supr.  100;  =  Farmers'  National  Bank  v.  Drey- 
Murphy  V.  Levy,  50  N.  Y.  Supp.  682,  fus,  82  Mo.  App.  399.  See  Nebraska 
23  Misc.  147.  National    Bank    v.    Logan,    35    Neb. 

Pennsylvania.— Willis    v.    Finley,  182,  52  N.  W.  808,  7  Bkg.  L.  J.  144; 

173  Pa.  28,  27  Pitts.  L.  J.  N.  S.  33,  Donlon  v.  Davidson,  39  N.  Y.  Supp. 

34  Atl.  213.  1020,  7  App.  Div.  461;    Dion  v.  La- 

Termont. — Gregg  v.  Beane,  69  Vt.  chance.  Rap.  Jud.  Quebec,  14  C.  S. 

22,  37  Atl.  248,  14  Bkg.  L.  J.  319.  77. 

Canada. — Dion  v.  Lachance,  Rap.  "First    National    Bank    v.    Buck- 

Jud.  Quebec,  14  C.  S.  77.  hannon  Bank,  80  Md.  475,  12  Bkg. 

See    §    582    herein;    Negot.    Inst.  L.  J.   193,  27  L.  R.  A.   332,  31  Atl. 

Law,  §§  4,  321,  322;   Bills  of  Exch.  302.    Compare  Anderson  v.  Rodgers, 

Act,  §  74,  Appendix  herein.  53   Kan.    542,    11   Bkg.   L.   J.    87,   36 

=  Legare     v.     Arcand,     9     Quebec  Pac.  1067,  27  L.  R.  A.  248. 

Rapp.  Jud.  122.  "*  Andrews   v.    Bradley,   102   Fed. 

8  Parker  v.  Reddick,  65  Miss.  242,  54.  See  §§  496,  498,  505-508  herein. 
3  So.  575,  7  Am.  St.  Rep.  646. 


I 


739  PEESENTMENT — KEASOXABLE   TUIB — DILIGEXCE.  [§    575 

it  is  received  at  the  place  where  the  bank  is  located.  And  a  delay  of 
five  days,  excluding  Sunday,  in  presenting  a  check  for  payment  is 
sufficient  to  discharge  the  drawer  when  there  is  no  excuse  for  delay,  and 
presentation  in  reasonable  time  is  not  waived."  It  is  declared  in  a 
Connecticut  case  that  the  rule  undoubtedly  is,  that  it  is  th0  duty  of 
the  holder  of  a  check,  payable  at  a  bank,  on  demand,  to  present  it 
for  pa3^ment  within  a  reasonable  time,  and  if  not  paid  to  give  notice 
of  non-payment  to  the  drawer,  and  if  the  drawer  had  funds  in  the 
bank  sufficient  for  its  payment,  which  were  lost  in  consequence  of  the 
holder's  neglect,  he  will  be  exonerated  from  liability.  But  according 
to  recent  authorities  this  rule  does  not  apply  to  a  case  where  the 
drawer  has  sustained  no  loss  or  injury,  by  the  neglect  of  the  holder. 
Were  it  otherwise  the  drawer  would  profit  by  a  neglect  which  did  him 
no  injury."*  The  negotiable  instrument  statute  of  Iowa  classifies  a 
bank  check  in  the  ordinary  form  as  a  bill  of  exchange  payable  on 
demand.  That  enactment  also  provides  that  it  is  sufficient  to  charge 
the  indorser  of  a  bill  of  exchange  payable  on  demand  that  presentation 
to  the  drawee  and  demand  of  payment  shall  be  sufficient  if  made 
within  a  reasonable  time  after  its  issue  or  after  the  last  negotiation 
of  such  bill.  It  is  further  enacted  that  in  determining  what  is  a  rea- 
sonable time  within  the  statute  regard  must  be  had  to  the  nature  of 
the  instrument,  the  usage  of  the  trade  or  business,  if  any,  with  respect 
to  such  instruments,  and  the  facts  of  the  particular  case.  Contrary  to 
the  requirement  for  notice  to  the  indorser  of  the  dishonor  of  a  check 
or  bill  upon  presentation  for  payment,  the  holder  of  the  indorsed 
paper  is  not  held  to  any  fixed  or  invariable  limit  of  time  in  which  to 
make  such  presentment  and  demand.  He  is  required  to  act  with  rea- 
sonable promptness  and  diligence,  taking  into  consideration  the  nature 
of  the  instrument,  the  usages  of  the  business  world  and  the  peculiar 
facts,  if  any,  attending  the  particular  transaction,  and  also  the  usage 
of  banks  presumed  to  be  known  to  those  dealing  with  them.''  Again, 
it  is  said  by  the  court  in  a  Kansas  case  that:  "It  is  the  law  that  checks 
are  payable  instantly  on  demand,  but  it  is  not  the  law  that  payment  of 
a  check  must  be  demanded  instantly.  Granting  that  a  check  has  some 
features  of  a  bill  of  exchange,  under  the  statutes  of  this  state  it  need 
not  be  presented  until  the  day  after  it  is  given,  if  the  party  receiving 

■^ Burns  v.  Yocum   (Ark.  1906),  98  » Plover    Savings    Bk.    v.    Moodie 

S.  W.  956.  (Iowa   1906),    110   N.   W.    29;    Code 

«Hoyt   V.    Seeley,    18    Conn.    352,  Supp.   1902,   §§  3060-a71,  3060-al03, 

360,  per  Waite,  J.  3060-al85,  3060-al93. 


57G] 


CHECKS. 


730 


it  and  the  bank  upon  which  it  is  drawn  are  in  the  same  place.  If  they 
are  not  in  the  same  place,  it  is  only  necessary  that  the  check  be  put  in 
course  of  collection  within  the  time  otherwise  allowed  for  presentation. 
It  cannot  be  said  to  be  due  until  demand  for  payment  is  made.  If  not 
forwardejl  and  presented  within  the  time  allowed  by  the  rules  of  com- 
mercial law,  the  drawer  must  show  the  delay  caused  him  to  suffer 
loss,  before  he  can  defeat  recovery  by  a  bona  fide  holder.  The  same  rule 
holds  regarding  protest  and  notice  of  non-payment."^" 

§  576.     Same  subject  continued — Mail — Collection  through  bank. 

— The  following  important  j)oints  are  decided  in  a  West  Virginia  case^^ 
which  holds  that:  (1)  A  person  receiving  a  check,  on  a  fund  in  ths 
hands  of  a  bank,  for  the  amount  of  a  demand  against  the  drawer  there- 
of, is  bound  to  exercise  reasonable  diligence  in  making  presentment 
thereof  for  payment,  if  he  wishes  to  avoid  risk  of  loss  by  insolvency  of 
the  drawee.  (2)  If  the  payee  of  the  check  and  the  drawee  reside,  or  have 
their  places  of  business  in  the  same  city  or  town,  presentment  must  be 
made  before  the  expiration  of  business  hours  of  'the  day  next  after  the 
day  of  the  receipt  thereof.^-  (3)  If  the  person  receiving  a  check  and  the 


"  Cox  V.  Citizens'  State  Bank 
(Kan.  1906),  85  Pac.  762. 

"  Lewis,  Hubbard  &  Co.  v.  Mont- 
gomery Supply  Co.,  59  W.  Va.  75, 
52  S.  E.  1017. 

"Where  parties  in  same  place. 
See  Morris  v.  Eufaula  Bank,  122 
Ala.  580,  25  So.  499  (on  first  secu- 
lar day  after  check  received,  citing 
a  number  of  cases) ;  Holmes  v. 
Roe,  62  Mich.  199,  28  N.  W.  864 
(must  be  presented  same  day,  or  at 
latest  the  following  day) ;  Grange 
V.  Reigh,  93  Wis.  552,  13  Bkg.  L. 
J.  564,  67  N.  W.  1130  (must  be  pre- 
sented at  latest  on  day  following 
receipt  of  check);  Gregg  v.  Beane, 
69  Vt.  22,  37  Atl.  348,  14  Bkg.  L.  J. 
319. 

If  a  check  is  received  at  the  town 
or  city  where  the  bank  at  which  it 
is  payable  is  located  it  must  be  pre- 
sented the  following  day  or  the 
drawer  will  not  be  liable.   Edmisten 


v.  Herpolsheimer,  66  Neb.  94,  92 
N.  W.  138,  59  L.  R.  A.  934. 

As  to  the  business  or  banking 
hours,  see  Niblack  v.  Park  National 
Bank,  169  111.  317,  30  Chic.  Leg. 
News  103,  48  N.  E.  438,  15  Bkg. 
L.  J.  33,  rev'g  67  111.  App.  583; 
Northwestern  Iron  &  M.  Co.  v.  Na- 
tional Bank  of  Illinois,  70  111.  App. 
245;  Madderom  v.  Heath  &  M.  Mfg. 
Co.,  35  111.  App.  588;  McDonald  v. 
Mosher,  23  111.  App.  206;  Murphy  v. 
Levy,  50  N.  Y.  Supp.  682,  23  Misc. 
147;  Loux  v.  Fox,  171  Pa.  68,  37 
W.  W.  C.  278,  12  Bkg.  L.  J.  667,  33 
Atl.  190;  Grange  v.  Reigh,  93  Wis. 
552,  67  N.  W.  1130,  13  Bkg.  L.  J. 
564;  Lloyd  v.  Osborne,  92  Wis.  93, 
65  N.  W.  859,  13  Bkg.  L.  J.  177. 

It  is  not  necessary  in  order  to 
constitute  due  diligence  that  a  check 
should  be  presented  outside  of  busi- 
ness hours,  unless  custom  or  spe- 
cial circumstances  warrant  a  change 


I 


^31 


PRESEXTMEXT — MAIL — COLLECTIOX    THROUGH   BAXK.      [§'   576 


bank  on  which  it  is  drawn  are  in  different  places,  it  must  be  forwarded, 
for  presentment,  by  mail  or  other  usual  mode  of  transmission,  on  the 
next  day  after  the  receipt  thereof  at  the  place  in  which  the  payee 
resides  or  does  business,  if  reasonably  and  conveniently  practicable; 
and,  if  it  is  not  so  practicable,  then  by  the  next  mail  or  other  similar 
means  of  conveyance,  leaving  after  said  date.^^  But  neither  the  payee 
nor  his  agent  is  required  to  transmit  such  check  by  the  only  or  last 
mail  of  the  day  next  after  its  receipt,  if  such  mail  closes  or  departs 
at  an  hour  so  early  as  to  render  it  inconvenient  for  the  holder  to  avail 
himself  of  it.  What  is  an  unreasonably  early  hour  in  such  case  de- 
pends upon  all  the  circumstances  of  the  transaction  and  situation  of 
the  parties;  and,  the  facts  being  free  from  controversy  and  doubt,  is 
a  question  of  law  for  the  court.^*  (4)  In  the  absence  of  any  agree- 
ment to  the  contrary,  and  of  any  circumstance,  known  to  the  payee, 
making  it  imprudent  to  do  so,  he  may  indorse  and  deliver  the  check 
to  a  bank  for  collection;  but  this  does  not  extend  the  time  within 


in    such    rule.     Temple    v.    Carroll 
(Neb.),  105  N.  W.  989. 

Clearing  house — A  check  should 
he  presented  or  forwarded  the  day 
following  its  receipt,  even  though  it 
is  received  after  banking  hours  in 
a  place  where  collection  is  made 
through  a  clearing  house.  Edmisten 
V.  Herpolsheimer,  66  Neb.  94,  92 
N.  W.  138,  59  L.  R.  A.  934. 

^' Where  parties  in  different  places, 
see  Northwestern  Coal  Co.  v.  Bow- 
man, 69  Iowa  150  (should  forward 
by  mail  on  day  received  or  on  next 
following  day) ;  Holmes  v.  Roe,  62 
Mich.  199,  28  N.  W.  864  (must  be 
forwarded  at  last  day  after  its 
receipt  and  then  presented  the  next 
day  after  its  then  receipt)  ;  Gregg 
v.  Beane,  69  Vt.  22,  37  Atl.  248,  14 
Bkg.  L.  J.  319,  37  Atl.  248  (on  next 
secular  day  after  receipt) ;  Lloyd 
v.  Osborne,  92  Wis.  93,  65  N.  W. 
859,  13  Bkg.  L.  J.  177  (forwarded 
by  last  mail  same  day  as  its  receipt 
and  presented  next  following  day 
when  there  received). 

Check  may  be  forwarded  on  day 


following  its  receipt  where  the  bank 
is  not  located  in  the  same  town  or 
city.  Edmisten  v.  Herpolsheimer,  66 
Neb.  94,  92  N.  W.  138,  59  L.  R.  A. 
934. 

"  Where  a  debtor  residing  in  an- 
other town,  a  few  miles  distant, 
sends  his  creditor  a  check,  such 
debtor  is  not  discharged  although 
the  check  is  not  forwarded  for  pre- 
sentment either  on  the  next  day 
after  its  receipt  or  even  on  the  third 
day  thereafter,  which  was  Saturday, 
and  on  that  day  at  noon  the  bank 
stopped  payment,  it  appearing  that 
the  postoffice  nearest  to  the  cred- 
itor's residence  was  three  or  four 
miles  away  and  that  the  only  mails 
to  the  debtor's  town  left  early  the 
next  morning  after  the  check  was 
received  and  at  the  same  time  on 
the  third  day,  so  that  if  the  cred- 
itor's agent  had  received  the  check 
on  that  day  he  would  have  been 
entitled  to  at  least  the  whole  of  it 
in  which  to  make  presentment.  Cox 
V.  Boone,  8  W.  Va.  500,  23  Am.  Rep. 
627. 


07 


6] 


CHECKS. 


732 


which  it  must  he  forwarded  for  presentment.  The  bank,  however,  in 
such  case,  is  not  required  to  forward  it  on  the  next  day  after  its  re- 
ceipt by  the  payee,  if  there  be  no  reasonably  convenient  means  of  doing 
so,  within  the  banking  hours  of  that  day.^^  (5)  Though  the  courts 
of  that  state  cannot  have  judicial  knowledge  of  the  existence  of  any 
particular  bank,  or  of  any  mode  of  business  peculiar  to  a  given  bank, 
they  will  take  judicial  notice  that,  in  all  cities  and  towns  of  large 
population  and  extensive  business,  within  their  jurisdiction,  banks 
exist,  and  of  the  fact  that  their  operations  are  governed  by  reasonable 
rules  and  regulations,  to  which  parties  dealing  with  them  or  in  com- 
mercial paper  are  deemed  to  have  subjected  themselves.  But  courts 
cannot  take  judicial  notice  of  the  business  hours  of  any  particular 
bank,  although  the  courts  of  that  state  judicially  know  that  ordinarily 
banks  in  the  cities  and  larger  towns  of  the  state  do  not  open  their 
doors  for  business  at  an  earlier  hour  than  nine  o'clock  in  the  morning. 
( 6 )  The  parties  to  a  check  drawn  on  a  bank  and  sent  to  a  distant  place 
to  be  forwarded  for  presentation,  are  deemed  in  law  to  have  acted 
with  knowledge  of  the  usual  diligent  method  of  making  such  pre- 
sentment through  a  bank  at  the  place  to  which  it  is  sent,  and  to  have 
agreed  to  suffer  any  reasonable  delay  incident  to  such  mode  of  pre- 
sentment. In  such  case,  the  drawer,  by  allowing  his  funds  to  remain 
in  the  drawee's  bank,  and  the  payee,  by  accepting  the  check,  evince 
belief  in  the  solvency  of  the  bank,  and  the  former  voluntarily  takes 
the  risk  of  its  solvency  during  the  reasonable  period  necessary  for  pre- 
sentment of  the  check  in  the  usual  manner.  (7)  The  drawer,  in  de- 
livering a  check  to  an  agent  of  the  payee,  having  no  authority  to  in- 
dorse it,  at  the  place  of  business  of  the  drawer,  impliedly  agrees  to 
allow  such  additional  time  for  presentment  as  may  be  necessary  for 
the  transmission  of  the  check  to  the  principal  of  the  agent.^®   It  was 


"  Check  deposited  in  bank  for 
collection  and  duty  of  bank,  see 
Morris  v.  Eufaula  Bank,  122  Ala. 
580,  25  So.  499;  Horingfort  v.  Veh- 
man,  2  Ohio  Dec.  151;  Rosenthal  v. 
Ehrlicher,  154  Pa.  396,  32  W.  N.  C. 
221,  26  Atl.  435;  Gregg  v.  Beane, 
69  Vt.  22,  37  Atl.  248,  14  Bkg.  L. 
J.  319.    See  §§  516-518,  583  herein. 

^^The  court,  per  Poffenbarger,  J., 
said:  Presentation  of  a  "check  for 
payment  at  the  bank  on  which  it  is 
drawn  must  be  made  within  a  rea- 


sonable time,  and  what  is  a  reason- 
able time  depends  upon  the  situa- 
tion of  the  parties  with  reference 
to  one  another  and  with  reference 
to  the  bank,  and  all  other  material 
facts  and  circumstances  entering 
into  the  transaction.  "When  the 
drawee  and  payee  are  in  the  same 
town  or  city  presentation  must  be 
made  not  later  than  the  next  day 
after  the  reception  of  the  check 
unless  there  is  some  understanding 
or    agreement    to    the    contrary   or 


733  PRESENTMENT MAIL COLLECTION   THROUGH   BANK.      [§'   576 

also  declared  that:    "In  some  respects  the  rights  of  the  parties  to  a, 
check,  drawn  by  an  individual  on  a  hank,  are  governed  by  the  princi- 


some  circumstance  intervenes  or  is 
connected  with  the  transaction  suf- 
ficient to  vary  the  rule;  but  it  is 
sufficient  to  present  it  at  any  time 
on  the  next  day  within  business 
hours.  Alexander  v.  Birchfield,  1 
Car.  &  Marsh  75  (41  E.  C.  L.  47). 
In. that  case  Tindall,  C.  J.,  said: 
'The  only  way  in  which  I  can  state 
the  rule  to  you  is  this,  that,  if  a 
party  receive  a  check  on  a  particu- 
lar day,  he  may  present  it  at  any 
time  during  banking  hours  on  the 
following  day  to  that  on  which  he 
received  it.'  See,  also,  to  the  same 
effect,  Moule  v.  Brown,  4  Bing.  N. 
C.  266  (33  E.  C.  L.  347);  Cox  v. 
Boone,  8  W.  Va.  500;  Simpson  v. 
Ins.  Co.,  44  Cal.  139;  Cawein  v. 
Brewinski,  6  Bush.  (Ky.)  457; 
Schoolfield  v.  Moon,  9  Heisk.  (Tenn.) 
171;  Boddington  v.  Schlencker,  4 
Barn.  &  A.  752;  Holmes  v.  Roe, 
62  Mich.  199;  Lloyd  v.  Osborne, 
92  "Wis.  93,  5  Am.  &  Eng.  Ency. 
Law  1042.  But  when  the  person 
receiving  the  check  is  at  a  place 
different  from  that  of  the  place  of 
business  of  the  drawee,  additional 
time  is  allowed.  The  person  receiv- 
ing it  need  not  forward  it  for  pre- 
sentment on  the  day  of  its  reception, 
but  may  do  so  on  the  next  day 
thereafter,  and  the  person  to  whom 
it  is  forwarded  for  presentation 
need  not  present  it  on  the  day  of 
reception,  but  may  do  so  on  the  next 
day  after  he  receives  it.  In  this 
case  two  extra  days  are  allowed, 
while  in  the  other  but  one  is  al- 
lowed. 5  Am.  &  Ency.  Law  1042; 
Moule  V.  Brown,  4  Bing.  N.  C.  266; 
Holmes  v.  Roe,  62  Mich.  199;  Pri- 
deaux  v.  Criddle,  L.  R.  4  E.  B.  455; 
Griffin  v.  Kemp,  46  Ind.  172,  176; 


Burkhalter  v.  Bank,  42  N.  Y.  538; 
Parsons  on  Notes  and  Bills,  72.  The 
reason  for  this  indulgence  is  well 
stated  by  Story  on  Bills,  section  290, 
in  discussing  the  law  of  notice  of 
dishonor  and  protest,  in  which  the 
principle  is  generally  held  to  be 
the  same.  He  says:  'In  the  first 
place,  then,  it  is  not  by  our  law 
necessary  in  any  case  to  give  notice, 
either  by  post  or  otherwise,  on  the 
very  day  on  which  the  dishonor  and 
protest  took  place,  although  the 
holder  is  at  liberty  to  do  so  at  his 
option.  He  is  always  allowed  by 
law  a  whole  day  for  this  purpose, 
and  is  not  compellable  to  lay  aside 
all  other  business  to  devote  himself 
to  that  particular  purpose.  For  it 
would  be  most  inconvenient  and  un- 
reasonable to  require  such  strict- 
tiess,  as  it  might  interfere  with 
other  business  and  duties  quite  as 
pressing  and  important;  and  there- 
fore it  is  sufficient,  if  he  sends 
notice  by  the  post  or  otherwise  by 
the  next  day.'  The  same  reason 
which  suffices  to  give  tv/o  days,  one 
for  reception  and  the  other  for  pres- 
entation, when  the  payee  and 
drawee  are  at  the  same  place,  justi- 
fies the  general  rule,  allowing  four 
days  when  they  are  at  different 
places.  *  *  *  Enough  has  been 
stated  to  clearly  demonstrate  that 
the  utmost  diligence  possible  is  not 
required.  The  payee  is  bound  to 
exercise  only  reasonable  diligence 
and  need  not  do  that  which  is  con- 
trary to,  or  variant  from,  the  ordi- 
nary and  prudent  mode  of  trans- 
acting business.  But  the  law  does 
seem  to  require  such  action,  within 
reasonable  limitations,  determined 
by    considerations    of    convenience, 


§  577]  CHECKS.  734r 

pies  applicable  to  the  parties  to  an  inland  bill  of  exchange;  but  not 
in  all  respects.  Notice  of  dishonor  and  non-payment  of  a  check,  and 
diligence  in  the  presentation  thereof,  are  required  only  when  it  is 
necessary  to  protect  the  drawer  from  loss  by  reason  of  the  failure  of 
the  drawee,  holding  funds  of  the  drawer  sufficient  to  pay  the  check. 
Presumably  the  check  is  drawn  upon  funds  in  the  hands  of  the  drawee 
belonging  to  the  drawer,  and  amounts  to  an  appropriation  thereof  in 
favor  of  the  payee  on  the  check,  and  he  owes  to  the  drawer  the  duty 
of  exercising  a  certain  amount  of  diligence  to  obtain  payment  in  order 
to  prevent  a  loss  to  the  drawer  by  reason  of  failure  of  the  bank.  'In 
other  words,  if  he  fails  to  perform  such  duty,  the  loss  falls  upon  him- 
self and  he  is  barred  by  law  of  any  right  to  recover  against  the  maker 
of  the  check.  If,  by  delay  in  presentation,  a  loss  occurs,  the  payee  or 
holder  is  deemed  to  have  extended  credit  to  the  bank,  and  must  suf- 
fer the  consequences."^'^ 

§  577.  When  presentment  is  made. — Presentment  of  check  for  pay- 
ment is  made  when  the  holder  or  his  agent  produces  and  exhibits  it 
to  the  proper  official  or  agent  of  the  bank  so  that  he  may  have  an 
opportunity  to  see  that  it  is  signed  by  the  depositor,  that  it  is  so  dated 
as  to  be  payable  at  the  time  when  it  is  presented,  that  it  is  properly 
filled  out,  that  the  party  presenting  it  has  the  legal  title  to  it  by  in- 
dorsement or  otherwise,  and  that  the  indorsement,  if  any,  is  genuine.^^ 

but  not  of  leisure,  as  is  calculated,        "  Lewis,  Hubbard  &  Co.  v.  Mont- 

in  view  of  the  possibilities  of  loss,  gomery   Supply  Co.,   59   W.  Va.   80, 

by  delay,  to  prevent  it.    Hence,  the  52  L.  E.  1017,  per  Poffenberger,  J., 

two-day  rule,  allowed   for  forward-  citing  Cox  v.  Boone,  8  W.  Va.  500; 

ing  notices  or  paper  from  present-  Compton  v.  Oilman,  19  W.  Va.  312; 

ment,  is  subject  to  this  qualification,  Pursell  v.  Allemong  &  Son,  22  Grat. 

namely,  that  it  must  be  sent  by  the  739,  5  Am.  &  Eng.  Ency.  Law  1030; 

mail   of   the   second    day.    If   there  Parsons    on    Notes   and    Bills,    Vol. 

be  more  than  one  mail  on  that  day,  II,   pp.    58,   59;    Bank   v.   Bank,   10 

it  need  not  go  by  the  first,  but,  if  Wall.  380. 

there  be  but  one,  it  must  go  by  it,        ^^  Peabody  v.  Citizens'  State  Bank 

unless  it  leave  or  closes  at  an  un-  of    St.    Charles    (Minn.    1906),    108 

reasonably   early   hour.     The   whole  N.  W.  272,  274.  Language  of  Elliott, 

of  the   second   day   is  not  allowed,  J.,    citing    Crawford    v.    West    Side 

unless  the  last  mail  of  that  day  goes  Bank,  100  N.  Y.  50,  2  N.  E.  881,  53 

at  the    close    of   business.     To   this  Am.  Rep.  152;   Waring  v.  Betts,  90 

point  the  American  authorities  seem  Va.    46,    17    S.    E.    739,    44    Am.    St. 

to  be  unanimous."    Lewis,  Hubbard  Rep.    890.    The   court   also   says  in 

&    Co.    v.    Montgomery    Supply    Co.,  the  principal  case:     "The  legal   re- 

59  W.  Va.  80,  81,  82,  52  S.  E.  1017.  lation  between  a  bank  and  a  depos- 


735 


SUBSTITUTED   CHECKS — WANT    OF   DILIGENCE. 


[§ 


§  578.     Substituted   checks — Presentment — Want   of  diligence. — 

The  utmost  diligence  is  required  in  malcing  presentment  of  a  substi- 
tuted check  given  to  a  collecting  bank  by  the  drawee  bank  upon  sur- 
render of  the  original  check  by  such  collecting  bank.^''  Where  a  sub- 
stituted check  was  taken  before  noon  of  a  business  day  closing  at  three 
o'clock  in  the  afternoon,  and  such  check  could  have  been  collected 
within  twenty  minutes,  and  it  was  not  presented  for  payment  at  all, 
but  on  the  following  day  an  attempt  was  made  to  collect  it  through 
the  clearing  house,  and  the  drawer  failed  at  the  hour  of  two-forty-five 
in  the  afternoon  of  that  day  and  the  check  was  thrown  out,  it  was  held 
that  no  diligence  in  collecting  it  appeared.^"    "The  rule  fixing  the 


itor  is  in  most  respects  that  of 
debtor  and  creditor.  The  title  to 
the  specific  money  deposited  passes 
to  the  banlt,  which  becomes  indebted 
to  the  depositor  in  the  amount  of 
the  deposit.  The  banlt  is  then 
obliged  to  pay,  when  a  demand  is 
properly  made.  The  well-understood 
customs  of  the  business  enter  into 
and  become  a  part  of  the  contract. 
The  obligation  of  the  bank  is  to 
a  certain  extent  conditional.  It  is 
not  like  other  debtors,  obliged  to 
seek  its  creditor  and  pay  him  wher- 
ever found.  There  is  an  implied 
limitation  as  to  the  time  and  place. 
It  must  pay  in  money  at  its  bank- 
ing house  upon  demand  during  the 
customary  hours  of  business.  'This 
being  the  understanding  upon  which 
the  deposit  is  made,  it  is  parcel  of 
the  bank's  contract  to  repay — that 
is,  a  condition  precedent  to  its  duty 
to  repay — that  the  depositor  shall 
call  upon  it  to  do  so  at  its  banking 
house,  and  there  is  no  default  of 
the  bank  until  such  call  is  made.' 
Branch  v.  Dawson,  33  Minn.  399, 
23  N.  W.  552;  Harrison  v.  Nicollet 
National  Bank,  41  Minn.  488,  43  N. 
W.  336,  5  L.  R.  A.  746,  16  Am.  St. 
Rep.  718." 

"Verbal  demand  good  without  phys- 
ical presence  of  check — Demand  as 
owner's    agent.     See    Garthwaite   v. 


Bank  of  Tulare,  134  Cal.  237,  66 
Pac.  326,  a  case  of  forged  indorse- 
ment. 

^"Anderson  v.  Gill,  79  Md.  312, 
22  Wash.  L.  Rep.  569,  29  Atl.  527, 
25  L.  R.  A.  200. 

^»  Noble  V.  Doughten,  72  Kan.  336, 
83  Pac.  1048.  The  following  ad- 
ditional points  were  decided  in  the 
above  case.  (1)  Title  to  Check  In- 
dorsed and  deposited.  If  the  payee 
of  a  check  drawn  on  a  bank  in  a 
city  other  than  that  of  his  residence 
indorse  it  and  deposit  it  in  his  home 
bank  in  the  usual  and  ordinary 
manner,  and  withot  any  agree- 
ment or  understanding  in  reference 
to  the  transaction  other  than 
such  as  the  law  implies,  the 
check  becomes  the  property  of  the 
indorsee.  (2)  Dishonor  of  such 
check.  Ownership  not  affected.  The 
fact  that  the  indorsee  may  have 
the  right  to  charge  the  check 
to  the  depositor's  account  if  it 
should  be  dishonored  after  due  dili- 
gence has  been  exercised  to  collect 
it,  does  not  affect  the  character  of 
the  transfer  or  render  the  bank  any 
the  less  the  owner  of  the  check. 
(3)  Indorsement  to  correspondent 
— Guaranty  —  Deposit  —  Title.  If  a 
bank  holding  title  to  a  check  under 
the  circumstances  stated  indorse  it 
to  the  order  of  its  correspondent  in 


578] 


CHECKS. 


736 


close  of  business  hours  of  the  next  secular  day  as  a  reasonable  time 
within  which  a  check  may  be  presented,  so  as  to  hold  the  drawer  when 
drawn  on  a  bank  in  the  same  place  where  it  is  delivered,  has  relation 
only  to  the  contract  and  liability  of  the  parties  to  the  instrument,  and 
does  not  apply  to  a  check  given  by  the  drawee  to  the  payee,  or  to  the 
agent  of  the  payee,  of  the  original  check,  upon  its  surrender.  *  *  * 
The  holder  of  a  substituted  check  taken  upon  the  surrender  of  the 
original  check  to  the  drawee  thereof  must  use  such  diligence  in  pre- 
senting it  for  payment  as  a  prudent  man  would  under  like  conditions 
use.  This  imposes  no  hardship  upon  the  person  who  voluntarily  ac- 
cepts the  drawee's  check  instead  of  cash.  If  he  has  had  ample  and 
abundant  time  to  convert  the  drawee's  check  into  money,  and  still 
omits  to  do  so,  he  obviously  has  not  used  due  diligence,  and  the  results 
of  such  negligence  should  not  be  -sasited  upon  the  original  drawer, 
who  was  in  no  way  responsible  therefor.   Whether  a  delay  to  present 


the  city  where  the  drawee  hank  is 
located,  with  a  guaranty  of  the  pre- 
vious indorsement,  and  forward  it 
with  a  deposit  slip  attached  for 
credit  as  a  deposit  to  such  corre- 
spondent, who  accepts  it  on  the 
terms  proposed  hy  the  indorsement 
and  the  deposit  slip  and  undertakes 
to  collect  it,  the  title  to  the  check, 
no  further  facts  appearing,  vests  in 
the  second  indorsee.  (4)  Acceptance 
by  correspondent  of  drawer's  check 
in  lieu  of  cash.  If  a  bank  holding 
title  to  a  check  under  the  circum- 
stances stated  in  the  last  paragraph 
presents  it  for  payment  on  the  day 
of  its  receipt  to  the  drawee,  who 
then  has  funds  of  the  drawer  on 
deposit  to  meet  it  and  who  is  ready 
to  pay  it  in  money,  but,  instead  of 
taking  cash,  surrenders  the  check 
for  the  drawee's  own  ch6ck  on  an- 
other bank,  it  must  use  the  utmost 
diligence  to  collect  the  second  check 
or  bear  any  loss  which  may  be  oc- 
casioned by  the  delay  in  case  the 
drawer  should  become  insolvent. 
(5)  Insolvency  of  first  drawee — 
Second  presentment — Discharge  of 
parties.   Under  circumstances  of  the 


character  indicated  in  the  last 
paragraph  the  presentment  for  pay- 
ment of  the  first  check  and  the 
substitution  of  the  second  check  in 
lieu  of  payment  in  money,  fixes  the 
rights  of  the  parties;  and  after  the 
insolvency  of  the  drawee  of  the  first 
check  has  occurred  the  negligent 
holder  cannot  charge  the  drawer 
and  indorsers  with  liability  by  re- 
possessing itself  of  the  instrument, 
presenting  it  for  payment  a  second 
time,  and  protesting  it  for  non- 
payment; and  this  is  true  even  al- 
though the  first  presentment  might 
have  been  rightfully  delayed,  for  a 
longer  period  of  time  than  that  dur- 
ing which  the  drawee  remained 
solvent.  (6)  Second  check — Mistake 
— Recovery  by  Drawer.  Under  the 
facts  in  this  case  a  drawer  whose 
check  was  not  collected  because  of 
the  negligence  of  an  indorsee  is 
equitably  entitled  to  recover  from 
the  payee,  on  the  ground  of  mis- 
take, the  amount  of  a  second  check, 
issued  on  account  of  the  supposed 
dishonor  of  the  first  one  and  duly 
paid. 


737  LOCAL    CUSTOM!    OF   BANKS.  [§§    579-581 

the  drawee's  check  till  the  close  of  business  hours  is  due  diligence 
cannot  be  asserted  as  an  invariable  rule.  In  some  instances  it  might 
be,  whilst  in  others  it  would  manifestly  not  be.  *  *  *  That  a 
higher  degree  of  diligence  is  demanded  under  facts  like  those  before 
US,  than  that  which  obtains  between  the  parties  to  the  instrument  is 
obvious,-  because,  as  we  have  said,  the  drawer  of  the  original  check 
must  be  held  to  have  contemi:)lated  that  when  presented  it  would  be 
paid  in  money  only,  and  the  payee  and  drawee  have  no  right,  except 
at  their  own  peril,  to  substitute  some  other  mode  of  settlement  which 
results  in  injury  to  the  drawer.  *  *  *  We  hold,  then,  that  when  the 
payee  of  a  check,  or  his  agent,  takes  from  the  drawee,  who  has  ample 
funds  of  the  drawer,  a  check  of  the  drawee  on  some  other  bank  or 
banker,  instead  of  money,  he,  the  payee,  or  his  agent,  must  use  the 
utmost  diligence  to  present  the  substituted  check  for  payment."-"* 
But  where  no  degree  of  diligence  could  have  obtained  payment  of  a 
substituted  check  no  liability  is  created  as  to  the  drawer  of  the 
original  check.  ^^ 

§  579.  Substituted  presentment  by  copy  or  description. — Where 
the  holder  of  a  check  learns  that  its  attempted  presentment  by  mail 
has  failed  and  that  it  is  lost,  at  least  for  the  purposes  of  immediate  pre- 
sentment, and  he  has  the  opportunity  so  to  do,  he  owes  the  duty  to 
at  once  make  substituted  presentment  and  demand  by  means  of  a  copy 
or  sufficient  description  of  the  check,  and  in  case  of  non-payment 
to  give  notice  to  the  indorser.^- 

§  580.  Substituted  checks — Local  custom  of  banks. — A  local  cus- 
tom of  a  bank  to  take  np  checks,  drawn  upon  them  by  their  deposi- 
tors, with  their  own  checks  on  other  banks  will  not  excuse  holders 
from  exercising  the  utmost  diligence  in  collecting  the  substituted 
checks.^^ 

§  581.  Effect  of  certification — Operation  of  check  as  assi^ment  or 
lien. — Where  a  check  is  certified  Ijy  the  bank  on  which  it  is  drawn 

="*  Anderson   v.   Gill,    79   Md.    312,  302,    27    C.    R.    A.    332,    12    Bkg.    L. 

quoted    in    Noble    v.    Doughton,    72  J.  393. 

Kan.  336,  355,  83  Pac.  1048.  -- Aebi  v.  Bank  of  Evansville,  124 

''First    National    ijank    v.    Buck-  Wis.  73,  102  N.  W.  329,  109  Am.  St. 

hannon   Bank,    80    Md.   475,   31   Atl.  Rep.  324. 

=^  Noble  V.  Doughton,  72  Kan.  336, 

Joyce  Defenses — 47.  83  Pac.  1048. 


581] 


CHECKS. 


738 


the  certificate  is  equivalent  to  an  acceptance.^*  By  the  law  merchant 
of  this  country,  the  certificate  of  the  bank  that  a  check  is  good  is 
equivalent  to  acceptance.  It  implies  that  the  check  is  drawn  upon, 
sufficient  funds  in  the  drawee's  hands  and  that  they  have  been  set 
apart  for  its  satisfaction  and  that  they  shall  be  so  applied  whenever 
the  check  is  presented  for  payment.  It  constitutes  an  undertaking  not 
only  that  the  check  is  then  good  but  that  it  will  continue  good.  Such 
an  agreement  is  as  binding  and  obligatory  upon  banks  as  their  notes 
of  circulation,  or  any  other  valid  obligation.  The  purpose  of  certify- 
ing a  check  as  regards  both  parties  is  to  enable  the  holder  to  use  it  as 
money. -°    Certification  of  a  check  also  guarantees  the  genuineness  of 


=*Negot.  Inst.  Law,  §  323,  Appen- 
dix herein. 

As  to  certification  and  effect 
thereof,  see,  generally: 

United  States. — Espy  v.  National 
Banli,  18  Wall.  (U.  S.)  605. 

Illinois. — Drovers'  National  Bank 
V.  Anglo-American  Packing  Co.,  117 
111.  100,  57  Am.  Rep.  855,  7  N.  E.  601; 
Jackson  Paper  Mfg.  Co.  v.  Commer- 
cial National  Bank,  99  111.  App.  108, 
rev'd  199  111.  151,  59  L.  R.  A.  657,  65 
N.  E.  136;  Wright  v.  MacCarty,  92 
111.  App.  120;  American  Trust  & 
Savings  Bank  v.  Crowe,  82  111.  App. 
537;  Strauss  v.  American  Exchange 
National  Bank,  72  111.  App.  314. 

Massachusetts. — Minot  v.  Ross, 
156  Mass.  458,  32  Am.  St.  Rep.  472, 
31  N.  E.  489,  16  L.  R.  A.  510. 

Missouri. — Muth  v.  St.  Louis 
Trust  Co.,  82  Mo.  App.  596. 

Nebraska. — Farmer's  Bank  v. 
Dunbar,  32  Neb.  487. 

New  Hampshire.  —  Barnet  v. 
Smith,  31  N.  H.  256. 

New  York.  —  Goshen  National 
Bank  v.  Bingham,  118  N.  Y.  349,  23 
N.  E.  180,  16  Am.  St.  Rep.  765,  7 
L.  R.  A.  595;  Lynch  v.  First  Na- 
tional Bank,  107  N.  Y.  179,  11  N. 
Y.  St.  R.  389,  27  Week.  D.  328,  13 
N.  E.  775;  Crawford  v.  West  Side 
Bank,  100  N.  Y.  50,  aff'g  49  Supr. 
Ct.  68;  Clews  v.  Bank  of  New  York, 


89  N.  Y.  418;  National  Bank  of 
Commerce  v.  National  Mechanic's 
Bank,  55  N.  Y.  211,  14  Am.  Rep.  232; 
Farmers'  and  Mechanics'  Bank  v. 
Butchers'  and  Drovers'  Bank,  28 
N.  Y.  425,  16  Am.  Dec.  678;  Schlesin- 
ger  v.  Kurztroh,  94  N.  Y.  Supp.  442, 
47  Misc.  634;  Meuer  v.  Phoenix  Na- 
tional Bank,  86  N.  Y.  Supp.  701, 
42  Misc.  341,  aff'd  88  N.  J.  Supp. 
83,  94  App.  Div.  331;  Herman  Fur- 
niture and  Plumber's  Cabinet 
Works  V.  German  Exchange  Bank, 
87  N.  Y.  Supp.  462;  People  v.  St. 
Nicholas  Bank,  77  Hun  157. 

Texas. — Henrietta  National  Bank 
V.  State  Bank,  80  Tex.  648. 

Canada.  —  La  Banque  Jacques- 
Cartier  v.  La  Corporation  de  Limoi- 
lon,  17  Rap.  Jud.  Quebec,  C.  S.  211; 
Legare  v.  Arcand,  9  Quebec  Rap. 
Jud.  122. 

-=  Merchants'  National  Bank  v. 
State  National  Bank,  10  Wall.  (U. 
S.)  47,  per  Swayne,  J. 

"The  certification  of  a  check,  if 
written  out,  would  contain  a  state- 
ment that  the  drawer  had  funds 
sufficient  to  meet  it  in  the  bank  ap- 
plicable to  its  payment,  and  an 
agreement  on  behalf  of  the  bank 
that  these  funds  should  be  retained 
and  paid  upon  the  check  whenever 
it  was  presented."  Cooke  v.  State 
National  Bank  of  Boston,  52  N.  Y. 


^39 


EFEECT   OF   CERTIFICATION. 


[§'  581 


96,  11  Am.  Rep.  667;  Thompson's 
Nat.  Bank  Cases,  698,  711,  per 
Church,  Ch.  J. 

Cancellation  of  certification,  see 
Dillaway  v.  Northwestern  National 
Bank,  82  111.  App.  71. 

Evidence  of  acceptance  as  cash — 
Entry  in  pass  book  of  certified 
check,  see  Gaden  v.  Newfoundland 
Savings  Bank  (1899),  App.  Cas.  281, 
68  L.  J.  P.  C.  57,  80  Law  T.  N.  S. 
329. 

Effect  of  banker's  oral  agreement 
to  accept  checks.  Drawers'  want 
of  funds;  third  person's  agrement 
to  supply  them,  see  Leach  v.  Hill, 
106  Iowa  171,  76  N.  W.  667. 

Cashier's  authority  to  certify — 
Same,  when  drawer  has  no  funds. 
"The  cashier  has  a  right  by  virtue 
of  his  office  to  make  this  certificate, 
when  the  drawer  has  funds.  He  is 
the  custodian  of  the  bank  and  of 
the  books;  he  receives  money  and 
gives  vouchers  therefor;  and 
whether  upon  receiving  a  check  he 
pays  it  in  money  or  gives  the  holder 
a  certificate  of  deposit  or  draft  or 
a  certificate  that  he  will  retain  suf- 
ficient of  the  money  standing  to 
the  drawer's  credit  to  pay  it  when 
presented,  he  is  in  either  case  act- 
ing within  the  line  of  his  duty  and 
within  the  scope  of  the  authority 
which  necessarily  attaches  to  his 
office.  Whether  the  bank  might  not 
restrict  this  authority,  so  as  to  af- 
fect the  rights  of  persons  having 
notice,  is  not  material.  It  is  suf- 
ficient that  the  public  have  a  right 
to  regard  his  authority  as  coexten- 
sive with  these  duties,  and  that 
such  authority  is  inherent  in  the 
office.  This  is  substantially  conceded 
by  the  learned  counsel  for  the  ap- 
pellants, but  they  insist  that  the 
cashier  has  no  power  to  make  the 
certificate  when  the  drawer  has  no 
funds.    I  agree  that  he  has  not,  as 


between  him  and  the  bank,  and  the 
liability  of  the  bank  is  not  based 
upon  his  power  to  bind  them  by 
such  a  contract  without  funds,  but 
upon  the  ground  that  the  bank  can- 
not dispute  the  fact  that  there  are 
funds,  and  hence  the  contract  is  en- 
forced as  though  there  were  funds 
to  meet  it.  It  follows  that  a  bona 
fide  holder  only  can  enforce  the  lia- 
bility against  the  bank,  where  the 
certificate  is  given  in  the  absence  of 
funds.  The  bank  having  placed  the 
cashier  in  the  position  which  im- 
plies this  inherent  authority,  those 
who  deal  with  the  bank  have  a 
right  to  infer  that  he  possesses  it, 
and  although  the  exercise  of  it  in 
a  given  case  may  not  be  warranted 
on  account  of  the  existence  or  non- 
existence of  some  extrinsic  fact  pe- 
culiarly within  its  official  knowl- 
edge, yet  the  bank  is  responsible  in- 
stead of  an  innocent  party,  upon 
every  principle  of  reason  and  mor- 
ality. This  principle  applies  to  the 
ordinary  relation  of  principal  and 
agent,  and,  a  fortiori,  when  the  em- 
ployment concerns  the  general  pub- 
lic, involving  extensive  commercial 
transactions.  Farmers'  &  Mechan- 
ics' Bank  of  Kent  County,  Mary- 
land V.  Butchers'  &  Drovers'  Bank, 
16  N.  y.  125  (aff'g  4  Duer.  219); 
Schuyler's  Case,  34  N.  Y,  30.  Ultra 
vires  cannot  be  alleged  for  telling 
the  truth,  even  by  bank  officers,  nor 
can  they  insist  upon  a  falsehood  to 
the  injury  of  one  who  has  confided 
in  their  veracity.  The  import  of  a 
certification  and  the  liability  of  the 
bank  upon  the  principle  here  indi- 
cated legally  result  from  the  nature 
of  the  agreement  and  the  applica- 
tion of  well-settled  rules  of  law  and 
do  not  depend  upon  usage  or  cus- 
tom. Whether  it  is  competent  for 
banks,  by  usage  or  express  agree- 
ment, to  extend  their  liabilities  so 


581] 


CHECKS. 


740 


the  signature.'*'  But  where  there  was  a  fraudulent  alteration  of  the 
date,  signature,  and  amount,  and  the  drawee  bank  thereafter  certifies 
the  check  and  pays  the  amount  thereof  to  another  bank,  recovery  may 
be  had  by  the  former  against  the  latter  for  money  so  paid.^^  If  the 
parties  to  a  check,  certified  as  "good,"  reside  in  the  same  town  it  must 
also  be  presented  for  payment  within  business  hours  of  the  day  after 
it  is  drawn.^^     It  is  held  in  New  York  that  as  between  the  drawer  and 


as  to  include  cases  where  certificates 
are  issued  without  funds,  to  the 
knowledge  of  the  holder,  it  is  un- 
necessary to  determine.  Selden,  J., 
in  16  N.  Y.  125,  128,  expressed  the 
opinion  that  banks  have  no  power 
to  loan  their  credit  in  that  form. 
It  is  clear,  however,  that  where  such 
a  certificate  is  made  without  funds, 
by  a  cashier  in  fraud  of  the  rights 
of  the  bank,  no  one  but  a  bona  fide 
holder  can  enforce  it."  Cooke  v. 
State  National  Bank  of  Boston,  52 
N.  Y.  96,  11  Am.  Rep.  667;  Thomp- 
son's Nat.  Bank  Cases  698,  711,  per 
Church,  Ch.  J. 

As  to  cashier's  powers  in  general, 
see: 

United  States. — Martin  v.  Webb, 
110  U.  S.  7;  Merchants'  National 
Bank  v.  State  National  Bank,  10 
Wall.  (U.  S.)  604.  United  States 
Bank  v.  Dunn,  6  Pet.  (U.  S.)  51; 
Bank  of  United  States  v.  Dandridge, 
12  Wheat.  (U.  S.)  64;  Farmers'  & 
M.  National  Bank  v.  Smith,  77  Fed. 
129,  40  U.  S.  App.  690,  23  C.  C.  A. 
80,  14  Bkg.  L.  J.  69. 

Iowa. — Iowa  State  Savings  Bank 
v.  Black,  91  Iowa  490. 

Maine. — Franklin  Bank  v.  Stew- 
ard, 37  Me.  519. 

Maryland. — Weckler  v.  First  Na- 
tional Bank,  42  Md.  581. 

Massachusetts. — Jewett  v.  West 
Somerville  Cooperative  Bank,  173 
Mass.  54,  52  N.  E.  1085. 

Michigan. — First  National  Bank 
V.  Stone,  106  Mich.  367,  2  Det.  L.  N. 
463,  12  Bkg.  L.  J.  681,  64  N.  W.  487. 


Minnesota. — Ft.  Dearborn  Na- 
tional Bank  v.  Seymour,  71  Minn. 
81,  73  N.  W.  724. 

New  Hampshire. — Hanson  v. 
Heard,  69  N.  H.  190,  38  Atl.  788. 

New  York. — Wiley  v.  First  Na- 
tional Bank,  47  N.  Y.  546;  Barnes 
V.  Ontario  Bank,  19  N.  Y.  156. 

South  Carolina. — Pollock  v.  Caro- 
lina Interstate  Bldg.  &  L.  Assoc,  51 
S.  C.  420,  29  S.  E.  77,  64  Am.  St. 
Rep.  683,  8  Am.  &  Eng.  Corp.  Cas. 
N.  S.  157. 

Wisconsin. — Houghton  v.  First 
National  Bank,  26  Wis.  663,  7  Am. 
Rep.  107. 

""  Security  Bank  v.  National  Bank 
of  the  Republic,  67  N.  Y.  458,  23 
Am.  Rep.  129. 

-'  National  Bank  of  Commerce  v. 
National  Mechanics'  Banking  Asso- 
ciation, 55  N.  Y.  211,  14  Am.  Rep. 
232,  and  note  237.  See  Security  Na- 
tional Bank  v.  National  Bank  of  the 
Republic,  67  N.  Y.  438,  23  Am.  Rep. 
129;  Marine  National  Bank  v.  Na- 
tional City  Bank,  59  N.  Y.  67,  17 
Am.  Rep.  305  and  note  314. 

Certification  for  greater  amount 
than  deposit,  see  Dillaway  v.  North- 
western National  Bank,  82  111.  App. 
71. 

^  Andrews  v.  German  National 
Bank,  9  Heisk.  (Tenn.)  211,  24  Am. 
Rep.  300, 

Right  to  correct  such  a  certifica- 
tion, see  Second  National  Bank  of 
Baltimore  v.  Western  National  Bank 
of  Baltimore,  51  Md.  128,  34  Am. 
Rep.  300. 


741  EFFECT   OF   CERTIFICATION".  [§'   581 

the  holder,  a  certification  of  the  check  operates  as  payment  and  dis- 
charges the  former's  liability  in  case  of  the  subsequent  insolvency  of 
the  drawee,  even  though  presentment  for  payment  is  made  in  the 
afternoon  of  the  day  of  certification.^''  In  a  Tennessee  case  it  is  de- 
cided that  it  is  immaterial,  in  so  far  as  the  liability  of  the  certifying 
bank  is  concerned,  whether  it  had  sufficient  funds  of  the  drawer  or 
not.^'*  Again,  under  the  negotiable  instruments  law  of  New  York, 
where  the  holder  of  a  check  procures  it  to  be  accepted  or  certified  the 
drawer  and  all  indorsers  are  discharged  from  liability  thereon.^^  So, 
under  a  Tennessee  decision,  certification  at  the  instance  of  the  holder 
discharges  the  drawer's  liability  on  the  check,  as  it  operates  as  a  pay- 
ment of  the  debt. ^2  And  if  the  drawee,  before  delivery  of  a  check  to 
the  holder,  certifies  it  at  the  indorser's  request,  the  indorser  is  not 
thereby  released.^ ^  But  where  the  certification  is  made  at  the  drawer's 
request  before  delivery  of  the  check,  and  presentment  is  not  made 
before  suspension  of  the  bank,  the  latter  is  liable  only  to  the  holder 
in  due  course  and  not  to  the  drawer,  so  that  a  set-off  by  the  drawer 
against  a  debt  to  the  bank  is  precluded.^*  And  a  promise  to  accept 
and  pay  a  check,  made  by  the  drawee  to  the  drawer,  is  not  a  sufficient 
ground  of  liability  as  to  the  holder  where  it  does  not  appear  that  re- 
liance was  placed  by  the  holder  upon  such  promise  when  he  took  the 
check.^^  The  understanding  of  merchants  and  bankers  as  to  the  effect 
of  a  certification  is  not  provable  by  extrinsic  evidence.^*^  Again,  the 
negotiable  instruments  law  of  New  York  also  provides  that  a  check 
of  itself  does  not  operate  as  an  assignment  of  any  part  of  the  funds 
to  the  credit  of  the  drawer  with  the  bank,  and  the  bank  is  not  liable 

"^  First  National   Banlt   of   Jersey  =*  Sctilesinger  v.  Kurzrolt,  94  N.  Y. 

City  v.  Leach,  52  N.  Y.  350,  11  Am.  Supp.  442,  47  Misc.  634. 

Rep.  708.  As  to  certification  at  drawer's  re- 

^^  Frencli  v.  Irwin,  4  Baxt.  (Tenn.)  quest,    see    also    Metropolitan    Na- 

401,  27  Am.  Rep.  769.    See  quotation  tional   Bank  v.  Jones,  137   111.   634, 

from  opinion  of  Church,  Ch.  J.,  in  31  Am.  St.  Rep.  403,  27  N.  E.  533, 

Cooke  V.  State  Nat.  Bk.  of  Boston  12  L.  R.  A.  492;   Born  v.  First  Na- 

given  in  note  25  to  this  section.  tional  Bank,  123  Ind.  78,  18  Am.  St. 

'^Negot.  Inst.  Law,  §  324,  Appen-  Rep.  312,  24  N.  E.  123,  7  L.  R.  A. 

dix    herein.     See    Meuer   v.    Phenix  442;    Cullinan    v.    Union    Surety    & 

National   Bank,   88  N.  Y.   Supp.   83,  Guaranty  Co.,  80  N.  Y.  Supp.  58,  79 

94  App.  Div.  331.  App.  Div.  409. 

^-French  v.  Irwin,  4  Baxt.  (Tenn.)  ^^Carr  v.  National  Security  Bank, 

401,  27  Am.  Rep.  769.  107  Mass.  45,  9  Am.  Rep.  6. 

'■■'  Mutual  National  Bank  v.  Rutge,  ""  Security  Bank  v.  National  Bank 

28  La.  Ann.  933,  26  Am.  Rep.  126.  of  Republic,   67   N.  Y.  458,  23  Am. 

Rep.  129. 


§  582] 


CHECKS. 


742 


to  the  holder,  unless  it  accepts  or  certifies  the  check.^^  So,  under  a 
decision  in  that  state,  no  part  of  the  debt  is  transferred  or  assigned  by 
a  check,  nor  is  any  lien  at  law  or  in  equity  created  thereby,  nor  can 
the  holder  derive  any  benefit  from  the  bank's  agreement  to  pay  their 
customers'  checks  to  the  extent  of  the  deposit  to  their  credit,  as  no 
obligation  rests  upon  the  bank  to  pay  checks  in  any  particular  order.^* 

§  582.  Necessary  that  drawer  sustain  actual  loss  or  injury  from 
laches  in  presentment. — Unless  actual  loss  or  injury  is  sustained  by  the 
drawer  through  laches  in  presentment  of  a  check  he  is  liable,  in  so  far 
as  the  holder  is  concerned,  as  delay  in  presentment  is  immaterial  where 
the  drawer  is  not  injured,  and  he  is  discharged  from  liability  to  the 
extent  of  the  loss  so  sustained.^^ 


^'  Negot.  Inst.  Law,  §  325. 

'^  ^tna  National  Bank  v.  Fourth. 
National  Bank,  46  N.  Y.  82,  7  Am. 
Rep.  314. 

Examine  also  the  following  cases: 

United  States. — Florence  Mining 
Co.  V.  Brown,  124  U.  S.  385,  31  L. 
Ed.  424,  8  Sup.  Ct.  531. 

Colorado. — Colorado  National 
Bank  of  Denver  v.  Boettcher,  4  Colo. 
185,  40  Am.  Rep.  142. 

Illinois. — Brown  v.  Schintz,  98  111. 
App.  452,  459,  aff'd  202  111.  509,  67 
N.  E.  172. 

Indiana. — Harrison  v.  Wright,  100 
Ind.  515,  58  Am.  Rep.  805. 

New  York. — First  National  Bank 
of  Union  Mills  v.  Clark,  134  N.  Y. 
368,  48  N.  Y.  St.  R.  283,  32  N.  E. 
38,  aff'g  30  N.  Y.  St.  R.  1021,  9  N. 
Y.  Supp.  952;  O'Connor  v.  Mechan- 
ics' Bank,  124  N.  Y.  324,  36  N.  Y. 
St.  Rep.  277,  26  N.  E.  816,  rev'g  54 
Hun  272,  27  N.  Y.  St.  Rep.  1,  7  N.  Y. 
Supp.  380;  Lynch  v.  First  National 
Bank,  107  N.  Y.  179,  11  N.  Y.  St.  R. 
389,  27  Week.  D.  328,  13  N.  E.  775; 
Jordan  v.  National  Shoe  &  Leather 
Bank,  74  N.  Y.  467,  30  Am.  Rep.  319. 

Tennessee. — Akin  v.  Jones,  93 
Tenn.  353,  42  Am.  St.  Rep.  921,  27 
S.  W.  669,  25  L.  R.  A.  523. 


But  compare  Wyman  v.  Ft.  Dear- 
born National  Bank,  181  111.  279,  72 
Am.  St.  Rep.  259,  48  L.  R.  A.  565; 
Gage  Hotel  Co.  v.  Union  National 
Bank,  171  111.  531,  63  Am.  St.  Rep. 
270,  39  L.  R.  A.  479,  49  N.  E.  420; 
Metropolitan  National  Bank  v. 
Jones,  137  111.  634,  12  L.  R.  A.  492, 
27  N.  E.  533,  31  Am.  St.  Rep.  403; 
Farmers'  Bank  &  Trust  Co.  v.  New- 
land,  97  Ky.  464,  31  S.  W.  38; 
Fonner  v.  Smith,  31  Neb.  107,  11 
L.  R.  A.  528,  47  N.  W.  632,  28  Am. 
St.  Rep.  510;  Raesser  v.  National 
Exchange  Bank,  112  Wis.  591,  88 
N.  W.  618. 

^^  United  States. — Bull  v.  Kasson, 
First  National  Bank,  123  U.  S.  105, 
31  L.  Ed.  97;  Bowen  v.  Needles  Na- 
tional Bank  (U.  S.  C.  C),  87  Fed. 
430. 

Georgia. — Merritt  v.  Gate  City  Na- 
tional Bank,  100  Ga.  147,  38  L.  R.  A. 
749. 

Illinois. — I  ndustrial  Bank  v. 
Bowes,  165  111.  70,  46  N.  E.  10,  rev'g 
64  111.  App.  300,  1  Chic.  L.  J.  Wkly. 
455;  Howes  v.  Austin,  35  111.  396; 
Marshall  v.  Freeman,  52  111.  App. 
42. 

Indiana. — See  Henshaw  v.  Root, 
60  Ind.  220. 


743  DEAWEE  INSOLVENT   OR  BANKRUPT.  [§    583 

§  583.  Where  drawee  becomes  insolvent  or  bankrupt — Collection 
through  bank. — A  dela}^  of  one  day  in  presenting  a  check,  during 
which  time  the  drawee  fails,  may  constitute  laches.*"  If  a  check  is 
given  for  the  amount  of  a  draft  hy  the  firm  on  which  it  is  drawn,  and 
such  firm  does  business  in  the  same  city  as  the  party  to  whom  such 
check  is  given,  it  should  be  presented  on  the  day  on  which  it  is  re- 
ceived; and  where  the  drawer  had  funds  in  the  bank  on  which  the 
check  was  drawn,  and  the  check  passed  through  another  bank  in  which 
it  was  deposited  and  did  not  reach  the  drawer's  bank  until  after  fail- 
ure, the  party  sending  the  draft  was  held  to  be  released  from  his  in- 
debtedness.*^ And  where  a  person  sent  a  check  to  another  in  part 
payment  of  his  indebtedness  and  it  was  duly  mailed  and  should  have 
been  received  the  following  day  and  it  would  have  been  honored  if 
presented  in  a  reasonable  time  after  its  receipt,  but  such  presentment 
was  not  made  because  of  the  negligence  of  the  party  to  whom  the 
check  was  forwarded,  and  the  amount  thereof  was  lost  by  reason  of 
the  bank's  failure,  and  the  check  was  not  returned  to  the  sender,  the 
latter's  claim  against  the  party  receiving  the  check  is  not  waived  by 
the  presentment  of  the  sender's  claim  for  his  deposit  to  the  trustee 
of  the  insolvent  bank.*^  Under  a  Wisconsin  decision  where  the  draw- 
ers of  a  bank  check  drew  out  all  their  funds  before  failure  of  the  bank 
but  the  holder  had  negligently  delayed  presentment  until  after  such 
failure,  the  facts  that  the  check  would  have  been  honored  if  it  had 

Maryland. — See  Exchange  Bank  v.  Damages— When  a  bank  check  is 

Sutton  Bank,  78  Md.  577,  23  L.  R.  wrongfully     protested     the    drawer 

A.  173.  may    recover    temperate    compensa- 

Missouri. — Nelson   v.   Kastle,    105  tory  damages  without  alleging  and 

Mo.  App.  187,  79  S.  W.  730;  Herider  proving  special  damages.    The  right 

V.  Phoenix  Loan  Assoc,  82  Mo.  App.  to  recover  such  damages  is  not  con- 

427;   Long  Bros.  v.  Eckert,  73  Mo.  fined  to  a  trader  in  the  restricted 

App.  445.  sense  in  which  the  term  is  used  in 

Virginia. — See  Blair  v.  "Wilson,  28  the  bankruptcy  laws,  but  extends  to 

Gratt.  (Va.)  165.  any  person  who  is  engaged  in  busi- 

West    Virginia. — Compton    v.    Gil-  ness  and  whose  credit  is  thus  neces- 

man,   19   W.   Va.    312,   42  Am.  Rep.  sarily  injured.    Peabody  v.  Citizens' 

776.  State    Bk.    of    St.    Charles    (Minn. 

Examine  Andrews  v.  Bradley,  102  1906),  108  N.  W.  272. 

Fed.    54;    Carroll   v.    Sweet,   128    N.  ^'' Smith  v.  Miller,  43  N.  Y.  171. 

Y.  19,  37  N.  Y.  St.  R.  868,  27  N.  E.  ^^  Smith  v.  Miller,  43  N.  Y.  171,  3 

763,   13   L.  R.   A.   43,  rev'g  5  N.  Y.  Am.  Rep.  690. 

Supp.  572,  25  N.   Y.   St.   R.   356,  57  *-  Pink    Front   Bankrupt    Store    v. 

Supr.  Ct.  100.   See  Negot.  Inst.  Law,  G.  A.  Mistrot  &  Co.  (Tex.  Civ.  App.), 

§  322.  90  S.  W.  75. 


583] 


CHECKS. 


744 


been  promptly  presented  and  that  the  drawers  were  compelled  to  pay 
the  bank's  assignee  in  bankruptcy  the  money  which  they  had  drawn, 
out  will  not  prevent  recovery  by  holder  of  the  paper  from  the  draw- 
ers.** If  the  drawer  uses  a  National  bank  check,  but  erases  only  part 
of  the  name  describing  or  designating  such  bank  and  writes  above  it 
the  name  of  a  private  banker,  and  the  check  is  purchased  two  days 
thereafter  from  the  party  to  whom  the  check  was  given,  and  the  pur- 
chaser, who  knew  the  private  banker  and  had  done  some  banking  with 
him,  delays  presentment  until  after  the  drawee  has  failed,  no  recovery 
can  be  had  of  the  drawer,**  But  if,  through  the  drawer's  acts,  the 
holder  has  not  lost  his  remedy  af^ainst  the  drawer  of  a  check,  given 
him  in  settlement  of  an  account  for  merchandise,  such  holder  is  still 
liable  for  the  price  of  the  goods,  although  the  bank  had  failed  before 
presentment,  which  had  been  delayed.*^   If  a  check,  deposited  by  the 


^^Kinyon  v.  Stanton,  44  Wis.  479, 
28  Am.  Rep.  601. 

«Cork  V.  Bacon,  45  Wis.  192,  30 
Am.  Rep.  712. 

*MVilliams  v.  Brown,  80  N.  Y. 
Supp.  247,  80  App.  Div.  628,  82  App. 
Div.  353. 

As  to  laches  in  presentment  and 
insolvency  of  bank,  see  further  the 
following  cases: 

Alabama. — Watt  v.  Gans,  114  Ala. 
264,  21  So.  1011  (no  recovery  by 
holder  from  drawer) ;  Industrial 
Trust  T.  &  Sav.  Co.  v.  Weakley 
103  Ala.  458,  15  So.  854  (no  recov- 
ery against  drawer). 

Georgia. — Tomlin  v.  Thornton,  99 
Ga.  585,  27  S.  E.  147  (payee  cannot 
recover  from  drawer). 

Illinois. — Balkwill  v.  Bridgeport 
Wood  Finishing  Co.,  62  111.  App.  663, 
1  Chic.  L.  J.  Wkly.  102  (where  payee 
not  guilty  of  negligence). 

Iowa. — Hamlin  v.  Simpson,  105 
Iowa  125,  44  L.  R.  A.  397,  74  N.  W. 
906,  15  Bkg.  L.  J.  343  (drawer  was 
injured  by  laches  and  was  released). 

Kansas. — Anderson  v.  Rodgers,  53 
Kan.  542,  36  Pac.  1067,  27  L.  R.  A. 
248,  11  Bkg.  L.  J.  87  (payee  assumes 


risk  of  insolvency  and  loss  by  un- 
reasonable delay). 

Michigan. — Hamilton  v.  Winona 
Salt  &  L.  Co.,  95  Mich.  436,  54  N.  W. 
903  (holder  not  entitled  to  recover 
where  negligent,  even  though  prom- 
ise is  made  by  drawer  that  he  will 
pay,  but  the  latter  had  then  no 
knowledge  of  the  laches). 

New  York. — Williams  v.  Brown, 
65  N.  Y.  Supp.  1049,  53  App.  Div. 
486  (debt  discharged  by  the  laches) ; 
Martin  v.  Home  Bank,  52  N.  Y. 
Supp.  464,  30  App.  Div.  498,  aff'd 
160  N.  Y.  190,  54  N.  E.  717  (drawer 
and  indorser  discharged  by  the 
laches);  Grant  v.  McNutt,  33  N.  Y. 
Supp.  62,  66  N.  Y.  St.  R.  719,  12 
Misc.  20  (when  drawer  not  dis- 
charged); Carroll  v.  Sweet,  37  N. 
Y.  St.  R.  868,  27  N.  E.  763  (delay 
and  consequent  loss  discharges  in- 
dorser who  had  transferred  check 
for  antecedent  debt,  but  only  to 
amount  of  check). 

Pennsylvania. — Wagner  v.  Crook, 
167  Pa.  259,  31  Atl.  576,  12  Bkg.  L. 
J.  255  (drawer's  non-liability  not 
changed  by  sending  duplicate  check, 
on  false  statement  that  original  lost. 


745 


DRAWEE    INSOLVENT    OR   BANKRUPT. 


[§  583 


holder  with  a  bank  for  collection,  is  not  presented  in  proper  time  and 
not  until  after  the  failure  of  the  drawee  bank,  and  the  delay  and  loss 
are  consequent  upon  forwarding  it  by  an  indirect  route  for  present- 
ment the  holder  is  precluded  recovery  from  the  drawer.*° 


where  latter  received  too  late) ;  Na- 
tional State  Bank  v.  Weil,  141  Pa. 
457,  21  Atl.  661,  4  Bkg.  L.  J.  331 
(in  absence  of  excusing  circum- 
stances, payee  or  transferee  assumes 
risk  of  delay). 

Vermont. — Gregg  v.  Beane,  69  Vt. 
22,  37  Atl.  248,  14  Bkg.  L.  J.  319 
(question  of  diligence  and  relative 
rights  of  drawer  and  payee  where 
drawee  suspends). 

Wisconsin. — Lloyd  v.  Osborn,  92 
Wis.  93,  13  Bkg.  L.  J.  177,  65  N.  W. 
859  (when  payee  not  precluded  re- 
covery against  maker — excuses). 

«Watt  v.  Gans,  114  Ala.  264,  21 
So.  1011. 

Collection  through  bank — Rights, 
duties  and  liabilities,  see  the  follow- 
ing decisions: 

United  States. — Commercial  Na- 
tional Bank  v.  Armstrong,  148  U.  S. 
50,  37  L.  Ed.  363;  Holder  v.  West- 
ern German  Bank,  132  Fed.  187, 
aff'd  136  Fed.  90,  68  C.  C.  A.  554; 
First  National  Bank  v.  Wilmington 
&  W.  R.  Co.,  77  Fed.  401,  42  U.  S. 
App.  232,  23  C.  C.  A.  200. 

Alabama. — Farley  National  Bank 
v.  Pollock  &  Bernheimer  (Ala.),  39 
So.  612;  Jefferson  County  Savings 
Bank  v.  Hendrix  (Ala.),  39  So.  295, 
1  L.  R.  A.  N.  S.  246;  Josiah  Morris 
&  Co.  v.  Alabama  Carbon  Co.,  139 
Ala.  620,  36  So.  764. 

Arkansas. — K  uder  v.  Greene 
72  Ark.  504,  82  S.  W.  836. 

Colorado. — Manhattan  Life  Ins. 
Co.  V.  First  National  Bank  (Colo. 
App.),  80  Pac.  467. 

Georgia. — Tomlin  v.  Thornton,  99 
Ga.  585,  27  S.  E.  147;   Georgia  Na- 


tional  Bank   v.   Henderson,   46   Ga. 
487,  12  Am.  Rep.  490. 

Illinois. — Bank  of  Commerce  v. 
Miller,  105  111.  App.  224. 

Indiana. — First  National  Bank  of 
Crown  Point  v.  First  National  Bank 
of  Richmond,  76  Ind.  561,  40  Am. 
Rep.  261. 

/ot<;a.— Guelich  v.  National  State 
Bank  of  Burlington,  56  Iowa  434, 
41  Am.  Rep.  110. 

Kansas. — Anderson  v.  Rodgers,  53 
Kan.  542,  36  N.  W.  1067,  27  L.  R.  A. 
248;  Stockton  v.  Montgomery,  9 
Kan.  App.  104,  57  Pac.  1059,  16  Bkg. 
L.  J.  496. 

Kentucky. — Second  National  Bank 
v.  Merchants'  National  Bank,  23  Ky. 
L.  Rep.  1255,  55  L.  R.  A.  273,  65 
S.  W.  4;  Long  v.  Bank  of  Commerce, 
18  Ky.  L.  Rep.  922,  38  S.  W.  886. 

Maryland. — Anderson  v.  Gill,  79 
Md.  312,  25  L.  R.  A.  200,  29  Atl.  527, 
22  Wash.  L.  Rep.  569. 

Minnesota. — Minneapolis  Sash  & 
D.  Co.  v.  Metropolitan  Bank,  76 
Minn.  136,  44  L.  R.  A.  504,  78  N.  W. 
780,  16  Bkg.  L.  J.  399. 

Mississippi. — Continental  National 
Bank  v.  First  National  Bank 
84  Miss.  103,  36  So.  189;  Third  Na- 
tional Bank  of  Louisville  v.  Vicks- 
burgh  Bank,  61  Miss.  112,  48  Am. 
Rep.  78. 

Missouri. — National  Bank  of  Com- 
merce v.  American  Exchange  Bank, 
151  Mo.  320,  16  Bkg.  L.  J.  448,  52 
S.  W.  265. 

Nebraska. — Western  Wheeled 
Scraper  Co.  v.  Sadilep,  50  Neb.  105, 
69  N.  W.  765,  14  Bkg.  L.  J.  139. 

New  York. — Bank  of  America  v. 


584,  585] 


CHECKS. 


746 


§  584.  Surety. — It  is  held  that  the  neglect  to  present  a  cheek  and 
demand  payment  within  a  reasonable  time  does  not  release  a  surety 
from  liability,  as  a  presumption  exists  that  he  has  knowledge  that  it 
is  not  to  be  used  in  the  usual  manner,  but  an  exception  exists  where  he 
also  shows  that  the  time  has  been  extended  to  the  principal  debtor 
without  his  assent  or  specified  limitation  to  himself.*'^ 

§  585.  Indorser. — An  indorser  of  a  check  is  not  liable  where  pre- 
sentment is  not  made  in  a  reasonable  time.*^  Where  the  payee  of  a 
check  becomes  chargeable  as  an  indorser  only,  such  check  must  be  pre- 
sented for  payment  within  a  reasonable  time.  This  applies  in  a  case 
where  a  check  upon  another  bank  is  indorsed  by  the  payee  and  de- 
posited in  the  bank  in  which  he  keeps  an  account,  and  the  bank  ac- 
cepts it  and  credits  the  amount  as  cash  on  the  depositor's  account  to  be 
checked  against  as  he  sees  fit,  as  such  facts  indicate  a  completed  trans- 


Waydell,  92  N.  Y.  Supp.  666,  103 
App.  Div.  25,  94  N.  Y.  Supp.  135,  104 
App.  Div.  620;  National  Revere 
Bank  v.  National  Bank  of  the  Re- 
public, 66  N.  Y.  Supp.  662,  aff'd  172 
N.  Y.  102,  64  N.  B.  799;  Williams 
v.  Brown,  65  N.  Y.  Supp.  1049,  53 
App.  Div.  486;  Martin  v.  Home 
Bank,  52  N.  Y.  Supp.  464,  30  App. 
Div.  498,  aff'd  60  N.  Y.  190,  54  N. 
E.  717;  Briggs  v.  Central  National 
Bank  of  City  of  New  York,  89 
N.  Y,  182,  42  Am.  Rep.  285;  Ayrault 
V.  Pacific  Bank,  47  N.  Y.  570,  7  Am. 
Rep.  489. 

Oregon. — Kershaw  v.  Ladd,  34 
Oreg.  375,  56  Pac.  402,  44  L.  R.  A. 
236,  16  Bkg.  L.  J.  273. 

Pennsylvania. — Morris  v.  First 
National  Bank,  201  Pa.  158,  50  Atl. 
1000;  Wagner  v.  Crook,  167  Pa.  259, 
31  Atl.  576,  12  Bkg.  L.  J.  225. 

South  Carolina. — Gregg  v.  Bank 
of  Columbia,  72  S.  C.  458,  52  S.  E. 
195. 

Tennessee. — Bank  of  Louisville  v. 
First  National  Bank  of  Knoxville, 
8  Baxt.  (Tenn.)  101,  35  Am.  Rep. 
691. 


*^  Newman  v.  Kaufman,  28  La. 
Ann.  865,  26  Am.  Rep.  114. 

*^Aebi  V.  Bank  of  Evansville,  124 
Wis.  65,  102  N.  W.  329;  Wis.  Laws 
1899,  c.  356,  §§  1684-2,  p.  746,  id., 
p.  717,  c.  356,  §  1678-11;  Fritz  v. 
Kennedy,  119  Iowa  628,  93  N.  W. 
603. 

When  indorsers  bound,  when  not, 
see  the  following  cases: 

Iowa. — Hough  V.  Gearen,  110  Iowa 
240,  81  N.  W.  463. 

Mississippi. — Parker  v.  Reddick, 
65  Miss.  242,  7  Am.  St.  Rep.  646,  3 
So.  575. 

Nebraska. — Nebraska  National 
Bank  v.  Logan,  29  Neb.  278,  3  Bkg. 
L.  J.  107,  45  N.  W.  459. 

New  York. — Cuminsky  v.  Kle- 
mier,  68  N.  Y.  Supp.  776,  34  Misc. 
181;  Carroll  v.  Sweet,  30  N.  Y.  Supp. 
204,  61  N.  Y.  St.  Rep.  673,  9  Misc. 
382,  37  N.  Y.  St.  R.  868,  27  N.  E. 
763. 

Tennessee. — Kirkpatrick  v.  Pur- 
year,  93  Tenn.  409,  24  S.  W.  1130, 
22  L.  R.  A.  785. 

Wisconsin.— Gifford  v.  Hardell,  88 
Wis.  538,  43  Am.  St.  Rep.  925,  60 
N.  W.  1064,  12  Bkg.  L.  J.  29. 


ii 


747 


INDOESER. 


[§  585 


fer  of  the  cheek  by  which  the  bank  accepting  it  becomes  the  owner 
thereof  and  not  a  mere  agent  to  collect,  and  the  payee  becomes  charge- 
able only  as  indorser.*^  In  order  to  charge  an  indorser  upon  a  check 
or  inland  bill  of  exchange  payable  on  demand,  presentment  must  be 
made  by  the  holder  within  a  reasonable  time  after  it  comes  into  his 
possession.  Where  such  reasonable  time  is  not  fixed  by  statute,  then, 
in  the  absence  of  special  circumstances  of  excuse,  it  is  limited  to  the 
next  business  day,  or  if  the  bank  upon  which  the  check  is  drawn  is  at 
another  place  the  check  must  be  forwarded  to  the  place  of  payment  on 
the  next  business  day,  and  presented  at  latest  upon  the  day  following 
its  receipt  at  the  place  of  payment.^" 


*»Aebi  V.  Bank  of  Evansville,  124 
Wis.  65,  102  N.  W.  329,  109  Am.  St. 
Rep.  324. 

^'Aebi  V.  Bank  of  Evansville,  124 
Wis.  73,  102  N.  W.  329,  109  Am.  St. 
Rep.  324. 

CJheck — Rights,  duties  and  liabili- 
ties of  indorsee  and  indorser  and 
effect  of  certification  of  the  drawee 
bank.  Where  the  dispute  was  be- 
tween the  indorsee  and  the  indorser 
of  a  check  in  a  recent  Michigan  case 
the  court,  per  McAlvay,  J.,  said: 
"The  following  rules  of  the  law 
merchant  fixing  the  rights,  duties 
and  liabilities  of  indorsee  and  in- 
dorser each  to  the  other,  and  the 
effect  of  certification  by  the  drawee 
bank  upon  such  rights,  duties  and 
liabilities  are  well  settled.  The  un- 
dertaking of  the  indorser  of  a 
check  is  that,  if  not  paid  on  pres- 
entation within  a  reasonable  time 
he  will  pay  it,  provided  he  is  prop- 
erly notified.  Such  reasonable  time 
for  presentation  and  demand  for 
payment  is  admitted  to  be  within 
the  day  following  the  indorsement. 
The  indorsee,  as  between  himself 
and  the  indorser,  undertakes  to  de- 
mand payment  within  the  day  fol- 
lowing the  indorsement,  and,  if  pay- 
ment is  not  made,  to  give  due  notice 
of  dishonor.  This  is  his  sole  duty, 
and  he   does  anything  else  at  his 


peril.  2  Dan.  Neg.  Inst,  par.  1601; 
People  V.  Cromwell,  102  N.  Y,  477, 
7  N.  E.  413.  The  fact  that  there  are 
no  funds  in  the  account  against 
which  the  check  is  drawn  does  not 
relieve  the  holder  from  presentation 
and  notice  of  dishonor  to  the  in- 
dorser, unless  it  appears  that  the  in- 
dorser knew  it.  2  Dan.  Neg.  Inst, 
par.  1596;  1  Morse  Banking,  par. 
262  (8).  Nor  are  the  rights  of  the 
indorser  changed  because  he  suf- 
fered no  apparent  damage  by  reason 
of  failure  to  demand  payment  and 
give  notice  of  dishonor  to  him  with- 
in the  required  time.  Mohawk  Bank 
V.  Boderick,  13  Wend.  (N.  Y.)  133, 
27  Am.  Dec.  192;  Tiedeman,  Com. 
Paper,  §  442;  Gough  v.  Staats,  13 
Wend.  (N.  Y.)  549;  First  Nat  Bank 
V.  Miller,  37  Neb.  500,  55  N.  W.  1064, 
40  Am.  St  Rep.  499.  The  certifi- 
cation of  a  check  by  a  bank  that  it 
is  'good'  'is  similar  to  accepting  of 
a  bill,  for  he  (the  banker)  admits 
hereby  assets,  and  makes  himself 
liable  to  pay.'  Lord  Mansfield,  in 
Robson  V.  Bennett,  2  Taunt.  389.  'By 
the  law  merchant  of  this  country 
the  certificate  of  the  bank  that  the 
check  is  good  is  equivalent  to  ac- 
ceptance; it  implies  that  the  check 
is  drawn  upon  sufficient  funds  in 
the  hands  of  the  drawee,  that  they 
have  been  set  apart  for  its  satisfac- 


586] 


CHECKS. 


748 


§  586.  Reasonable  expectation  that  check  will  he  honored — ^Want 
of  funds. — Presontmeiit  of  a  check  is  unnecessary  where  the  drawer 
has  no  funds  and  no  reasonable  expectation  that  the  paper  will  he 
honored. ^^  And  it  is  held  that  the  drawer's  want  of  funds  at  the  time 
of  drawing  the  check  or  his  subsequent  withdrawal  thereof  before  pre- 
sentment made  dispenses  with  notice  of  dishonor  to  him,  notwith- 
standing want  of  diligence  in  making  demand.^^  It  is  declared  that  it 
is  not  necessary  that  the  drawer  of  a  bill  should  have  funds  in  the 
hands  of  the  drawee,  since  if  he  has  not  a  check  would  be  a  fraud.^^ 


tion,  and  that  they  shall  be  so  ap- 
plied whenever  the  check  is  pre- 
sented for  payment.  It  is  an  under- 
taking that  the  check  is  good  then, 
and  shall  continue  good,  and  this 
agreement  is  as  binding  on  the  bank 
as  its  notes  of  circulation,  a  certifi- 
cate of  deposit  payable  to  the  order 
of  depositor,  or  any  other  obligation 
it  can  assume.'  Mr.  Justice  Swayne 
in  Merchants'  Bank  v.  State  Bank, 
10  Wall.  (U.  S.)  604,  19  L.  Ed.  1008. 
Where  the  check  is  drawn  against 
funds  the  certification,  if  procured 
by  the  payee  or  indorsee,  discharges 
both  maker  and  indorser,  because 
equivalent  to  payment.  2  Dan.  Neg. 
Inst,  par.  1604;  Metropolitan  Bank 
V.  Jones,  137  111.  634,  27  N.  B.  533, 
12  L.  R.  A.  492,  31  Am.  St.  Rep. 
403.  The  important  question  in  the 
case  at  bar  is  whether  certification 
of  a  check  on  presentation  by  the 
indorsee,  though  there  are  no  funds, 
is  equivalent  to  payment.  As  a  gen- 
eral proposition  we  think  it  is  as 
to  both  the  maker  and  indorser.  2 
Dan.  Neg.  Inst.,  par.  1604,  and  cases 
cited.  The  rules  of  the  law  mer- 
chant are  inflexible  and  arbitrary, 
and  necessarily  so.  An  indorser  may 
always  insist  that  the  conditions 
requisite  to  make  his  undertaking 
enforceable  shall  be  strictly  com- 
plied with;  namely,  presentation  for 
payment  and  notice  of  dishonor.  As 
to  the  indorsee  the  certifying  bank 
is  bound  by  estoppel  where  he  has 


changed  his  position  or  parted  with 
value  on  the  strength  of  the  certifi- 
cation. Brooklyn  Trust  Co.  v.  Toler, 
138  N.  Y.  675,  34  N.  E.  515.  In  this 
case  the  plaintiff  parted  with  no 
value  before  certification,  but  re- 
lying upon  the  certification  trans- 
ferred $50,000  to  New  York.  We 
find  then  as  between  the  plaintiff 
and  the  bank  there  was  a  new  and 
enforceable  contract  created  by  the 
certification  of  the  check.  Ordinar- 
ily there  would  be  no  question  but 
that  such  condition  released  the  in- 
dorsers."  First  National  Bank  v. 
Currie  (Mich.  1907),  110  N.  W.  499. 
The  court  distinguishes  Irving  Bank 
V.  Wetherald,  36  N.  Y.  335. 

"  Beauregard  v.  Knowlton,  156 
Mass.  395,  31  N.  E.  389. 

«  Fletcher  v.  Pierson,  69  Ind.  281, 
35  Am.  Rep.  214. 

Examine  the  following-  cases: 

Illinois. — Thom  v.  Sinsheimer,  66 
111.  App.  555,  1  Chic.  L.  J.  693. 

Indiana. — Culver  v.  Marks,  122 
Ind.  554,  7  L.  R.  A.  489,  23  N.  E. 
1086. 

Iowa. — Hamlin  v.  Simpson,  105 
Iowa  125,  15  Bkg.  L.  J.  343,  74  N.  W. 
906,  44  L.  R.  A.  397. 

New  York. — Carroll  v.  Sweet,  37 
N.  Y.  St.  R.  868,  27  N.  E.  763. 

Oregon. — First  National  Bank  v. 
Linn  County  National  Bank,  30 
Oreg.  296,  47  Pac.  614. 

^^  Merchants'  National  Bank  v. 
State  National  Bank,  10  Wall.    (U. 


749  PROTEST — NOTICE   OF    NON-PAYMENT.  [§§'   587-589 

§  587.  Protest. — Formal  protest  of  a  check  is  held  to  be  unneces- 
sary to  charge  the  indorser,  such  check  being  considered  as  an  inland 
bill  f^  although  there  may  be  a  formal  protest  under  a  statutory  pro- 
vision.^^ 

§  588.  Notice  of  non-payment. — It  is  held  that  demand,  refusal  to 
pay,  and  notice  of  non-payment  are  necessary  to  render  the  drawer 
liable  where  he  has  not  stopped  payment  of  the  check.^° 

§  589.  "Waiver  of  presentment  for  payment. — The  drawer's  state- 
ments and  acts  may  be  such  as  to  constitute  a  waiver  of  presentment 
for  payment.  ^^ 

S.)  47,  per  Swayne,  J.,  citing  Boehm  poration  de  Limoilon,  17  Rap.  Jud. 

V.    Sterling,    7    Tenn.   430;    Keen   v.  Quebec,  C.  S.  211.    See  §  528  herein 

Beard,  8   C.  B.  N.  S.  373;    Serle  v.  as  to  inland  bills. 

Norton,  2  Mood.  &  Rob.  404n;  Alex-  '^German   National   Bank  v.   Bea- 

ander    v.    Berchfield,     7    Mann.    &  trice  National  Bank,  63  Neb.  246,  88 

Gran.   1067;    Grant  on   Banking  89,  N.  W.  480. 

90.  =«Ross   V.   Saron,    93   N.   Y.   Siipp. 

"Wood    River    Bank    v.    Omaha  553.    See  Garthwaite  v.  Bank  of  Tu- 

First   National   Bank,    36   Neb.    708,  lare,  134  Cal.  237,  66  Pac.  326. 

55  N.  W.  239,  9  Bkg.  L.  J.  11;    La  "  Compton  v.   Gilman,   19  W.  Va. 

Banque  Jacques  Cartier  v.  La  Cor-  312,  42  Am.  Rep.  776. 


CHAPTER   XXVII. 

SET-OFF,  RECOUPMENT  AND  COUNTERCLAIM. 

Subdivision    I.     General  rule  as  to §§  590-617 

Subdivision  II.    Availability  in  respect  to  parties  and 

holders  other  than  maker  or  drawer  §§  618-640 

Subdivision  I. 

GENERAL   RULE   AS   TO. 


Sec. 

590.  What  law  governs. 

591.  What  essential  to  allowance  of 

a  set-off. 

592.  Right    to    set    off— Must    have 

been   acquired  prior  to  com- 
mencement of  suit. 

593.  Where    claim    or    demand    ac- 

quired   subsequent   to    trans- 
fer. 

594.  Where  claimed   set-off  was  ac- 

quired after  notice  of  assign- 
ment. 

595.  A  mere  contingent  liability  is 

not  available. 

596.  What  may  be  set  off  generally 

— Particular    claims    or    de- 
mands. 

597.  Set-off  of  damages  recoverable 

in  an  action  of  tort. 

598.  Same    subject,    continued — Ap- 

plication of  rule. 

599.  Damages   arising  ex  contractu 

and  under  same  contract. 

600.  Damages   arising   ex   contractu 

but  under  different  contract. 

601.  Damages    for    breach    of    war- 

ranty or  covenant. 


Sec. 

602.  Same  subject — In  action  by  an 

innocent  holder. 

603.  Money  paid  to  clear  land  of  in- 

cumbrance. 

604.  Of  bank  deposits — Rule  as  to. 

605.  In   action   by   depositor   to    re- 

cover bank  deposit. 

606.  Of  bill  or  note. 

607.  Same     subject — Essentials     to 

availability. 

608.  Same      subject — Essentials     to 

availability,  continued. 

609.  Same   subject — Where   a  fraud 

on  plaintiff. 

610.  Same    subject — As   affected   by 

statutes  or  laches. 

611.  Same  subject — Want  of  title  to 

notes  will  preclude. 

612.  Of  bills  or  notes  of  bank. 

613.  Where      collateral      has     been 

given. 

614.  Usurious   interest — Rule   as   to 

recoupment  of. 

615.  Same     subject — Right     as     af- 

fected by  federal  statutes. 

616.  Right  of  set-off  generally  as  af- 

fected by  statutes. 

617.  Waiver  of  right  to  set  off. 


§  590.  What  law  governs. — ^Resort  nnist  be  had  to  the  law  of  the 
fonmi,  and  not  to  that  of  the  place  in  which  commercial  paper  was 
executed,  for  the  purpose  of  determining  the  availability  of  a  set-off 

750 


751  WHAT   ESSENTIAL   TO   ALLOWANCE   OF    SET-OFF.  [§    591 

in  an  action  thereon.^  "Set-off  is  a  mode  of  defense,  essentially,  not 
a  part  connected  with  the  remedy,  which,  according  to  the  well-settled 
and  universal  doctrine,  is  governed  by  the  law  of  the  forum,  and  not 
by  the  lex  loci  contractus.  The  forms  of  remedies,  the  modes  of  pro- 
ceeding and  the  execution  of  judgments  are  to  be  regulated  solely  and 
exclusively  by  the  laws  of  the  place  where  the  action  is  instituted."^ 

§  591.  What  essential  to  allowance  of  a  set-off. — Where  a  defend- 
ant seeks  to  avail  himself  of  a  set-off,  it  is  decided  that  it  is  essential 
to  its  allowance  that  the  demand  or  claim  be  one  which  is  due  between 
the  same  parties  and  in  the  same  right.^  So,  in  an  action  against  the 
maker  of  a  promissory  note,  he  cannot  plead  as  a  set-off  an  amount 
due  from  the  plaintiff  to  a  society,  of  whose  funds  the  defendant,  as 
an  officer,  is  custodian.*  And  equities  between  the  parties  to  a  note 
arising  from  other  and  independent  transactions  between  them,  are 
held  not  available  against  the  note  in  the  hands  of  an  assignee,^  So, 
in  an  action  by  an  indorsee  against  the  drawee  of  a  bill  of  exchange, 
it  was  decided  that  a  demand  due  from  the  payee  to  a  partnership  of 
which  the  defendant  was  a  member,  if  available  as  a  set-off  in  any 
case,  was  not  so  available  without  proof  that  the  other  partners  con- 
sented to  such  use  of  the  claim  and  that  plaintiff  had  knowledge  of 
their  consent.®  But  where  the  claim  sued  on,  as  in  the  case  of  a  note," 
and  the  one  set  up  in  the  answer  are  liquidated  demands,  it  is  not 
necessary  to  enable  defendant  to  set  the  latter  up  against  the  demand 
sued  on  that  there  should  have  been  an  agreement  to  that  effect.'^ 

^  Mineral  Point  R.  Co.  v.  Barron,  Pennsylvania. — U  n  i  o  n    National, 

83   III.   365;    Bank  of  Galliopolis  v.  Bank  v.  Cannonburgh  Iron  Co.   (Pa. 

Trimble,  6  B.  Mon.  (Ky.)  599;  Gibbs  Sup.),  6  Atl.   577,  23   Cent.  Law  J. 

V.  Howard,  2  N.  H.  296;  Second  Na-  526. 

tional  Bank  v.  Hemingray,  31  Ohio  See,  also,  Holland  v.  Makepeace,  8 

St.  168.    But  see  Bliss  v.  Houghton,  Mass.  418. 

13  N.  H.  126.  ^  Lewis  v.  Pickering,  58   Neb.   63, 

■  Bank  of  Galliopolis  v.  Trimble,  6  78  N.  W.  368. 

B.  Mon.  (Ky.)  599,  per  Breck,  J.  =  Ryan  v.  Chew,  13  Iowa  589;  Ship- 

^  Alabama. — Manning  v.  Maroney,  man  v.  Robbins,  10  Iowa  208;  Cald- 

87  Ala.   563,  6   So.  343,  13  Am.   St.  well    v.    Cook,    5    Litt.     (Ky.)    180; 

Rep.  67.  Bowman  v.  Halstead,  2  A.  K.  Marsh. 

Indiana. — Proctor  v.  Cole,  104  Ind.  (Ky.)  200,  12  Am.  Dec.  380. 

373,  3  N.  E.  106;   Parks  v.  Zeek,  53  "  Manning  v.  Maroney,  87  Ala.  563, 

Ind.  221.  6  So.  343,  13  Am.  St.  Rep.  67. 

Mississippi. — Walker   v.    Hall,    66  '  Ruzeoski   v.   Wilrodt    (Tex.  Civ. 

Miss.  390,  6  So.  318.  App.  1906),  94  S.  W.  142. 

North  Carolina. — Roberts  v.  Jones, 
1  Murph.  (N.  C.)  353. 


§  592]      SET-OFF,  RECOUPMENT  AND  COUNTERCLAIM.         753 

§  592.  Eight  to  set-off — Must  have  been  acquired  prior  to  com- 
mencement of  suit. — One  of  the  essentials  to  the  right  of  a  person  to 
avail  himself  of  a  set-off  in  an  action  against  him  on  commercial 
paper,  is  that  the  claim  or  demand  which  he  seeks  to  set  ofE  should 
have  been  acquired  by  him  prior  to  the  commencement  of  the  suit,  for 
if  it  appear  that  it  was  acquired  subsequent  thereto,  he  cannot,  as  a 
general  rule,  avail  himself  of  the  same.^  So  it  is  held  in  an  early  case 
in  New  Hampshire  that  if  the  defendant,  after  plaintiff's  writ  is  made 
out  and  placed  in  an  officer's  hands,  on  the  same  day  and  before  serv- 
ice, take  by  indorsement  the  promissory  note  of  the  plaintiff,  it  cannot 
be  allowed  as  a  set-off.^  And  where  a  person  had  possession  of  a 
sealed  note  before  suit  was  brought  against  him,  but  it  was  not  trans- 
ferred to  him  until  after  suit  was  brought,  it  was  held  that  he  could 
not  set  it  off  against  the  plaintiff,  though  the  assignment  to  him  was 
dated  back  before  the  writ  was  issued.^*^  And  this  rule  has  been  held 
to  apply,  though  the  plaintiff  was  an  indorsee  after  maturity.  ^^  But 
it  has  been  decided  that,  in  a  suit  against  a  firm,  it  is  proper,  on  a  bill 
in  equity  by  the  firm  sued,  to  set  off  the  note  of  a  partner  of  the  debtor 
firm  made  to  the  plaintiff,  by  whom  it  was  sold  and  assigned  to  a 
third  person,  who  transferred  it  to  the  defendants,  where  it  was 
alleged  that  the  maker  of  such  note  and  the  plaintiff  suing  at  law 

^Illinois. — Kelly  v.  Garrett,  1  Gil-  627.  The  court  said:  "The  corn- 
man  (111.)  649.  plaint    shows    that   the   promissory 

Indiana. — Hadley  v.  Wray,  76  Ind.  note,    upon    which    the    action    is 

476.  brought,   was   indorsed   to   plaintiff 

Minnesota. — Northern    Trust    Co.  after    maturity.     This    entitled    de- 

V.  Hiltgen,  62  Minn.  361,  64  N.  W.  fendant  to  set  up  against  it  any  de- 

909.  fense   which   he    could    have    inter- 

Missouri. — Frazier    v.    Gilson,    7  posed    against    the    assignor,    and 

Mo.  271.  which  existed  at  the  time  or  before 

New  York,. — Jefferson  Co.  Bank  v.  notice   of  the   assignment.    The  in- 

Chapman,  19  Johns.   (N.  Y.)   322.  stitution   of  the  action  was  notice 

Pennsylvania. — Speers  v.  Sterrett,  of  the  assignment  of  the  note,  and 

29  Pa.  St.  192.  yet   defendant   seeks  to   set   up   as 

South  C arolin a. — Godley  v.  against  plaintiff  a  defensive  counter- 
Barnes,  13  Rich.  (S.  C.)  161.  claim  against  the  assignor,  which, 

Compare  Aldrich   v.   Campbell,   4  according   to   his  sworn   statement. 

Gray    (Mass.)    284;    Gaines   v.  ,Sal-  'has  arisen  since  the  commencement 

mon,  16  Tex.  311.  of  this   action,   and   since   the   for- 

"  Hardy  v.  Corliss,  21  N.  H.  356.  mer  answer  of  defendant  iwas  filed. 

^"Bishop  v.  Tucker,  4  Rich.  L.  (S.  This  he  cannot  be  permitted  to  do." 

C.)  178.  Per  Searls,  C. 

"  Wood  V.  Bush,  72  Cal.  22,  13  Pac. 


753    CLAIM  OR  DEMAND  SUBSEQUENT  TO  TRANSFER.   [§§  593,  594 

were  insolvent,  the  court  declaring  that  the  firm  assigning  the  note 
were  liable  upon  their  indorsement,  and  being  insolvent,  a  court  of 
equity  would  allow  such  set-off.^^ 

§  593.     Where  claim  or  demand  acquired  subsequent  to  transfer. — 

In  actions  on  commercial  paper  it  has  also  been  generally  determined 
that  it  is  essential  to  the  availability  of  a  set-off  that  it  should  have 
been  acquired  by  the  defendant  prior  to  the  transfer.  And  this  is 
held  to  be  true,  even  though  the  action  be  by  a  purchaser  after  matur- 
ity.^^  There  are,  however,  some  cases  in  which  it  is  decided  that  the 
maker  of  a  note  may,  in  an  action  against  him  by  the  indorsee  or 
assignee,  avail  himself  of  the  right  to  set  off  any  claim  or  demand 
which  existed  against  the  payee  prior  to  notice  of  the  transfer  or 
assignment.^*  But  in  one  of  the  states  in  which  it  was  so  decided  it 
was  also  held  that  in  an  action  on  a  note  which  is  payable  to  bearer 
the  maker  cannot,  as  against  the  holder  thereof,  avail  himself  of  such 
a  set-off  where  it  does  not  appear  that  the  maker  gave  notice  thereof 
to  the  purchaser.  ^^ 

§  594.  Where  claimed  set-off  was  acquired  after  notice  of  assign- 
ment.— It  is  a  generally  accepted  rule  that  where  a  maker  of  com- 
mercial paper  has  received  notice  of  an  assignment  or  transfer  thereof 
to  a  bona  fide  holder,  he  can  not,  in  an  action  on  such  paper,  avail 
himself,  as  against  such  holder,  of  a  right  to  set  off  any  claim  or 
demand  against  the  payee,  indorser  or  assignor  which  was  acquired 
subsequent  to  the  notice  of  assignment  or  transfer.^*'  So,  in  an  action 
upon  a  note  brought  by  the  payee,  for  the  use  of  his  assignee  against 
the  maker — the  note  having  been  assigned,  but  not  indorsed,  after 

"Hall  v.  Kimball,  77  111.  161.  Nebraska.— Davis     v.     Neligh,     7 

"  United   States.— Fossitt   v.    Bell,  Neb.  84. 

Fed.  Cas.  No.  4958   (4  McLean  427).  New  Hampshire. — Bliss  v.  Hough- 

Alabama.—Cra.yton    v.    Clark,    11  ton,  13  N.  H.  126. 

Ala.  787.  New   York. — Fumiss   v.   Gilchrist, 

Indiana..— Weader    v.    Bank,    126  1  Sandf.   (N.  Y.)  53. 

Ind.  Ill,  25  N.  E.  887;    Johnson  v.  Vermont. — Shef-wood    v.    Francis, 

Amana  Lodge,  92  Ind.  150.  11  Vt.  204;  Parker  v.  Kendall,  3  Vt. 

Massachusetts. — Backus  v.  Spaul-  540. 

ding,  129  Mass.  234.  Virginia. — Davis     v.      Miller,     14 

Minnesota. — Linn     v.     Rugg,     19  Gratt.  (Va.)  1. 

Minn.  181   (Gil.  145).  "Stewart  v.  Anderson,  6   Cranch 

Mississippi. — Northern     Bank     v.  (U.  S.)    203;  King  v.  Conn,  25  Ind.. 

Kyle,  7  How.   (Miss.)  360.  425;  Martin  v.  Trobridge,  1  Vt.  477. 

"Parker  v.  Kendall,  3  Vt.  540. 
Joyce  Defenses — 48. 


§    594]  SET-OFF,    RECOUP]"'ENT   AND    COUNTERCLAIM.  75-t 

due — and  it  not  appearing  that  the  payee  was  insolvent  when  he  made 
the  assignment,  it  has  heen  decided  that  the  maker  cannot  set  off 
money  paid  b}^  him  as  surety  for  the  payee,  after  he  received  notice  of 
the  assignment,  although  the  money  paid  was  upon  a  liability  entered 
into  before  the  assignment,  but  which  had  not  been  reduced  into  a 
judgment  against  the  surety  before  notice  of  the  assignment  was 
given. ^^  And  it  is  decided  in  an  early  case  that  a  demand  for  un- 
liquidated damages,  arising  from  a  breach  of  covenant  of  title,  may 
be  set  off  in  equity  against  a  note  founded  on  an  independent  consid- 
eration, when  the  vendor  is  dead  and  his  estate  insolvent,  but  to  make 
it  available  as  a  set-off  against  an  equitable  assignee  of  the  note  it 
must  be  shown  to  have  accrued  before  notice  of  the  assignment.^* 
And  where  a  note  held  by  a  bank  debtor  against  a  third  person  was 
transferred  by  the  holder  to  the  bank  as  collateral  security  and  a 
surety  who  had  paid  the  debt  to  the  bank  took  from  it  an  assignment 
of  such  note,  it  was  decided,  in  an  action  on  the  note  by  the  surety,, 
that  the  maker  could  not  set  off  a  demand  against  the  payee,  or  prin.- 
cipal  debtor,  which  had  been  acquired  subsequent  to  the  notice  of  the 
transfer  to  the  bank,  and  that  the  assignment  to  the  surety  related 
back  to  the  time  when  the  note  was  transferred  to  the  bank,  and 
clothed  the  assignee  with  the  rights  then  held  by  the  bank,  against 
which  subsequent  equities  could  not  be  asserted.^'' 

^^  United   States. — H  arrisburg  Pennsiflvania. — Phillips    v.    Bank 

Trust  Co.  V.    Shufeldt,   31   C.   C.  A.  of  Lewiston,  18  Pa.  St.    (6  Harris) 

190,  87  Fed.  669,  under  2  Hill's  Code  394. 

Wash.,  §  806.  Virginia. — Ritchie     v.     Moore,     5 

Alabama. — Manning    v.    Maroney,  Munf.  (Va.)  388,  7  Am.  Dec.  688. 

87  Ala.   563,   6  So.   343,   13  Am.  St.  "  Follett  v.  Buyer,  4  Ohio  St.  5S6. 

Rep.  67;    Wray  v.  Furniss,  27  Ala.  The  court  said:    "The  general  prin- 

471;  Crayton  v.  Clark,  11  Ala.  787.  ciple,   that,  as   against  a   bona  fide 

California. — Wood    v.     Brush,    72  assignee,  there  can  be  no  set  off  of 

Cal.  224,  13  Pac.  627.  demands    upon     the     assignor,     ac- 

Indiana. — Johnson  v.  Amana  quired  after  notice  of  the  assign- 
Lodge,  No.  82,  Independent  Order  ment,  and  that  a  court  of  law  is 
of  Odd  Fellows,  92  Ind.  150;  Gold-  fully  competent  to  protect  the  as- 
thwaite  v.  Bradford,  36  Ind.  149.  signee,     is     certainly     well     estab- 

Kentucky. — Small  v.  Browder,  11  lished."     Per    Thurman,    J.,    citing 

B.     Mon.     (Ky.)     212;     Wathen    v.  Pancoast    v.    Ruffin.    1     Ohio    381; 

Chamberlain,    8    Dana    (Ky.)     164;  Weakly  v.  Hall,  13  Ohio  174. 

Hunt  v.  Martin,  2  Litt.   (Ky.)   82.  ^^Wray's    Adm'rs    v.    Furniss,    27 

Louisiana. — Norwood  v.  Pettis,  10  Ala.  471. 

La.  Ann.  259.  ^'  Lewis  v.  Faber,  65  Ala.  460. 

Massachusetts. — Backus  v.  Spauld- 
ing,  129  Mass.  234. 


I 


iH 


755  WHAT   MAY   BE   SET   OFF  GENERALLY.         [§§    595,    596 

§  595.  A  mere  contingent  liability  is  not  available. — It  is  a  gen- 
eral rule  of  pleading  that  no  matter  of  defense  arising  after  action 
brought  can  be  properly  pleaded  in  bar  of  the  action  generally.  It 
follows,  therefore,  that  where  a  defendant  seeks  to  avail  himself  of  a 
set-off,  the  claim  or  demand  relied  upon  for  that  purpose  must  be 
one  in  respect  to  which  he  could  have  maintained  an  action  thereon 
at  the  time  of  the  commencement  of  the  suit  against  him,  and  that  he 
cannot  avail  himself  of  a  liability  which  is  merely  contingent  and  has 
not  become  fixed. ^°  So  it  has  been  decided  that  in  an  action  upon 
promissory  notes,  other  notes  indorsed  by  the  plaintiff  and  held  by 
the  defendant,  which  did  not  mature  until  after  the  suit  was  brought, 
cannot  be  set  off  against  the  notes  in  suit.^^  It  has,  however,  been 
decided  that  where  a  joint  undertaking  has  been  entered  into,  but 
before  the  maturity  or  payment  one  of  the  co-obligors  makes  an 
assignment  for  the  benefit  of  his  creditors,  and  the  other  afterwards 
pays  the  joint  debt,  the  latter  may,  in  an  action  against  him  by  the 
assignees  of  a  note  executed  by  him  to  the  assignor,  his  co-obligor,  set 
off  the  latter's  aliquot  part  of  the  joint  debt,  though  it  was  declared 
in  this  case  that  the  rule  would  probably  be  different  if  the  action 
were  by  an  assignee  for  value. ^^ 

§  596.  What  may  be  set  off  generally — Particular  claims  or  de- 
mands.— In  an  action  on  a  note  it  has  been  decided  that  the  defend- 
ant may  avail  himself  of  a  set-off  arising  from  an  agreement  entered 
into  for  a  valid  consideration  to  pay  to  the  defendant  the  debt  of  a 
third  person  owing  to  him.^^  And  where  services  have  been  rendered 
by  the  defendant  to  the  plaintiff,  a  bill  therefor  has  been  held  to  be 
a  proper  matter  of  set-off.^'*  And  it  has  also  been  decided  that  where 
a  person  has  been  induced  to  execute  a  note  by  false  representations 
of  the  payee,  damages  resulting  from  such  false  representations  may 
be  set  off  in  an  action  on  the  note.-^  So  it  has  been  held  that  a 
defendant  may  so  avail  himself  of  an  open  account  which  has  been 
transferred  to  him  by  a  third  party.^*'     And  the  defendant  may,  in 


^oWood  v.  Steele,  65  Ala.  436 
Houghton  V.  Houghton,  37  Me.  72 
Hauston    v.    Fellows,    27    Vt.    634 


"  Graves  v.  Shulman,  59  Ala.  406. 
=*Briggs  V.  Moore,  14  Ala.  433. 
==  Strickland    v.    Graybill,    97    Va. 
Lamb  v.  Pannell,  28  W.  Va.  663.  602,  34  S.  E.  475. 

^  Hotchkiss  v.  Roehm,  181  Pa.  St.         ="  Blount  v.  Rick,  107   Ind.  238,  5 
65,  37  Atl.  119.  N.    E.   898,   8   N.    E.   108;    Ashby  v. 

=^  Chenault  v.  Bush,  84  Ky.  528,  2     Carr,  40  Miss.  64. 
6.  W.  160. 


§■   597]  SET-OFF,   RECOUPMENT,    COUNTERCLAIM,  756 

some  cases,  be  entitled  to  a  judgment  in  his  favor  for  the  amount  of  the 
set-off  in  excess  of  the  claim  of  the  plaintiff.^^  But  in  the  case  of  a 
certified  check  it  has  been  held  that  the  banker  upon  whom  it  is  drawn 
cannot  set  off  against  such  check  when  it  is  presented  the  amount  of 
an  indebtedness  to  him  from  the  holder  of  the  instrument.^®  And 
where  a  note  is  given  for  the  purchase  price  of  a  machine  the  maker 
cannot  avail  himself  of  the  breach  of  a  subsequent  promise  of  an 
agent  of  the  seller  to  repair  the  same.^"  Again  in  an  action  by  a  bank 
upon  a  note  given  to  it,  it  has  been  decided  that  the  defendant  cannot 
avail  himself  by  way  of  set-off  of  stock  of  the  bank.^° 

§  597.     Set-off  of  damages  recoverable  in  an  action  of  tort. — It  is 

a  general  rule  that  in  an  action  upon  commercial  paper  the  defendant 
cannot  avail  himself  of  a  set-off  of  damages  which  are  recoverable 
in  an  action  of  tort.^^  So  where  the  defendant  alleged  that  the  notes 
were  given  in  consideration  of  the  purchase  price  of  plaintiff's  interest 
in  partnership  property  and  that  before  the  maturity  of  the  notes 
plaintiff  entered  the  partnership  premises  and  forcibly  took  posses- 
sion of  the  business  and  property  of  said  partnership  and  had  since 
retained  possession,  and  it  was  contended  by  the  defendant  that  the 
alleged  tortious  acts  of  the  plaintiff  were  equivalent  to  and  should  be 
treated  as  a  total  failure  of  the  consideration  for  which  the  notes 
were  given,  the  court  held  that  such  tortious  act  grew  out  of  a  sep- 
arate transaction  and  that  damages  arising  from  such  act  could  not  be 
recouped  by  way  of  equitable  defense.^ ^ 

=^Tuck  v.  Tuck,  5  Mees.  &  W.  109;  kansas  City  v.  Hasie,  57  Kan.  754, 

Moore  v.  Butlin,  7  Adol.  &  El.  595.  48  Pac.  22. 

^  Brown  v.  Leckie,  43  111.  497.  Maine. — Winthrop    Sav.    Bank   v. 

'^Buntain  v.  Button,  21  111.  190.  Jackson,  67  Me.  570. 

^^  Harper     v.     Calhoun,     7     How.  Missouri. — Brake   v.    Corning,   19 

(Miss.)    203.    See,  also,  Whittington  Mo.  125. 

V.  Farmers'  Bank,  5  Har.  &  J.  (Md.)  Texas. — Riddle    v.    McKinney,    67 

489.  Tex.  29,  2  S.  W.  748. 

*^  United  States. — Central  Ohio  R.  Virginia. — Harrison   v.   Wortham, 

Co.  v.   Thompson,   2    Bond    (U.    S.)  8  Leigh.  (Va.)  296. 

296,  Fed.  Cas.  No.  2550.  Wisconsin. — See       Anderson       v. 

AZaftowia.— Pulliam    v.    Owen,    25  Johnson,  106  Wis.  218,  82  N.  W.  177. 

Ala.  492.  But  compare  Cato  v.  Phillips,  28 

Illinois. — Lyon  v.   Bryant,   54    111.  Tex.  101. 

App.  331.  '=Roth  V.  Reiter,  213  Pa.  St.  400, 

J??fZia«o.— Blue     v.     Capital     Nat.  65  Atl.  932.  The  court,  per  Elkin,  J.. 

Bank,  145  Ind.  518,  43  N.  E.  655.  said:     "It  is  conceded  in  this  case, 

Kansas. — First  Nat.  Bank  of  Ar-  and  it  is  the  law,  that  in  an  action 


757  DAMAGES  ATIISING  EX   CONTEACTU.  [§§    598,   599 

§  598.  Same  subject,  continued — Application  of  rule. — In  an  ac- 
tion upon  a  promissory  note  for  borrowed  money  damages  caused  by 
a  slander  upon  the  credit  of  the  maker  cannot  be  made  the  subject  of 
a  counterclaim.^^  And  where  property  is  pledged  as  collateral  security 
to  a  note  it  is  decided  that  damages  arising  from  the  negligence  of  the 
plaintiff  in  its  care  and  custody  of  the  land  are  not  a  subject  of  re- 
coupment.^* Likewise  unliquidated  damages  arising  from  negligence 
of  the  plaintiffs  in  a  matter  in  which  they  acted  as  agents  of  the  de- 
fendant is  not  a  subject  of  set-off.^^  Nor  can  unliquidated  damages 
caused  by  the  act  of  the  plaintiff  in  selling  property  of  the  defendant, 
in  violation  of  a  trust,  for  less  than  its  value,  be  pleaded  by  the  de- 
fendant in  an  action  against  him  on  a  promissory  note  given  for  the 
purchase  of  other  property..^®  But  it  has  been  decided  that  the  de- 
mand for  the  amount  of  a  note  received  for  collection  and  converted  is 
not  unliquidated  damages,  and  is  subject  of  set-off.^^  And  it  has  been 
decided  in  an  action  of  debt  that  an  unliquidated  demand  for  dam- 
ages for  conversion  of  goods  may  be  used  as  a  set-off  against  a  non- 
resident.^^ 

§  599.    Damages  arising  ex  contractu  and  under  same  contract. — 

In  an  action  upon  a  bill  or  note  damages  arising  from  the  same  con- 
tract in  which  the  instrument  sued  on  was  given  and  which  result 
from  a  failure  of  consideration  or  a  non-performance  of  Ihe  obligations 
of  the  contract  are,  as  a  general  rule,  available  as  a  set-off.^**   So  it  is 

on  a  contract,  unliquidated  damages  sible  that  there  was  a  tort  corn- 
arising  out  of  a  tort  independent  of,  mitted  against  the  malter  of  this 
and  disconnected  with  the  transac-  note  by  the  plaintiff  in  this  case  but 
tion  sued  on,  cannot  be  recouped  by  it  was  not  a  part  of  this  transaction 
way  of  equitable  defense.  This  rule  and  therefore  cannot  be  used  to  ex- 
of  law  needs  no  citation  of  author-  tinguish  this  indebtedness.' " 
ities  to  support  it.  It  is,  however,  ^  Blue  v.  Capital  Nat.  Bank,  145 
earnestly  contended  that  the  defend-  Ind.  518,  43  N.  E.  655. 
ant  in  the  present  case  had  a  right  ^*Winthrop  Sav.  Bank  v.  Jackson, 
to  recoup  the  damages  arising  from  67  Me.  570. 

the  alleged  tortious  act  against  the  '°  Brake  v.  Corning,  19  Mo.  125. 

amount  of  the  notes,  because  said  ^"Riddle  v.  McKinney,  67  Tex.  29, 

tortious  act  was  directly  connected  2  S.  W.  748. 

with   the   transaction   in   considera-  ^^  Gunn's  Adm'r  v.   Todd,   21   Mo. 

tion  of  which  the  notes  were  given.  303. 

The   appellee   asserts  that  the   tor-  ^^  Abernathy  &   Pinegar  v.   Myer- 

tious  act  complained  of  grew  out  of  Bridges    Coffee    &    Spice    Co.    (Ky. 

a    separate     transaction,     and     the  C.  A.  1907),  100  S.  W.  862. 

court  below  has  so  found  in  the  fol-  ^Alabama. — Foster  v.   Bush,    104 

lowing  language:    'It  appears  pes-  Ala.  662,  16  So.  625. 


§  600] 


SET-OFF,   EECOUPMENT,   COUNTERCLAIM. 


758 


declared  in  a  late  ease  in  "Wisconsin  that  damages  arising  from  fraud, 
mistake,  partial  failure  of  consideration,  or  non-performance  of  some 
of  the  contract  obligations  may,  in  an  action  on  a  note  given  to 
evidence  the  consideration,  be  counterclaimed  by  way  of  recoupment, 
such  practice  being  established  to  avoid  circuity  of  action  and  multi- 
plicity of  suits  when  such  a  claim  can  be  adjusted  without  depriving 
any  of  the  parties  of  their  substantial  rights.***  So  in  a  recent  case  in 
Texas  it  has  been  decided  that  though  a  counterclaim  to  a  note  sued 
on  is  for  unliquidated  damages  yet  it  is  properly  considered  where  it 
arises  out  of  the  same  transaction  in  which  the  note  declared  on  was 
executed.*^  So,  where  notes  were  given  for  an  interest  in  a  partnership 
business  it  was  decided  in  an  action  on  the  notes  that  damages  arising 
by  reason  of  misstatement  in  the  inventories  on  the  basis  of  which  the 
sale  was  made  were  available  as  a  counterclaim.*^ 

§  600.   Damages  arising  ex  contractu  but  under  different  contract. — 
A  defendant  cannot,  in  an  action  on  a  bill  or  note,  set  off  unliquidated 


California. — Snow  v.  Holmes,  71 
Cal.  142,  11  Pac.  856. 

Maryland. — Haman  v.  Bannon,  71 
Md.  424,  18  Atl.  862. 

Massachusetts. — Magee  Furnace 
Co.  v.  Boston-  Soapstone  Furnace 
Co.,  124  Mass.  409;  Stacy  v,  Kemp, 
97  Mass.  166. 

Rhode  Island. — Hill  v.  Southwick, 
9  R.  I.  299. 

Pennsylvania. — Hubler  v.  Tamney, 
5  Watts  (Pa.)  51. 

Texas. — Tyson  v.  Jackson  Bros. 
(Tex.  Civ.  App.  1905),  90  S.  W.  930. 

*"  Steckbauer  v.  Leykom  (Wis. 
1907),  110  N.  W.  217. 

*i  Tyson  v.  Jackson  Bros.  (Tex. 
Civ.  App.  1905),  90  S.  W.  930. 

^=  Steckbauer  v.  Leykom  (Wis. 
1907),  110  N.  W.  217.  The  court, 
per  Siebecker,  J.,  said  in  this  case: 
"If  the  statements  of  the  inventory 
were  in  fact  untrue,  though  the 
party  making  them  at  the  time  be- 
lieved them  true,  it  is  a  legal  wrong 
for  which  relief  is  awarded,  upon 
the  ground  that  the  party  making 
them  must  be  held  to  respond  for 


the  injury  done  in  assuming  to 
know  and  to  represent  as  facts 
things  which  did  not  actually  exist, 
but  on  which  the  other  party  relied 
to  his  damage  in  making  the  pur- 
chase. Its  operation  is  in  the  nature 
of  a  constructive  fraud.  We  are  not 
clear  whether  the  trial  court  re- 
garded the  evidence  in  this  light  or 
whether  the  stipulation  of  the  par- 
ties was  held  to  be  an  agreement 
that  there  was  a  partial  failure  of 
consideration,  and  that  an  allow- 
ance of  damages  on  the  basis  of  the 
items  stipulated  was  to  be  made  de- 
fendants by  way  of  reduction  of 
plaintiff's  claim.  However  that  may 
be,  we  are  of  the  opinion  that  un- 
der the  evidence  and  facts  stipu- 
lated, the  court  was  justified  in  pro- 
ceeding upon  either  theory.  Which- 
ever one  was  followed  would  lead 
to  the  same  result,  namely,  that  de- 
fendants were  entitled  to  a  reduc- 
tion of  the  loss  they  sustained  by 
reason  of  the  errors  in  the  inven- 
tory." 


759  DAMAGES    FOR   BREACH    OF   WARRANTY   OR   COVENANT.      [§    601 

damages  which  arise  ex  contractu  but  under  a  contract  other  than 
that  in  which  the  instrument  sued  on  was  given,*^  So  where  an  actioii 
was  brought  on  a  promissory  note  which  was  secured  by  a  mortgage 
of  land  it  was  held  that  the  defendant  could  not  recoup  damages  which 
had  been  sustained  by  him  as  a  result  of  the  mortgagor's  negligence 
in  procuring  insurance  upon  a  house  covered  by  the  mortgage,  under 
an  agreement  made  subsequent  to  the  mortgage.^*  The  court  said  that 
the  agreement  as  to  insurance  was  not  "an  agreement  made  at  the  time 
the  note  was  given,  and  was  not  a  part  of  the  same  transaction.  It 
was  a  subsequent  independent  contract.  The  answer  sets  up,  there- 
fore, as  a  defense  to  the  note,  that  the  plaintiff  has  broken  another 
contract  which  he  entered  into  with  the  defendant,  by  which  he  has 
sustained  damages.  The  defendant  has  no  right  to  recoup  such  dam- 
ages, but  his  remedy,  if  he  has  any,  is  by  a  cross  action."*^  And  where 
an  action  was  brought  for  a  breach  of  a  contract  to  deliver  cans  and 
the  defendant  set  up  as  a  counterclaim  a  note  which  it  held  against 
the  plaintiff  it  was  decided  that  only  so  much  of  said  note  should  be 
allowed  as  a  counterclaim  as  represented  the  cost  of  cans  which  had 
been  delivered  under  the  contract  out  of  which  the  suit  arose,  and 
which  was  the  foundation  of  plaintiff's  claim.**'  It  has,  however,  been 
decided  that  in  equity  a  defendant,  who  has  acquired,  prior  to  notice 
of  transfer,  a  claim  for  unliquidated  damages  which  arose  out  of 
another  contract  may  avail  himself  of  the  same  by  way  of  set-off.*^ 

§  601.     Damages  for  breach  of  warranty  or  covenant. — In  an  ac- 
tion upon  a  promissory  note  given  in  payment  for  personal  property 

*' United     States. — Armstrong     v.  Tennessee. — Bolinger    v.    Gordon, 

Brown,  1   Wash.   C.   C.    (U,   S.)    43,  11    Humph.    (Tenn.)    61;    Moore   v. 

Fed.  Cas.  No.  542.  Weir,  3  Sneed  (Tenn.)  46. 

Alabama.— McCord  v.  Williams,  2  West      Virginia.— McSmithee      v. 

Ala.  71.  Feamster,  4  W.  Va.  673. 

Georgia.— Grimn    v.    Lawton,    54  But  see   Phillips  v.   Lawrence,   6 

Ga.  104.  Watts   &    S.    (Pa.)    150;    Kaskaskia 

Illinois. — Clause  v.  Press  Co.,  118  Bridge  Co.  v.  Shannon,  6  111.  15. 

111.  612,  9  N.  E.  201.  « Brighton     Five     Cent     Savings 

Indiana.— West  v.  Hayes,  104  Ind.  Bank  v.  Sawyer,  132  Mass.  185. 

251,  3   N.  B.   932;    Smith  v.   Smith,  ^=  Per  Morton,  J.,  citing  Sawyer  v. 

1  Ind.  476.  Wiswell,  9  Allen    (Mass.)    39;    Bart- 

Massac7iMse«s.— Loring  v.  Otis,  7  lett  v.  Farrington,  120  Mass.  284. 

Gray  (Mass.)   563;  Pitts  v.  Holmes,  ^^  California  Canneries  Co.  v.  Pa- 

10  Cush.   (Mass.)  92.  cific  Sheet  Metal  Co.,  144  Fed.  886. 

Missouri. — Pratt    v.    Menkins,    18  *^Wray  v.  Furniss,  27  Ala.  471. 
Mo.  158;  Mahan  v.  Ross,  18  Mo.  121. 


§    601]  SET-OFF,    EECOUPMENT,    COUNTERCLAIM.  760 

the  maker  of  such  note  may  introduce  evidence  of  a  breach  of  war- 
ranty in  respect  to  such  property  and  damages  for  such  breach  may  be 
allowed  by  way  of  recoupment  or  set-off.*^  And  though  a  person  exe- 
cutes notes  in  payment  for  personal  property  with  a  knowledge  of  a 
breach  of  warranty  in  respect  thereto,  yet  if  they  are  executed  in  re- 
liance upon  assurances  by  the  vendor  that  the  defect  will  be  remedied, 
the  former  may,  in  an  action  on  the  notes,  avail  himself  of  the  damages 
arising  from  such  breach  as  a  set-off,  where  the  vendor  has  not  fulfilled 
his  promise  to  remedy  the  defect.  Thus  it  has  been  so  held  where  ma- 
chinery was  sold  with  a  warranty  in  respect  thereto  and  after  its  de- 
livery the  agents  of  the  seller  came  to  the  purchaser  and  asked  him  to 
execute  notes  therefor  as  contemplated  by  the  order  on  which  the  ma- 
chinery was  sent  out,  wliich  the  purchaser  after  refusing  because  the 
machinery  was  not  such  as  was  required  by  the  warranty,  finally  did 
on  the  understanding  and  promise  of  the  agents  that  the  machinery 
should  be  made  to  operate  as  it  was  warranted  to  do,  which  promise 
was  not  performed.*^  And  it  has  been  decided  that  in  an  action  by  a 
mortgagee  against  a  mortgagor  upon  a  note  and  mortgage  given  for 
the  purchase  money  of  the  premises,  the  mortgagor  may,  as  a  defense, 
set  up  a  counterclaim  for  damages  by  reason  of  the  fraud  of  the  mort- 
gagee, in  concealing  from  him  material  facts  as  to  the  condition  and 
extent  of  the  premises.^''   But  it  is  decided  in  another  case  that,  in  an 

*^  Alabama. — Weaver      v.      Shrop-  title  passed  to  him  with,  a  warranty 

shire,  42  Ala.  230.  for  his  protection,  and  if  there  was 

Illinois. — ^Wheelock    v.    Barkeley,  a  breach  of  that  warranty  he  might 

138  111.  153,  27  N.  E.  942.  have  either  of  two  remedies:    First, 

Indiana. — Mills  v.  Rosenbaum,  103  after  running  and  accepting  the  ma- 

Ind.  152,  2  N.  E.  313.  chinery    he    would    be    entitled    to 

Massachusetts. — W  entworth  v.  maintain  an  action  for  damages,  in 

Dows,  117  Mass.  14.  which  he  might  recover  not  only  a 

Minnesota. — Rugland    v.    Thomp-  sum  equal  to  the  difference  between 

son,  48  Minn.  539,  51  N.  W.  604.  the  value  of  the  defective  thing  and 

New   York. — Loring  v.    Morrison,  one  of  its  kind  not  defective,  but  in 

15   N.   Y.   App.    Div.    498,   44    N.   Y.  which    he    might   also    recover    any 

Supp.  526.  such  sum  as,  under  the  rules  of  law, 

Tennessee. — Phoenix    Iron    Works  he    might   be   entitled   to   as   conse- 

V.  Rhea  (Tenn.  Ch.  App.),  38  S.  W.  quential     damage.      Second,     when 

1079.  sued  for  the  purchase  money  he  may 

Compare   Stockton   Savings  &   L.  set  up  the  defective  quality  of  the 

Soc.  V.  Giddings,  96  Cal.  84,  30  Pac.  thing   warranted    in   diminution   of 

1016.  the  price."  Per  Stayton,  J. 

**  Aultman  &  Taylor  Co.  v.  Hefner,  ^  Pierce   v.    Tiersch,    40   Ohio    St. 

67  Tex.  54.    The  court  said:    "The  168;   citing  Baughman  v.  Gould,  45 


761  ACTION    BY   INXOCENT   HOLDER.  [§§    602,    G03 

action  upon  a  note  given  for  the  price  of  land,  the  defendant  cannot  be 
allowed  to  prove,  by  way  of  recoupment  in  damages,  that  the  plaintiff 
made  false  representations  as  to  the  quality  and  productiveness  of  the 
soil,  and  the  number  of  acres  contained  within  boundaries  which  were 
truly  pointed  out,  by  which  the  defendant  was  deceived  and  thereby 
induced  to  make  the  purchase.^ ^  And  in  an  early  case  in  Ohio  it  is 
decided  that  in  that  state  the  covenant  against  incumbrances  is  a 
real  covenant  running  with  the  land  and  is  not  broken  until  eviction 
and  that  where  promissory  notes  were  given  in  part  payment  of  real 
estate,  conveyed  by  a  deed  containing  the  covenants  of  warranty  and 
freedom  from  incumbrances,  and  at  the  time  the  land  was  mortgaged 
for  more  than  its  value,  one  to  whom  the  notes  were  transferred  before 
maturity  for  value,  but  with  full  notice  of  these  facts,  may  recover 
against  the  maker  of  the  notes,  although,  after  the  indorsement,  an 
eviction  occurred  by  the  sale  of  the  land  upon  foreclosure  under  the 
prior  incumbrance.^^  The  right  to  set  off  damages  arising  from  a 
breach  of  warranty  is  held  not  to  be  one  of  which  a  guarantor  or  surety 
may  avail  himself. ^^ 

§  602.  Same  subject — In  action  by  an  innocent  holder. — In  an  ac- 
tion by  a  bona  fide  holder  of  a  bill  or  note  the  maker  cannot  avail 
himself  of  a  set-off  of  damages  arising  from  a  breach  of  warranty 
or  covenant  on  the  part  of  the  payee.^*  It  is,  however,  decided  that 
where  a  note  is  not  negotiable  by  the  law  merchant,  there  may,  in  an 
action  against  the  maker,  be  a  set-off  of  damages  arising  from  a  breach 
of  warranty,  even  though  the  plaintiff  is  a  bona  fide  holder  or  as- 
signee of  the  instruments^ 

§603.  Money  paid  to  clear  land  of  incumbrance. — Where  the 
maker  of  a  note  given  for  the  purchase  price  of  land  conveyed  by  a 
warranty  deed  has  been  obliged  to  pay  a  sum  of  money  in  order  to 

Mich.  481;   Allen  v.   Shackleton,  15  306,   as   against  an   insolvent  prin- 

Ohio  St.  145.  cipal. 

"Gordon    v.    Parmelee,    2    Allen  "Gridley  v.  Tucker,  1  Freem.  Ch, 

(Mass.)   212.  (Miss.)    209;   Blair  v.  Reed,  20  Tex. 

"Stiles  v.  Hobbs,  2  Disn.   (Ohio)  310.     Compare    Holman    v.    Creag- 

571.  miles,  14  Ind.  177. 

"Mabie  v.  Johnson,  8  Hun  (N.  Y.)  '^^  National  Bank  of  Commerce  v. 

309;  Hiner  v.  Newton,  30  Wis.  640;  Feeney,  12  So.  Dak.  156,  80  N.  W. 

Osborne  v.  Bryce,  23  Fed.  171.     But  186. 
see,  Gillespie  v.  Torrence,  25  N.  Y. 


§    G04]  SET-OFF,    RECOUPMENT,    COUNTERCLAIM.  762 

free  the  land  from  an  incumbrance,  he  may  set  off  the  amount  so 
paid  against  the  payee  or  an  assignee  with  notice.'^''  So  in  a  suit  by 
the  assignee  against  the  maker  of  a  promissory  note  given  as  the  last 
payment  on  real  estate  conveyed  by  warranty  deed,  it  was  held  that  the 
purchaser,  who  had  paid  all  the  consideration  money  except  the  note 
in  suit,  was  properly  allowed  to  recoup  an  amount  which  he  had  been 
compelled  to  pay  to  discharge  an  incumbrance  not  excepted  from  the 
warranty,  being  a  note  secured  by  mortgage  on  said  real  estate,  other 
notes  secured  by  the  same  mortgage  being  so  excepted  in  the  deed.'^'^ 
And  it  has  also  been  decided  that  where  several  notes  have  been  so 
given,  damages  arising  from  a  breach  of  warranty  may  be  apportioned 
pro  rata  against  the  different  notes  instead  of  setting  them  off  against 
one,  so  that  a  surety  thereon  will  be  exonerated. ^^  But  where  several 
promissory  notes  are  given  for  the  contract  price  of  personal  property 
it  is  decided  that,  in  an  action  upon  one  of  such  notes,  it  will  be 
presumed  that  the  notes  unpaid  have  not  been  transferred  and  are 
still  in  the  hands  of  the  payee,  and  that  though  the  defendant  may 
in  such  action  recoup  damages  for  a  breach  of  warranty,  yet  if  such 
damages  are  in  excess  of  the  amount  of  the  note  in  suit,  it  is  error 
to  render  a  judgment  for  such  excess.^® 

§  604.  Of  bank  deposits — Eule  as  to. — Where  a  person  who  has 
funds  deposited  in  a  bank  executes  his  note  to  that  bank  and  the  bank 
subsequently  becomes  insolvent  before  the  maturity  of  the  note,  the 
maker  may,  in  an  action  against  him  thereon,  set  off  against  the  note 
the  amount  of  his  deposit.  "^^   So  it  is  said  in  this  connection  in  a  case 

*»Holley  V.  Younge,  27  Ala.   203;  Michigan. — Thompson     v.     Union 

Packwood    v.    Gridley,    39    111.    388;  Trust  Co.,  130  Mich.  508,  90  N.  W. 

Davis  V.  Bean,  114  Mass.  358;  Drew  294;   Stone  v.  Dodge,  96  Mich.  514, 

v.  Towle,  27  N.  H.  412.  56  N.  W.  75,  21  L.  R.  A.  280. 

^'  Stilwell  V.  Chappell,  30  Ind.  72.  Minnesota. — Becker    v.    Seymour, 

=«  Franklin  Bank  v.  Cooper,  36  Me.  71  Minn.  394,  73  N.  W.  1096. 

221.  Missouri. — Smith   v.    Spengler,   83 

^"Aultman     v.     Hetherington,     42  Mo.  408. 

Wis.  622;  Aultman  v.  Jett,  42  Wis.  Netv     Jersey. — Van     Wagoner    v. 

488.  Paterson  Gas  Light  Co.,  23  N.  J.  L. 

^"United    States.— Scott    v.    Arm-  283. 

strong,   146  U.   S.   499,   13   Sup.   Ct.  New  Yorfc.— Smith  v.  Fox,  48  N. 

148,  36  L.  Ed.  1059.  Y.   674;    Smith  v.   Kelton,  43  N.  Y. 

Illinois. — McCagg  v.  Woodman,  28  419;  Jones  v.  Robinson,  6  Bosw.  627; 

111.  84.  Bank  y.  Tartter,  4  Abb.  N.  C.  215; 

Kentucky. — Finnell   v.    Nesbit,   16  In   re.   Receiver  of   Middle  District 

B.  Mon.  (Ky.)  351.  Bank,  1  Paige  585,  19  Am.  Dec.  452; 


763      ACTION  BY  DEPOSITOR  TO  RECOVER  BANK  DEPOSIT.   [§  GO 5 

in  Michigan :  "It  is  well  settled  that,  in  a  suit  by  a  receiver  of  an  in- 
solvent bank  upon  a  note  or  obligation  due  the  bank,  the  defendant 
will  be  allowed  to  set  off  his  deposit  or  a  certificate  of  deposit  held 
by  him  at  the  time  of  the  suspension  of  the  bank."^^  So  it  has  been 
decided  by  the  United  States  Supreme  Court  that  a  customer  of  a 
national  bank,  who  in  good  faith  borrows  money  of  the  bank  and 
gives  his  note  therefor  and  deposits  the  amount  borrowed  to  be  drawn 
against,  any  balance  to  be  applied  to  the  payment  of  the  note  when 
due,  has  an  equitable,  but  not  a  legal,  right  in  case  of  the  insolvency 
and  dissolution  of  the  bank  and  the  appointment  of  a  receiver  before 
the  maturity  of  the  note  to  have  the  balance  to  his  credit  at  the  time 
of  the  insolvency  applied  to  the  payment  of  his  indebtedness  on  the 
note."^  It  has,  however,  been  decided  that  in  order  to  render  a  set-off 
of  an  account  or  deposit  available  the  defendant  must  have  acquired 
the  same  by  assignment  or  otherwise  prior  to  the  insolvency  of  the 
bank.*'^ 

§  605.  In  action  by  depositor  to  recover  bank  deposit. — A  bank  ob- 
taining commercial  paper  as  indorsee,  whether  for  collection  or  as 
owner,  before  an  assignment  by  the  maker  for  the  benefit  of  creditors, 
may  set  off  the  amount  thereof  in  a  suit  brought  by  the  assignee  to 
recover  the  maker's  balance  on  deposit.^'*  And  where  a  depositor  brings 

Miller  v.  Receiver,  1  Paige  444;  Mc-  citing  National  Bank  of  Newburgh 

Laren  v.  Pennington,  1  Paige  102.  v.  Smith,  63  N.  Y.  271,  23  Am.  Rep. 

Pennsylvania. — Skiles  v.  Houston,  48,  as  "a  conclusive  authority  to  the 

110  Pa.  St.  254,  2  Atl.  30;  Jordan  v.  effect  that,   in   the   absence   of   any 

Sharlock,  84  Pa.  St.  366,  24  Am.  Rep.  direction   or  agreement  to   that  ef- 

98.  feet,  it  was  optional  with  the  plain- 

Rhode    Island. — Clarke    v.    Haw-  tiff    v^rhether    it    would    apply    the 

kins,  5  R.  I.  219.  money  or  not  upon  the  note  in  suit, 

England. — See  Dickson  v.  Evans,  and  that  it  was  under  no  positive 

6  Term.  R.  57.  legal  obligation  to  do  so." 

Admissibility    of    evidence    as   to  °'  Stone  v.  Dodge,  96  Mich.  514,  56 

bank  deposit  at  time  of  maturity  of  N.  W.  75,  21  L.  R.  A.  280,  per  Mc- 

note.  In  an  action  by  a  bank  against  Grath,   J.,   quoted   in   Thompson   v. 

an  indorser  of  a  note  payable  to  the  Union  Trust  Co.,  130  Mich.  508,  90 

bank  it  has  been  held  proper  in  a  N.  W.  294. 

recent  case  in  New  York  to  exclude  "  Scott   v.   Armstrong,    146   U.    S. 

evidence    to    show   that    the    maker  499,  13  Sup.  Ct.  148,  36  L.  Ed.  1059, 

had,  subsequent  to  the  maturity  of  cited  in  Thompson  v.   Union   Trust 

the  note,  a  sufficient  deposit  in  the  Co.,  130  Mich.  508,  90  N.  W.  294. 

plaintiff  bank  to  pay  it,  which  the  "^  Higgins  v.  Worthington,  90  Hun 

plaintiff    failed    to    appropriate    for  (N.  Y.)  436,  35  N.  Y.  Supp.  815. 

that  purpose.    Far  Rockaway  Bank  v.  "*  Penn  Bank  v.  Farmers'  Deposit 

Norton,  186  N.  Y.  484,  79  N.  E.  709,  Nat.  Bank,  130  Pa.  St.  209,  20  Atl. 


§'  606]        SET-OFF,  RECOUPMENT,  COUNTERCLAIM.  764 

an  action  against  a  bank  to  recover  his  deposit  it  has  been  decided  that 
a  judgment  which  has  been  obtained  by  the  bank  against  the  depositor 
on  a  note  made  by  the  latter  to  the  former  is  available  as  a  set-off.** 

§  606.  Of  bill  or  note. — In  an  action  upon  commercial  paper  the 
defendant  may  in  many  cases  avail  himself  of  a  bill  or  note,  executed 
by  the  plaintiff,  as  a  set-off  against  the  latter.^*'  So  it  has  been  decided 
that  the  maker  of  a  note  may,  in  an  action  against  him  by  the  as- 
signee, avail  himself  by  way  of  set-off  of  a  note  of  the  assignor  which 
he  purchased  before  notice  of  the  assignment,  though  after  knowledge 
of  the  assignor's  death."^  And  where  a  note  was  not  due  at  time  of 
notice  of  the  assignment  of  the  note  upon  which  suit  was  brought,  it 
was  held  that  it  was  nevertheless  available  as  a  set-off  where  it  be- 
came due  before  the  note  sued  on.^^  Again  it  is  held  that  the  maker 
of  a  note,  which  is  held  as  collateral  for  a  sum  in  excess  of  the  amount 
secured,  is  entitled  to  a  set-off  of  such  excess  against  the  payee.®* 
Where,  however, -it  appears  that  there  has  been  a  failure  of  the  con- 
sideration for  a  note,  and  defendant  had  knowledge  of  this  fact  at  the 
time  he  purchased  the  instrument,  it  is  not  available  as  a  set-off.'^" 
And  in  those  cases  where  an  indorsement  is  essential  in  order  to  render 
a  transfer  of  a  note  effective  so  that  the  transferee  may  maintain  an 
action  thereon  in  his  own  name,  it  has  been  decided  that  one  to  whom 

150;  Farmers'  Deposit  Bank  v.  Penn  Massachusetts. — Backus  v.  Spauld- 

Bank,  123  Pa.  St.  283,  16  Atl.  761,  2  ing,  116  Mass.  418. 

L.  R.  A.   273.    See,   also,   Kentucky  New  York. — Rice  v.   Grange,  131 

Flour  Co.  V.  Merchants'  Nat.  Bank,  N.  Y.  149,  30  N.  E.  46;   Geffchen  v. 

90  Ky.  225,  13  S.  W.  910,  9  L.  R.  A.  Slingerland,  1  Bosw.  (N.  Y.)  449. 

108.  Pennsylvania.  —  Penn.     Bank     v. 

<'=' Marsh    v.    Bank,    34    Barb.     (N.  Farmer's  Nat.  Bank,  130  Pa.  St.  209, 

Y.)    298;    Ford's  Adm'r  v.  Thorton,  20  Atl.   150;    Rider  v.   Johnson,   20 

3  Leigh  (Va.)   695.  Pa.  St.   (8  Harris)   190. 

^'^  United      States.  —  Stettinus     v.  Tennessee. — Fields    v.    Carney,    4 

Myer,  4  Cranch  C.  C.    (U.   S.)    349,  Baxt.    (Tenn.)   137. 

Fed.  Cas.  No.  13385.  «^  King  v.  Conn,  25  Ind.  425. 

Alabama. — Gary  v,  James,  7  Ala.  '^  Stewart  v.  Anderson,  6  Cranch 

640.  (U.  S.)   203,  3  L.  Ed.  199. 

Connecticut. — Bunnell    v.    Butler,  "^  Jones  v.  Hawkins,  17  Ind.  550; 

23  Conn.  65.  Lacroix    v.    Derbigny,    18   La.    Ann. 

Indiana. — Bedford  Bank  v.  Acoam,  27;  Moody  v.  Towle,  5  Greenl.  (Me.) 

125  Ind.  584,  25  N.  E.  713,  21  Am.  415. 

St.  Rep.  258,  9  L.  R.  A.  560.  '"Messmore  v.  Larson,  86  111.  278. 

Kentucky. — Otwell  v.   Cook,   9   B. 
Mon.   (Ky.)   357. 


765  OF  BILL   OR   NOTE ESSENTIALS   TO   AVAILABILITY.       [§    607 

a  note  has  been  transferred  by  delivery  merely,  without  any  indorse- 
ment, is  not  entitled  to  a  set-off  of  such  note  in  an  action  against  him 
on  paper  which  he  executed.^^  In  this  connection  it  is  also  decided 
in  Massachusetts  that  a  certificate  of  deposit  is  not  a  note  and  that 
it  is  not  subject  to  a  set-ofE  of  a  note  of  the  payee  in  the  hands  of  the 
defendant." 

§607.  Same  subject — Essentials  to  availability. — Though  a  de- 
fendant may,  in  an  action  against  him  on  commercial  paper  which  he 
has  executed,  set  off  a  bill  or  note  which  he  holds  against  the  plaintifiE, 
yet  it  is  held  to  be  an  essential  to  the  availability  of  such  a  set-oS 
that  the  bill  or  note  should  be  due.'^^  And  it  is  also  decided  that  it 
must  have  become  due  before  the  action  against  the  defendant  was 
commenced,''*  and  that  it  is  not  available  where  it  became  due  subse- 
quent to  that  date,  though  before  plea  was  filed."  In  the  application  of 
these  rules  it  is  held  in  some  earlier  cases  where  a  bill  was  ofEered  as  a 
set-off  to  a  note  that,  though  both  the  plaintiff  and  the  acceptor  of 
the  bill  were  insolvent,  it  would  not  be  allowed  as  a  set-off,  it  not  being 
due.'^"  And  in  this  connection  it  has  been  decided  in  a  late  case  in 
New  York,  under  the  code  provision  of  that  state  permitting  the  as- 
signee of  any  claim  or  demand  to  enforce  the  same  in  his  own  name 
"subject  to  any  defense  or  counterclaim  existing  against  the  trans- 
ferer" prior  to  notice  of  transfer  and  under  the  further  provision 
of  the  code  that  where  an  action  is  brought  on  a  contract  other 
than  a  negotiable  note  or  bill  of  exchange  any  claim  or  demand  ex- 
isting in  favor  of  the  defendant  prior  to  notice  of  the  assignment  and 
against  the  party  to,  or  an  assignee  of,  the  contract  shall  be  allowable 
as  a  counterclaim,  that,  in  an  action  on  an  assigned  claim  the  defend- 
ant cannot  set  up  as  a  counterclaim  a  note  to  him  from  the  assignor 
of  the  plaintiff  where  such  note  was  not  due  when  the  claim  was  as- 

"Ayres  v.  McConnel,  15  111.  230;  553;  McAlpin  v.  Wingard,  2  Rich. 
Stickney  V.  Clement,  7  Gray  (Mass.)  Law  (S.  C.)  547;  Evans  v.  Pros- 
170;  Trow  v.  Baley,  56  Vt.  560.  ser,  2  Term  Rep.  186;  Braithwaite 
But  see  Hickerson  v.  McFadden,  1  v.  Coleman,  4  Nev.  &  M.  654;  Rich- 
Swan  (Tenn.)  258;  Sheppard  v.  ards  v.  James,  2  Exch.  471;  Gled- 
Stites,  7  N.  J.  L.  90.  stane's  Case,  1  Ch.  App.  538.    Com- 

"Shute  V.  Bank,  136  Mass.  487.  pare  Griffin  v.  Chubb,  16  Tex.  219. 

"  Citizens'       Saving       Bank       v.  "  Deale  v.  Krofft,  4  Cranch  C.  C. 

Vaughan,   115   Mich.  156,  73  N.  W.  (U.  S.)  448,  Fed.  Cas.  No.  3698. 

143;     Ross    v.    Johnson,    1    Handy  ""Lockwood  v.  Beckwith,  6  Mich. 

(Ohio)  388.  168;  United  States  Trust  Co.  v.  Har- 

'*Spaulding  v.  Backus,  122  Mass.  ris,  2  Bosw.  (N.  Y.)  75. 


§    608]  SET-OFF,    RECOUPilEXT,    COUXTEECLAIM.  766 

signed.""  But  in  a  recent  ease  in  Massachusetts  it  has  been  decided 
that  courts  proceeding  according  to  the  common  law  with  jurisdiction 
of  the  subject-matter  and  of  the  parties  may  in  some  cases  after  ver- 
dict continue  cases  until  a  defendant  can  obtain  judgment  on  his 
claim  which  for  any  suihcient  reason  could  not  have  been  pleaded  in 
the  suit,  so  that  ultimately  such  set-off  can  be  made.  Thus  it  was  so 
held  in  a  recent  case  where  a  holder  of  certain  notes  brought  an  action 
thereon  for  the  benefit  of  a  decedent's  estate  and  the  defendant  held 
valid  outstanding  notes  against  the  estate,  the  solvency  of  which  was 
doubtful,  and  he  was  unable  to  enforce  the  notes  by  reason  of  a  special 
statute  of  limitations.'^^  So  in  a  case  in  Iowa  it  is  decided  that  in  an 
action  against  a  bank  to  recover  the  amount  of  a  deposit,  the  bank  is 
entitled  to  set  off  a  note  which  is  owing  to  it  by  the  depositor,  though 
such  note  is  not  due,  where  it  appears  that  the  depositor  is  insolvent.'^* 

§  608.  Same  subject — Essentials  to  availability,  continued. — An- 
other essential  to  the  availability  of  notes  as  a  set-off  is  that  they 
should  be  due  in  the  same  right.  Thus  where  a  suit  is  brought  by  a 
person  in  his  representative  capacity  it  is  held  that  a  note  which  was 
executed  to  him  in  his  individual  capacity  is  not  available.***  Again 
where  a  person  seeks  to  avail  himself  of  a  set-off,  the  claim  or  demand 
upon  which  he  relies  should,  to  be  available,  be  one  upon  which  he  could 
maintain  a  suit.  So  a  set-off  of  a  bill  or  note  will  not  be  allowed  where 
it  appears  that  the  instrument  was  transferred  to  the  defendant  for  the 
purjDose  of  using  it  as  a  set-off,  it  being  understood  that  it  was  to  be 
returned  to  the  indorser  or  accounted  for  to  him.*^  Notes,  to  be  so 
available,  should  also  be  those  which  are  confined  to  transactions  be- 
tween the  same  parties.®^  And  a  note  will  not  be  allowed  as  a  set-off 
where  it  is  shown  that  it  is  held  by  the  defendant  and  another  jointly.^^ 

"Michigan   Savings  Bank  v.  Mil-  "Atkins  v.  Knoght,  46  Ala.  539; 

ler,  110  App.  Div.    (N.   Y.)    670,  96  McDade  v.   Mead,  18  Ala.   214;    Ad- 

N.  Y.  Supp.  568,  decided  under  Code  ams  v.  McGrew,  2  Ala.  675;  Proctor 

Civil  Proc,  §§  1909,  502,  subd.  1.  v.  Cole,  104  Ind.  373,  4  N.  E.  303; 

''Jump    v.    Leon     (Mass.,    1906),  McGowan    v.    Budlong,    79    Pa.    St. 

78  N.  B.  532.  470. 

™ Thomas  v.   Exchange   Bank,   99  ^Holland  v.   Makepeace,  8   Mass. 

Iowa  202,  68  N.  W.  780.     See  §  605  418. 

herein  as  to  set-off  in  action  by  de-  *^  Proctor  v.  Cole,  104  Ind.  373,  4 

positor  to  recover  bank  deposit.  N.  E.  303. 

^Roberts  v.  Jones,  1  Murph.   (N. 
C.)   353. 


767  BILLS    OR    NOTES    OF   BANK.  [§§'   G09-612' 

§  609.  Same  subject — Where  a  fraud  on  plaintiff. — A  defendant 
will  not  be  allowed  to  avail  himself  of  a  claim  or  demand  as  a  set-off 
where  it  would  operate  as  a  fraud  on  the  plaintiff.  Thus  the  rule  has 
been  applied  where  two  persons  who  were  each  indebted  to  the  other 
each  gave  his  individual  notes  to  the  other  for  the  full  amount  of  his 
indebtedness  and  one  of  them  assigned  one  of  his  notes  to  a  third  party 
and  subsequently  failed  and  in  an  action  by  the  assignee  against  the 
maker  of  the  note  the  latter  pleaded  as  a  set-ofE  one  of  the  notes  of 
the  assignor.** 

§  610.  Same  subject — As  affected  by  statute  or  laches. — The  right 
of  a  person  to  set  off  a  bill  or  note  may  be  affected  by  statute.  So 
where  it  is  provided  by  statute  that  the  claims  of  creditors  shall  be 
satisfied  prior  to  those  of  a  member  of  an  insolvent  firm  it*  is  decided 
that  in  an  action  against  a  special  partner  to  recover  a  balance  due 
from  him  to  the  partnership  on  his  account  with  it,  he  is  not  entitled 
to  set  off  a  note  which  he  holds  against  the  firm.^^  So  the  statute  of 
limitations  may  operate  to  prevent  a  defendant  from  availing  himself 
of  the  right  to  set  off  a  bill  or  note.*^  x\nd  in  this  connection  it  has 
been  decided  that  the  right  may  be  barred,  though  the  note  itself  is  not 
barred.®''  Laches  on  the  part  of  a  defendant  may  also  operate  to  pre- 
clude a  set-off  of  a  bill  or  note,  where  the  laches  are  of  such  a  char- 
acter as  would  prevent  a  recovery  upon  the  instrument.®* 

§611.  Same  subject — Want  of  title  to  notes  will  preclude. — 
Where,  in  an  action  against  a  person,  notes  are  pleaded  by  him  as  a 
set-off,  it  may  be  shown,  for  the  purpose  of  defeating  his  right  to  the 
set-off  claimed,  that  there  is  a  want  of  title  thereto  in  him.*® 

§  612.  Of  bills  or  notes  of  bank. — This  right  to  set  off  a  bill  or  note 
has  been  allowed  in  the  case  of  an  action  by  a  bank  upon  commercial 
paper,  it  being  held  that  the  defendant  may  be  entitled  to  a  set-off 
of  bills  or  notes  which  have  been  issued  by  the  bank,®*^  except  in  those 

"Barbaroux    v.    Barker,    4    Mete.  *^  Lyon    v.    Petty,    65    Cal.    322,    4 

(Ky.)  47.  Pac.  103. 

"Savage   v.    Carney    (Tenn.),    47  ^  Reilly  v.  Rucker,  16  Ind.  303. 

S.  W.  571.  ""Coxe   v.   Bank,   8   N.   J.   L.   172; 

*>  Harwell    v.    Steel,    17   Ala.    373;  Bank  of  Niagara  v.   McCracken,   18 

Lyon  v.   Petty,   65   Cal.   322,   4   Pac.  .Johns.    (N.   Y.)    493;    Niagara  Bank 

103.  v.    Roosevelt,   9   Cow.    (N.   Y.)    409; 

"'Nason  v.  McCulloch,  31  Me.  158.  Blunt  v.  Windley,  68  N.  C.  1;   Ra- 


§    613]  SET-OFF,   RECOUPMENT,    COUNTERCLAIM.  768 

cases  where  it  appears  that  the  notes  did  not  mature  or  were  not  pur- 
chased until  after  the  bank  had  become  insolvent,  it  being  held  under 
such  circumstances  that  they  were  not  so  available.®^  And  this  right 
of  set-off  has  been  held  to  exist  in  an  action  upon  a  note  which  was 
transferred  by  the  bank  after  it  became  insolvent.^^ 

§  613.  Where  collateral  has  been  g^ven. — Where  collateral  has 
been  given  as  security  for  the  payment  of  a  note  in  a  suit  upon  the 
note  the  debtor  may  plead  as  a  counterclaim  or  set-off  the  actual  value 
of  any  of  such  collateral  which  the  creditor  has  converted  to  his  own 
use  or  the  value  of  any  such  security  which  he  has  released,  dissipated 
or  diverted  from  the  purpose  for  which  he  held  it.^^  So  where  the 
maker  of  a  note  pledged  other  notes  with  the  payee  as  collateral  se- 
curity and  these  notes  were  repledged  by  the  latter  as  collateral  se- 
curity on  a  loan  made  to  him,  it  was  held  that  such  act  of  the  payee 
amounted  to  a  conversion  and  that  in  an  action  by  the  administrator 
of  the  payee  of  the  principal  note,  it  appearing  that  the  notes  given 
as  collateral  could  not  be  produced,  the  maker  was  entitled  to  a  judg- 
ment against  the  estate  of  the  deceased  for  the  difference  between  the 
value  of  the  collateral  notes  and  the  sum  due  from  her.^*  On  the 
other  hand,  in  an  action  by  the  maker  of  a  note  for  its  conversion  and 
also  the  conversion  of  collateral  given  to  secure  it,  it  has  been  held 
that  the  defendant  may  set  up  by  way  of  counterclaim  the  fact  that 
such  note  was  not  paid  at  its  maturity  and  ask  for  an  allowance  as  a 
set-off  of  the  amount  of  the  note  with  interest.®^  And  it  has  been  held 
that  where,  by  the  negligence  of  the  pledgee,  the  collection  of  col- 
lateral securities  has  been  lost  by  the  operation  of  the  statute  of  limi- 
tations, and  such  statutory  defense  has  become  perfect,  the  pledgor 
may,  by  a  counterclaim,  recover  the  value  of  his  collateral,  even  though 
it  be  not  known  that  his  debtor  will,  when  sued  on  such  collateral, 

cine  Co.  Bank  v.  Keep,  13  Wis.  209.  ^'Hawley  v.  Brownstone,  123  Cal. 

Compare  Hallowell  &  Augusta  Bank  643,  56  Pac.  468;  Jennings  v.  Moore, 

v.  Howard,  13  Mass.  235.  189  Mass.  197,  75  N.  E.  214;    Rich- 

"  Eastern     Bank    v.    Capron,     22  ardson   v.   Ashby,   132    Mo.    238.   33 

Conn.    639;    Haxtun    v.    Bishop,    3  S.  W.  806;   Carson  v.  Buckstaff,  57 

Wend.    (N.  Y.)   13;   Clarke  v.  Haw-  Neb.  262,  77  N.  W.  670. 

kins,   5   R.   I.   219;    Farmer's  Bank  ^Richardson   v.   Ashby,   132   Mo. 

V.    Willis,    7    W.    Va.    31.     But   see  238,  33  S.  W.  806. 

Morse  v.  Chapman,  24  Ga.  249.  '=  Empire  Dairy  Feed  Co.  v.  Chat- 

'^  Merchants'    Exchange    Bank    v.  ham   National   Bank,   30   App.   Div. 

Fuldner,  92  Wis.  415.  66  N.  W.  691.  (N.  Y.)  476,  52  N.  Y.  Supp.  387. 


iG9 


USURIOUS   INTEREST — RULE   AS    TO   RECOUPMENT    OF. 


[§  614 


plead  the  statute  in  defense."*'  And  it  has  been  held  in  this  connec- 
tion that  a  defendant  may  set  off  a  note  held  by  him  and  which  is 
secured  by  collateral  without  delivering  up  the  collateral."^  Again,  it 
has  been  decided  that  where  an  action  is  brought  on  a  debt  the  de- 
fendant may  set  up  by  way  of  counterclaim  bills  due  from  the  plain- 
tiffs of  which  the  defendant  is  an  indorsee  and  holder  and  that  this 
right  is  not  defeated  by  the  fact  that  the  defendant  holds  collateral 
security  from  a  third  party.''^ 

§  614.  Usurious  interest — Rule  as  to  recoupment  of. — Where  usuri- 
ous interest  has  been  paid  on  a  note  it  has  been  decided  that  the 
taking  and  receiving  of  such  interest  is  available  as  a  defense  by  way 
of  set-off  in  an  action  brought  on  the  instrument,  by  the  payee  or  an 
assignee  with  notice.^**  And  it  is  also  held  to  be  so  available  in  an 
action  upon  a  renewal  of  a  note.^°°  The  right  of  a  party  to  set  off  a 
payment  of  usury  is  held  not  to  be  affected  by  the  fact  that  the  amount 
so  paid  cannot  be  recovered  in  a  separate  action. ^"^  And  in  some  states 
the  rule  prevails  that  usury  can  only  be  recouped.^ °^   Nor  is  the  right 


"''Hawley  Brothers  Hardware  Co. 
v.  Brownstone,  123  Cal.  643,  56  Pac. 
468;  citing  First  National  Bank  v. 
O'Connell,  84  Iowa  377,  35  Am.  St. 
Rep.  313;  McQueen's  Appeal,  104 
Pa.  St.  596,  49  Am.  Rep.  592;  Miller 
V.  Gettysburg  Bank,  8  Watts  (Pa.) 
192,  note  34  Am.  Dec.  451. 

"'Wallace  v.  Finnegan,  14  Mich. 
170. 

"^McKinnon  v.  Armstrong  Bros. 
&  Co.,  L.  R.  2  App.  Cas.  531,  wherein 
it  is  said  by  Lord  Blackburn:  "I 
think  the  law  is  tersely  and  accu- 
rately expressed  by  Lord  Ormidale 
in  the  court  below.  He  says  'I  can 
neither  find  authority,  nor  see  any 
good  reason  for  holding,  that  the 
circumstance  of  a  party  having  a 
collateral  security  for  his  debt  is 
destructive  of  his  right  of  compen- 
sation or  set-off,  supposing  it  to  be 
otherwise  well  founded.'  " 

"''  Georgia. — Wilkinson  v,  Wooten, 
59  Ga.  584. 

Joyce  Defenses — 49. 


Illinois. — House  v.  Davis,  60  111. 
367. 

Indiana. — Bemmon  v.  Whitman, 
75  Ind.  318. 

Kansas. — First  National  Bank  v. 
Turner,  3  Kan.  App.  352,  42  Pac. 
936. 

Michigan. — Craig  v.  Butler,  9 
Mich.  21. 

New  York. — Caponigri  v.  Altiere, 
48  N.  Y.  Supp.  808. 

Pennsylvania. — Thomas  v.  Shoe- 
maker, 6  Watts  and  S.  (Pa.)  179. 

Vermont. — Lewis  v.  Jewett,  51  Vt. 
378. 

""McGee  v.  Long,  83  Ga.  156,  9 
S.  E.  1107;  Harris  v.  Bressler,  119 
111.  467,  10  N.  E.  188;  Morrison  v. 
State  Bank,  3  Kan.  App.  201,  43  Pac. 
441;  Knapp  v.  Briggs,  2  Allen 
(Mass.)  551. 

^"'Mitchell  v.  Lyon,  77  111.  525; 
compare  Sims  v.  Squires,  80  Ind. 
42. 

^""Halcraft  v.  Mellott,  57  Ind.  549; 
Craig  V.  Butler,  9  Mich.  21. 


§    615]  SET-OFF,    EECOUPMEXT,    COUXTERCLAIJI.  770 

of  a  defendant  to  avail  himself  of  a  set-off  of  this  character  defeated 
hy  the  statute  of  limitations.^"*  But  where  a  surety  pa3'S  a  debt  of 
the  principal  upon  the  recjuest  of  the  latter,  who  stands  by  and  permits 
him  to  make  such  payment  in  ignorance  of  the  fact  that  it  is  tainted 
with  usury,  the  principal  will  not  be  permitted,  in  an  action  against 
him  by  the  surety  on  an  obligation  subsequently  given  by  the  former 
to  the  latter  to  secure  him  for  making  such  payment,  to  avail  himself 
of  a  set-off  of  the  usury  contained  in  the  original  debt.  Xor  can  the 
principal,  in  an  action  by  the  surety  on  a  note  paid  by  the  latter,  set  ofT 
against  such  note  usurious  interest  which  was  previously  paid  by  him 
to  the  creditor  and  of  which  the  surety  had  no  notice  or  knowledge."^ 
Again,  where  several  acceptances  are  given  by  joint  makers  for  por- 
tions of  the  original  obligation  which  contained  usury,  it  is  held  that 
in  an  action  on  the  acceptances  so  given  there  can  only  be  a  pro  rata 
set-off  of  the  usury  which  was  paid  by  them  jointly.^"^  Usury,  to  be 
available  as  a  set-off,  must  attend  the  same  contract.  So  where  a  party 
indorsed  a  note  for  the  balance  due  on  a  usurious  account  between  the 
maker  and  the  payee,  and  he  subsequently  took  up  such  note  and  gave 
his  own  to  the  payee  therefor,  it  was  decided  in  an  action  against  him 
on  his  ow^n  note  he  could  not  deduct  the  original  usury. ^*''^  And  an 
usurious  payment  made  on  a  note  will  not  be  available  as  a  set-off 
in  an  action  upon  another  note,  though  the  parties  to  the  action  and 
to  the  notes  are  the  same.^"^ 

§615.  Same  subject — Right  as  affected  by  federal  statutes. — It 
is  a  general  rule  that  where  a  new  right  or  offense  is  created  by  a  stat- 
ute which  provides  a  specific  remedy  or  punishment  therefor  the  pro- 
visions of  such  statute  are  alone  applicable  and  exclusive  of  any  other 
remedy  or  punishment.  So  it  has  been  decided  that  the  provisions  of 
the  federal  statutes  specifying  the  remedy  where  paj^ments  of  usurious 
interest  have  been  made  to  national  banks  are  exclusive  and  that  in 
an  action  upon  a  note  there  cannot  be  a  set-off  of  the  interest  or  the 
penalty  provided  for  therein.^**^    But  where  a  claim  for  usurious  in- 

"*  Union  National  Bank  v.  Fraser,  ""  Haseltine   v.   Cent.   Nat.   Bank, 

63  Miss.  231.  183    U.    S.    132,    22    Sup.    Ct.  -50,   46 

I'^'Blakely  v.  Adams,  113  Ky.  398,  L.   Ed.    118;    Stephens  v.   Mononga- 

68  S.  W.  473.  hela  Bank,  111  U.  S.  197;  Driesbach 

"« Deposit  Bank  v.   Robertson,   17  v.  Nat.  Bank,  104  U.  S.  52;   Barnet 

Ky.  Law  R.  1252,  34  S.  W.  23.  v.  Bank,  98  U.  S.  555;   Danforth  v. 

'°' Craig  V.  Butler,  9  Mich.   21.  Bank,   1   C.   C.  A.   62,  48  Fed.  271; 

'"'Ewing  v.  Griswold,  43  Vt.  400;  Lloyd   v.   First   Nat.   Bank,  5   Kan. 

Barnet  v.  Bank,  98  U.  S.  555.  App.   512,   47   Pac.   575;    Nat.  Bank 


771    RIGHT  OF  SET-OFF  GEXERALLY  AS  AFFECTED  BY  STATUTE.     [§    G16 

terest  has  been  reduced  to  a  judgment  it  has  been  decided  that  the 
provisions  of  the  statute  do  not  apply  and  that  the  judgment  is  avail- 
able as  a  set-off.^ ^^ 

§  616.  Right  of  set-off  generally  as  affected  by  statute. — Statutes 
have  been  passed  in  several  states  in  regard  to  the  right  of  set-off  either 
specifying  what  is  so  available  in  actions  generally  or  having  refer- 
ence particularly  to  actions  upon  commercial  paper.  Where  statutes 
of  this  character  are  in  existence  recourse  thereto  should  be  had  in 
order  to  determine  what  may  be  available  in  actions  upon  such  paper. 
So  in  some  states  it  has  been  provided  that,  except  where  paper  is 
negotiable,  set-offs  against  the  payee  may  also  be  available  against  an 
assignee  or  indorsee  until  notice  of  transfer.^^^  Again  an  exception 
has  been  made  in  the  case  of  bona  fide  holders  of  such  j)aper  before 
maturity.^ ^^  In  Mississippi  it  has  been  held  that,  under  the  statute  of 
that  state,  there  may,  in  an  action  on  an  indorsed  bill  or  note,  be  a 
set-off  of  a  claim  or  demand  which  was  acquired  prior  to  notice  of  the 
transfer.^^^  So  in  New  York  it  has  been  decided  under  the  code  of 
Civil  Procedure  permitting  a  counterclaim  to  be  interposed  if  it  be 
"a  cause  of  action  arising  out  of  the  contract  or  transaction  set  forth 
in  the  complaint  as  the  foundation  of  the  plaintiff's  claim,  or  con- 
nected with  the  subject  of  the  action,""*  that  it  is  not  essential  in  an 
action  upon  contract  that  the  counterclaim  should  also  be  a  cause  of 
action  upon  contract,  provided  it  arises  out  of  the  contract  or  trans- 
action set  forth  in  the  complaint  or  is  connected  with  the  cause  of 
action,  and  it  may  therefore  be  a  cause  of  action  sounding  in  tort.^^^ 
And  it  has  been  declared  in  a  case  in  Florida  that  under  the  statutes 

of  Fayette  Co.   v.   Dushane,   96   Pa.  Madison  v.   Davis,   8   Biss.    (U.   S.) 

St,   340    (overruling   Lucas   v.    The  100,  Fed.  Cas.  No.  10,038. 

Bank,  28  P.  F.  Smith  228;  Overhalt  "« Lloyd  v.   First  National  Bank, 

V.  The  Bank,   1   Norris    (Pa.)    490;  5  Kan.  App.  512,  47  Pac.  575. 

Comanche  Nat.  Bank  v.  Dabney  et  "^Vann  v.  Marbury,  100  Ala.  438, 

al.     (Tex.    Civ.     App.),    44     S.    W.  14  So.  273;   Brown  v.  Scott,  87  Ala. 

413.     But    see    Montgomery    v.    Al-  453,   6    So.    384;    Prather   v.   Weissi- 

bion  Nat.  Bank,  50  Neb.  652,  70  N.  ger,   10   Bush.    (Ky.)    117;    Bank  v. 

W.  239;  Lanham  v.  First  Nat.  Bank,  Wood,  142  Mass.  563,  8  N.  E.  753. 

46  Neb.  663,  65  N.  W.  786;   Norfolk  "=  Drexler  v.  Smith,  30  Fed.  754. 

Nat.  Bank  v.  Schwenk,  46  Neb.  381,  "=  Brown  v.   Bank,   62   Miss.   754; 

64   N.   W.    1073;    National   Bank   of  Phipps  v.  Shegogg,  30  Miss.  241. 

Auburn  v.  Lewis,   75  N.  Y.   516,  31  "*  §  501  Code  Civ.  Proc 

Am.   Rep.    484    (reversing   10    Hun.  "' Kneeland  v.  Pennell,  96   N.  Y. 

(N.    Y.)    468);    National    Bank    of  Supp.  403. 


§    617]  SET-OFF,    RECOUPMENT,    COUXTERCLAIM.  772 

of  that  state^^®  all  debts  and  demands  naturally  existing  between  the 
parties  at  the  commencement  of  the  action  are  proper  subjects  of  set- 
off, but  independent  demands  in  no  way  connected  with  the  transaction 
which  forms  the  basis  and  constitutes  the  cause  of  action  of  plaintiff 
and  not  mutually  existing  between  the  parties  to  the  action  at  the  time 
of  the  commencement  thereof,  can  not  be  set  off  in  an  action  on  a 
note.^^'^  The  right  of  a  person  to  set  off  a  claim  against  a  note  or  bill 
may  also  be  prevented  by  the  operation  of  the  statute  of  limitations.^^^ 
It  is,  however,  decided  in  this  connection  that  if  the  right  is  not 
barred  at  the  time  of  the  commencement  of  the  action,  a  set-off  will 
be  available  though  the  period  specified  by  the  statute  may  have 
elapsed  before  the  answer  was  filed  in  which  it  was  set  up.^^^ 

§  617.  Waiver  of  right  to  set-off. — The  right  of  a  party  to  avail 
himself  of  a  set-off  may  be  waived  by  him.  So  it  is  decided  that  if 
upon  notice  of  the  assignment  of  a  note  being  given  to  the  maker,  he 
promises  to  pay  the  note  to  the  assignee,  this  will,  in  law,  amount  to 
a  waiver  of  all  right  to  the  maker  to  plead  in  offset  to  the  note  any 
demand,  which  may  have  accrued  to  him  against  the  payee  prior  to  the 
assignment,  such  a  promise  being  declared  not  to  be  a  mere  nudum 
pactum.'^^^  And  a  party  may  also  be  precluded  from  availing  himself 
of  a  set-off  where  he  has  knowledge  that  a  person  is  about  to  purchase 
a  note  but  does  not  give  the  intending  purchaser  any  notice  thereof.^ ^^ 
But  the  failure  of  a  defendant  to  avail  himself  of  a  right  to  a  set-off 
prior  to  a  verdict  or  judgment  against  him  does  not  necessarily  operate 
as  a  waiver  of  such  right  or  estop  him  from  subsequently  availing 

"»§   1069   Rev.   Stat.   1892,   §   1461  16    Mass.    398.     But    it    is    objected 

Gen.  Stat.  1906.  that  there  was  no  consideration  for 

"'Hooker     v.      Forrester      (Fla.,  the    promise,    that   it   was    a   mere 

1907),  43  So.  241.  nudum   pactum,    and    therefore   not 

"*  Shields    v.     Stark     (Tex.     Civ.  obligatory  upon  the  defendant.  This 

App.),  51  S.  W.  540.  objection    is   not  well   founded.     It 

"°  "Walker    v.    Fearhake,    22    Tex.  is    settled    by    numerous    adjudged 

Civ.  App.  61,  52  S.  W.  629.  cases  that  the  assignment  of  a  debt 

^^  Stiles  v.  Farrar,  18  Vt.  444.   The  for   a   valuable   consideration,   with 

court  said:    "This  promise,  if  bind-  notice  to  the  debtor,  is  a  sufficient 

ing  upon  the  defendant,  does,  in  the  consideration  to  sustain  an  express 

judgment  of   the   court,   amount   to  promise  to  pay  the  debt."  Per  Kel- 

an  acquiescence  in  the  assignment  logg,  J.    See  Wiggin  v.  Damreli,  4 

and  a  waiver  of  all  right  or  claim  N.  H.  69. 

in    the    defendant    to    interpose    an         ^='King  v.   Fowler,   16   Mass.   397. 

offset  to  the  note.    King  v.  Fowler,  See  Allee  v.  Little,  5  N.  H.  277. 


AVAILABILITY   IX   RESPECT   TO    PARTIES    GEXEEALLY. 


[§  G18 


himself  thoreof.^^-  So  where  the  payee  of  a  due  bill,  at  the  time  of 
his  bringing  suit  thereon  and  rendition  of  the  verdict,  was  solvent, 
but  subsequently  became  insolvent,  it  was  decided  that  a  court  of 
equity  would  restrain  the  collection  of  the  judgment  and  compel  the 
allowance  of  any  set-off  which  the  Judgment  debtor  might  have  against 
the  judgment  creditor,  though  such  set-off  existed  when  suit  was 
brought  and  judgment  rendered,  where  it  appeared  that  the  right 
thereto  was  not  litigated  in  that  suit.^^* 


Subdivision  II. 

AVAILABILITY  IN  RESPECT  TO  PARTICULAR  PARTIES  AND  HOLDERS  OTHER 
THAN   MAKER   OR   DRAWER. 


Sec. 
618. 

619. 
620. 
621. 
622. 

623. 

624. 

625. 


626. 
627. 

628. 
629. 


Availability  in  respect  to  par- 
ties generally. 

Acceptor. 

Administrators   and    executors. 

Agents  and  brokers. 

Agents  continued  —  Collecting 
banks. 

Assignees  and  indorsees — What 
available  generally. 

Assignees  and  indorsees — What 
available  generally  continued. 

Assignees  and  indorsees — Stat- 
ute as  to  set-off  against  in- 
dorsees. 

Bankrupts  and  insolvents. 

Bona  fide  purchasers — General 
rule  as  to. 

Husband  and  wife. 

Joint  creditors  and   debtors. 


Sec. 

630.  Same     subject  —  Where    party 

sues  in  his   sole   right — Set- 
off of  joint  liability. 

631.  Same  subject — Right  as  affect- 

ed  by   statute. 

632.  Same     subject — Principal     and 

surety. 

633.  Same    subject — Joint   and    sev- 

eral note. 

634.  Partners. 

635.  Purchasers  after  maturity. 

636.  Purchasers     after     maturity — 

Continued. 

637.  Purchasers     after     maturity — 

Set-off   arising   out   of    other 
transactions. 

638.  State  — No     right     of     set-off 

against. 

639.  Sureties. 

640.  Sureties — Set-off     of     damages 

due  to  principal. 


§  618.  Availability  in  respect  to  parties  generally. — Where  an  ac- 
tion is  brought  upon  a  note  in  the  name  of  the  payee,  if  it  appears 
that  a  third  person  is  beneficially  interested  in  the  debt,  any  defense 
or  set-off  which  the  defendant  may  have  against  such  third  person 


^  See    Baskerville    v.    Brown,    2        ^"^  Chicago,  Danville  &  Vincennes 
Burrows  1229.  •  R.  R.  Co.  v.    Field,  86  111.  270. 


618] 


SET-OFF,    RECOUPMENT,    COUNTERCLAIM, 


774 


will  be  available,  though  the  action  is  brought  in  the  name  of  the  one 
who  has  the  legal  title  to  the  note/^*  So  where  a  note  is  executed  to 
a  person  as  guardian  of  an  insane  person  and  a  suit  is  commenced 
upon  the  note  by  the  guardian  in  his  own  name  it  has  been  decided 
that  the  defendant  may  plead  by  way  of  set-ofE  a  debt  due  him  from 
the  insane  ward.^^^  And  where  a  factor,  acting  for  the  principal,  but 
concealing  the  principal,  delivers  goods  in  his  own  name,  the  person 
contracting  with  him  has  a  right  to  consider  him  to  all  intents  and 
purposes  as  the  principal,  and  the  purchaser  of  goods  from  one  who 
represents  himself  as  the  owner,  but  who  is  in  reality  a  mere  agent, 
where  there  are  no  circumstances  which  would  indicate  to  a  reason- 
able man  that  the  agency  existed,  or  which  would  induce  him  to  make 
inquiry,  may  set-off  the  note  of  such  agent,  held  by  him,  in  an  action 
by  the  principal  for  the  purchase  price  of  the  goods.^-*'  Again,  where 
a  note  is  made  to  one  "as  assignee"  it  has  been  decided  that  in  an  action 
upon  such  instrument  against  the  maker  the  latter  will  be  entitled 
to  a  set-off  of  a  claim  assigned  to  him  for  rent  during  the  time  tlie 
l^ayee  was  carrying  on  the  assigned  business. ^-^  And  where  an  action 
was  brought  on  an  account  for  the  use  of  another  it  was  held  that  a 
note  by  the  plaintiff  to  the  one  for  whose  use  the  suit  was  brought  and 
which  the  defendant  acquired  before  notice  of  the  assignment  was  avail- 
able as  a  set-off.  ^-^  But  in  an  action  upon  a  sealed  note  drawn  by  the 
defendant  and  payable  to  the  plaintiff  as  "agent  of  the  creditors"  of 


"*Farwell  v.  Tyler,  5  Clarke 
(Iowa)  535;  Ward  v.  Martin,  3  Mo. 
19. 

^^  Nickerson  v.  Gilliam,  29  Mo. 
456.  The  court  said:  "It  is  always 
admissible  in  an  action  by  or 
against  a  trustee  to  plead  a  set-off 
of  money  due  to  or  from  the  cestui 
que  trust.  It  is  made  the  duty  of 
the  guardian  to  prosecute  and  de- 
fend all  actions  instituted  by  or 
against  his  insane  ward.  His  re- 
lation to  the  ward  is  a  fiduciary 
one,  and  he  is  to  all  intents  and 
purposes  a  trustee,  having,  subject 
to  the  supervision  of  the  courts, 
the  entire  control  and  manage- 
ment of  his  ward's  estate.  Now,  al- 
though the  statement  in  the  note  of 
the  fiduciary  character  of  the  plain- 


tiff is  not  conclusive  evidence  of  the 
fact,  or  that  a  trust  attaches  with 
respect  to  the  note,  yet  the  plaintiff 
admits  the  fact  of  guardianship,  and 
if  the  defendant  can  show  that  the 
transaction  upon  which  the  suit  is 
founded  was  one  in  which  the  ward 
had  the  beneficial  interest,  as  that 
the  note  was  given,  for  example,  for 
property  of  the  ward,  as  the  answer 
states,  why  may  not  the  defendant 
have  the  benefit  of  his  set-off  with- 
out being  driven  to  another  action 
to  recover  it,  when  the  result  would 
have  been  the  same?"  Per  Ewing,  J. 

'"■•  Pollacek  v.  Scholl,  51  App.  Div 
(N.  Y.)  319,  64  N.  Y.  Supp.  979. 

"'  Tierney  v.  Peerless  Shoe  Co., 
68  N.  Y.  Supp.  392,  33  Misc.  R.  803. 

^'  Smith  V.  Ewer,  22  Pa.  St.  116. 


775         ACCEPTOR — ADMINISTRATORS   AXD   EXECUTORS.  [§§    619,    G20 

a  third  person,  it  has  been  held  that  the  defendants  cannot  set  off  a 
sealed  bill  drawn  by  such  third  person  in  favor  of  the  plaintiff  and 
assigned  to  them  before  the  commencement  of  the  suit.^^^  Again  in 
an  action  by  the  indorser  of  a  note  against  prior  indorsers  it  is  held 
that  there  cannot  be  a  set-off  against  him  of  an  indebtedness  due  from 
him  to  a  corporation  which  was  not  a  party  to  the  note.^^"'  And  where 
a  note  is  made  payable  in  a  bank,  it  is  decided  that  the  maker  thereby 
authorizes  the  bank  to  advance  on  his  credit  to  the  owner  of  the  note 
the  sum  expressed  on  its  face  and  that  it  would  be  a  fraud  upon  the 
bank  to  set  up  off-sets  against  this  note  in  consequence  of  any  trans- 
actions between  the  parties.^^" 

§  619.  Acceptor. — The  acceptor  of  a  bill  cannot  inquire  into  the 
consideration  between  the  drawer  and  payee  or  between  the  latter 
and  a  subsequent  indorsee,  and  in  an  action  by  such  indorsee  against 
the  acceptor  the  latter  cannot  avail  himself  as  a  set-off  of  a  debt  due 
from  the  indorsee  to  the  indorser  or  payee.  And  likewise  in  an  ac- 
tion by  the  payee  an  acceptor  cannot  set  up  a  debt  due  from  the  latter 
to  the  drawer.^^^  And  in  an  action  by  the  holder  of  a  certified  check 
against  the  banker  upon  whom  it  is  drawn  the  latter  cannot  set  off  a 
debt  due  to  him  from  such  holder.^^^  But  in  a  case  in  Kentucky  in 
which  it  appeared  that  the  drawer  of  a  bill  had  died  insolvent,  it  was 
decided  in  an  action  by  the  indorser  who  had  paid  the  bill  against  the 
acceptor,  who  alleged  that  he  had  accepted  such  bill  for  the  sole  bene- 
fit of  the  drawer  of  the  bill,  who  had  died  insolvent,  that  a  plea  of  set- 
off of  an  indebtedness  due  from  the  indorser  to  the  estate  of  the 
drawer  should  be  allowed.^^'* 

§  620.  Administrators  and  executors. — ^In  an  action  brought  by  an 
executor  in  his  own  name  upon  a  note  given  to  him  as  executor 
for  a  debt  due  to  the  testator  at  the  time  of  his  decease  it  has  been 
decided  that  the  defendant  cannot  set  off  a  demand  which  existed 
against  the  testator  at  the  time  of  his  death.^^^  i\.nd  it  has  been  held 
that  where  an  estate  is  notoriously  insolvent,  a  note  which  was  not 

""  Stryker  v.  Beekman,  8  N.  J.  L.  "=  Smith   v.   Adams,   14   La.   Ann. 

209.  409. 

™Russ  v.   Sadler,  197  Pa.  St.  51,  ^'' Brown  v.  Leckie,  43  111.  497. 

46  Atl.  903.  "*  Bowman     v.     Wright,     7     Bush 

"'Mandeville    v.    Union    Bank    of  (Ky.)    375. 

Georgetown,  9  Cranch  (U.  S.)  9,  3  i=^  Merritt  v.  Seaman,  6  N.  Y.  168. 
L.  ed.  639. 


§    620]  SET-OFF,   RECOUPilENT,    COUXTERCLAIM.  776 

due  at  the  time  of  the  testator's  death  cannot  be  set  ofE  against  an 
action  brought  by  the  administrator  to  recover  a  bank  deposit,  though 
in  this  case  it  was  held  that  if  the  estate  were  solvent,  the  fact  that 
the  note  was  not  so  due  would  not  defeat  the  right  where  it  became 
due  before  suit  was  commenced.^ ^'^  So  in  an  action  by  an  administra- 
tor a  defendant  is  not  entitled  to  set  off  a  note  which  was  purchased 
by  him  after  the  testator  died  insolvent.^^^  Nor,  in  an  action  by  an 
administrator  against  one  for  a  debt  which  was  due  the  intestate 
before  his  death,  can  the  defendant  set  off  the  amount  of  a  payment 
made  by  him  as  surety  for  the  intestate  after  his  death.^^®  And  where 
a  note  was  given  to  an  executor  for  the  purchase  of  the  deceased's 
interests  in  a  partnership,  it  was  decided  in  an  action  on  the  note 
against  the  maker  that  the  latter  could  not  set  up  a  prior  partnership 
account  which  was  already  barred  by  statute.^^^  Again,  where  an 
action  is  brought  by  an  administrator  to  recover  for  property  which 
was  purchased  from  him  in  his  representative  capacity  it  is  decided 
that  the  defendant  is  not  entitled  to  set  off  a  note  made  to  him  by 
the  testator,  as  to  allow  such  a  set-off  would  operate  to  give  the  de- 
fendant a  preference  and  priority  over  the  creditors  of  the  estate."* 
So  where  lands  belonging  to  an  estate  were  sold  by  the  administrator 

^^°  Bosler  v.  Exchange  Bank,  4  Pa.  receive  their  whole  debt;  if  other- 
St.  32,  wherein  it  was  said  by  the  wise  they  have  a  vested  right  to  a 
court:  "A  set-off  is  allowed  in  a  suit  pro  rata  dividend.  It  is  an  unan- 
brought  either  by  or  against  execu-  swerable  objection  to  the  decision  of 
tors  or  administrators,  and  the  fact  the  court,  that  what  they  assert 
that  the  debt  proposed  to  be  set  off  will  be  that  one  creditor  may  re- 
was  not  due  at  the  time  of  the  death  ceive  the  whole  amount  of  his  debt, 
of  the  testator  or  intestate,  would  whereas  other  creditors  will  receive 
make  no  difference  if  due  when  a  pro  rata  only,  lessened  by  the 
suit  was  commenced,  and  the  estate  sum  which  he  has  been  permitted 
be  solvent.  But  is  a  set-off  allowable  to  set-off;  this  we  conceive  is  not 
when  the  estate  is  notoriously  in-  in  accordance  with  justice,  for 
solvent?  We  think  not,  for  the  sim-  equality  is  equity,  nor  consistent 
pie  reason  that  it  would  disturb  the  with  authority."  Per  Rogers,  J. 
course  of  administration.  At  the  "^  Irons  v.  Sayles,  5  R.  I.  264. 
death  of  the  testator  or  intestate  "'Union  v.  Union's  admr.,  8  Grat. 
the  executor  or  administrator  is  the  (Va.)  1. 

trustee    for    the    creditors,    whose  "*  Grew     v.      Burditt,      9      Rich, 

right  to  the  assets  at  that  time  be-  (Mass.)   265. 

comes  fixed  and  determined.    Noth-  ""  Bizzell  v.   Stone,   12  Ark.   378; 

ing  that  the  executor  or  administra-  Bales  v.  Hyman,  57  Miss.  330;  Mills 

tor  can  do  can  alter  the  course  of  v.    Lumpkin,    1    Kelly     (Ga.)    511; 

distribution.     If   the   estate   be   sol-  Ransom  v.  McClees,  64  N.  C.  17. 
vent,   the   creditors   are   entitled  to 


777 


AGENTS   AND   BROKERS. 


[§  621 


and  a  note  therefor  was  given  to  him  it  was  held  that  the  defendant 
was  not  entitled  to  set  off  a  claim  which  he  purchased  from  the  estate, 
expecting  to  use  it  as  a  set-off. ^*^  But  where  a  legatee  borrowed  from 
executors  the  money  of  their  testator  and  gave  his  note  to  them  for 
the  amount  of  the  loan,  it  was  held  that,  in  an  action  upon  the  note, 
brought  by  an  assignee  who  took  it  after  maturity,  the  defendant  could 
set  up  as  a  counterclaim  against  such  note  the  amount  due  him  from 
the  estate  of  the  deceased.^ *- 

§  621.  Agents  and  brokers. — In  an  action  on  a  note  payable  to  a 
person  named  or  bearer,  the  production  of  the  note  by  the  plaintiff, 
not  being  the  payee  named,  is  held  to  be  sufficient  evidence  of  his 
title,  although  he  is  the  general  agent  of  the  payee,  who  is  alleged 
in  the  answer  to  be  the  payee  of  the  note,  and  the  holder  of  such  a 
note  takes  it  sul)jeet  to  no  equities  or  right  of  set-off  which  the 
maker  would  have  against  the  original  payee.^*^    And  where  a  note 


^"  Floyd  v.  Rust,  58  Tex.  503. 

"=Whedlee  v.  Reddick,  79  N.  C. 
521. 

"^Tettee  v.  Prout,  3  Gray  (Mass.) 
502.  It  was  said  in  this  case:  "The 
plaintiff  in  this  case  brings  his  ac- 
tion as  bearer  of  a  note  made  by  the 
defendant  to  the  Cheshire  Iron 
Works  or  bearer.  He  therefore 
claims  as  the  holder  of  a  negotiable 
promissory  note,  payable  on  time, 
and  not  dishonored;  and  if  he  es- 
tablishes this  title  by  proof  he  is 
entitled  to  the  same  privileges  and 
immunities  as  an  indorsee,  having 
taken  a  note  by  indorsement  in  the 
course  of  business,  before  it  has  be- 
come due.  He  is  not  subject  to  any 
equities  as  between  the  promisor 
and  the  original  payee,  nor  to  the 
set-off  of  any  debt,  legal  or  equita- 
ble, which  the  promisor  may  after- 
wards acquire.  Wheeler  v.  Guild, 
20  Pick.  (Mass.)  545.  By  giving  a 
note  payable  to  bearer  at  a  future 
day,  which  is  strictly  a  negotiable 
note,  the  defendant  agreed  to  pay 
the  amount  to  any  person  to  whom 
it    should    be    transferred,    without 


claiming  to  set  off  any  demand  which 
he  then  had  or  might  have  against 
the  promisee.  It  is  in  this  respect  like 
mercantile  notes  (in  use,  we  believe 
in  some  of  the  states  where  the  law 
allows  set-offs  and  other  equitable 
defenses,  even  against  indorsees  of 
promissory  notes)  payable  without 
defalcation,  thereby  meaning,  by 
force  of  the  contract  itself,  to  bind 
the  maker  to  pay  the  amount  abso- 
lutely to  the  regular  holder,  and  re- 
nouncing any  benefit  of  set-off  or 
other  equitable  defense  against  the 
payee.  Then  the  other  question  is, 
as  to  the  proof.  Where  the  plaintiff 
brings  the  note  declared  upon  in  his 
own  hand,  and  offers  it  in  evidence, 
this  is  not  only  evidence  that  he  is 
the  bearer,  but  also  raises  a  pre- 
sumption of  fact  that  he  is  the 
owner;  and  this  will  stand  as  proof 
of  title,  until  other  evidence  is  pro- 
duced to  control  it.  Ordinarily,  such 
bearer,  relying  on  the  general  pre- 
sumption, has  no  means  of  proving 
the  transfer  of  the  note  to  himself. 
The  defendant  contends  that,  as  the 
plaintiff   was  the   general   agent  of 


§  622]        SET-OFF^  RECOUPMENT,  COUNTERCLAIM.  778 

is  made  and  delivered  to  a  broker  ''for  sale  or  advance"  and  it  is 
purchased  by  one  who  pays  therc^for  by  advancing  the  amount  by 
a  credit  given  to  the  broker,  the  maker  is  not  entitled  in  an  action 
against  him  to  a  set-off  of  the  amount  of  the  claim  alleged  to  be  due 
from  the  holder  to  the  Ijroker.^"**  And  where  bills  are  remitted  by 
one  party  to  another  to  be  discounted  and  applied  to  a  particular 
jjurpose,  and  the  party  transmitting  them  becomes  bankrupt  before 
the  proceeds  are  received  by  the  parties  to  whom  they  are  sent,  it 
has  been  decided  that  the  latter  will  not  be  entitled  to  set  off  the 
debt  of  the  former  against  his  assignee.  ^*^  But  where  the  holder  of  a 
note  that  is  made  payable  to  himself  or  bearer  puts  it  into  the  hands  of 
an  agent  for  collection,  the  fact  that  the  action  thereon  is  brought 
in  the  name  of  the  agent  does  not  preclude  the  maker. from  availing 
himself  of  any  set-off  which  he  might  have  against  the  principal, 
but  he  has  the  same  right  of  set-off  as  if  the  action  had  been  brought  in 
the  name  of  the  principal.^*^ 

§  622.  Agents  continued — Collecting  banks. — An  indorsement  "for 
collection"  is  held  to  convey  no  title  to  the  paper,  but  is  to  be  regarded 
as  a  notice  to  all  persons  subsequently  dealing  with  the  paper  that 
the  person  indorsing  it  "for  collection"  did  not  part  with  the  title 
or  intend  to  transfer  the  ownership  of  the  proceeds  to  another.  The 
legal  import  and  effect  of  such  an  indorsement  is  to  notify  the  sub- 
sequent indorsee  that  the  original  indorser  is  the  owner  of  the  draft, 
that  the  one  to  whom  it  is  indorsed  "for  collection"  is  merely  his 
agent  for  collection  and  that  a  qualified  title  for  this  purpose  only 
and  no  other  is  in  such  indorsee.^*^  So  where  a  bank  to  whiqh  a  draft 
was  indorsed  "for  collection"  failed  after  again  indorsing  it  to  a  third 
party  who  was  to  collect  it,  it  was  held  that  the  collecting  agent 
could  not  set  off  against  the  draft  a  balance  against  the  bank  to  which 
it  was  originally  indorsed  "for  collection."^**    But  where  a  bank  to 

the  corporation  to  whom  the  note  "'Buchanan  v.   Findley,  9  Barn. 

was  payable,  and  as  such,  had  the  &  C,  738. 

custody  of  all  their  notes,  his  pos-  "^Royce     v.     Barnes,     11     Mete. 

session  may  have  been  the  posses-  (Mass.)   276. 

sion    of    the    corporation.     But    we  "^  Central    Railroad    Co.   v.    First 

think  this  fact  alone  is  not  sufficient  National  Bank  of  Lynchburg,  73  Ga. 

to  rebut  the  general  presumption."  383;   Cecil  Bank  v.  Farmers'  Bank, 

Per  Shaw,  J.  22  Md.  148. 

'"  Carman  v.  Harrison,  13  Pa.  St.  '*^  Central    Railroad    Co.   v.   First 

158.  National  Bank,  73  Ga.  383. 


779  ASSIGNEES   AXD   INDORSEES,  [§    623 

which  a  note  is  indorsed  in  blank  subsequently  indorses  it  to  another 
bank  "for  collection  and  credit"  without  any  notice  that  it  does  not 
belong  to  the  former  and  there  is  a  course  of  dealings  between  such 
banks  by  which  there  is  a  mutual  crediting  of  proceeds  of  all  papers 
sent  to  each  by  the  other  for  collection,  it  has  been  determined  that 
the  bank  to  which  it  was  so  transmitted  may  have  a  lien  thereon. ^*° 

§  623.  Assignees  and  indorsees — What  available  generally. — Where 
an  action  is  brought  against  the  maker  of  a  note  by  an  assignee  thereof 
it  is  held  that  a  claim  which  the  maker  may  have  had  against  the 
payee  before  he  received  notice  of  the  assignment  is  available  by  way 
of  set-oflE  against  the  assignee.^'^''  So  where  a  note  not  payable  to 
order  was  for  a  valuable  consideration  assigned  to  third  persons,  and 
an  action  brought  for  their  benefit  in  the  name  of  the  payee,  it  was 
held  that  the  maker  might  set-off  a  debt  due  to  him  at  the  time  or 
the  assignment  from  the  payee,^^^  And  an  amount  wrongfully  with- 
held by  the  payee  of  mortgage  coupon  bonds  has  been  held  available 
as  a  set-off  in  an  action  by  the  assignee  against  the  maker,^^^  as  has 
also  the  amount  of  a  time  deposit  made  with  the  payee  and  which 
became  due  before  notice  of  the  assignment.^ ^^  And  where  it  appears 
that  the  assignee  or  indorsee  of  a  note  by  whom  an  action  thereon  is 
brought  holds  the  paper  in  trust  for  the  payee  the  maker  is  entitled 
to  a  set-off  of  any  claim  or  demand  whicli  would  be  available  against 
the  payee.^^*  And  this  is  the  rule  where  an  action  is  brought  by  a 
collecting  agent  to  whom  the  note  was  indorsed. ^^^  So  also  where 
a  note  is  assigned  by  the  payee  for  the  purpose  of  avoiding  the  pay- 

"°Bank  of  Metropolis  v.  Bank  of  Per  Richardson,  J.,  citing  Green  v. 

New  England,  1  How.   (U.  S.)    234;  Hatch,  12  Mass.  195. 

Vickery  v.  Assoc,  21  Fed.  773.   And  "=  Huber   v.    Egner,    22    Ky.    Law 

see  Wood  v.  Bank,  129   Mass.   358.  Rep.  1800,  61  S.  W.  353. 

Compare   Hackett  v.  Reynolds,  114  "^  Huber    v.    Egner,    22    Ky.    Law 

Pa.  St.  328,  6  Atl.  689.  Rep.  1800,  61  S.  W.  353. 

™  Huber   v.   Egner,    22    Ky.   Law  ^^^  Connecticut. — Hillhouse    v.    Ad- 
Rep.  1800,  61  S.  W.  353;  Sanborn  v.  ams,  57  Conn.  152,  17  Atl.  698. 
Little,  3  N.  H.  539.  /ndiana.— Henry  v.   Scott,  3   Ind. 

"'Sanborn  v.  Little,  3  N.  H.  539.  412. 

The  court  said:    "The  interest  of  the  Minnesota. — Felsenthal  v.  Hawks, 

assignee  of  a  chose  in  action  being  50  Minn.  178,  52  N.  W.  528. 

merely  equitable,  he  is  to  stand  in  Missouri. — McDonald  v.  Harrison, 

the  situation  of  the  assignor,  at  the  12  Mo.  447. 

time  of  the  assignment,  and  subject  England. — See   Thornton   v.   May- 

to  every  defense,  which  might  have  nard,  L.  R.  10  C.  P.  695. 

been  set  up  against  the  assignment."  '^^  Lewis  v.  Sheamen,  28  Ind.  427. 


§  724]        SET-OFF,  RECOUPMENT,  COUXTERCLAIM.  780 

ment  of  debts  or  obligations,  it  is  held  that  the  maker  may  avail  him- 
self of  any  set-ofE  which  he  would  have  against  the  payee,^^^  as  is  also 
the  case  where  the  assignment  was  made  for  the  purpose  of  avoiding 
a  set-off. ^^^  And  if  the  surety  for  a  debt  pay  the  same  before  it  is 
due  it  has  been  held  that  the  payment  will,  after  the  debt  has  become 
due,  be  a  legal  set-off  against  his  note  payable  to  the  principal  and 
held  by  him  or  against  such  note  in  the  hands  of  an  assignee,  if  notice 
of  the  assignment  was  not  given  to  the  maker  before  the  payment 
became  a  valid  demand  against  the  payee.^^®  Again,  where  an  accom- 
modation indorser  is  sued  alone  upon  the  indorsement  it  is  held  that 
he  has  the  same  right  as  the  maker  to  the  benefit  by  way  of  set-off  or 
rebatement  of  the  forfeiture  given  by  statute  in  case  of  usury .^^* 

§  624.  Assignees  and  indorsees — What  available  generally,  con- 
tinued.— It  may  be  stated  as  a  general  rule  that  in  an  action  by  an 
indorsee  or  assignee  against  the  maker  the  latter  cannot  avail  himself 
of  a  set-off  which  he  may  have  against  an  intermediate  indorser  or 
holder. ^"^^  And  it  is  decided  that  dividends  which  have  accrued  upon 
the  bank  stock  of  an  insolvent  and  deceased  stockholder  are  not  avail- 
able as  a  set-off  to  an  indorsement  of  his  which  is  held  by  the  bank,^" 
And  where  a  party  who  had  borrowed  money  of  an  insurance  company 
gave  an  unconditional  note  to  a  third  party,  by  whom  it  was  indorsed 
to  the  company  for  the  accommodation  of  the  maker,  it  was  held 
in  an  action  against  the  indorser  by  the  company  that  there  could  not 
be  a  set-off  of  the  claims  of  the  maker  against  the  company  on  the 
policy  of  insurance.^^^  And  where  a  party  has  given  several  different 
obligations,  some  of  which  are  held  b}--  the  obligee  and  some  by  an 
assignee,  and  a  right  of  set-off  exists  to  some  extent  in  favor  of  the 
debtor,  but  such  right  of  set-off  is  general  and  not  applicable  by 
special  agreement  to  any  of  the  obligations  in  particular,  it  has  been 

^^Eason  v.  Locherer,  42  Tex.  173.  Laclede  Bank,  62  Miss.  586;  Hooper 

"'Young  V.  Rodes,  5   T.  B.  Mon.  v.    Spicer,    2    Swan.     (Tenn.)     494. 

(Ky.)  489.  Compare   Baxter   v.   Little,   6   Mete. 

i=«  Jackson  v.  Adamson,  7  Blackf.  (Mass.)  7,  39  Am.  Dec.  707;  Harris 

(Ind.)  597.  V.  Burwell,  65  N.  C.  584. 

^^^  National    Bank    of    Auburn    v.  See    §  627    herein    on    6cma   fide 

Lewis,  75  N.  Y.  516,  31  Am.  Rep.  484.  holders. 

^«>'' Goldthwaite   v.   National   Bank,  ^^  Brent  v.  Bank,  2  Cranch  C.  C. 

67  Ala.  549;    McKenzie  v.  Hunt,  32  (U.  S.)  517,  Fed.  Cas.  No.  1834. 

Ala.    494;    Kennedy   v.   Manship,    1  '"-St.  Louis  Perpetual  Ins.  Co.  v. 

Ala.    43;    Stocking   v.    Toulmin,    3  Homer,  9  Mete.  (Mass.)  39. 
Stew.    &    P.    (Ala.)    35;    Savage   v. 


781  BANKRUPTS    AND    IXSOLVEXTS.  [§§    G2o,    G26 

held  such  set-off  will  not  be  available  against  any  assignee  while  the 
original  creditor  still  holds  debt  enough  to  extinguish  the  same, 
though  if  such  set-off  exceeds  the  sum  remaining  due  to  the  original 
creditor  the  oldest  assignee  has  the  best  equity.^*^^ 

§  625.  Assignees  and  indorsees — Statute  as  to  set-off  against  in- 
dorsee.— Where  it  is  provided  by  statute  that  in  a  suit  by  an  indorsee 
<against  the  worker  of  a  promissory  note  payable  on  demand  "any 
matter  shall  be  deemed  a  legal  defense,  and  may  be  given  in  evidence 
accordingly,  which  would  be  a  legal  defense  to  a  suit  on  the  same 
note,  if  brought  by  the  promisee,"  it  has  been  decided  that  the 
maker  of  such  a  note  is  entitled  in  an  action  by  an  indorsee  to  set-off 
a  judgment  recovered  by  him  against  the  promisee. ^°* 

§626.  Bankrupts  and  insolvents.^"^  Where  the  holder  of  a  note, 
who  is  a  debtor  of  the  maker  and  is  insolvent,  brings  an  action  upon 
the  note  the  maker  will  be  permitted  to  set  off  a  debt  due  to  him  from 
such  holder.^*^^  And  it  has  been  decided  that  there  may  be  a  set-off 
of  bills  which  were  purcliased  after  the  insolvency  of  the  drawer. ^"^^ 
Again,  where  an  assignment  in  insolvency  was  made  by  the  principal 
debtor  it  was  held  that  a  surety  who  had,  after  such  time,  paid  a  note 

'"'Anderson    v.    Mason,    6    Dana  *     *     *     We  think  that  any  matter 

<Ky.)   217.  which   would   constitute   a   defense, 

'"^  Lewis  v.  Brooks,  9  Mete,  by  way  of  set-off,  where  the  payee 
(Mass.)  367,  construing  Mass.  St.  is  plaintiff,  may  also  be  given  in 
1839,  c.  121,  §  1.  The  court  said:  evidence  by  the  promisor  of  a  note 
"This  statute  is  founded  upon  the  payable  on  demand,  when  an  in- 
principle  of  the  law  merchant,  that  dorsee  is  plaintiff;  and  this, 
he  who  takes  a  bill  or  note,  after  it  whether  such  defense  be  made  by 
is  due,  takes  it  subject  to  all  the  ob-  showing  payment,  or  by  way  of  set- 
jections  and  equities  to  which  it  off;  and  that  the  words  'legal  de- 
was  liable  in  the  hands  of  the  per-  fense'  are  not  to  be  restricted  to  the 
son  from  whom  he  takes  it;  and  case  of  payment  or  of  a  technical 
the  question  is,  whether  the  pro-  bar."  Per  Hubbard,  J. 
vision  of  the  statute  is  to  be  re-  "°  See  U.  S.  Bankruptcy  Act  of 
stricted  to  a  defense  which  is  either  1898,  §  68,  4  Anne,  c.  17. 
payment  or  a  technical  bar  to  a  '""Bernstein  v.  Coburn,  49  Neb. 
recovery,  or  whether  it  is  to  receive  734,  68  N.  W.  1021. 
a  liberal  construction,  so  that  the  '"^  Colyer  v.  Craig,  11  B.  Mon. 
defendant  may  avail  himself  of  a  (Ky.)  73;  McKinnon  v.  Armstrong, 
defense  in  the  nature  of  a  set-off.  L.  R.  2  App.  Cas.  531.  But  see  Oys- 
which  he  could  do  if  the  original  ter  v.  Short,  177  Pa.  St.  589,  35  Atl. 
payee  of  the  note  was  the  plaintiff.  686. 


§    627]  SET-OFF,    RECOUPilEXT,    COUXTERCLAi:*!.  78'2 

•which  was  protested  before  was  entitled  to  set  it  off.^°®  So  where  the 
paj'ee  of  a  note  transferred  it  after  he  became  bankrupt  it  was  held 
that  in  an  action  against  the  two  sureties  by  the  indorsee  there  could 
be  a  set-off  of  a  debt  due  to  one  of  the  sureties.^®^  But  it  has  been 
decided  that  where  a  bank  cashier  who  is  a  debtor  to  the  bank  pur- 
chases a  claim  against  it  after  its  insolvency  he  is  not  entitled  to 
set  off  such  claim  in  an  action  against  him  on  his  note.^'°  And  it  is 
also  held  that  one  who  has  purchased  a  note  after  maturity  cannot 
set  it  off  in  an  action  against  him  by  the  assignee  of  an  insolvent. ^'^ 
So  again  where  an  action  is  brought  against  several  makers  of  a  note 
by  the  receiver  of  an  insolvent  bank  it  is  held  that  notes  which  were 
made  by  the  bank  and  a  third  party,  which  are  held  by  one  of  the 
makers,  and  which  were  not  due  when  the  receiver  was  appointed  are 
not  available.^'^2 

§  627.  Bona  fide  purchasers — General  rule  as  to. — It  is  a  general 
rule  that  where  an  action  is  brought  against  the  maker  of  commer- 
cial paper  by  one  who  is  a  holder  of  such  paper  in  du,e  course,  for 
value  and  without  notice,  such  holder  is  not  subject  to  a  set-off  which 
the  maker  may  have  against  the  payee  of  the  instrument.^^^    So  a 

^«»  Morrow  v.  Bright,  20  Mo.   298.  Iowa. — Council  Bluffs  Iron  Works 

But  see  Nettles  v.  Huggins,  8  Rich.  v.  Cuppey,  41  Iowa  104. 

L.  (S.  C.)  273.  Kansas. — Fireman     v.     Blood,     2 

^^'Bank  of  Mobile  v.  Poelnitz,  61  Kan.  496. 

Ala.  147.    See  also,  Colyer  v.  Craig,  Kentucky. — Bank    of    Martin    v. 

11  B.  Mon.   (Ky.)   73.  Cassedy,  103  Ky.  363,  45  S.  W.  110; 

^•"Dyer   v.    Sebrall,   135   Cal.   597,  Carothers  v.  Richards,  17  Ky.  Law 

67  Pac.  1036.  Rep.  42,  30   S.  W.   211;    Stevens  v. 

"^  Northern  Trust  Co.  v.  Hiltgen,  Gregg,  89  Ky.  461,  12  S.  W.  775. 

62  Minn.  361,  64  N.  W.  909;   Ander-  Louisiana. — Pavey  v.  Stauffer,  45 

son  V.  Van  Alen,  12  Johns.   (N.  Y.)  La.  Ann.  353,  12  So.  512. 

343;  Johnson  v.  Bloodgood,  1  Johns.  Massachusetts. — Pettee    v.    Prout, 

Cas.  (N.  Y.)  51,  2  Caines  303.  3  Gray   (Mass.)   502. 

"^Balch  v.  Wilson,  25  Minn.  299.  Netv  Hampshire. — Leavitt  v.  Pea- 

"^  United   States.— Oats   v.    Bank,  body,  62  N.  H.  185, 

100  U.  S.  239;  Murphy  v.  Arkansas  New  Jersey. — Price  v.  Keen.  40  N. 

&   L.    Ld.    &   Improvement    Co.,    97  J.    L.    332;     Cumberland    Bank    v. 

Fed.  723;   Drexler  v.  Smith,  30  Fed.  Hann,    18    N.    J.    L.    222;    Tillou   v. 

754.  Britton,  9  N.  J.  L.  120. 

Alabama. — Bostick  v.  Scruggs,  50  Xeio    York. — Farmer's    Bank    of 

Ala.  10;  Sawyer  v.  Hill,  12  Ala.  575.  Saratoga  Co.   v.  Maxwell,  32  N.  Y. 

Indiana.— Proctor  v.   Baldwin,   82  579;   Van  Duzer  v.  Howe,  21  N.  Y. 

Ind.  370.  531;    Flour  City  National  Bank  v. 


783 


HUSBAND  AND   WIFE. 


[§•   628 


set-off  which  the  acceptor  may  have  against  the  drawer  of  a  bill 
is  not,  as  a  general  rule,  available  against  one  who  is  such  a  holder.^'''* 
Nor  can  the  maker  of  a  note,  in  an  action  against  him  by  the  payee 
for  the  use  of  a  bona  fide  holder,  avail  himself  as  a  set-off  of  any 
claim  or  demand  which  he  may  have  against  intermediate  parties.^ "^ 
Nor  is  an  accommodation  indorser  wha  has  paid  a  note  to  a  bona  fide 
purchaser  subject,  in  an  action  against  the  maker,  to  a  set-off  which 
the  latter  may  have  against  the  payee.  And  this  is  held  to  be  the  rule 
though  the  indorser  may  have  had  knowledge  of  such  set-off  at  the  time 
he  indorsed  the  note.^'^^ 

§  628.  Husband  and  wife. — Wliere  the  husband  has  by  law  the 
right  to  treat  commercial  paper  given  to  the  wife  during  her  cover- 
ture, as  joint  property  or  as  several,  and  he  chooses  to  treat  a  note 
so  given  as  several  in  an  action  upon  the  note  by  him  alone,  it  is  held 
that  it  will  be  subject  to  a  set-off  of  debts  due  from  him,  but  not 
to  a  debt  of  his  wife  before  marriage.^^'^  Again,  in  an  action  by  a  hus- 


Trader's  National  Bank,  35  Hun. 
(N.  Y.)  241;  Barlow  v.  Myers,  3 
Hun  (N.  Y.)  720,  6  Thomp.  &  C. 
183,  reversed  in  64  N.  Y.  41,  21  Am. 
Rep.  582;  Petrie  v.  Miller,  57  App. 
Div.  (N.  Y.)  17,  67  N.  Y.  Supp.  1042; 
McGrath  v.  Pitkin,  56  N.  Y.  Supp. 
398;  Brookman  v.  Metcalf,  5  Bosw. 
(N.  Y.)  429,  aff'd  32  N.  Y.  591; 
Gleason  v.  Moen,  2  Duer  (N.  Y.) 
639;  Smith  v.  Van  Loan,  16  Wend. 
(N.  Y.)  659;  Hendricks  v.  Judah,  1 
Johns.   (N.  Y.)   319. 

North  Carolina. — United  States 
Bank  v.  McNair,  116  N.  C.  550,  21 
S.  E.  389;  Tredwell  v.  Blount,  86 
N.  C.  33;  Blackner  v.  Phillips,  67 
N.  C.  340. 

OJiio. — Loomis  v.  Eagle  Bank  of 
Rochester,  1  Disn.  (Ohio)  285. 

Pennsylvania. — Young  v.  Shriner, 
80  Pa.  St.   (30  P.  F.  Smith)   463. 

Texas. — Selkirk  v.  McCormick,  33 
Tex.  136;  Smith  v.  Turney,  32  Tex. 
143. 

Vermont. — Sherwood  v.  Francis, 
11  Vt.  204. 


Wisconsi7i. — Patterson  v.  Wright, 
64  Wis.  289,  25  N.  W.  10. 

See  as  to  bona  fide  holders  gen- 
erally, chaps.  XX  and  xxi  herein. 

^'*  In  re  Agra  &  Masterman's  Bank, 
L.  R.  2  Ch.  App.  391. 

"'  Sykes  v.  Lewis,  17  Ala.  261. 

^■<'  Barker  v.  Parker,  10  Gray 
(Mass.)   339. 

"^  Burroughs  v.  Moss,  10  Barn.  & 
C.  558,  wherein  it  was  said:  "The 
form  of  the  security  gave  the  hus- 
band a  right  to  treat  it  as  joint 
property  or  as  several;  and  if  he 
chose  to  treat  it  as  several,  he 
might  deal  with  it  as  his  own,  and 
the  consequences  of  his  so  treating 
it  would  be  to  let  in  by  way  of  set- 
off to  any  claim  by  him  any  debts 
due  from  him.  If  on  the  other  hand, 
he  elected  to  treat  it  as  a  joint 
property  of  himself  and  his  wife, 
in  her  right,  he  might  let  in  debts 
due  from  her  in  her  own  right,  but 
it  is  clear  that  both  classes  of  debts 
could  not  be  let  in.  It  appears  that 
in   the   present   case   he   elected    to 


§    G29]  SET-OFF,    RECOUPMENT,    COUNTERCLAIM.  784 

band  and  wife  upon  a  note  executed  to  her  while  she  was  unmarried, 
it  has  been  decided  that  a  claim  which  constitutes  a  liability  of  the 
husband  only  is  not  available  as  a  set-ofE  against  the  note.^^®  And 
in  an  action  upon  a  check  against  the  drawer  a  claim  or  demand  due 
to  the  latter's  wife  from  the  payee  is  not  available  as  a  set-off.  ^^^  So 
where  a  note  was  made  to  a  married  women  for  money  belonging  to 
her  before  her  marriage  it  was  held  that  it  could  not  be  set  off  in 
an  action  against  the  husband  where  it  was  provided  by  statute  that 
the  personal  property  of  a  wife  at  the  time  of  her  marriage  or  acquired 
during  coverture  should  remain  hers  as  fully  as  if  she  were  un- 
married.^^** And  a  claim  for  medical  services  rendered  to  a  deceased 
husband  is  chargeable  to  his  estate  and  cannot  be  set  off  against  a  note 
owned  by  the  wife.^^^  And  where  certain  notes  were  transferred  by 
the  payee  to  his  wife  before  maturity  and  the  evidence  failed  to  show 
that  this  was  done  to  avoid  a  defense  of  an  account  for  labor  performed, 
goods  furnished  and  money  paid  and  the  account  had  no  necessary 
connection  with  the  indebtedness  sued  on,  it  was  decided,  in  an  action 
on  the  notes  by  the  payee's  wife,  that  the  court  properly  denied  the 
application  of  the  account  on  the  notes  by  way  of  set-off.^^^  Again, 
it  is  held  in  an  action  by  the  pledgee  of  a  note  against  the  maker 
that  the  latter  cannot  set  off  a  judgment  held  by  him  against  the  wife 
of  the  payee.^^^  It  has,  however,  been  decided  that  where  a  note  to  the 
wife  is  merged  in  a  judgment  recovered  in  the  name  of  the  husband, 
a  set-off  against  the  husband  will  be  available.^^* 

§  629.  Joint  creditors  and  debtors. — It  is  a  general  rule  where  an 
action  is  brought  by  the  joint  payees  of  a  note  that,  in  the  absence  of 
some  agreement  or  understanding  of  the  parties  rendering  it  available, 
there  cannot  be  a  set-off  of  an  individual  debt  of  one  of  the  payees 
on  the  ground  of  a  want  of  mutuality.^^^    But  the  rule  is  otherwise 

treat  the  note  as  his  separate  prop-  "''  Dolph  v.  Rice,  21  Wis.  590. 

erty,  for  he  indorsed  it  over  to  the  ^^  McCarty  v.  Mewhinney,  8  Ind. 

plaintiff.  That  mode  of  dealing  with  513. 

it   leads  to   the   same   consequences  '^'  Hollandsworth     v.     Squires 

as  if  the  note  had  been  given  to  him  (Tenn.),  56  S.  "W.  1044. 

alone,    and    consequently    the    debt  ^'- Cripps     v.      BuflBngton      (Iowa 

due  from  his  wife  before  her  mar-  1906),  108  N.  W.  231. 

riage  can  not  be  set  off."    Per  Bay-  ^^  Shields    v.     Stark     (Tex.     Civ. 

ley,  J.  App.),  51  S.  W.  540. 

"8  Smith     v.     Johnson,     5     Harr.  ^'^  Gilmore  v.  Bailey,  12  La.  Ann. 

(Del.)  40;  Green  v.  Carson,  4  Mete.  562. 

(Ky)  76.  i^^Hamill  v.  First  Nat.  Bank,  14 


785  JOIXT    CREDITORS   AND   DEBTORS.  [§    630 

where  the  parties  have  by  an  express  or  implied  agreement  made  it 
available.^^®  So  where  the  joint  holders  of  a  mortgage  bring  an  action 
of  foreclosure,  there  cannot  be  a  set-off  of  the  note  of  one  of 
them.^*^  Again,  in  an  action  against  a  person  iipon  his  individual 
debt,  it  is  decided  that  a  joint  note  executed  by  him  as  principal 
and  another  as  surety  cannot  be  set  off.^^^  But  where  a  note  is  held 
by  two  persons  for  one  of  them  it  is  held  that- in  an  action  by  both  of 
them  upon  the  note  an  individual  debt  due  to  the  maker  from  the  one 
for  whom  the  note  is  held  may  be  set  off.^^^  Again,  where  an  action 
is  brought  against  the  joint  makers  of  a  note,  who  are  both  princi- 
pals, a  set-off  in  favor  of  one  of  such  makers  is  not,  as  a  general  rule, 
available.  ^^°  And  it  has  also  been  decided  that  such  a  set-off  is  not 
available  in  an  action  against  two  or  more  joint  and  several  makers  of 
a  note."^ 

§  630.  Same  subject — Where  party  sues  in  his  sole  right — 
Set-off  of  joint  liability. — The  maker  of  a  note  is  not,  in  an  action 
against  him,  entitled  to  set  off  a  debt  which  is  due  to  himself  and 
another  jointly.^ '^^  And  in  an  action  by  one  who  sues  in  his  sole  right 
his  liability  jointly  with  another  on  a  joint  note  is  not  available  as  a 
set-off.  ^'^^  It  has,  however,  been  determined  that  this  rule  does  not 
apply  where  the  co-maker  is  dead,^^*  or  where  the  co-maker  was  the 

Colo.  1,  22  Pac.  1094;  Wulschmer  v.  Mississippi. — Bullard    v.    Dorsey, 

Sells,   87   Ind.   71;    Walker  v.   Hall,  7  Sm.  &  M.  (Miss.)  9. 

66    Miss.    390,    6    So.    318.     But   see  Pennsylvania. — H  enderson     v 

Miller  v.  Kreiter,  76  Pa.  St.  78.  Lewis,  9  Serg.  &  R.  (Pa.)  379. 

^^  Hamill  v.  First  National  Bank,  Yirginia. — Ritchie     v.     Moore,     5 

14  Colo.  1,  22  Pac.  1094.  Munf.   (Va.)   388.    But  see  Austin  v. 

^*^  Williamson  v.  Fox,  30  N.  J.  Eq.  Feland,  8  Mo.  309. 

488.  "'Lenoir  v.  Moore,  61  Miss.   400; 

**  Enix  V.  Hays,  48  Iowa  86.  Great   Western   Ins.    Co.   v.   Pierce, 

isoporkner    v.    Dinwiddle,    3    Ind.  1  Wyo.  45.    But  see  Canfield  v.  Ar- 

34.  nett,  17  Colo.  App.  426,  68  Pac.  784, 

^^'^  Illinois. — Burgwin    v.    Babcock,  decided     under    Mills     Ann.     Code, 

11  111.  28.  §  57. 

Indiana. — First  National  Bank  of  '"-  Proctor    v.    Cole,   104    Ind.    373, 

New  Castle  v.  Nugen,  99  Ind.  160;  3  N.  E.  106,  4  N.  E.  303. 

Menaugh   v.   Chandler,    89    Ind.   94;  "'Burnet  v.  Frazier,  19  Ky.  Law 

Griffin  v.  Cox,  30  Ind.  242.  Rep.  299,  40  S.  W.  697. 

Kentucky. — Powell  v.  Hogue,  8  B.  ^^  McCarthy  v.  Sleight,  114  Mich. 

Mon.  (Ky.)  443.  182,  72  N.  W.  165. 

Michigan. — Robbins  v.  Brooks,  42 
Mich.  62,  3  N.  W.  256. 

Joyce  Defenses — 50. 


§§    631,    632]      SET-OFF,    RECOUPMEXT,    COUXTERCLAIM.  786 

defendant's  wife  and  executed  the  note  as  his  surety.^®^  And  such 
a  liability  may  be  available  as  a  set-off  by  an  agreement,  express  or 
implied,  of  the  parties.^"*'  And  where  the  payee  of  a  note  assigned 
the  same  it  was  decided,  in  an  action  by  the  assignee,  that  a  judgment 
which  had  been  recovered  by  the  maker,  before  notice  of  the  assign- 
ment, against  the  payee  and  a  third  party,  was  available  as  a  set-off."^ 
Again  where  an  action  is  brought  by  one  in  his  sole  right  he  is  not 
subject  to  a  set-off  of  his  liability  on  his  joint  indorsement.^^^ 

§  631.  Same  subject — Right  as  affected  by  statute. — Though  it 
it  is  provided  by  statute  that  "all  joint  obligations  and  covenants 
shall  be  taken  and  held  to  be  joint  and  several  obligations  and  cove- 
nants," yet  this  is  held  to  refer  only  to  the  obligation  and  covenants 
made  by  persons  jointly  in  their  individual  capacity  and  not  to  part- 
nership debts  or  obligations  and  therefore  not  to  authorize  a  set-» 
off  of  a  debt  due  from  a  firm  against  the  claim  of  an  individual  part- 
ner of  the  firm.^^^  iVnd  it  has  been  decided  in  Massachusetts  that 
though  an  indorsee  of  a  note  before  delivery  is  by  statute  entitled 
to  notice  as  an  indorser,  yet  his  rights  and  liabilities  are  not  other- 
wise changed,  and  he  is  in  all  other  respects  to  be  considered  as  a 
co-maker  of  the  note  and  cannot,  in  an  action  on  the  note,  set  off  a 
debt  due  to  himself  alone.'""  Under  a  statute  in  Colorado  it  has 
been  decided  that  where  the  makers  of  a  note  are  jointly  and  severally 
liable  there  may,  in  an  action  against  them,  be  a  set-off  by  one  of  them 
of  a  several  demand  against  the  plaintiff. ^"^ 

§  632.  Same  subject — Prncipal  and  surety. — "Where  a  note  is  ex- 
ecuted by  one  as  principal  and  another  as  surety  it  has  been  decided 
that  in  an  action  against  the  principal  the  latter  may  avail  himself, 

"=Akshire  v.  Corey,  113  Ind.  484,  'Neiv   York. — Plets  v.   Johnson,   3 

15  N.  E.  685.  Hill   (N.  Y.)    112. 

"« Mitchell  v.  Sellman,  5  Md.  376.  But  see  Hoffman  v.  Zollinger,  3» 

^"^  Peyton     v.     Compress     Co.,     63  Ind.  461;   Baker  v.  Kinsey,  41  Ohio 

Miss.  410.  St.  403;   Pate  v.  Gray,  Hempst.   (U. 

"*J.?a6omo.— Duramus    v.     Harri-  S.)  155,  Fed.  Cas.  No.  10794a. 

son,  26  Ala.  326.  ^^  Coates  v.  Preston,  105  111.  470. 

jninois.— Hilliard    v.    Walker,    11  =0"  Brooks  v.   Stackpole,  168  Mass. 

111.  644.  537,  47  N.  E.  419. 

Indiana. — Blankenship  v.   Rogers,  ="'  Canfield  v.  Arnett,  17  Colo.  App. 

10  Ind.  333.  426,  68  Pac.  784. 

Maryland. — Robertson  v.  Parks,  3 
Md.  Ch.  65. 


787  JOINT   AND   SEVEILVL    NOTES — PARTNERS.         [§§'   G33-635 

by  way  of  set-off,  of  a  debt  clue  to  him  individually.^*'-  And  where 
a  note  is  so  executed  it  is  also  held  that  it  is  available  as  a  set-off  in 
an  action  brought  by  the  principal.^°^  But  where  a  person  executed 
a  note  to  another  for  the  purchase  of  an  interest  in  a  firm  and  a  creditor 
of  the  firm  signed  the  same  as  surety  it  was  held,  in  an  action  by 
a  third  party  to  whom  the  note  was  transferred,  that  the  surety  was 
not  entitled  to  set-off  against  the  plaintiff,  after  the  payee's  death, 
claims  which  he  held  against  the  firm,-''* 

§  633.  Same  subject — Joint  and  several  note. — Where  a  note  is  a 
joint  and  several  one  it  is  available  as  a  set-off  against  a  claim  in  favor 
of  one  of  the  makers.-"^  But  on  the  other  hand  it  is  decided  that 
where  an  action  is  brought  against  one  of  the  makers  on  a  joint 
and  several  note,  a  debt  due  to  the  other  maker  from  the  plaintiff  is 
not  available  as  a  set-off.-"*' 

§  634.  Partners. — In  an  action  by  a  partner  on  a  note  given  to 
him  individually  there  can  not  be  a  set-off  of  a  partnership  debt.^"" 
And  where  a  partner  gives  a  note  to  another  partner  for  the  use 
of  the  firm  it  is  determined  that,  in  an  action  by  the  payee,  a  part- 
nership account  against  him  is  not  available  as  a  set-off.^*'^  And  in 
an  action  by  a  purchaser  after  maturity  of  a  firm  note  indorsed  to 
one  partner,  the  purchaser  having  no  knowledge  or  notice  of  the 
relationship  of  the  indorsee  to  the  firm,  it  is  decided  that  an  account 
between  the  firm  and  the  partner  to  whom  the  note  was  indorsed  is 
not  available  as  a  set-off,  it  being  declared  that  though  it  is  a  rule 
that  a  purchaser  after  maturity  takes  a  note  subject  to  the  defenses 
and  equities  existing  between  the  parties  to  the  note,  the  rule  has 
reference  to  defences  and  equities  connected  with  the  instrument.^*'^ 

§  635. — Purchasers  after  maturity. — It  is  a  general  rule  that  where 
commercial  paper  is  indorsed  to  a  person  after  its  maturity,  the  in- 

=»2  Dodge  v.  Dunham,  41  Ind.  191.  =«^  Mitchell  v.  Sellman,  5  Md.  376. 

^'Harrison   v.    Henderson,   4   Ga.  See,    also,    Mynderse    v.    Snook,    1 

198;    Andrews  v.  Varrell,   46  N.  H.  Lans.   (N.  Y.)  488. 

17.  =°' Anderson  v.  Robertson,  32  Miss. 

="' Walker  v.  Eyth,  25  Pa.  St.  216.  241;   Willis  v.  Barron,  143  Mo.  450, 

="=  Ferguson  v.  Milliken,  42   Mich.  45  S.  W.  289. 

441,  4  N.  W.  185;  Hurdle  V.  Manner,  ="»  Young   v.    Shriner,    80    Pa.    St. 

50  N.  C.  360;  Moore  v.  Andrews,  13  463.    Compare   Davis  v.  Briggs,   39 

U.  C.  C.  P.  405.  Me.  304. 

^"  Jennings  v.   Shriver,   5   Blackf. 
(Ind.)  37. 


G35] 


SET-OFF,    RECOUPMENT,    COUNTEKCLAIM. 


788 


dorsee  takes  it  subject  to  such  defenses  as  existed  against  it  in  tLe 
hands  of  his  indorser.-^°  The  fact  that  a  bill  or  note  is  overdue 
is  a  circumstance  of  suspicion  suggesting  inquiry  and  if  a  purchaser 
of  such  paper  makes  no  inquiry  he  buys  it  at  his  peril.-^^  Therefore, 
a  purchaser  after  maturity  is  held  to  take  the  paper  subject  to  such 
set-offs  as  existed  in  favor  of  the  maker  against  the  payee  who  indorsed 
it  to  him,  or  where  he  takes  from  the  holder  subsequent  to  the  payee 
such  set-ofPs  as  existed  against  the  payee  and  were  available  against  his 
indorser,-^-  but  he  is  not  subject  to  a  set-off  which  existed  against  a 
payee  or  an  intermediate  holder  and  which  was  not  available  against 
the  one  from  whom  he  purchased  the  paper.^^^    Again  there  are 


^°  See  "Purchasers  after  Matur- 
ity, Chap.  XIX  herein. 

"1  See  §  420  herein. 

"^Alabama. — Mobile  Bank  v.  Poel- 
nitz,  61  Ala.  147. 

California. — Eich  v.  Greeley,  112 
Cal.  171,  44  Pac.  483. 

Georgia. — Crawford  v.  Beal,  1 
Dud.  (Ga.)  204. 

Illinois. — Bissell  v.  Curran,  69  111. 
20;  Ronehill  v.  Lofquist,  46  111.  App. 
442. 

Indiana. — Eigenmann  v.  Clark, 
21  Ind.  App.  129,  51  N.  E.  725; 
Thompson  v.  Lowe,  111  Ind.  272,  12 
N.  E.  476;  Indiana  Novelty  Mfg. 
Co.  V.  McGill,  15  Ind.  App.  1,  43  N. 
E.  464. 

Kansas. — Norton  v.  Foster,  12 
Kan.  44. 

Louisiana. — Jordan  v.  Downes,  9 
Rob.  (La.)  265. 

Maine. — Robinson  v.  Perry,  73  Me. 
168; 'Wood  v.  Warren,  19  Me.  (1 
App.)  23;  Burnham  v.  Tucker;  18 
Me.  179;   Shirley  v.  Todd,  9  Me.  83. 

Massachusetts. — Bond  v.  Fitzpat- 
rick,  4  Gray  (Mass.)  89;  Sargent  v. 
Southgate,  5  Pick.  (Mass.)  312. 

Mississippi. — Phipps  v.  Shegogg, 
30  Miss.  241. 

Nebraska. — Wilbur  v.  Jeep,  37 
Neb.  604,  56  N.  W.  198;  First  Nat. 
Bank  of  Rapid  City  v.  Security  Nat. 


Bank  of  Sioux  City,  34  Neb.  71,  51 
N.  W.  305;  Haggerty  v.  Walker,  21 
Neb.  596,  33  N.  W.  244;  Davis  v. 
Neligh,  7  Neb.  78. 

New  York. — Sherwood  v.  Barton, 
36  Barb.  (N.  Y.)  284;  Driggs  v. 
Rockwell,  11  Wend.  (N.  Y.)  504; 
Hendricks  v.  Judah,  1  Johns.  (N. 
Y.)  319;  Wiltsie  v.  Northam,  5 
Bosw.  (N.  Y.)  421. 

North  Carolina. — Ransom  v.  Mc- 
Clees,  64  N.  C.  17;  Harrington  v. 
Wilcox,  8  Jones  Law  (N.  C.)  349; 
Hurdle  v.  Hanner,  5  Jones  Law  (N. 
C.)  360. 

Ohio. — Wyman  v.  Robbins,  51 
Ohio  St.  98,  37  N.  E.  364. 

Pennsylvania. — Young  v.  Shriner, 
80  Pa.  St.  463;  Thompson  v.  Mc- 
Clelland, 29  Pa.  St.  475;  Lighty  v. 
Brenner,  14  Serg.  &  R.   (Pa.)  127. 

South  Carolina. — Quackenbush  v. 
Miller,  4  Strob.  (S.  C.)  235. 

Yermont. — Bowen  v.  Thrall,  28  Vt. 
382;  Pecker  v.  Sawyer,  24  Vt.  459. 

West  Virginia. — Davis  v.  Noll,  38 
W.  Va.  66.  17  S.  E.  791,  45  Am.  St. 
Rep.  841. 

-^^  Georgia. — ^Wilkinson  v.  Jeffers, 
30  Ga.  153. 

Iowa. — Stannus  v.  Stannus,  30 
Iowa  448;  Way  v.  Lamb,  15  Iowa  79. 

Netv  Jersey. — Cumberland  Bank  v. 
Hann,  3  Har.  (N.  J.  L.)  222. 


789  PURCIIASEES   AFTER   MATURITY.  [§    G36 

numerous  decisions,  some  of  them  founded  on  statutes,  which  hold 
that  a  set-off  against  the  payee  or  an  intermediate  holder  which 
was  acquired  prior  to  notice  of  the  transfer  to  a  purchaser  after  ma- 
turity is  available  against  the  latter,^^*  while  in  other  cases  this 
right  of  set-off  is  confined  to  those  claims  or  demands  which  were 
available  against  the  original  payee. ^^^  So  it  is  declared  that  in 
the  case  of  an  overdue  promissory  note  the  assignee  takes  it  subject 
to  all  equities  existing  between  the  maker  and  the  payee  and  the 
maker  may  set  off  any  liquidated  demand  which  he  held  against  the 
payee  at  the  time  he  received  notice  of  the  assignment,  but  claims 
subsequently  acquired,  even  though  they  had  their  origin  in  previous 
transactions,  are  not  the  subject  of  a  set-off.-^*^  But  though  a  claim 
or  demand  may  exist  of  which  the  maker  might  avail  himself  in  an 
action  against  him,  yet  it  has  been  decided  that  a  purchaser  after 
maturity  is  not  subject  to  such  a  set-off  where  it  also  appears  that 
the  payee  held  a  demand  against  the  maker  in  excess  of  the  set-off 
at  the  time  of  the  transfer.^^^ 

§  636.     Same  subject,  continued. — In  an  action  upon  a  note  by  a 
purchaser  after  maturity  the  maker  is  not  entitled  to  a  set-ofE  of 

Pennsylvania. — Donly  v.  Brown,  3  New     York. — Binghamton     Trust 

Wkly.  Notes  Cas.    (Pa.)    275;    Stew-  Co.  v.  Clark,  52  N.  Y.  Supp.  941. 

art  v.  Tizzard,  3  Phil.  (Pa.)  362.  -^^  Alabama. — McKenzie    v.    Hunt, 

Vermont. — Haley   v.    Congdon,    56  32   Ala.    494;    Kennedy  v.   Manship, 

Vt.  65;  Walbrldge  v.  Kibbee,  20  Vt.  1  Ala.  43. 

543.  Illinois. — Favorite  v.  Lord,  35  111. 

"*  Indiana.— Meeker     v.     Dhanks,  142;  Root  v.  Irwin,  18  111.  147. 

112  Ind.  207,  13  N.  E.  712;    Huston  Iowa.— Ryan  v.  Chew,  13  Iowa  589. 

V.  Bank,  85  Ind.  21;  Judah  v.  Potter,  Mississippi. — Savage   v.'  Bank,   62 

18   Ind.   224;    Cox  v.  Bank,   18   Ind.  Miss.  586. 

App.  248,  47  N.  E.  841.  OTiio.— Lillie  v.  Bates,  3  Ohio  Cir. 

loiva. — Downing     v.     Gibson,     53  Ct.  R.  94. 

Iowa  517,  5  N.  W.  699.  South    Carolina. — Perry   v.    Mays, 

Massachusetts. — Bond    v.    Fitzpat-  2  Bailey  (S.  C.)  354;  Nixon  v.  Eng- 

rick,  4  Gray    (Mass.)    89;    Baxter  v.  lish,  3  McCord  (S.  C.)  549. 

Little,   6  Mete.    (Mass.)    7;    Sargent  Tennessee. — Hooper   v.    Spicer,    2 

v.  Southgate,  5  Pick.   (Mass.)   312.  Swan  (Tenn.)  494. 

Minnesota. — Tuttle   v.   Wilson,    33  -'"  Davis  v.  Neligh,  7  Neb.  84. 

Minn.   422,    23   N.   W.   864;    Linn  v.  ='' Barney     v.     Norton,     2     Pairf. 

Rugg,  19  Minn.  181.  (Me.)     350;     Collins    v.     Allen,    12 

Missouri. — Munday    v.    Clements,  Wend.  356,  27  Am.  Dec.  130;  Whar- 

58  Mo.  577.  ton   v.    Hopkins,    11    Ired.    (N.    C.) 

505. 


§    G37]  SET-OFF,    RECOUPMENT,    COUNTEECLAIM.  790 

an  indebtedness  arising  out  of  a  suit  which  is  pending  on  appeal.^^^ 
Nor  can  the  maker  in  an  action  by  such  a  purchaser  of  a  note 
which  is  payable  without  defalcation  or  discount  set-off  a  demand 
which  he  may  have  against  the  payee,^^^  and  this  has  been  held  to 
be  the  rule  though  it  may  appear  that  such  purchaser  had  notice 
thereof.^^**  And  it  has  been  decided  that  where  a  cross  bill  is  not 
sufficient  as  a  counterclaim  against  a  payee  it  will  not  be  available 
against  a  purchaser  after  maturity.^^^  But  one  to  whom  a  bank  draft 
payable  on  demand  and  which  is  in  effect  a  check  is  transfered  some 
time  after  the  date  thereof,  is  held  to  take  it  subject  to  a  set-off.^^^ 
And  it  is  also  decided  that  where  a  note  is,  after  its  maturity,  repur- 
chased by  the  payee,  he  takes  it  subject  to  a  set-off  which  was  availa- 
ble against  his  indorser,  though  he  had  no  notice  thereof.^-^  But 
though  the  maker  may  be  entitled  to  a  set-off  against  such  a  purchaser 
it  is  held  that  he  will  not  be  entitled  to  recover  for  any  excess  of  such 
set-off  over  the  claim  of  the  plaintiff.'-* 

§  637.     Same  subject — Set-off  arising  out  of  other  transactions. — 

The  rule  that  a  purchaser  of  commercial  paper  after  maturity  takes 
it  subject  to  equities  and  defenses  available  against  his  indorser 
has  reference  to  those  equities  and  defenses  which  are  conuected 
with  the  note  itself.-^^  Therefore  a  purchaser  after  maturity  of 
a  bill  does  not  take  it  subject  to  a  set-off  of  any  claim  or  demand 
which  arises  out  of  distinct  and   independent  transactions.--"     So 

=1'  Woods  V.   Viosca,   26   La.   Ann.  Georgia. — Elliott  v.  Deason,  64  Ga. 

716.  63. 

='"  Coryell   v.    Croxall,   5   N.   J.   L.  Indiana. — Hankins    v.     Shoup,    2 

764.  Ind.  343. 

""Tillon    v.    Britton,    9    N.    J.    L.  loiva. — Bates    v.    Kemp,   13    Iowa 

120.  223. 

="Gabe  v.  McGinnis,  55  Ind.  373.  Maryland. — Annan    v.    Houck,    4 

Compare  Cumberland  Bank  V.  Hann,  Gill.    (Md.)   325. 

18  N.  J.  L.  222.  Missouri. — Barnes    v.    McMullins, 

~La  Due  v.   Bank,  31   Minn.   33,  78  Mo.  260;   Cutler  v.  Cook,  77  Mo. 

16  N.  W.  426.  388;  Arnot  v.  Woodburn,  35  Mo.  99. 

''^^  Martin  v.  Richardson,  68  N.  C.  Pennsylvania. — Hughes   v.   Large, 

255.  2  Pa.  St.  103. 

^*  Norton  v.  Foster,   12  Kan.   44;  Rhode  Island.— Traflord  v.   Hall, 

Reese  v.  Teagarden,  31  Tex.  642.  7  R.  I.  104,  82  Am.  Dec.  589. 

"^  See  §  431  herein.  Vermont. — Haley   v.   Congdon,   56 

'^-'^  Alabama. — Robertson   v.   Breed-  Vt.  65;   Armstrong  v.  Noble,  55  Vt. 

love,  7  Port.   (Ala.)  541.  428. 

Connecticut. — Robinson  v.  Lyman,  West  Virginia. — Davis  v.  Noll,  38 

10  Conn.  30.  W.  Va.  66,  17  S.  B.  791. 


791      STATE — NO  EIGHT  OF  SET-OFF  AGAINST SURETIES.      [§§    638,    639 

it  is  said  in  this  connection:  "Under  the  la',v  merchant  govern- 
ing negotiable  paper,  a  negotiable  instrument  passing  into  the  hands 
of  an  innocent  holder  for  value  before  maturity  is  exempt  from  all 
equities  between  the  original  parties.  When  it  passes  for  value  after 
maturity,  the  purchaser  acquires  it  subject  to  such  equities  as  are 
connected  with  or  inhere  in  the  paper,  but  exempt  from  all  equities 
arising  out  of  independent  and  collateral  transactions.^^'^  Under  the 
law  merchant  this  note  passed  to  the  plaintiff  exempt  from  all  rights 
of  set-off  on  account  of  independent  transactions  between  the  original 
parties."^^^ 

§  638.  State — No  right  of  set-off  against. — oSTo  action  can  be  in- 
stituted on  a  claim  against  the  government  at  the  instance  of  an  in- 
dividual, either  directly  or  indirectly,  by  way  of  set-off,  unless  by 
the  sanction  of  express  law  to  that  effect. ^^^ 

§  639.  Sureties. — Where  an  action  upon  a  note  is  brought  against 
the  maker  and  surety  a  counterclaim  which  is  available  to  the  former 
may,  as  a  general  rule,  be  set  up  by  the  latter.-^"  And  where  a  set- 
off has  been  established  by  the  maker  it  is  held  that  it  will  inure 
to  the  benefit  of  the  surety  though  such  set-off  would  not  be  available 
to  the  latter  in  an  action  against  him  alone.-^^  And  a  like  rule  has  been 
held  to  apply  in  the  case  of  a  joint  and  several  note.-^^  So  it  is  de- 
clared that  the  relation  of  the  drawer  and  indorser  to  the  acceptor  is 
that  of  sureties  for  the  latter  and  that  in  an  action  against  the 

England. — Borrough   v.    Moss,    10  Indiana. — Slayback    v.    Jones,     9 

Barn.  &  C.  558;   Holmes  v.  Kidd,  3  Ind.  470. 

Hurl.  &  N.  891.  New      Hampshire. — Mahuriu      v. 

But  see  Robinson  v.  Perry,  73  Me.  Perason,  8  N.  H.  539. 

168;  Johnson  v.  Humphrey,  91  Wis.  Islew   York. — Loring  v.    Morrison, 

76,  64  N.  W.  317.  15    N.    Y.    App.    Div.    498.   44   N.   Y. 

="  Citing  Story  on  Bills  (4th  Ed.),  Supp.  526. 
§  220;  1  Edwards  Bills  &  Notes  (3d  North    Carolina. — Jarrat   v.    Mar- 
Ed.),  §  379;   Burroughs  v.  Moss,  10  tin,  70  N.  C.  459. 
Barn.     &    Cr.     558;     Whitehead    v.  ='^  Queen  City  Bank  v.  Brown,  75 
Walker,  10  M.  &  W.  698;   Robinson  Hun    (N.   Y.)    259,   26    N.    Y.    Supp. 
V.  Lyma^,  10  Conn.  30.  1016.    See  Wolf  v,  Michael,  21  Misc. 

===^  Cutler  v.  Cook,  77  Mo.  388,  per  R.  (N.  Y.)  86,  46  N.  Y.  Supp.  991. 

Martin,  C.  ='=  Becherwaise  v.  Lewis,   L.   R.  7 

=^  Chevallier's  Adm'r  v.  State,  10  C.  P.  372.    See,  also,  Sefton  v.  Har- 

Tex.  315.  gett,  113  Ind.  592,  15  N.  E.  513. 

•^"Alabama. — Lynch   v.   Bragg,   13 
Ala.  773. 


§    640]  SET-OFF,    EECOUPMENT,    COUNTERCLAIM.  793 

former,  another  acceptance  of  the  plaintiff  which  is  held  by  their 
acceptor  will  be  available  as  a  Bet-off.'^^  And  in  an  action  against  the 
snrety  by  an  administrator  upon  a  note  given  to  the  deceased,  the 
surety,  it  appearing  that  the  maker  of  the  note  is  insolvent,  is  entitled 
to  have  applied  by  way  of  set-off  in  payment  of  the  note  a  share  of 
the  estate  coming  to  the  maker.^^*  But  it  has  been  decided  that  a 
person  is  not  entitled  to  set  off  against  a  debt  due  to  an  as- 
signee in  insolvency  an  amount  which  he  was  compelled  to  pay  as 
surety  for  the  assignor,^^^  And  where  a  set-off  is  pleaded  only  by  the 
principal,  and  the  surety  takes  an  appeal,  it  is  decided  that  he  will 
not  be  heard  on  the  appeal  as  to  the  judgment  which  was  rendered  in 
respect  to  the  set-off.^^''  And  in  some  cases  it  is  decided  that,  where 
the  action  is  brought  against  the  surety  alone,  he  cannot,  avail  himself 
of  a  counterclaim  which  may  exist  in  favor  of  the  principal.^^^  In 
other  decisions,  however,  a  contrary  view  is  taken,  it  being  declared 
that,  where  an  action  is  so  brought,  a  counterclaim  so  existing  will  be 
available  to  the  surety.-^^  Again  in  a  recent  case  in  Alabama  it  is 
decided  that  a  surety  is  not  entitled  to  set  off  the  amount  collected 
on  collaterals  given  by  the  principal  to  secure  the  demand  of  the 
creditor  or  payee  of  the  note.^^^ 

§  640.     Same  subject — Set-off  of  admages  due  to  principal. — In  an 

action  upon  a  note  against  the  principal  and  surety  the  latter  is  held  to 
be  entitled  to  a  set-off  of  damages  due  to  the  principal  and  which  arise 
out  of  the  same  transaction.-'*^  So  it  has  been  held  that  where  the 
consideration  for  a  note  was  a  machine,  the  surety  may,  in  an  action 
against  him  and  the  principal,  set  off  damages  which  result  from  a 
breach  of  warranty  in  respect  to  such  machine.^*^ 

"^  Allen  v.  Kemble,  6  Moore  P.  C.  98,    37    N.   E.    264;    Becherwaise   v. 

314.  Lewis,  L.  R.  7  C.  P.  372. 

=^' Wright  V.  Austin,  56  Barb.   (N.  =="  Noble    v.    Anniston    Nat.    Bank 

Y.)   13.  (Ala.  1906),  41  So.  136. 

=^Cosgrove  v.  McKasy,  65   Minn.  ='"  Waterman  v.  Clark,  76  111.  428; 

426,  68  N.  W.  76.  Slayback  v.  Jones,  9  Ind.  470;   City 

^^''Home    Security    Bldg.    &    Loan  of  Concord  v.  Pillesbury,  33   N.  H. 

Assn.  v.  George,  57  Cal.  363.  310;    Newell   v.    Salmons,   22   Barb. 

=^' Phoenix     Iron     Works     Co.     v.  (N.  Y.)  647. 

Rhea    (Tenn.   Ch.   App.).   38   S.   W.  ="  Loring  v.  Morrison,  15  App.  Div. 

1079.    See  Stockton  Savings  &  Loan  (N.    Y.)    498,    44    N.   Y.    Supp.    526. 

Soc.  V.  Giddings,  96  Cal.  84,  30  Pac.  Compare  Stockton  Sav.  &  Loan  See. 

1016.  V.  Giddings,  96  Cal.  84,  30  Pac.  1016. 

=»^Wyman  v.  Robbins,  51  Ohio  St. 


CHAPTER  XXVIII. 


WAIVER   AND  ESTOPPEL. 


Sec. 

641.  By  acceptance — Generally. 

642.  Certification  by  bank  of  check. 

643.  Same      subject — Payment      by 

bank  of  check. 

644.  By  signature  and  execution. 

645.  By  indorsement. 

646.  By  recitals. 

647.  Recitals  in  bonds. 

648.  By  bill  or  note, 

649.  By  giving  of  new  note. 

650.  By  new  promise. 

651.  Same    subject — Limitations    of 

rule. 

652.  By  giving  paper  to  cover  short- 

age in  accounts  or  to  deceive 
state  officials. 

653.  By    representations   in   connec- 

tion     with      transfer — What 
operates  as  an  estoppel. 

654.  Same  Subject — When  an  estop- 

pel does  not  arise. 

655.  Effect  of  representations  subse- 

quent to  transfer. 

656.  By  admission  or  declaration. 

657.  Same  subject. 

658.  Same  subject. 

659.  By  acts,  conduct  or  words. 

660.  Same  subject — Corporate  trans- 

actions. 

661.  By  laches. 


Sec. 

662.  By  retaining  consideration. 

663.  By  another  action  or  proceed- 

ing. 

664.  As  to  consideration  in  general. 

665.  Where  consideration   illegal. 

666.  Signing    for    accommodation — 

Want  or  failure  of  considera- 
tion. 

667.  By  receipt  of  benefits — Failure 

of  consideration. 

668.  By   conduct,   representation   or 

promise — Want  or  failure  of 
consideration. 

669.  By  knowledge  or  notice — Want 

or  failure  of  consideration. 

670.  As   to   capacity   and   authority 

generally. 

671.  Same  subject — Corporate  trans- 

actions. 

672.  Same     subject     continued — Act 

of  public  or  corporate  official 
in  violation  of  statute. 

673.  As  to  forgery  and  alteration — 

In  general. 

674.  Same  subject — By  admission  of 

signature. 

675.  Same  subject — Failure  to  give 

notice  of  forgery. 

676.  Same  subject — As  to  checks. 

677.  As  to  statute  of  limitations. 


§'641.  By  acceptance — Generally. — One  who  accepts  a  bill  is  by 
his  act  estopped,  as  against  a  hona  fide  endorsee  for  value,  from  deny- 
ing the  signature  of  the  drawer.^    Nor  will  he  be  permitted  to  show 


^  United    States. — Goetz    v.    Bank,  •      Kansas. — Ort  v.  Fowler,  31  Kan. 
119  U.  S.  551,  7  Sup.  Ct.  318.  478,  2  Pac.  580. 

793 


§    642]  WAIVER  AND   ESTOPrEL.  794 

that  he  has  not  sufficient  funds  of  the  drawer  in  his  hands  to  meet 
the  bill.^  And  it  may  be  stated  generally  that  the  act  of  acceptance 
operates  as  an  estoppel  in  respect  to  any  antecedent  matter.  So 
where  the  amount  is  left  blank  an  acceptor  can  not  subsequently  set 
up  that  it  has  been  fraudulently  filled  with  a  greater  amount  than  was 
agreed  upon,  as  a  person  who  gives  an  acceptance  in  blank  holds  out 
the  person  he  entrusts  therewith  as  having  authority  to  fill  in  the 
bill  as  he  pleases.^  And  where  a  bill  is  drawn  and  indorsed  by  an 
agent  the  one  who  accepts  such  bill  will  not  be  permitted  to  deny  that 
the  agent  had  authority  to  so  act.*  And  it  has  also  been  decided 
that  want  of  consideration  for  an  acceptance  which  was  unconditional 
cannot  be  set  up  as  a  defense  to  an  action  by  the  payee,  as  by  such  an 
acceptance  the  acceptor  is  held  to  occupy  the  same  position  as  a  co- 
maker, and  having  voluntarily  placed  himself  in  this  position,  is 
estopped  to  set  up  such  a  plea.^  But  where  one  accepts  a  bill  or  draft 
and  gives  it  to  the  drawer  to  enable  him  to  raise  money  upon  it,  it  is 
held  that  the  acceptor  is  not  bound  by  the  representation  that  the 
paper  is  regular  business  paper  and  that  he  will  not  be  estopped  from 
setting  up  the  defense  of  usury  in  the  discount  as  against  the  holder.^ 

§642.  Same  subject — Certification  by  bank  of  check. — The  gen- 
eral rule  that  an  acceptor  is  by  his  act  precluded  from  questionng 
the  genuineness  of  the  drawer's  signature  applies  where  a  check  is 
certified  by  a  bank.'^     And  a  bank  will  be  bound  by  its  acceptance 

Louisiana. — Howard  v.  Mississippi  ^Garrard  v.  Lewis,  17.  "117102" B, 

Valley  Bank,   28    La.   Ann.    727,    26  Div.  30. 

Am.  Rep.  105.  *  Jones  v.  Tumour,  4   Car.  &  P. 

Maryland. — Commercial    Bank    v.  204. 

First  National  Bank,  30  Md.  11.  ^  Law    v.    Brinker,    6    Colo.    555; 

New    York. — Arnold    v.    National  Armstrong   v.    American    Exchange 

Albany   Exchange   Bank,   3   Thomp.  Nat.   Bank,   133  U.   S.   433,  10   Sup. 

&  C.   769;    Canal  Bank  v.   Bank  of  Ct.  450,  33  L.  Ed.  747. 

Albany,  1  Hill  287.  "Jackson  v.  Fassitt,  33  Barb.   (N. 

England.— Cooi>eT    v.     Meyer,     10  Y.)  645,  21  How.  Prac.  (N.  Y.)  279. 

Barn.    &    C.    468;     Phillips    v.    Im  ^Espy  v.  Bank  of  Cincinnati,  18 

Thurm,  18  C.  B.  N.  S.  694;  Beeman  Wall.    (U.   S.)    605,   21   L.  Ed.   947; 

V.  Duck,  10  Mees.  &  W.  251;  Hame-  Louisiana    National    Bank    v.    Citi- 

lin   V.    Bruck,    L.    R.    9    Q.    B.    306;  zens'    National    Bank   of   Louisiana, 

Price  V.  Neal,  3  Burrows  1334.  28   La.  Ann.   189,   26  Am.  Rep.   92; 

-Griffith    V.    Reed,    21    Wend.    (N.  Clews  v.  Association,  89  N.  Y.  418; 

Y.)  502,  34  Am.  Dec.  267.    See  Dur-  Hogen    v.    Bank,    6    Lans.    (N.    Y.) 

kee  V.  Conklin,  13  Colo.  App.  313,  57  490;    Merchants'  Loan  &  Trust  Co. 

Pac.  486.  V.  Metropolis  Bank,  7  Daly  (N.  Y.) 


795    BY   ACCEPTANCE — BY    SIGNATURE   AND    EXECUTIOX.     [§§    643,    644 

as  genuine  of  a  forged  certification.^  A  certification,  however,  is  de- 
clared to  bind  the  bank  only  as  to  the  genuineness  of  the  signature  of 
the  drawer,  that  he  has  sufficient  funds  to  meet  it  and  that  they  will 
not  be  withdrawn  and  not  to  estop  the  bank  from  denying  the  genuine- 
ness of  any  otlier  part  of  the  check  or  of  any  names  appearing  thereon, 
or  of  the  title  of  the  holder,  or  the  amount  stated  in  the  body  of  the 
check.®  A  bank  may,  however,  by  reason  of  negliegence  in  certifying  a 
check  be  precluded  from  questioning  the  amount  thereof.^" 

§  643.  Same  subject — Payment  by  bank  of  check. — A  bank  is 
presumed  to  know  whether  the  signature  of  a  depositor  is  genuine, 
and  where  it  pays  a  check  to  a  bona  fide  holder  who  in  no  way  con- 
tributes to  the  deception  it  is  held  to  have  taken  the  risk  of  paying 
and  to  be  estopped  to  subsequently  question  the  signature  in  an  action 
to  recover  back  the  amount.  ^^  The  drawee  of  a  check  by  accepting  it 
is  regarded  as  occupying  the  position  of  a  guarantor  as  to  the  genu- 
ineness of  the  signature  affixed  thereto. ^- 

§  644.  By  signature  and  execution. — One  who  issues  negotiable  pa- 
per to  another  for  the  purpose  of  his  selling  it  and  thus  raising  money 
upon  it,  is  estopped  to  question  the  validity  of  the  paper  in  the  hands 
of  an  innocent  purchaser.  This  principle  has  been  applied  where,  for 
the  purpose  of  raising  money,  coupon  bonds  are  issued,  it  being  held 
in  such  a  case  that  the  party  issuing  them  will  be  estopped  to  question 
their  validity  in  the  hands  of  one  purchasing  them  for  value  and  with 
DO  notice  or  knowledge  of  the  purpose  for  which  they  were  issued. ^^ 
So  the  drawer  of  a  check,  draft  or  bill  of  exchange  who  delivers  it  to 
an  impostor,  supposing  him  to  be  the  person  whose  name  he  has 
assumed,  must,  as  against  the  drawee  or  a  bona  fide  holder,  bear  the 

137;     French     v.     Irwin,     4     Baxt.  "  Helwege    v.    Hibernia    National 

(Tenn.)    401,  27  Am.  Rep.  769.  Bank,  28  La.  Ann.  520. 

^  Continental    Bank    v.    Common-  "  Dedham  National  Bank  v.  Ever- 

wealth  Bank,  50  N.  Y.  575.  lett  National  Bank,  177  Mass.  392,  59 

"White    v.    Bank,    64    N.    Y.    316;  N.  E.  62. 

Marine   National   Bank  v.   National  "  Farmers'  &  Merchants'  Bank  v. 

City   Bank,    59    N.   Y.    67;    National  Bank  of  Rutherford,  115  Tenn.  64, 

Bank  of  Commerce  of  New  York  v.  88  S.  W.  939. 

National  Mechanics'  Banking  Assoc.  "  Waggoner  v.  German  American 

of  New  York,  55  N.  Y.  211.   Compare  Title  Co.,  22  Ky.  Law  R.  215,  56  S. 

Louisiana    National    Bank    of    New  W.  961. 
Orleans  v.  Citizens'  Bank  of  Louis- 
iana, 28  La.  Ann.  189. 


645] 


WAIVER   AND   ESTOPrEL. 


796 


loss  where  the  impostor  obtains  payment  of,  or  negotiates  the  same.^* 
And  a  maker  may  be  estopped  from  setting  up  in  defense  his  own 
fraud,  as  where  the  note  was  given  in  connection  with  a  transaction 
the  purpose  of  which  was  to  aid  in  defrauding  his  creditors.^^  But 
the  fact  that  a  defendant  admits  the  genuineness  of  a  note  which  is 
not  identified  as  the  note  in  controversy  does  not  estop  him  from  deny- 
ing the  execution  of  the  note  sued  on.^^  And  the  mere  fact  that  a 
person  had  reason  to  believe  that  a  note  was  to  be  used  for  an  unlaw- 
ful purpose  has  been  held  not  to  be  sufficient  to  estop  him  from  de- 
fending on  the  ground  of  illegality  or  fraudulent  representations  by 
which  the  execution  was  obtained.^^ 

§  645.  By  indorsement. — Where  a  person  either  as  indorser  or 
surety  affixes  his  signature  to  commercial  paper  below  or  after  the 
signatures  of  others,  he  thereby  sanctions  and  affirms  the  genuineness 
of  the  previous  signatures  and  will  be  estopped  in  an  action  by  a  holder 
in  good  faith  and  for  value  from  showing  that  they  are  forgeries.^* 


"  Land  Title  &  Trust  Co.  v.  North- 
western National  Bank,  211  Pa.  St. 
211,  60  Atl.  723. 

"Butler  v.  Moore,  73  Me.  151. 

"  Glazier  v.  Streamer,  57  111.  91. 

"  American  National  Bank  of  Aus- 
tin V.  Cruger,  91  Tex.  446,  44  S.  W. 
278.  See,  also,  Davis  v.  Sittig,  65 
Tex.  497,  wherein  it  was  so  held, 
though  it  appeared  that  the  maker 
of  the  note  had  knowledge,  at  the 
time  of  its  execution  that  it  was 
given  in  connection  with  a  transac- 
tion which  was  in  fraud  of  the 
payee's  creditors. 

^^  Indiana. — Alleman  v.  Wheeler, 
101  Ind.  141. 

Kentucky. — Burgess  v.  Northern 
Bank,  4  Bush.  600. 

Massachusetts. — Cabqt  Bank  v. 
Morton,  4  Gray  156;  State  Bank  v. 
Fearing,  16  Pick.  533. 

New  York. — Mosher  v.  Carpenter, 
13  Hun  602;  TurnbuU  v.  Bowyer,  2 
Rob.  406,  affirmed  in  40  N.  Y.  456, 
100  Am.  Dec.  523;  Herrick  v.  Whit- 
ney, 15  Johns.  240. 


OTito.— Selser  v.  Brock,  3  Ohio  St. 
302. 

Pennsylvania. — Rapp  v.  Bank,  136 
Pa.  St.  426,  20  Atl.  508. 

A  recovery  of  the  consideration 
may  be  had  by  the  purchaser  from 
the  one  by  whom  the  paper  was 
transferred  to  him. 

Kansas. — Smith  v.  McNair,  19 
Kan.  330. 

Massachusetts. — Brewster  v.  Bur- 
nett, 125  Mass.  68;  Merriam  v.  Wol- 
cott,  3  Allen  258. 

Neto  York. — Morrison  v.  Currie, 
11  N.  Y.  Super.  Ct.  (4  Duer)  79. 

North  Carolina. — ^^Hargrave  v.  Du- 
senberry,  9  N.  C.  326. 

England. — Gurney  v.  Wormersley, 
4  El.  &  Bl.  133;  Jones  v.  Ryder,  5 
Taunt.  488.  So  where  money  was 
paid  to  a  broker  for  a  note,  the  sig- 
nature to  which  was  forged,  it  was 
held  that  an  action  would  lie  to  re- 
cover the  money  paid  therefor  to 
the  broker,  although  he  had  paid 
the  amount  to  his  principal,  the 
name  and  identity  of  the  principal 


797  BY  INDORSEMENT.  [§    Gio 

"The  language  of  the  authorities  is  that  by  his  indorsement  he  virtu- 
ally undertakes  to  every  subsequent  holder  that  the  names  of  the  maker 
and  previous  indorsers  are  really  in  the  handwriting  of  those  to  whom 
they  resi^ectively  purport  to  belong/'^''  So  in  the  case  of  the  fraudulent 
transfer  or  disposition  of  a  bill  or  note  by  an  agent  to  whom  the  owner 
has  indorsed  it  in  blank  and  delivered  it,  the  latter  will  be  estopped 
from  setting  up  the  fraudulent  conduct  of  his  agent  where  an  action 
is  brought  on  the  instrument  by  a  bona  fide  holder.^**  And  where  a 
merchant  entrusts  his  clerk  with  blank  indorsements  and  one  by  false 
pretenses  obtains  and  uses  them,  it  is  held  that  it  is  not  such  a  fraud 
as  will  discharge  the  indorser  in  an  action  by  an  indorsee.^ ^  Again, 
in  the  case  of  the  blank  indorsement,  for  the  purpose  of  deposit,  of 
a  check  which  is  subsequently  repudiated  and  returned,  if  the  blank 
indorsement  is  negligently  left  upon  the  check  and  it  is  transferred 
to  a  bona  fide  holder,  the  latter  may  recover  thereon  from  the  indorser 
who  under  such  circumstances  is  estopped  to  set  up  the  fraud. ^~ 
And  where  it  is  provided  by  statute  that  all  notes  are  negotiable  by 
indorsement,  so  as  to  vest  the  property  in  each  indorsee  successively, 
and  the  assignee  is  permitted  to  recover  in  his  own  name  of  the  maker, 
in  an  action  upon  a  note  by  an  indorsee  it  is  decided  that  a  married 
woman  who  is  bound  by  an  estoppel  in  pais  like  any  other  person 
under  the  statute,  and  who  has  indorsed  the  note  in  blank,  will  be 
estopped,  as  against  the  indorsee  who  is  a  bona  fide  holder  for  'value 
from  claiming  that  the  assignment  was  of  a  character  other  than, 
it  appears  to  be  by  such  indorsement.^^ 

not  being  disclosed  at  the  time  of  feit  bonds  of  the  United  States  need 

sale.    Merriam  v.   Wolcott,  3   Allen  not  return  such  bonds  before  bring- 

(Mass.)    258.    And   it  has  been   de-  ing  an  action  to  recover  the  amount 

cided   that   if   a   person    receive   in  paid   by   him   in    purchasing   them, 

payment    a    counterfeit    or    forged  Brewster  v.  Burnett,  125  Mass.  68. 

bank   note,   he    may   treat   it   as    a  ^"Veazie  v.  Willis,  6  Gray  (Mass.) 

nullity      and      recover      back      the  90,  per  Dewey,  J. 

amount,  though  the  person  passing  ^Connell    v.    Bliss,    52    Me.    476; 

the  same  may  be  guilty  of  no  fraud.  Weirick  v.  Bank,  16   Ohio  St.   297. 

Hargrave  v.  Dusenberry,  9  N.  C.  326.  See    Marston    v.   Allen,    8    Mees.    & 

It  is  also  held  in  such  cases  that  it  W.  494. 

is  not  necessary  to  offer  to  return  ^  Putnam  v.  Sullivan,  4  Mass.  45. 

the  worthless  paper,  the  return  be-  "-  Turnbull    v.    Bowyer,    40    N.    Y. 

ing  declared  to  be  useless,  since  the  456,  affirming  2  Rob.   (N.  Y.)  411. 

paper    being    forged    it    is    entirely  ^  Shirk  v.  North,  138  Ind.  210,  37 

worthless  to   all   parties.     Smith   v.  N.    E.    590;    Long    v.    Crosson,    119 

McNair,  19   Kan.   330.    So  it  is  de-  Ind.  3,  21  N.  B.  450;  Lane  v.  Schlem- 

cided  that  a  purchaser  of  counter-  mer,   114    Ind.    297,   15    N.   E.    454; 


§  6i6'\  "WAIVER  AND  ESTOPPEL.  798 

§  646.  By  recitals. — When  a  sane  man,  knowingly  and  without 
restraint,  delivers  to  another  for  a  valuable  consideration  his  obliga- 
tion in  writing  for  the  doing  or  refraining  from  doing  any  certain 
thing,  he  cannot  be  heard  to  say  afterwards  that  he  was  deceived  and 
by  reason  thereof  he  did  not  know  the  purport  of  such  instrument.^'' 
The  maker  of  commercial  paper  is  subject  to  the  application  of  this 
principle  and  may  be  estopped  by  recitals  which  are  contained  in  the 
instrument.  ^^  And  likewise  recitals  oontained  in  a  collateral  mortgage 
may  operate  as  an  estoppel,^®  as  may  also  those  contained  in  a  contem- 
poraneous agreement  which  is  construed  as  a  part  of  the  instrument.^^ 
And  where  a  note  has  a  certificate  attached  thereto  in  which  it  is 
stated  that  the  note  is  for  value  received  and  that  it  will  be  paid  at 
maturity,  the  party  giving  it  will  be  estopped  from  falsifying  his  own 
statement  as  contained  in  his  certificate.^^  An  indorsee  may  also  be 
estopped  from  contradicting  recitals  which  are  contained  in  his  in- 
dorsement.'**  The  general  rule  that  a  party  may  be  estopped  by  recitals 
in  a  bill  or  note  has  been  applied  in  the  case  of  recitals  as  to  the  con- 
sideration,^°  as  to  the  place  at  which  the  note  was  executed,^^  in  regard 
to  interest,^^  and  that  those  who  have  signed  the  instrument  as  makers 
are  all  principals.^^  Also  a  clause  describing  the  payee  by  a  firm  name 
has  been  held  to  operate  as  an  estoppel.^*   Again,  it  has  been  decided 

Moore   v.   Moore,   112    Ind.    152,   13  tional  Bank  v.  Showacre,  26  W.  Va. 

N.  B.  673;  Rogers  v.  Insurance  Co.,  48. 

Ill   Ind.   343,   12   N.   E.   495;    "Ward  ="  Brandenburgh    v.    Three    Forks 

V.    Insurance   Co.,    108    Ind.    301,    9  Deposit    Bank,    19    Ky.    Law    Rep. 

N.  E.  361.  1974,  45  S.  W.  108. 

=2*  Hurt  V.  "Wallace  (Tex.  1899),  49  =^  Chapman  v.  Skellie,  65  Ga.  124; 

S.  W.  675.  Reed    v.    Litsey,    17    Ky.    Law   Rep. 

^United  S^aies.— Silvert  v.  Kent,  1125,   33   S.   "W.   827;    Central  Trust 

105  Fed.  840.  Co.  v.  Burton,  74  "Wis.  329,  43  N.  W. 

Indiana. — Menaugh    v.    Chandler,  141. 

89  Ind.  94.  =^  Mechanics'  Bank  of  Brooklyn  v. 

Iowa. — James  v.  Dalbey,  107  Iowa  Townsend,  17   How.   Prac.    (N.  Y.) 

463,  78  N.  "W.  51.  569. 

Nebraska. — Bair  v.  People's  Bank,  ^  Kempner  v.  Huddleston,  90  Tex. 

27  Neb.  597.  182,  37  S.  "W.  1066. 

South   Carolina.— White  v.   Golds-  ™  Silver  v.  Kent,  105  Fed.  840. 

berg,  49  S.  C.  530,  27  S.  E.  517;  Nott  ^^  Quaker    City    National   Bank   v. 

V.  Thompson,  35  S.  C.  461,  14  S.  E.  Showacre,  26  "W.  Va.  48. 

940.  =- James  v.  Dalbey,  107  Iowa  463, 

Terras.— Hurt    v,    "Wallace     (Tex.  78  N.  W.  51. 

1899),  49  S.  W.  675.  "Menaugh  v.  Chandler,  89  Ind.  94. 

West  Virginia.— Quaker  City  Na-  '*  Bair  v.   People's  Bank,   27  Neb. 

577,  43  N.  W.  347. 


799  RECITALS   IN    BONDS.  [§    64:7 

that  recitals  in  a  note,  executed  by  a  married  woman,  to  the  effect 
that  it  is  for  the  benefit  of  her  separate  estate,  have  been  held  to 
estop  her  from  showing  the  contrary.^^  It  has,  however,  been  held 
that  recitals  in  a  mortgage  that  "we  have  purchased"  and  "we  hereby 
acknowledge  that  we  own  the  above  described  real  estate  in  equal 
shares"  do  not  estop  a  wife  from  showing  that  she  in  fact  acted  as 
surety  for  her  husband.^*'  And  it  has  also  been  determined  that  a  per- 
son is  not  estopped  from  availing  himself  of  a  counterclaim  for  dam- 
ages arising  from  a  breach  of  warranty  in  respect  to  the  article  for 
the  purchase  of  which  the  note  was  given,  by  the  fact  that  there  is  an 
express  waiver  of  defenses  in  the  note.^'^ 

§  647.  Recitals  in  bonds. — Where  bonds  issued  by  a  municipality 
contain  a  recital  that  they  have  been  properly  issued  in  accordance 
with  all  the  conditions  and  requirements  imposed  by  the  law  and  they 
also  bear  the  certificate  of  the  proper  state  official  to  the  effect  that  they 
are  regularly  and  legally  issued,  one  who  purchases  them  in  the  open 
market  for  full  value  and  without  any  knowledge  of  facts  which  would 
impair  their  validity,  may  recover  thereon,  the  municipality  being 
estopped  from  showing,  as  against  such  a  purchaser  that  the  recitals 
are  untrue.^^ 

^=  White  V.  Goldsberg,  49  S.  C.  530,  testimony    below    showed,    without 

27  S.  E.  517;   Nott  v.  Thompson,  35  contradiction,  that  the  entire  issue 

S.  C.  461,  14  S.  E.  940.  of  bonds   in   suit   *    *    *    was   sold 

^*Cole  V.  Temple,  142  Ind.  498,  41  in  the  open  market  for   cash  at  a 

N.  E.  942.  small     premium     above    their     par 

=■' Osborne    v.    McQueen,    67    Wis.  value    *    *    *    and     that     the     pur- 

392,  29  N.  W.  636.  chaser    had    no    knowledge    of    any 

^^  Board  v.  Comm'rs  of  Kearny  Co.  facts    or    circumstances    impairing 

v.  Vandriss,  115  Fed.  866,  53  C.  C.  A.  their  validity,  save  such  as  was  dis- 

192.     The  bonds  referred  to  in  this  closed    by    the    bonds    themselves, 

case  contained  a  recital  as  follows:  when   read   in  connection  with  the 

"It  is  hereby   certified  and  recited  act  under  which  they  had  been  is- 

that  all  acts,  conditions  and  things  sued.   The  original  purchaser  of  the 

required    to    be    done    precedent    to  bonds,   and    all    subsequent   holders 

and    in   the    issuing   of   said,  bonds  thereof,  who  succeeded  to  his  rights, 

have  been  properly  done,  happened,  must  be  regarded,  therefore,  as  bona 

and  performed   in  regular  and  due  fide  holders,  unless  the  bonds  them- 

form  as  required  by  law."   The  bank  selves,  or  the  act  under  which  they 

also  bore  a  certificate  of  the  auditor  were  issued,  or  both,  when  read  to- 

of  the   state   of  Kansas  that   "this  gether,  disclosed  that  they  were  is- 

bond  has  been  regularly  and  legally  sued    without   authority   or   not    in 

issued,   that  the  signatures  thereto  conformity  with  law,  and  were  for 

are  genuine."  The  court  said:    "The.  that  reason  invalid.    *    *    *    jf  ^j^ey 


§§  648,  649]  -WAIVER  axd  estoppel.  800 

i  648.  By  bill  or  note. — One  who  gives  a  note  for  the  pa^^ment  of 
a  debt  after  the  same  has  been  contracted  waives  all  defenses  of  which 
he  had  full  knowledge  at  the  time  such  settlement  was  made.^"  So 
where,  upon  the  settlement  of  an  open  account  between  parties,  a  note 
is  executed  by  the  debtor  to  the  creditor  for  a  balance  agreed  to  be  due, 
the  execution  of  the  note  is  generally  held  to  operate  as  a  waiver  of  ob- 
jections to  the  account.^"  And  where  a  party,  with  knowledge  of  an 
alleged  breach  of  a  contract,  accepts  a  substitute  performance  and 
subsequently  executes  his  note  in  payment  thereof,  he  will  be  con- 
sidered as  having  waived  a  strict  performance  and  cannot  set  up  the 
breach  in  defense  to  an  action  on  the  note.*^  So  in  the  case  of  a  note 
being  given  after  the  accrual  of  a  cause  of  action  which  is  alleged  in 
a  plea  of  set-off  the  note  may  operate  as  an  estoppel  in  respect  to  the 
right  of  the  party  to  avail  himself  of  such  set-off.*^  And  where  a  party 
procures  a  satisfaction  of  a  judgment  against  him  by  executing  a  nego- 
tiable note  for  the  amount  thereof  he  will  be  estopped  in  an  action 
against  him  on  the  note  from  showing  that  the  judgment  was  obtained 
upon  a  note  which,  was  in  part  for  illegal  interest.*^ 

§  649.  By  giving  of  new  note. — One  who  gives  a  new  note  with  full 
knowledge  of  defenses  which  were  available  in  respect  to  the  original 
note  is  held  by  such  act  to  waive  all  such  defenses  and  to  be  estopped 

were  6ona  fide  holders,  the  recital  *^Reid  v.  Field,  83  Va.  26,  1  S.  E. 
in  the  bonds  is  obviously  of  such  a  395.  The  court  said:  "In  the  case 
nature  as  will  cure  any  irregularity  here,  the  defendant  in  error,  by  his 
in  the  exercise  of  the  power  to  issue  own  showing,  after  the  alleged 
them  which  was  conferred  on  the  breach  of  the  original  agreement  by 
municipality  by  the  act  of  March  5,  the  plaintiff  in  error,  by  accepting  a 
1887.  The  recital  also  estops  the  substituted  performance,  and  by  his 
municipality  from  pleading  that  its  subsequent  promise — the  note  sued 
officers  acted  fraudulently  in  issuing  on — waived  the  protection  given  by 
the  bonds  or  in  disposing  of  the  pro-  the  law,  relinquished  his  right  to 
ceeds.  These  defenses  are  elimi-  rely  upon  the  rule  provided  for  his 
nated  by  the  recital,  upon  the  as-  protection,  and  consequently  stands 
sumption  that  the  securities  were  precluded  from  his  otherwise  valid 
sold  to  an  innocent  purchaser  for  defense  thereunder."  Per  Richard- 
value."   Per  Thayer,  J.  son,  J. 

^Atlanta   Consol.  Bottling  Co.  v.  "Borchenius   v.   Manutson,   7   111. 

Hutchinson,   109    Ga.   550,   35   S.   E.  App.  365.    See  Edison  General  Elec. 

124.                                   ,  Co.  V.  Blount,  96  Ga.  272,  23  S.  E. 

^'Andleur  v.  Kuffel,'  71  Ind.  54?;  306. 

Jenkins  v.  Levis,  25  Kan.  479;  Knox  "  Gipson  v.  Shanklin,  83  Ind.  147. 
V.  Whaley,  1  Esp.  159. 


801  BY   NEW  PROMISE.  [§    650 

from  availing  himself  of  the  same  in  an  action  on  the  renewal.  So 
a  maker  may  in  this  manner  be  estopped  from  setting  up  the  defense 
of  a  failure  of  consideration,**  or  of  fraud  or  fraudulent  representa- 
tions in  connection  with  the  execution  of  the  original  note.*^  So  if  the 
maker  of  a  note  gives  the  holder  a  new  note,  with  another  surety,  and 
takes  up  the  old  one,  it  is  decided  that  he  is  thereby  precluded,  when 
called  on  for  payment,  from  entering  into  the  original  consideration, 
because  he  has,  by  his  act,  induced  the  holder  to  surrender  the  right 
which  he  has  against  the  indorser,  who  was  responsible  on  the  original 
instrument.***  Again  where  a  note  has  been  accepted  by  a  person  in 
renewal  of  a  prior  one  it  has  been  decided  that  he  will  be  thereby 
estopped  from  setting  up  that  he  did  not  accept  it  for  the  purpose  for 
which  it  was  given.*'' 

§  650.  By  new  promise. — A  party  to  commercial  paper  who  has 
knowledge  of  matters  which  would  be  available  to  him  as  a  defense 
to  an  action  thereon  may  waive  his  right  to  set  up  such  defense  by  a 
new  promise  subsequently  made  by  him  and  upon  the  faith  of  which 
a  party  takes  the  paper.*^  So  if  a  surety,  with  knowledge  of  the  fact 
that  an  agreement  for  an  extension  of  time  has  been  made  between 
the  creditor  and  the  principal,  make  a  new  promise  to  pay  the  debt, 
he  cannot  afterward  avail  himself  of  the  agreement,  as  a  discharge  of 
his  liability,  notwithstanding  there  was  no  new  consideration  for  his 
promise.*^    And  it  has  been  declared  that  a  discharged  bankrupt  is 

**  Griffith    V.    Trabue,    11    Heisk.  Tennessee. — Rosenplanter  v.  Toof, 

(Tenn.)  645.  99  Tenn.  92,  41  S.  W.  336. 

"Ross   v.   Webster,   63   Conn.   64,  Texas. — Selkirk  v.  McCormick,  33 

26  Atl.   476;    Isham  v.  Davidson,  1  Tex.  136. 

Hun  (N.  Y.)  114.  Virginia. — Davis    v.     Thiomas,     5 

"  Coco  V.  Lacour,  4  La.  507.  Leigh  1. 

*^ Dewey  v.  Bell,  5  Allen   (Mass.)  England. — Kerrison    v.    Cooke,    3 

165.  Camp.    362;    Stevens  v.   Lynch,    12 

*^  United  States. — Young  v.  Grun-  East  38. 

dy,  7  Cranch   (U.  S.)   548,  3  L.  Ed.  ^'Fowler  v.  Brooks,  13  N.  H.  240. 

435.  The  court  said:    "If,  with  a  knowl- 

Mississippi. — Gilpin   v.   Smith,  11  edge  of  the  fact,  he  had  deemed  it 

Smedes  &  M.  109.  expedient  to  waive  this  right,  a  new 

Missouri. — Badger  v.  Stephens,  61  promise  to  pay  would  have  contin- 

Mo.  App.  387,  1  Mo.  App.  Repr.  627.  ued   his  liability,  without  any  new 

New     Hampshire. — F  o  w  1  e  r     v.  consideration.     The    right    of    dis- 

Brooks,    13    N.    H.    240;    Wiggin   v.  charge,  in  such  case,  from  the  mere 

Damrell,  4  N.  H.  69.  fact  of  the  extension  of  time,  is  a 

Joyce  Defenses — 51. 


§    651]  WAIVER   AND   ESTOPPEL.  802 

under  a  moral  obligation  to  pay  his  debts  in  full,  when  he  can,  and 
that  this  obligation  is,  at  common  law,  a  sufficient  consideration  for 
a  new  promise,  made  after  a  discharge  in  bankruptcy  to  pay  a  note.'^'' 
A  party  is  not,  however,  estopped  by  a  new  promise  from  setting  up 
defenses  which  were  available  to  him  and  of  which  he  had  no  knowl- 
edge at  the  time  of  making  such  new  promise.  ^^  And  where  the 
maker  of  a  note  agreed  to  pay  the  assignee  thereof,  provided  the 
latter  would  extend  the  time  of  payment,  and  the  assignee  thereupon 
released  his  assignor  and  then  brought  an  action  to  enforce  the  notes 
against  the  maker  before  the  expiration  of  the  time  agreed  upon  for 
the  extension,  it  was  decided  that  the  maker  was  not  estopped  from 
availing  himself  of  a  defense  which  existed  at  the  time  such  agree- 
ment was  made.^^ 

§  651.  Same  subject — Limitations  of  rule. — In  order  to  render 
a  new  promise,  by  a  party  to  commercial  paper,  binding  upon  him 
it  has  been  determined  that  the  promise  must  be  given  to  the  creditor 
or  to  some  one  acting  in  his  behalf  .^^  And  the  promise  must  be  un- 
ambiguous and  explicit,^*  and  unconditional,^^  or  if  depending  on  a 
condition  it  must  be  shown  that  the  condition  has  been  performed.^^ 
So  where  a  person  promised  that  if  successful  in  business  he  would 
commence  paying  a  note  it  was  held  that  the  promise  was  a  condi- 
tional one  and  that  performance  of  the  condition  must  be  shown  to 
authorize  a  recovery.^^  It  has  also  been  decided  that  a  consideration 
is  not  necessary  to  support  a  subsequent  promise,^^  though  there  are 

personal    privilege    of    the    surety,  ^=  Gilpin   v.    Smith,   11    Smedes   & 

which  he  may  waive;   and  he  does  M.   (Miss.)  109. 

so,  emphatically,  if,  with  knowledge  ^^Wakeman  v.   Sherman,  9  N.  Y. 

of  the  fact,  he  notwithstanding  re-  85.     Compare    Depuy    v.    Swart,    3 

news  his  promise."  Per  Parker,  J.  Wend.  (N.  Y.)  135. 

=°Apperson   &   Co.   v.   Stewart,    27  ^*  Huffman  v.  Johns  (Pa.  Sup.),  6 

Ark.  619.  Atl.  205.   See  Horner  v.  Speed,  2  Pat. 

"  Arizona.— Barry  v.  Kirkland,  52  &  H.  (Va.)  616. 

Pac.  771.  "Branch  Bank  at  Mobile  v.  Boy- 

Eentucky. — Clay    v.    McClanahan,  kin,  9  Ala.  320. 

5  B.  Mon.  241.  ="  Branch  Bank  at  Mobile  v.  Boy- 

Louisiana. — Lambeth    v.    Kerr,    3  kin,  9  Ala.  320;  Wakeman  v.  Sher- 

Rob.  144.  man,  9  N.  Y.  85. 

Massachusetts. — Mackay     v.     Hoi-  "Wakeman  v.  Sherman,  9  N.  Y. 

land,  4  Mete.  69.  85. 

Missouri. — Long  v.  Dismer,  71  Mo.  ='Way  v.  Sperry,  6  Cush.  (Mass.) 

452.  238;    Hobaugh  v.   Murphy,    114   Pa. 

Compare    Lewis    v.    Hodgdon,    5  St.  358,  7  Atl.  139. 
Shep.   (Me.)  267. 


803    EEPEESENTATIOXS  IN  COXXECTIOX  WITH  TRANSFER.     [§§    652,    653 

some  cases  which  do  not  favor  this  doctrine. '^^  But  though  a  con- 
sideration might  be  necessary  it  would  seem  that  an  extension  of  time 
would  be  a  sufficient  one."" 

§  652.  By  giving  paper  to  cover  shortage  in  accounts  or  to  deceive 
state  officials. — Parties  who  execute  paper  for  the  purpose  of  enabling 
an  official  who  is  short  in  his  accounts  or  financially  embarrassed  to 
bridge  over  his  financial  reports,  and  who  have  knowledge  of  the  pur- 
pose for  which  such  paper  is  to  be  used,  will  not  be  allowed  to  hide 
themselves  behind  a  violation  of  law  in  which  they  have  participated 
and  they  are  estopped  to  allege  against  an  action  on  the  paper  such 
violation  of  law.**^  And  one  who  gives  to  a  corporation,  such  as  an  in- 
surance company,  his  note  for  the  purpose  of  enabling  the  company 
to  deceive  the  commissioners  as  to  its  financial  condition,  and  upon  the 
understanding  that  the  note  shall  be  surrendered  when  certain  finan- 
cial straits  have  been  passed  is  estopped  from  taking  advantage  of  his 
own  fraud.®^ 

§  653.  By  representations  in  connection  with  transfer — ^What 
operates  as  an  estoppel. — Where  a  maker,  by  his  representations  to  an- 
other that  a  note  is  good  and  is  a  valid  and  enforceable  obligation,  in- 
duces the  latter  to  purchase  it,  the  maker  will  be  estopped  in  an  ac- 
tion against  him  on  the  instrument  from  questioning  its  validity.®^ 

™Henry  v.  Gilliland,  103  Ind.  177;  Indiana.— Plummer    v.    Bank,    90 

Ray  V.  McMurtry,  20  Ind.  307.  Ind.   386;    Rose   v.    Hurley,   39    Ind. 

""Brown  v.   First  National   Bank,  77;    Vanderpool    v.    Brake,   28   Ind. 

115  Ind.  572,  18  N.  E.  56;  Fraley  v.  130;  Rose  v.  Teeple,  16  Ind.  37. 

Kelly,  79  N.  C.  348;  Henly  V.  Lanier,  Iowa. — Shipley    v.    Reasoner,    87 

75  N.  C.  172;   Jones  v.  Sennott,  57  Iowa  555,  54  N.  W.   470;    Callanan 

Vt.  355.  V.  Shaw,  24  Iowa  441. 

"^  Longmire  v.  Fain,  89  Tenn.  393,  Kentucky. — Tichenor     v.     Owens- 

18  S.  W.  70.  boro  Sav.  Bank  &  Trust  Co.,  24  Ky. 

"-New  England  Fire  Insurance  Co.  Law  Rep.  145,  68  S.  W.  127;  Blades 

v.  Haynes,  71  Vt.  306,  45  Atl.  221.  v.  Newman,  19  Ky.  Law  Rep.  1062, 

«Ato&ama.— Wilkinson    v.    Seary,  43  S.  W.  176;  Smith  v.  Stone,  17  B. 

74   Ala.    243;    Brooks   v.   Martin,   43  Mon.  170. 

Ala.  360.  Massachusetts. — Nye  v.  Chase,  139 

Arkansas.— McL,am  v.   Coulter,   5  Mass.  379,  31   N.  E.  736;   Tobey  v. 

Pike  13.  Chipman,  13  Allen,  123. 

Connecticut. — See          Middletown  Michigan. — Sutton     v.     Beckwith, 

Bank  v.  Jerome,  18  Conn.  443.  68  Mich.  303,  36  N.  W.  79. 

Georgia. — Henry  v.  McAllister,  99  Alississippi. — Torrey  v.  Grant,  10 

Ga.  557,  26  S.  E.  469.  Smedes  &  M.  89. 


§    653]  "WAIVER   AND   ESTOPPEL.  804 

So  where  tlie  maker  of  a  promissory  note,  payable  to  a  certain  person 
or  bearer,  answered,  in  response  to  an  inquiry  by  one  to  whom  the 
payee  had  offered  to  sell  it  after  its  dishonor,  that  it  was  all  right 
and  that  he  would  pay  it,  whereupon  the  purchase  was  made,  it  was 
decided  that  the  maker  was  estopped  from  setting  up  want  or  failure 
of  consideration,  or  any  other  equity  existing  between  himself  and 
the  payee,  as  a  defense  to  an  action  on  the  note  by  the  purchaser  or  his 
privies,''*  And  where  a  bank,  to  which  a  non-negotiable  note  or  order 
is  presented  for  discount,  is  induced  to  discount  the  same  by  an  an- 
swer which  it  receives  from  the  maker  in  response  to  an  inquiry  made 
of  him,  the  latter  cannot  subsequently  deny  liability  on  the  note,  and 
the  fact  that  the  bank  gave  no  notice  of  the  discount  is  held  to  be 
immaterial.*'^  So  where  a  purchaser  relies  on  a  representation  that 
the  note  is  all  right  and  will  be  paid  the  maker  will  be  estopped  from 
availing  himself  of  a  set-off  which  he  may  have  against  the  payee.^^ 
This  general  rule  of  estoppel  has  also  been  applied  in  the  case  of  repre- 
sentations by  the  maker  that  the  paper  is  business  paper.**''  And  it  has 
been  decided  that  representations  as  to  the  priority  of  a  mortgage 
given  as  collateral  to  secure  the  payment  of  notes  may  operate  as  an 
estoppel,  although  it  could  have  been  learned  from  an  examination  of 
the  record  that  a  prior  mortgage  was  in  existence. *'^  Again  where  a 
bank  is  induced  by  another  bank  to  honor  the  draft  of  a  third  person 
so  that  he  may  pay  a  debt  due  to  one  of  his  creditors,  it  has  been  de- 
cided that  the  latter  bank  will  be  estopped,  in  an  action  on  the  draft, 
from  asserting  the  claim  that  the  maker  did  not  owe  to  his  creditor 

New  York. — Fleiscliman  v.  Stern,  him  the  plaintiffs  below  afterwards 

90  N.  Y,  110.  acquired    their   title.     *     *     *     The 

Pennsylvania. — Edgar  v.  Kline,  6  maker  of  the  note  is  estopped  from 

Pa.  St.  327.  using  the  defense  which  he  now  sets 

England. — Davison  v.  Franklin,  1  up.    He   cannot  use   it   against  the 

Barn.  &  Adol.  142.  person  who  purchased  on  the  faith 

•^  Reedy  v.  Brunner  &  Co.,  60  Ga.  of   his    statement,   nor   against   the 

107,  where  in  the  court  said:     "The  privies     of     that     purchase."      Per 

note  being  past  due,  the  payee  of-  Bleckley,  J. 

fered    it   for    sale.     The    person    to  See,    also,    Davis    v.    Thomas,    5 

whom   it  was  offered,  went  to  the  Leigh.  (Va.)  1. 

maker   and   inquired  concerning  it.  "^  Strang  v.  MacArthur,  212  Pa.  St. 

The  maker  answered  that  it  was  all  477,  61  Atl.  1015. 

right,    and   that   he   would    pay    it.  "^  Wiggin  v.  Damrell,  4  N.  H.  69. 

Acting  upon  this  clear  and  explicit  *"  Fleischman   v.    Stern,    90   N.   Y. 

answer,  the  individual  to  whom  the  110;    Lynch   v.   Kennedy,    34    N.  Y. 

answer    was    made    purchased    the  151;  7n  re,  Many,  Fed.  Cas.  No.  9054. 

note  and  paid  value  for  it.    Under  ^^  Dodge  v.  Pope,  93  Ind.  480. 


805         EEPRESEXTATIOXS    IN    COXXECTION    WITH    TRAXSFEE.         [§    65-i 

the  amount  of  such  draft.^^  A  city  may  also  be  estopped  to  deny  the 
validity  of  its  warrants  on  the  ground  that  they  were  not  issued  in  pur- 
suance of  an  ordinance  appropriating  money  to  the  payment  thereof 
where,  by  the  promises  and  misrepresentations  of  its  officers,  a  holder 
of  the  same  has  been  induced  to  permit  them  to  remain  uncollected 
until  the  cause  of  action  on  the  debt  is  barred.'"  The  rule  that  a 
maker  may,  by  his  representations  in  connection  with  the  transfer  of 
paper,  be  estopped  from  asserting  defenses  against  such  paper  in- 
cludes those  cases  where  a  note  is  executed  and  placed  in  the  hands  of 
an  agent  or  broker  for  sale  and  a  false  representation  inducing  the 
purchase  is  made  by  the  one  so  acting  for  the  maker. ''^  And  it  would 
also  seem  that  representations  of  such  a  character  made  by  the  maker 
would  operate  as  an  estoppel  upon  a  receiver  appointed  for  the  maker.'^- 

§  654.     Same  subject,  continued — ^When  an  estoppel  does  not  arise. 

— An  estoppel  does  not  arise  in  favor  of  a  purchaser  of  commer- 
cial paper  where  it  appears  that  the  representation  relied  upon  was 
obtained  by  fraud  on  the  part  of  such  purchaser, '^^  or  that  the  lat- 
ter neither  relied  upon  nor  was  deceived  by  the  statement  of  the 
maker."*  So  a  representation  that  a  note  is  all  right  and  a  prom- 
ise to  pay  the  same  has  been  held  not  to  estop  the  maker  from  set- 
ting up  the  defense  of  usury  where  it  is  apparent  that  the  pur- 
chaser knew  of  the  usury  and  did  not  in  good  faith  rely  on  such 
statements. '^^  And  the  fact  that  representations  have  been  made  by 
a  maker  of  a  note  which  may  have  influenced  or  induced  the  pur- 

""  Guthrie  National  Bank  v.   Dos-  trust  be  violated,  the  innocent  dealer 

baugh,  11  Okla.  664,  69  Pac.  797.  must   be   protected.     The    choice    of 

™  Hubbell  v.  City  of  South  Hutch-  the   medium   rests  with   the   seller, 

inson,  64  Kan.  645,  68  Pac.  52.  and  he  must  take  the  consequences." 

'^Ahern  v.  Goodspeed,  9  Hun   (N.  Per  Brady,  J. 
y.)   263,  aff'd  72  N.  Y.  108.    As  was  "Armstrong     v.     American     Ex- 
said    in    this    case:      "The    broker  change  National  Bank,  133  U.  S.  433, 
could  not  be  expected  to  sell  notes  10  Sup.  Ct.  450. 

or  have  them  discounted,  by  silently  "  Hill   v.   Thixton,    94  Ky.   96,   23 

presenting  them  to  a  purchaser.   He  S.    W.    947;     Lyndonville    National 

must    be    expected    to    know    some-  Bank  v.  Fletcher,  68  Vt.  81,  34  Atl. 

thing  of  them,  and  what  he  assumes  38. 

to  know  legitimately  connected  with  '*  Spray  v.  Burk,  123  Ind.  565,  24 

them,    and    necessarily    a    part    of  N.  E.  588,  so  holding  where  a  note 

them,  if  stated  by  him,  is  as  bind-  was  given  for  a  gambling  debt  and 

ing  as  if  uttered  by  the  principal,  the  purchaser  had  knowledge  there- 

The  latter  has  placed  the  broker  in  of. 

a  position  to  do  wrong,  and  if  th«  ^Watson  v.  Hoag,  40  Iowa  142. 


§    655]  WAIVER   AND   ESTOPPEL.  806 

chase  of  the  paper  will  not  operate  as  an  estoppel  to  assert  fraud 
where  it  appears  that,  at  the  time  of  making  such  representation,  the 
maker  had  no  knowledge  of  such  defense  and  it  also  appears  that  the 
intending  purchaser  had  full  knowledge  thereof.'^®  Nor  will  he  be  es- 
topped by  casual  answers  made  to  persons  who  have  no  interest  in  the 
subject-matter  of  their  inquiries,  though  the  instrument  is  subse- 
quently purchased  by  themJ^  And  it  has  also  been  decided  that  an 
acceptor  of  a  bill  will  not  be  estopped  by  representations  made  to  the 
purchaser  by  the  drawer  for  whose  accommodation  it  was  accepted.'^^ 
Again  where  a  person  indorses  a  note  upon  an  agreement  in  writing 
with  the  payee  that  the  latter  shall  not  proceed  against  him  until  he 
has  first  exhausted  all  the  property  of  the  principal,  the  payee  cannot 
proceed  by  suit  against  the  indorser  until  he  has  first  exhausted  the 
property  of  the  principal  as  agreed,  and  notice  to  sue  the  principal 
given  to  the  indorser  is  not  notice  to  sue  the  indorser  himself,  and 
does  not  estop  the  latter  from  setting  up  the  defense  that  he  is  liable 
only  after  the  property  referred  to  has  been  exliausted.'^^ 

§  655.  Effect  of  representations  subsequent  to  transfer. — A  maker 
or  indorser  of  commercial  paper  is  not  estopped  by  representations, 
made  subsequent  to  its  transfer,  in  regard  to  its  binding  force  or 
validity.®"    A  representation,  however,  made  by  the  holder  of  a  note 

^^  Sackett  v.  Kellar,  22  Ohio  St.  ing  required  this,  and  the  withhold- 
554.  It  appeared  in  this  case  that  ing  of  such  information,  under  such 
one  about  to  purchase  notes  and  state  of  facts,  was,  in  law  and  in 
having  knowledge  of  fraud  in  con-  good  conscience,  a  fraudulent  sup- 
nection  with  the  procuring  of  their  pression  of  the  truth,  and  the  plain- 
execution  went  to  the  maker  and  tiff  took  the  notes  subject  to  all 
inquired  concerning  them  and  was  their  infirmities,  which  had  come  to 
informed  that  they  were  all  right  his  knowledge."  Per  Mcllvaine,  J. 
and  would  be  paid  at  maturity.  See,  also,  Clements  v.  Loggins,  2 
Having  received  this  answer  he  pur-  Ala.  514. 

chased  the  notes,  without  disclosing  "  Allum  v.  Perry,  68  Me.  232. 

to  the  maker  his  knowledge  in  re-  "Jackson  v.  Fassitt,  33  Barb.  (N. 

gard  to  the  fraud,  and  of  which  the  Y.)   645. 

maker    had    no    knowledge    at    the  "^  Planters'    Bank    v.    Houser,    57 

time.    The   court   said   of   the   pur-  Ga.  140. 

chaser's  conduct:    "It  was  his  plain  ^Crossan    v.    May,    68    Ind.    242 

duty,    under   the    circumstances,    to  Stutsman  v.   Thomas,   39   Ind.   384 

inform   the    defendant  of   the   facts  Windle    v.    Canaday,    21    Ind.    248 

affecting  the   validity  of  the  notes  Traders'  National   Bank  v.  Rogers, 

which   had   come  to  his  knowledge  167  Mass.  316,  45  N.  E.  923. 
before  purchasing  them.    Fair  deal- 


807  BY   ADMISSION    OR    DECLAIfATION".  [§    656 

after  its  maturity,  wliicli  is  of  such  a  nature  as  to  induce  an  indorser 
to  believe  that  no  liability  is  claimed  to  exist  against  him,  and  by 
reason  of  which  he  is  in  fact  induced  to  abstain  from  securing  him- 
self when  he  might  easily  have  done  so,  and  such  security  is  subse- 
quently lost  to  him,  will  operate  as  an  estoppel  in  an  action  by  such 
holder  against  the  indorser.^^  And  where  a  note  had  been  discounted 
by  a  bank,  under  an  agreement  that  it  was  to  be  paid  by  a  third  party, 
and  at  its  maturity  it  was  protested  and  notice  sent  to  the  maker  and 
indorser,  who  immediately  called  at  the  bank  and  were  informed  that 
the  one  who  was  to  have  paid  the  note  had  requested  that  it  be  charged 
to  his  account,  that  this  had  been  done,  that  it  was  all  right,  and  that 
they  need  not  trouble  themselves  any  further,  whereupon  the  maker 
returned  to  such  third  party  funds  of  the  latter  which  were  sufficient 
to  pay  the  note,  it  was  held  that  the  bank  was  by  such  representations 
and  statements  estopped  to  enforce  the  note  against  such  maker  and 
indorser.*^ 

§  656.  By  admission  or  declaration. — If  the  maker  of  a  note,  when 
applied  to  by  one  intending  to  purchase  it  to  know  if  there  is  any 
defense  against  it,  admits  that  he  has  none,  he  thereby  estops  himself 
from  afterward  setting  up  any  defense,  when  sued  on  the  note,  which 
existed  at  that  time  within  his  knowledge,  as  it  would  be  a  fraud  on 
the  intended  purchaser ;  but  this  would  not  preclude  a  defense  which 
might  subsequently  arise  out  of  the  original  contract,  such  as  total 
failure  of  consideration.^^  And  where  the  maker  of  a  note  admitted 
in  supplemental  proceedings  against  the  payee  that  he  owed  the  latter 
the  amount  of  a  note,  and  at  the  time  the  proceedings  were  com- 
menced the  note  had  been  transferred  to  a  bona  fide  holder,  who  was 
not  a  party  to  the  proceedings,  it  was  decided  that  such  holder  could 
recover  in  an  action  against  the  maker,  as  it  was  the  maker's  folly  to 
admit  that  he  owed  the  note  to  the  payee  before  ascertaining  whether 
the  note  had  been  negotiated.^*  And  where  admissions  were  made  after 
maturity  by  the  indorser  of  a  note  upon  which  the  holder  relied  and 
postponed  bringing  suit  until  after  the  maker  had  become  insolvent 
it  was  decided  that  the  indorser  was  by  such  admissions  estopped  from 

« Roberts  v.  Miles,  12  Mich.  297;  ^Mawry  v.  Coleman,  24  Ala.  381, 
State  Bank  v.  Wilson,  12  N.  C.  484.  60  Am.  Dec.  478;   Clements  v.  Log- 
Compare  DeMayer  v.  Bank,  8  Neb.  gins,  2  Ala.  514. 
105.  ^*  Rice  V.  Jones,  103  N.  C.  226,  9  S. 

*^  Manufacturers'  Bank  of  Troy  v.  E.  571. 
Scofield,  39  Vt.  590. 


§§  657,  658]  WAIVER  axd  estoppel.  808 

denying  his  signature.^^  But  where  an  action  was  brought  on  a  note 
pledged  to  the  plaintiff  as  collateral  security  it  was  decided  that  the 
defandant  was  not  estopped  by  an  admission  that  the  plaintiff  obtained 
the  note  before  maturity  from  setting  up  the  defense  that  he  was  not  a 
hona  fide  holder  and  that  there  was  a  failure  of  consideration.*^ 

§  657.  By  admission  or  declaration,  continued. — Though  a  party 
to  commercial  paper  may  be  bound  by  declarations  or  admissions  made 
by  him  while  he  is  the  owner  and  in  possession  thereof,  yet  such  declara- 
tions or  admissions  will  not  as  a  general  rule  operate  as  an  estoppel 
upon  others  who  may  be  parties  to  the  paper.*^  So  a  maker  will  not 
be  bound  by  admission  made  by  an  indorser.**  And  admissions  of  one 
of  two  makers,  where  they  are  not  partners,  as  to  the  validity  of  the 
paper  have  been  held  not  to  estop  the  other  from  setting  up  want  of 
consideration,  though  the  plaintiff  in  interest,  or  the  person  from 
whom  he  received  it,  purchased  the  note  on  the  faith  of  the  admis- 
sion.*^ And  in  an  action  against  partners  on  a  promissory  note  exe- 
cuted by  one  of  them  in  the  name  of  the  firm,  it  has  been  decided  that 
admissions  of  that  partner  are  not  admissible  to  prove  the  note  a  part- 
nership one.^'^ 

§  658.  By  admissions  or  declarations,  continued. — Admissions  by 
an  assignor  have  in  many  cases  been  held  binding  upon  an  assignee,®^ 
or  one  who  is  a  holder  by  delivery  merely.®-  Admissions  of  one  party 
may  also  be  binding  upon  another  where  there  is  an  identity  of  in- 
terest,®^ as  where  an  indorsee  is  the  agent  of  the  indorser  with  power 

»=  Bates  V.  Leclair,  49  Vt.  229.  ^'Andrews   v.   Campbell,   36   Ohio 

«« McDonald  v.  Mayer,  97  Ga.  281,  St.  361. 

23  S.  E.  72.  ^  Lewis  v.  Woodworth,  2  N.  Y.  512. 

^'United  States. — Dodge  v.  Freed-  ^  Tuttle  v.  Cooper,  5  Pick.  (Mass.) 

man's  Savings  &  Trust  Co.,  93  U.  S.  414. 

379.  "1  Thorp   v.    Goewey,    85    111.    611; 

New   York. — Paige   v.    Cagwin,    7  Shade    v.    Creviston,    93    Ind.    591; 

Hill    361;     Whitaker    v.    Brown,    8  Stoner  v.  Ellis,  6  Ind.  152;   Abbott 

Wend.  490.  v.  Muir,  5  Ind.  444;  Blount  v.  Riley, 

Pennsylvania. — Camp    v.    Walker,  3   Ind.  471;    Bond  v.   Fitzpatrick,  8 

5  Watts  482.  Gray   (Mass.)   536;   Sharp  v.  Smith, 

South  Carolina.— T>Q  Bruhl  v.  Pat-  7  Rich.  L.   (S.  C.)  3. 

terson,  12  Rich.  L.  363.  "-  Thorp  v.  Goewey,  85  111.  611. 

England. — Hemings   v.    Robinson,  ®^  Welstead  v.  Levy,  1  Moody  &  R. 

Barnes  436;  Beauchamp  v.  Parry,  1  138;  Rocock  v.  Billing,  2  Bing.  269. 
Barn.  &  Adol.  89;  Kent  v.  Lowen,  1 
Camp.  177. 


809  BY   ACTS,    CONDUCT   OR   WORDS.  [§    659 

to  sue  for  liira.°*  And  where  paper  is  delivered  into  the  possession  of 
another  who  is  authorized  to  treat  and  deal  with  it  as  his  own,  it  is 
decided  that  admissions  made  by  the  latter  may  operate  as  an  estoppel 
upon  the  one  by  whom  the  power  was  given.'^^  It  has  also  been  held 
that  a  purchaser  after  maturity  may  be  estopped  by  admissions  made 
by  a  prior  holder  while  the  instrument  was  in  his  possession.®^ 

§  659.  By  acts,  conduct  or  words. — One  who,  by  his  words  or  con- 
duct, induces  another  to  pursue  a  certain  course  of  action  in  regard 
to  commercial  paper,  and  the  words  or  conduct  are  of  such  a  character 
as  would  justify  a  man  of  ordinary  prudence  in  pursuing  that  course, 
may  be  estopped  from  showing  that  the  facts,  which  the  other  party 
has  been  thereby  led  to  believe  exist,  do  not  in  fact  exist,  and  conse- 
quently be  precluded  from  availing  himself  of  a  defense  which  would 
be  inconsistent  with  the  existence  of  such  facts.®^  So  where  paper 
is  given  or  transferred  in  settlement  of  an  account  and  the  party 
giving  or  transferring  it  treats  it  as  valid  until  the  account  has  been 
barred,  he  will  be  estopped  from  denying  his  liability  thereon  in  an 
action  against  him,"^  And  where  the  maker  of  a  note  presents  it  for 
discount  he  should  be  estopped  from  setting  up  any  defense  affecting 
its  validity  against  the  party -discounting  it  with  no  notice  or  knowl- 
edge thereof.**^    So  in  the  case  where  an  acceptor's  liability  is  made 

'^Welstead  v.  Levy,  1  Moody  &  R.  Minnesota. — Yellow   Medicine   Co. 

138.  Bank  v.  Wiger,  59  Minn.  384,  61  N. 

"'Bank  of  Newbury  v.  Sinclair,  60  W.  452. 

N.  H.  100;   Reed  v.  Vancleve,  27  N.  New  York. — Weed  v.  Carpenter,  4 

J.  L.  352.  Wend.  219. 

^^Curtiss  v.   Martin,   20   111.   557;  Pennsylvania. — Decker    v.    Eisen- 

Eaton   V.   Corson,    59   Me.   510.    But  hauer,  1  Ren.  &  W.  476. 

see    Shober   v.   Jack,   3    Mont.    351;  Texas. — Kolp   v.    Specht,   11   Tex. 

Paige  V.  Cagwin,  7  Hill  (N.  Y.)  361.  Civ.  App.  685,  33  S.  W.  714. 

*^  United  States. — Andrus  v.  Brad-  "^  Carter    v.    Bolin,    11    Tex.    Civ. 

ley,  102  Fed.  54;   Many,  In  re,  Fed.  App.  283,  32  S.  W.  123. 

Cas.  No.  9054.  "» Kitchell    v.    Schenck,    29    N.    Y. 

Connecticut. — Middleton    Bank   v.  515,  so  holding  where  in  an  action 

Jerome,  18  Conn.  443.  by  one  discounting  a  note  against 

Indiana. — Musselman  v.  McElhen-  the  maker  the  latter  sought  to  show 

ny,  23  Ind.  4,  85  Am.  Dec.  445;  Kuiss  usury  between  him  and  an  accom- 

V.    Holbrook,   16    Ind.    App.    229,    44  modation  indorser.    The  court  said: 

N.  E.  563.  "If  in  such  a  case  as  this,  where  the 

Iowa. — Bartle     v.     Breniger,     37  maker  of  a  note  having   it   in   his 

Iowa  139.  possession    applies    to    an    Innocent 

Maine. — Stratford  v.  Crosby,  8  Me.  party   to    discount   it,    and   receives 

154.  from  him  the  face  of  the  paper,  the 


§    660]  WAIVER   AND   ESTOPPEL.  810 

dependent  upon  the  performance  of  some  contract  obligation  by  a 
party  to  the  paper  and  performance  is  prevented  by  the  former,  he 
"will  be  estopped  in  an  action  against  him  on  the  paper  from  setting 
up  non-performance  as  a  defense.^"**  And  it  has  been  decided  that  an 
equitable  estoppel  may  arise  against  a  plaintiff  from  his  permitting 
mortgaged  property  to  be  sacrificed  at  a  mortgagee's  sale  for  a  sum 
less  than  its  value,  thereby  creating  a  deficiency  which  would  be  suffi- 
cient to  pay  the  amount  of  the  note.^''^  Again  the  granting  of  an  ex- 
tension of  time,  with  full  knowledge  of  facts  which  would  constitute 
a  good  defense  to  an  action  on  a  note,  may  operate  to  estop  a  party 
from  availing  himself  of  such  defense,  though  at  the  time  of  granting 
the  extension  he  was  ignorant  of  the  legal  effect  of  such  facts.^*^^  It 
has,  however,  been  decided  that  a  maker  does  not,  by  permitting  the 
holder  of  the  note  to  retain  the  same,  estop  himself  from  setting  up 
payment  as  a  defense.^ ''^  Where  a  partnership  note  is  given  to  a  bank 
and  one  of  the  partners  subsequently  sells  his  interest  to  a  third  per- 
son who  agrees  to  assume  the  liabilities  of  such  partner,  the  fact  that 
the  bank  subsequently  accepts  a  part  payment  on  the  note  from  the 
incoming  partner  does  not  operate  as  an  estoppel  so  as  to  prevent  the 
bank  from  recovering  the  balance  due  from  the  retiring  partner.^"* 

§  660.  Same  subject — Corporate  transactions. — Where  stockholders 
of  a  corporation  have  been  guilty  of  laches  in  permitting  corporation 
bonds  to  be  issued  and  have  availed  themselves  of  the  benefits,  they 
will  be  precluded  from  the  defense  that  the  act  of  issuing  them  was 
ultra  vires.^"^  And  where  a  corporation  receives  the  benefit  of  money 
which  was  borrowed  by  its  president  and  notes  of  the  corporation,  se- 
cured by  mortgage  on  its  property,  are  executed  therefor,  and  suc- 
cessive renewals  of  the  notes  are  procured  by  the  corporation  with  full 
knowledge  of  the  facts,  it  will  be  estopped  from  denying  its  liability 

maker  may  afterwards  set  up  a  de-  ^""Home  Bank  v.  Drumgoole,  109 

fense  of  usury  founded  on  a  trans-  N.  Y.  63,  15  N.  E.'747. 

action  between  him  and  an  accom-  "^  Island  Savings  Bank  v.  Galvin, 

modation  iudorser,  there  can  be  no  20  R.  I.  158,  37  Atl.  809. 

safety  in  discounting  negotiable  pa-  "^Rindskopf   v.   Doman,   28   Ohio 

per.     On    the    contrary,    where    the  St.  516. 

maker  of  a  note  thus  presents  his  ^"^  Hardy  v.  Waddell,  58  N.  H.  460. 

own  paper  for  discount,  he  should  "*  Smart    v.    Breckenridge    Bank 

be  estopped  from  setting  up  any  de-  (Ky.  C.  A.  1906),  90  S.  W.  5,  91  S. 

fense  of  such  a  character."   Per  In-  W.  697. 

graham,  J.  ^"^  Tyrell   v.   Railroad   Co.,   7  Mo. 

App.  294. 


811  BY    LACHES.  [§'   661 

in  a  subsequent  action  on  the  paper  so  given.^"^  Again,  where  property 
is  sold  to  a  corporation  or  syndicate  and  the  land  is  conveyed  to  an 
individual  member  whose  notes  are  accepted  .on  the  understanding  that 
it  is  for  the  purpose  of  relieving  a  certain  one  of  the  purchasers  from 
liability  for  the  balance  of  the  purchase  money,  the  vendor  is  estopped 
to  subsequently  assert  a  liability  against  the  latter  on  the  notes  or 
otherwise.^"^ 

§  661.  By  laches. — Where,  owing  to  the  carelessness  or  negligence 
of  a  maker  in  the  execution  of  commercial  paper,  an  alteration  may 
be  easily  made,  either  by  the  filling  in  of  blanks  in  an  incomplete  in- 
strument or  by  erasure  without  either  defacing  it  or  in  such  a  manner 
as  to  excite  the  suspicions  of  a  careful  man,  the  maker  may  be  estopped 
thereby  from  setting  up  the  alteration  as  a  defense  to  an  action  brought 
by  a  bona  fide  holder.^"^  So  it  has  been  held  proper  in  such  a  case  to 
instruct  the  jury  in  substance,  that  if  the  maker  executed  the  note  in 
controversy  with  a  material  portion  written  only  in  pencil,  subject  to 
be  easily  erased  so  as  to  leave  no  appearance  of  alteration  on  the  face 
of  the  note,  when,  by  ordinary  care  and  prudence,  he  could  have 
guarded  against  such  erasures,  he  was  guilty  of  negligence,  and  could 
not  defeat  its  collection  in  the  hands  of  an  innocent  holder  who  took 
it  before  maturity  without  notice  of  any  alteration.^"''  And  where  a 
maker  or  acceptor  attempts  to  destro}^  an  instrument  but  it  is  done 
in  such  a  negligent  manner  that  there  are  no  indications  upon  its  face 
of  an  intention  to  destroy  it,  and  a  third  party  subsequently  negotiates 
it,  it  has  been  decided  that  the  maker  or  acceptor  will  be  estopped  from 
setting  up  either  his  attempt  or  the  fraud  of  the  third  party  in  nego- 
tiating it,  where  the  action  is  brought  by  a  bona  fide  holder.  So  where 
the  drawer  of  a  bill  picked  it  up  in  the  presence  of  the  acceptor,  who 
had  negligently  torn  it  in  half  and  thrown  it  down,  and  subsequently 

^""Mining    Co.    v.    First    National  Louisiana. — Isnard   v.   Torres,   10 

Bank,  95  Fed.  23.  La.  Ann.  103. 

'"^  Underwood  v.  Patrick,  94  Fed.  Pennsylvania. — Zimmerman         v. 

468.  Rote,  75  Pa.  St.  188;  Phelan  v.  Moss, 

^"Ullinois.—Seihel  v.  Vaughan,  69  67  Pa.  St.  59. 

111.    257;    Harvey   v.    Smith,    55    111.  Compare  Walsh  v.  Hunt,  120  Cal. 

224;  Elliott  v.  Levings,  54  111.  213.  46,  52  Pac.  115. 

Indiana.— Noll   v.    Smith,   64    Ind.  ""  Seibel  v.  Vaughan,  69   111.   257. 

511;  Cornell  v.  Nebeker,  58  Ind.  425.  See,  also,  Harvey  v.  Smith,  55  111. 

Kentucky. — Blakey  v.  Johnson,  13  224. 
Bush   197,   26  Am.   Rep.   254;    Wool- 
folk  v.  Bank,  10  Bush  504. 


§    663]  WAIVER   AND   ESTOPPEL.  813 

pasted  the  two  pieces  together  and  negotiated  it  to  a  bona  fide  holder, 
and  the  appearance  of  the  bill  was  as  consistent  with  its  having  been 
divided  for  the  purpose  of  transmission  by  post  as  with  its  having 
been  torn  for  the  purpose  of  destroying  it,  the  acceptor  was  held  to 
be  estopped  from  setting  up  the  fraud  of  the  drawer  as  a  defense  to 
an  action  by  the  bona  fide  holder.^^°  But  where  a  note  given  for  prop- 
erty purchased  was  prepared  by  the  payee,  and  the  purchaser  before 
signing  the  same  and  without  the  knowledge  of  the  former  erased  a 
clause  of  the  note  making  it  negotiable  and  it  was  accepted  by  the 
payee,  who  did  not  know  of  or  assent  to  the  change,  without  an  exami- 
nation, it  was  decided  that  he  was  not  guilty  of  such  negligence  as 
would  amount  to  an  estoppel.^^^ 

§  662.  By  retaining  consideration. — It  is  a  general  rule  that  a 
party  who  receives  the  consideration  for  which  commercial  paper  was 
given  or  transferred  and  continues  to  retain  the  same  is  thereby  es- 
topped from  setting  up  a  defense  of  which  he  might  otherwise  avail 
himself.^^^  So  where  the  cashier  of  a  bank  sold  a  note,  and  the  pro- 
ceeds were  received  and  retained  by  the  bank,  it  was  decided  that  the 
bank  and  its  receiver  were  estopped  from  denying  the  authority  of  the 
cashier  to  make  such  sale.^^^   And  though  a  note  may  have  been  pro- 

""  Ingham  v.  Primrose,  7  C.  B.  N.  "^  Hawkins     v.     Fourth     National 

S.  82.  Bank,   150   Ind.   117,  49   N.   E.   957. 

"^Frum  V.  Keeney,  109  Iowa  393,  It   was    said   by   the   court  in   this 

80  N.  W.  507.  case:    "It  is  insisted  that  under  the 

^"^  United  States. — People's  Nation-  statute  of  the  United  States,  §  5209, 

al   Bank  v.   National   Bank,   101   U.  R.  S.  U.  S.,  the  cashier  for  the  In- 

S.  181;   Weber  v.  Spokane  National  dianapolis  Bank   had   no   power   to 

Bank,  64  Fed.  208,  12  C.  C.  A.  93;  sell   said   note   to   the   Knightstown 

Union  Loan  &  Trust  Co.  v.  South-  Bank  unless  such  authority  was  con- 

ern  California  Motor  Road  Co.,  51  ferred    upon    such    cashier    by    the 

Fed.     840;      Waynesville     National  board  of  directors  of  said  bank,  that 

Bank  v.  Irons,  8  Fed.  1.  the  burden  of  proving  such  author- 

Indiana. — Hawkins  v.  Fourth  Na-  ity  was  upon  the  Knightstown  Bank, 

tional  Bank,  150  Ind.  117,  49  N.  E.  and  as  the  special  finding  does  not 

957.  state  that  such  authority  was  con- 

Kentucky. — German     National  ferred    by    the    board    of    directors 

Bank  v.  Louisville  Butcher's  Hide  &  upon  the  cashier,  it  is  equivalent  to 

Tallow  Co.,  97  Ky.  34,  29  S.  W.  882.  a   finding   that   such    was    not   con- 

Neiv    Jersey. — Hackettstown    Na-  ferred  by  the  board  of  directors  of 

tional  Bank  v.  Ming,  52  N.  J.  Eq.  said  bank.    *    *    *    But  even  if  the 

157,  27  Atl.  920.  special     finding     stated     that     said 

Wisconsi?!. — Rogers   v.    Priest,    74  cashier  was  not  authorized   by  the 

Wis.  538,  43  N.  W.  510.  board  of  directors  to  sell  said  note 


813  BY  ANOTHER  ACTION   OR  PROCEEDING.  [§    663 

cured  by  fraud  or  fraudulent  representations  a  maker  may,  neverthe- 
less, be  precluded  from  availing  himself  of  such  a  defense  by  neither 
restoring  nor  making  any  offer  to  restore  the  consideration  which  he 
received. ^^*  So  in  a  case  in  which  this  question  is  considered  it  is  said : 
"Conceding  that  the  contract  was  procured  by  false  and  fraudulent 
representations,  the  party  defaruded  cannot  rely  upon  such  fraud  as 
a  defense  unless  he  has  rescinded  the  contract  and  offered  to  restore 
whatever  of  value  he  has  received.  A  party  cannot  repudiate  a  con- 
tract on  the  ground  of  fraud  and  at  the  same  time  retain  the  benefits 
derived  from  it,  but  must,  when  he  discovers  the  fraud,  restore  or  offer 
to  restore  to  the  other  party  what  he  has  received,  and  failing  to  do 
this  he  affirms  the  contract.  When  the  consideration  received  is  of  any 
value  to  either  party,  its  return  must  be  tendered  before  the  party  can 
sustain  an  action  for  rescission  of  the  contract  or  successfully  defend 
an  action  based  upon  such  contract.  A  party  to  a  contract  cannot  treat 
it  as  good  in  part  and  void  in  part,  but  he  must  affirm  it  or  avoid  it 
as  a  whole ;  nor  can  a  contract, ,  either  for  mistake  or  fraud,  be  re- 
scinded in  part  and  affirmed  in  part,  but  must  be  rescinded  in  toto  or 
not  at  all."ii5 

§■  663.  By  another  action  or  proceeding. — A  party  is  not  estopped 
from  bringing  a  proceeding  in  a  United  States  court  upon  commercial 
paper  by  the  mere  fact  that  there  is  a  suit  pending  in  a  state  court,  pro- 
vided the  action  is  one  which  may  be  properly  brought  before  the 
former  court,  it  being  declared  that  the  courts  of  the  United  States 
are  bound  to  proceed  to  judgment  and  to  afford  redress  to  suitors 
before  them  in  every  case  to  which  their  jurisdiction  extends  and  that 
they  cannot  abdicate  their  authority  and  duty  in  any  case  in  favor  of 
another  jurisdiction."*'  And  where  an  action  is  brought  against  an 
individual  as  maker  of  a  note  it  has  been  decided  that  the  plaintiff  will 
not  be  estopped  from  maintaining  such  action  by  the  fact  that  he  has 
brought  another  action  against  a  corporation  as  maker,  where  the  lat- 

on   behalf   of   said   bank,   as   it   is  "*Heaton    v.    Knowlton,    53    Ind. 

found    that    the    said    Indianapolis  357;   Drake  v.  Lowry,  14  Iowa  125; 

Bank  received  $4,930  for  said  note  Kenworthy  v.  Merritt,  2  Wash.  Terr. 

and  retained  the  same  and  has  re-  155,  7  Pac.  62;   City  National  Bank 

turned   no  part  thereof,   said   bank  v.  Kusworm,  91  Wis.  166,  64  N.  W. 

and  its  receiver  are  estopped  from  843. 

denying  that  said   cashier  was  au-  "^Heaton    v.    Knowlton,    53    Ind. 

thorized  by  the  board  of  directors  to  357.    Per  Buskirk,  J. 

sell  said  note,  or  that  the  sale  was  ""Hyde  v.  Stone,  20  How.  (U.  S.) 

ratified  by  said  board."  Per  Monks,  J.  170. 


§   663]  TV^AIVER  AND  ESTOPPEL.  814 

ter  action  has  not  gone  to  judgment  and  it  does  not  appear  that  the 
acts  of  the  plaintiff,  which  are  relied  on  to  create  an  estoppel,  have 
caused  the  defendant  to  change  his  position  or  to  take  any  action  in 
regard  to  the  note  which  would  be  injurious  to  him.^^'^  And  where 
officers  of  a  corporation  executed  a  note  in  such  a  manner  as  to  bind 
them  individually  it  has  been  decided  that  the  bringing  of  an  action 
by  the  holder  against  the  corporation  upon  a  note  similarly  executed 
is  no  bar  to  an  action  against  the  makers  of  the  note  in  suit  as  indi- 
viduals.^^^  So  it  is  decided  that  a  temporary  injunction  restraining 
the  payment  of  a  note  by  the  makers  and  guarantors  is  no  bar  to  an 
action  on  the  note,  it  being  declared  that  if  such  an  injunction  could 
be  pleaded  in  bar  it  would  amount  to  a  complete  satisfaction  of  the 
debt  as  much  so  as  an  actual  payment.^^^  Nor  in  an  action  upon  a  note 
against  an  indorsee  is  it  any  defense  that  a  bill  in  equity  has  been 
filed  against  the  principal  in  said  writing  to  enforce  a  vendor's  lien 
on  the  property  for  which  the  obligation  sued  on  was  given, ^^^^  And 
it  has  also  been  decided  that  an  action  brought  upon  a  note  secured 
by  a  mortgage  cannot  be  defeated  by  showing  that  the  mortgagee  has 
entered  for  the  purpose  of  foreclosure  and  that  the  value  of  premises 
is  in  excess  of  the  debt  for  which  they  are  security.^^^  Nor  is  a  bona 
fide  indorsee  of  paper,  who  takes  it  from  the  payee  for  a  valuable  con- 
sideration, precluded  from  maintaining  an  action  thereon  by  the  fact 
that  the  payee  had  commenced  an  action  against  the  maker,  founded 
on  the  paper  indorsed,  and  that  he  had  attached  real  and  personal 
property  much  beyond  the  amount  thereof  and  afterwards,  while  the 
action  was  pending,  had  negotiated  the  note  to  the  indorsee  for  the 
purpose  of  relinquishing  the  attachment,  and  that  the  latter,  with 
knowledge  of  the  purpose  of  the  payee  and  that  the  maker  was  also 
insolvent  and  unable  to  pay  his  debt,  had  purchased  the  paper,  it  not, 
however,  appearing  that  the  transfer  was  fraudulent.^--  And  it  is  de- 
cided that  the  rights  of  the  holder  of  an  order,  which  is  payable  out  of 
the  amount  due  on  a  builder's  contract,  to  enforce  the  same  cannot  be 
affected  by  proceedings  by  him  to  enforce  a  mechanic's  lien.^-^  Again, 

"^McClure  v.   Livermore,  78  Me.  (Ky.)     672.      Compare     Porter    v. 

390,  6  Atl.  11.  Knapp,  6  Lans.  (N.  Y.)  125. 

"« First  National  Bank  of  Brook-  ^^  Speight    v.    Porter,    4    Cushm. 

lyn  V.  Wallis,  150  N.  Y.  455,  44  N.  (Miss.)  286. 

E.   1038,   affirming  84   Hun   376,  32  ^^^  Portland  Bank  v.  Fox,  19  Me. 

N.  Y.  Supp.  382.  99. 

"» Campbell  V.  Oilman,  26  111.  120;  ^--Bellows     v.     Lovell,     4     Pick- 
Bryan  V.  Saltenstall,  3  J.  J.  Marsh.  (Mass.)  153. 


815  AS  TO  CONSIDERATION   IN  GENERAL.  §    664 

where  an  action  upon  a  note  is  brought  against  the  maker  it  is  held 
that  he  will  not  be  estopped  from  setting  up  a  breach  of  warranty  in 
regard  to  the  property  for  the  purchase  of  which  the  note  was  given  by 
the  fact  that  an  action  has  been  brought  by  him  for  damages  on  the 
contract.^^^  Nor  will  the  pendency  of  a  suit  brought  by  the  vendor  on 
a  purchase  price  note  preclude  the  vendor  from  setting  up  a  want  of 
consideration  for  a  note  given  by  him  to  balancei  the  excess  of  the  pur- 
chase price  note  over  the  purchase  price.^^® 

§  664.  As  to  consideration  in  general. — In  an  action  against  a  pur- 
chaser of  land  upon  tlie  purchase  price  note  given  by  him  it  has  been 
decided  that  his  acceptance  of  a  deed  with  a  warranty  will  estop  him 
from  setting  up  as  a  defense  thereto  a  failure  of  consideration,  it  being 
declared  that  relief  should  be  sought  in  a  court  of  equity.^ -*^  And  where 
a  corporation  is  authorized  by  statute  to  accept  premium  notes  in  ad- 
vance to  represent  capital  stock  for  the  security  of  dealers,  the  signers 
of  notes  which  are  given  under  a  statute  and  for  the  purpose  stated  will 
be  estopped  in  an  action  against  them  from  showing  that  the  notes  were 
without  consideration  because  no  insurance  has  been  effected  under  the 
policies  for  which  the  notes  were  given. ^^^  So  where  the  board  of  direc- 
tors of  a  bank,  whose  capital  was  impaired  by  bad  loans,  deemed  it  ad- 
visable to  charge  off  these  bad  loans  and  substitute  in  lieu  of  the  amount 
so  charged  off  notes  executed  and  indorsed  by  the  individual  members 
of  the  board,  it  was  decided  in  an  action  upon  a  note  so  executed  and 
indorsed  brought  by  the  receiver  of  the  bank  that  the  directors  were 
estopped  to  set  up  a  want  of  consideration.^-^  Again  one  who  promises 
pay  "without  plea  or  offset"  is  held  to  be  thereby  estopped  from  setting 
up  failure  of  consideration,  it  being  declared  that  by  these  terms  of 
the  contract  the  party  has  al)solutely  waived  the  right  to  resist  payment 
at  maturity. ^2^  It  is,  however,  decided  that,  as  against  one  who  is  not 
a  holder  for  value,  a  party  does  not,  either  by  his  silence  in  claiming 
failure  of  consideration  or  by  the  execution  of  a  new  note  to  such 

^Dunn  V.  Stokern,  43  N.  J.  Eq.  "'Maine  Mut.  Marine  Ins.  Co.  v. 

401,  3  Atl.  349.  Blunt,  64  Me.  95;  Howard  v.  Palmer, 

"*  Applegarth  v.  Robertson,  65  Md.  64  Me.  86. 

493,  4  Atl.  896.  ^^  State  Bank  v.  Kirk  (Pa.  1907), 

^=«  Litchfield  v.  Allen,  7  Ala.  779.  65  Atl.  932. 

"<=  Starke  v.  Hill,  6  Ala.  785;   Cul-  i=«  Grand  Gulf  Railroad  &  Banking 

lum  V.  Bank,  4  Ala.  21,  37  Am.  Dec.  Co.  v.  Stanbrough,  1  La.  Ann.  261. 
725.   See,  also,  Horton  v.  Arnold,  18 
Wis.  212. 


§    665]  WAIVER  AND  ESTOPPEL.  816 

holder,  estop  himself  from  setting  up  failure  of  consideration  as  a  de- 
fense, it  not  appearing  that  such  holder  has  been  induced  to  change 
his  situation  in  any  way,  or  that  he  has  been  misled  into  the  assump- 
tion of  fresh  liabilities,  or  has  relinquished  some  advantage  he  might 
otherwise  have  availed  himself  of.^^°  And  where  an  action  upon  a 
non-negotiable  note  is  brought  in  the  name  of  the  original  promisee  for 
the  benefit  of  the  assignee,  want  of  consideration  rendering  the  as- 
signment void  is  held  to  be  available  to  the  maker  as  a  defense.^^^  And 
it  is  also  declared  that  a  man  who,  either  by  himself  or  Ins  agent,  sells 
his  note  for  cash,  especially  if  it  is  one  not  covered  by  the  law  mer- 
chant, for  a  price  less  than  that  expressed  upon  its  face  does  not  by 
such  sale  preclude  himself  from  setting  up  want  of  consideration  to 
the  extent  of  a  discount,  unless,  perhaps,  a  possible  case  of  estoppel 
might  arise,  where  the  sale  was  by  an  agent.^^^ 

§  665.  Where  consideration  illegal. — Where  the  consideration  of  a 
note  is  an  agreement,  or  the  doing  of  an  act,  which  is  illegal  or  in 
violation  of  public  policy,  a  party  will  not  be  precluded  by  estoppel 
from  showing  such  fact.  And  an  obligor  is  not  bound  by  the  fact  that 
a  consideration  is  stated  upon  the  face  of  a  note  which  appears  to  be 
valid,  from  averring  and  proving  that  there  was  a  further  considera- 
tion which  was  illegal  and  against  public  policy,  it  being  declared  that 
the  right  of  avoiding  a  contract  having  for  its  object  or  consideration 
the  defeat  of  the  law  itself,  is  allowed  not  for  the  advantage  of  the 
party,  but  for  the  benefit  of  the  public,  and  it  cannot  be  precluded  by 
estoppel  or  by  express  agreement.^^^  So  where  an  indorsee  of  an 
usurious  note  had  knowledge  at  the  time  he  took  it  of  the  usury,  the 
fact  that  the  maker  assured  him  when  he  took  it  that  he  would  make 
no  defense  to  it,  does  not,  in  an  action  against  the  maker,  preclude  him 
from  setting  up  such  defense,  as,  the  consideration  being  an  illegal 
one,  the  waiver  of  the  defense  was  not  binding  as  to  a  party  having 
notice.^^*  So  in  another  case  it  is  said  that  there  can  be  no  ratification 

^="  Kirkpatrick  v.  Muirhead,  16  Pa.  evidence  in  a  judicial  proceeding,  is 

St.  117.  unlawful   as   against  public   policy, 

"'  Dunning  v.  Sayward,  1  Me.  366.  though  it  be  the  evidence  of  the  in- 

^'-Musselman     v.     McEhenny,     23  jured  party,  and  is  not  a  valid  con- 

Ind.  4,  85  Am.  Dec.  445.  sideration  for  a  promise,  either  ver- 

^"  Gardner  v.    Maxey,   9   B.    Mon.  bal  or  written. 

(Ky.)     90,    holding    that    the    com-  "*  Torrey  v.  Grant,  10  Sm.  &  M. 

pounding  of  a  prosecution  for  fel-  (Miss.)  89. 
ony,  or  an   agreement  to   suppress 


817  SIGNING    FOR   ACCOMMODATION.  [§§    6G6-GG8 

of  contracts  which  are  forbidden  by  statute  or  which  are  inconsistent 
with  public  policy,  or  where  there  is  fraud  of  such  a  character  as  to 
involve  a  public  wrong  or  a  crime,  in  which  case  the  ratification  is  also 
opposed  to  public  policy  and  cannot  be  permitted,^^^  And  a  party  is 
not  precluded  from  availing  himself  of  a  defense  of  this  character  by 
the  fact  that  the  paper  in  controversy  is  under  seal.'^® 

§  666.  Signing  for  accommodation — Want  or  failure  of  consider- 
ation.— One  who  lends  his  credit  to  another,  in  the  form  of  a  note 
executed  by  him,  to  be  sold  so  as  to  raise  funds,  cannot,  against  an 
assignee  or  indorsee  who  is  a  bona  fide  holder  of  the  paper,  set  up 
want  or  failure  of  consideration,^^''  And  one  who,  to  enable  the  payee 
to  negotiate  a  note,  signs  it  after  the  other  makers  have  signed  and 
delivered  it  to  the  payee,  is  held  to  be  precluded  from  setting  up  the 
defense  that  there  was  no  consideration  for  his  signature.^^^ 

§  667.  By  receipt  of  benefits — Failure  of  consideration. — One  who, 
in  the  absence  of  fraud  or  mistake,  gives  his  notes  in  settlement  of  a 
balance  due  for  goods  purchased  by  him  is  held  to  thereby  waive  a 
failure  which  is  merely  technical  on  the  part  of  the  payee  to  perform 
his  contract  and  to  be  estopped  from  availing  himself  of  the  defense 
that  there  was  a  partial  failure  of  consideration  because  the  quality 
or  quantity  of  the  goods  delivered  and  for  which  the  notes  were  given 
was  not  in  accordance  with  the  terms  of  the  contract,^ ^^ 

§  668.  By  conduct,  representation  or  promise — Want  or  failure  of 
consideration. — Failure  of  consideration  is  not  available  as  a  defense 
to  a  person  where  such  failure  is  due  to  his  own  neglect  or  refusal  to 
comply  with  his  part  of  the  agreement,  as  in  such  a  case  he  has  by  his 
own  conduct  estopped  himself  to  assert  this  defense.^*"  And  where 
a  third  person  is  induced  by  the  maker  of  a  note  to  purchase  it  the 
latter  is  thereby  estopped  to  assert  a  want  or  failure  of  consideration, 
as  to  permit  him  in  such  a  case  to  set  up  this  defense  would  operate 

"=Lyon  v.  Phillips,  106  Pa.  St.  57.  "» Rudolph  v.  Brewer,  96  Ala.  189, 

Compare  Kelly  v.  Allen,  34  Ala.  663.  11  So.  314. 

""  Calfee  v.  Burgess,  3  W.  Va.  274.  ""  Colby  v.  Lyman,  4  Neb.  429. 

"'Ritchie  v.  Cralle,  108  Ky.  483,  ""Cook  v.  Whitfield,  41  Miss.  541; 

56   S.    W.    963.     See    further    as    to  Kolp  v.   Specht,   11   Tex.   Civ.  App. 

right   of   accommodation   maker   or  685,  33'  S.  W.  714. 
indorser    to    set    up    this    defense, 
§§  269-283,  342  herein. 

Joyce  Defenses — 52. 


§§'   669,   670]  WAIVER  AND  ESTOPPEL.  818 

as  a  deception  upon  the  purchaser.  This  rule,  however,  is  held  to 
apply  only  in  those  cases  where  the  one  taking  the  paper  is  an  inno- 
cent purchaser  and  also  takes  it  on  the  strength  of  the  assurance  of 
the  maker,  without  notice  of  any  defense  in  respect  to  the  considera- 
tion.^*^ So  a  maker  of  a  note  who  induces  another  to  purchase  it  on 
the  strength  of  his  promise  to  pay  the  same  at  maturity  is  estopped 
in  an  action  against  him  on  the  note  to  set  up  the  defense  of  or  want 
or  failure  of  consideration.^*^ 

§  669.     By  knowledge  or  notice — ^Want  or  failure  of  consideration. 

— One  who  indorses  notes  to  another  with  knowledge  of  a  want  or 
failure  of  consideration,  and  they  are  indorsed  in  payment  of  an  in- 
debtedness which  will  be  barred  by  the  statute  of  limitations  at  the 
time  suit  may  be  brought  upon  such  note,  is  estopped  in  an  action  by 
such  indorsee  to  assert  that  there  was  a  want  of  consideration.^*^  And , 
where  a  person  could,  at  the  time  of  executing  a  note  in  renewal  of 
a  former  one,  easily  have  obtained  information  affecting  the  consider- 
ation and  which  would  be  a  defense  to  the  original  note,  it  has  been 
decided  that  law  will  charge  him  with  actual  notice  and  knowledge 
of  the  facts  which  he  could  then  have  learned  and  that  he  will  be  es- 
topped from  setting  up  a  defense  in  respect  to  the  consideration  based 
on  such  f  acts.^** 

§  670.  As  to  capacity  and  authority  generally. — ^A  party,  by  exe- 
cuting a  note  as  maker,  warrants  the  capacity  of  the  payee  to  accept 
and  transfer  it  in  the  usual  course  of  business  and  is  estopped,  in  an 
action  by  a  bona  fide  holder,  to  assert  that  the  payee  did  not  have 
such  capacity,^*^  Likewise  one  who  has  procured  a  loan  from  another 
and  executed  his  note  therefor  is  precluded  in  an  action  on  the  note 
from  showing  that  there  was  a  want  of  capacity  in  the  payee  to  make 

111  Torrey  v.  Grant,  10  Smedes  &  M.  "=  Arkansas. — Winship  v.  Bank,  42 

(Miss.)  89.  Ark.  22. 

"=  McCreary   v.   Parsons,   31   Kan.  Indiana. — Wolke    v.    Kuhne,    109 

447,  2  Pac.  570;   Brown  v.  Daggett,  Ind.    313,    10    N.    B.    116;    Wells   v. 

22  Me.  30.  Sutton,  85  Ind.  70. 

'^Carter   v.    Bolln,    11   Tex.    Civ.  l^few  York. — Nelson  v.  Eaton,   26 

App.  283,  32  S.  W.  123.  N.  Y.  410. 

^"Montfort    v.    Americus    Guano  07iio.— Ehrman  v.  Union  Central 

Co.,  108  Ga.  12,  33  S.  E.  636.    See,  Life  Ins.  Co.,  35  Ohio  St.  324. 

also,  McNeel  v.  Smith,  106  Ga.  215,  Pennsylvania.— Honsum     v.     Ro- 

32  S.  E.  119.  gers,  40  Pa.  St.  190. 

See  §  95  herein. 


819  CAPACITY   AND   AUTHORITY.  [    670 

the  loan.^^°  And  where  a  note  is  made  payable  by  a  person  to  his  own 
order  and  to  that  of  another  he  will  be  estopped  in  an  action  upon 
the  instrument  from  asserting  that  the  indorsement  was  made  without 
his  authority  where  it  is  shown  that  it  was  used  to  take  up  a  note  of 
his  own,  liability  upon  which  was  not  disputed  by  him.^*^  And  where 
a  note,  which  a  firm  was  under  an  obligation  to  guaranty,  was  guar- 
anteed by  one  of  the  partners  after  the  firm  had  dissolved,  it  was  de- 
cided, in  an  action  against  the  firm,  that  the  defense  that  the  partner 
was  not  authorized  to  so  act  could  not  be  set  up.^**  Again  where, 
after  the  dissolution  of  a  firm,  one  of  the  members,  without  the  author- 
ity of  his  partners,  executed  a  note  in  the  firm  name,  as  a  renewal  of 
some  firm  notes  and  the  individual  debt  of  one  of  the  members  was 
included  by  mistake,  it  was  held  in  an  action  on  the  note  that  the 
defendant,  a  member  of  the  firm  who  had  promised  to  pay  the  obliga- 
tion, supposing  it  simply  a  renewal,  was  estopped  to  deny  his  liability 
on  the  joint  indebtedness,  it  appearing  that  he  had  shared  in  the 
benefit  to  the  firm  which  had  resulted  from  the  surrender  of  the  orig- 
inal notes.^*^  But  where  a  partner  indorsed  paper  in  the  firm  name, 
but  not  in  the  course  of  the  firm  business,  it  was  decided  that  his 
partner  was  not  estopped  from  setting  up  want  of  authority  to  make 
such  indorsement,  although  it  appeared  that  he  had  knowledge  of 
similar  acts  having  been  previously  done  by  such  partner,  where  it 
also  appeared  that  he  had  on  numerous  occasions  protested  against  this 
practice.^^"  And  where  a  disability  on  the  part  of  a  maker  or  in- 
dorser  exists  owing  to  want  of  mental  capacity  he  will  not  be  estopped 
from  denying  that  he  has  acted,  even  as  against  a  hona  fide  holder.^^^ 

:48  Florida. — Allen    v.    Freedman's  bus   City  Bank  v.  Bruce,   17  N.  Y. 

Savings  &  Trust  Co.,  14  Fla.  418.  507. 

Georgia. — Bond    v.    Central    Bank  United  States. — Wyman  v.   Bank, 

of  Georgia,  2  Kelly  92.  29  Fed.  734. 

Indiana. — Poock  v.  Association,  71  "'Main  v.  Hilton,  54  Cal.  110. 

Ind.  357,  "«Star    Wagon    Co.    v.    Swezy,    59 

Iowa.— Pleasant     Valley     District  Iowa  609,  13  N.  W.  749. 

Township  v.  Calvin,  59  Iowa  189,  13  ""  Wilson  v.   Forder,   20   Ohio    St. 

N.  W.  80.  89,  5  Am.  Rep.  G27. 

Massachusetts. — Little  v.  O'Brien,  ^^  Smith   v.   Weston,  88   Hun    (N. 

9  Mass.  423.  Y.)  25,  34  N.  Y.  Supp.  557. 

Missouri. — McClintock   v.    Central  '"  Anglo-Californian        Bank        v. 

Bank,  120  Mo.  127,  24  S.  W.  1052.  Ames,  27  Fed.  727,  wherein  it  was 

Neio  York. — Rome   Savings  Bank  so  decided  in  an  Insane  indorser  of 

V.  Kramer,  32  Hun  270,  affirmed  in  a  certificate  of   deposit.    The  court 

102  N.  Y.  331,  6  N.  E.  682;   Colum-  said:    "Does  this  plaintiff,  as  a  hona 


671] 


WAIVER  AXD   ESTOPPEL. 


820 


§  671.  Same  subject — Corporate  transactions. — One  who  executes 
a  note  to  a  corporation  as  payee  thereby  admits  the  existence  of  the 
corporation  and  its  capacity  to  contract  and  cannot,  in  an  action 
against  him  on  the  instrument,  introduce  evidence  of  facts  which  tend 
to  impeach  or  contradict  the  force  and  effect  of  such  admissions.^^^ 
So  where  a  note  was  made  payable  in  bank  to  an  illegal  corporation 
whose  existence  was  subsequently  annulled  by  the  courts  it  was  de- 
cided that  the  maker  was  estopped  to  deny  its  existence  or  capacity  to 
accept  or  transfer  the  note  where  the  action  was  brought  by  a  bona 
fide  holder.^^^  And  one  who  has  obtained  the  funds  of  a  corporation 
and  impaired  the  security  of  depositors  by  getting  money  advanced 
on  commercial  paper  will  not  be  permitted  to  consummate  a  fraud 
on  the  depositors  and  the  public  by  setting  up  as  a  defense  to  an  action 
on  a  note  given  for  such  loan  that  the  act  of  the  corporation  was  un- 
authorized.^^*   Again,  where  a  party  makes  a  note  payable  to  a  de 


fide  holder,  occupy  any  better  posi- 
tion than  the  wrongdoer  from  whom 
he  purchased?  Doubtless,  it  is  en- 
titled to  all  the  protection  given  to 
such  a  purchaser  of  negotiable  pa- 
per; but  such  protection  does  not 
extend  to  an  indorsement  like  this. 
There  was  no  valid  contract  of  in- 
dorsement created  by  defendant's 
signature  on  the  back  of  the  paper. 
It  was  no  better  than  a  signature 
written  in  a  state  of  somnambulism, 
or  even  than  a  forgery.  No  negli- 
gence is  Imputable,  for  one  who  is 
incapable  of  prudence  cannot  be 
guilty  of  negligence;  nor  can  there 
be  an  estoppel.  He  who  is  legally 
disabled  to  act.  cannot  be  estopped 
from  denying  that  he  has  acted.  An 
estoppel  creates  no  power;  and 
while,  in  favor  of  a  bona  fi,de  pur- 
chaser, inquiry  is  denied  as  to  equi- 
ties between  prior  parties,  yet  such 
protection  does  not  cut  off  inquiry 
into  the  contractual  capacity  of 
those  parties."  Per  Brewer,  J.  See, 
also,  McClain  v.  Davis,  77  Ind.  419; 
Burke  v.  Allen,  29  N.  H.  106;  Wire- 
bach  V.  First  Nat.  Bank,  97  Pa.  St. 
543. 


^"  United  States. — Lauter  v.  Jar- 
vis-Conklin  Mortgage  Trust  Co.,  88 
Fed.  894,  29  C.  C.  A.  473;  Gorrell  v. 
Home  Life  Ins.  Co.,  63  Fed.  371,  11 
C.  C.  A.  240;  City  Bank  of  Hartford 
V.  Press  Co.,  56  Fed.  260,  Affirmed 
in  58  Fed.  321,  7  C.  C.  A.  248. 

Arkansas. — Reynolds  v.  Roth,  61 
Ark.   317,  33   S.   W.  105. 

Indiana. — Brickley  v.  Edwards, 
131  Ind.  3,  30  N.  E.  708. 

Missouri. — Studebacker  Bros.  Mfg. 
Co.  V.  Montgomery,  74  Mo.  101; 
First  National  Bank  v.  Gillilan,  72 
Mo.  77;  Camp  v.  Bryne,  41  Mo.  525. 

Nebraska. — Bair  v.  People's  Bank, 
27  Neb.  577,  43  N.  W.  347. 

Neio  Hampshire. — Nashua  Fire 
Ins.  Co.  V.  Moore,  55  N.  H.  48; 
Pine  River  Bank  v.  Hodsdon,  46  N. 
H.  114. 

See  §  95  herein. 

'=^  Brickley  v.  Edwards,  131  Ind. 
3,  30  N.  E.  708. 

1^*  Allen  V.  Freedman's  Savings  & 
Trust  Co.,  14  Fla.  418;  Brown  v. 
United  States  Home  &  D.  Ass'n 
(Ky.),  13  S.  W.  1085. 


821  CAPACITY   AND   AUTHORITY.  [§    673 

facto  corporation  he  will  be  estopped  from  setting  up  in  defense  to  an 
action  thereon  a  defect  in  its  organization  which  it  is  claimed  afEects 
its  capacity  to  sue.^^^  jSTor  can  the  maker  of  a  note  to  a  national  bank 
or  other  corporation  which  was  executed  for  a  loan  defeat  recover}' 
thereon  by  showing  that  no  security  was  taken  as  required  by  law.^°° 
Likewise  the  maker  of  a  note  cannot  set  up  that  the  act  of  the  cor- 
poration in  purchasing  the  note  was  ultra  \ares/°^  or  that  a  corpora- 
tion in  discounting  a  note  acted  in  excess  of  the  powers  conferred  upon 
it  by  its  charter  and  the  laws  of  the  state  or  of  the  United  States.^^* 
Again,  a  corporation  which  purchases  notes  cannot  subsequently,  after 
the  contract  has  been  performed  and  executed,  rescind  the  contract  on 
the  ground  that  it  had  no  authority  to  make  the  purchase,  as,  having 
placed  itself  in  the  position  of  a  wrongdoer,  it  is  subject  to  the  lia- 
bilities which  result  from  its  act.^^®  Nor  can  a  corporation,  which  has 
executed  a  note  in  the  corjjorate  name  in  the  usual  course  of  business, 
defeat  a  recovery  thereon  by  showing  that  it  was  not  properly  in- 
corporated.^^" 

§  672.  Same  subject,  continued — Act  of  public  or  corporate  official 
in  violation  of  statute. — A  maker  or  acceptor  of  commercial  paper 
which  is  received  by  a  public  officer  in  his  official  capacity  is  estopped 
to  set  up  in  defense  to  an  action  thereon  that  such  officer  acted  in  vio- 
lation of  his  rights  and  duties  in  that  he  was  required  by  statute  to 
receive  payment  in  money. ^^^  And  where  the  charter  of  a  bank  requires 
a  certain  amount  of  stock  to  be  paid  in  before  the  bank  can  go  into 
operation,  and  the  public  statute  requires  the  capital  of  banks  to  be 

"°  Bank  of  Port  Jefferson  v.  Dar-  Maine. — Richmond  Bank  v.  Robin- 

lin,  91  Hun    (N.  Y.)    236,  36   N.  Y.  son,  42  Me.  589. 

Supp.  153.  Missouri. — St.  Joseph  Fire  &  Ma- 

""  Union  Gold  Min.   Co.  v.  Rocky  rine  Ins.  Co.  v.  Hauck,  71  Mo.  465. 

Mountain    National    Bank,    2    Colo.  New    York — Pra,tt    v.    Short,    53 

248,  affirming  1  Colo.  532.  How.  Prac.  506,  affirmed  in  79  N.  Y. 

"'Merchants'    National     Bank    v.  437,  35  Am.  Rep.  531. 

Hanson,  33  Minn.  40,  21  N.  W.  849,  Compare  Western  Bank  v.   Mills, 

overruling  First   National    Bank   of  7  Cush.    (Mass.)   539;   Mills  v.  Rice, 

Rochester  v.  Pierson,  24  Minn.  140;  6    Gray     (Mass.)     458;     Vanatta    v. 

Ehrman  v.  Union  Central  Life  Ins.  Bank,  9  Ohio  St.  27. 

Co.,  35  Ohio  St.  324.  ""  Attleborough  National  Bank  v. 

^^^  Alabama.— Bates  v.  State  Bank,  Rogers,  125  Mass.  339. 

2  Ala.  451.  ^""Empire   Mfg.   Co.  v.    Stuart,   46 

Da/cofa— Neilsville    Bank    v.    Tut-  Mich.  482,  9  N.  W.  527. 

hill,  4  Dak.  295,  30  N.  W.  154.  ^"  Miltenberger  v.  Cooke,  18  Wall. 

(U.   S.)    421. 


673] 


WAIVER   AND   ESTOPPEL. 


822 


pand  in  cash,  if  a  subscriber  for  stock  is  allowed  by  the  directors  to 
give  a  note  for  his  stock  instead  of  paying  cash,  and  the  bank  goes 
into  operation  in  violation  of  the  charter  on  a  capital  in  which  the 
note  is  reckoned  as  a  cash  payment  for  stock,  it  is  held  that  the  illegal- 
ity of  the  transaction  cannot  be  set  up  in  defense  to  an  action  by  the 
bank  on  the  note.^''^ 

i$  673.     As  to  forgery  and  alteration-^In  general. — Where  a  bill  or 

note  has  been  put  into  circulation  by  a  maker  or  drawee  who  has  re- 
ceived the  proceeds  thereof  he  will  be  estopped  to  set  up  in  defense 
to  an  action  on  the  instrument  that  the  signature  of  an  indorser  thereon 
is  forged.^*'^  So  where  one  of  two  partners  drew  a  bill  in  the  firm 
name  upon  another  payable  to  the  order  of  one  whose  name  was 
forged  as  indorser  upon  the  bill  and  such  partner  had  it  discounted  in 
the  regular  course  of  business  and  ajDplied  the  proceeds  to  his  private 
use  it  was  held  that,  having  received  the  avails  of  the  bill,  such  party 
would  be  estopped  from  controverting  the  genuineness  of  the  indorse- 
ment.^^* And  where  one  to  whom  a  bill  is  indorsed  and  delivered  is 
acting  under  an  assumed  name  of  which  fact  the  indorser  is  ignorant 
and  the  indorsee- afterward  indorses  and  transfers  it  by  indorsement 
under  such  assumed  name  to  a  bona  fide  holder,  the  original  indorser 
will  be  estopped  in  an  action  against  him  by  such  holder  from  set- 
ting up  that  the  indorsement  is  a  forgery.^''^  Nor  can  indorsers  of  a 
note  who  have  executed  a  release  to  the  maker  which  amounts  to  a 
recogition  of  the  instrument  as  a  valid  obligation,  set  up,  as  a  defense 
to  an  action  by  a  bona  fide  holder,  that  there  is  a  material  alteration  in 


1"-  Pine  River  Bank  v.  Hodsdon,  46 
N.  H.  114.  The  court  said:  "The 
plaintiffs  in  claiming  on  these  notes 
act  for  the  general  benefit  of  all  par- 
ties interested  in  the  assets  of  the 
bank ;  for  the  innocent  stockholders, 
whether  they  hold  under  the  origi- 
nal subscriptions  or  by  subsequent 
purchase,  for  the  bill-holders,  de- 
positors and  other  creditors  of  the 
corporation.  The  bank  in  this  suit 
represents  their  interests.  If  a  re- 
covery should  be  had,  the  amount 
recovered  will  be  added  to  the  as- 
sets of  the  bank  for  their  benefit 
and    security.     "We    think    that    the 


directors,  if  they  were  concerned  in 
such  cheat  and  crime,  did  not  make 
the  bank,  representing  such  inter- 
ests and  charged  with  such  duties, 
party  to  the  cheat  and  crime  in 
such  way  as  to  prevent  a  recovery 
on  these  notes  for  the  benefit  of  the 
parties  whom  the  violated  law  was 
intended  to  protect."  Per  Perley,  J. 

'"^Coggill  V.  Bank,  1  N.  Y.  113; 
Meacher  v.  Fort,  3  Hill  (S.  C.)  227; 
Beekman  v.  Duck,  11  Mees.  &  W. 
251. 

i"  Coggill  V.  American  Exchange 
Bank,  1  N.  Y.  113. 

W5  Forbes  v.  Espy,  21  Ohio  St.  474. 


823  FORGERY  AND  ALTERATIONS.  [§  CT3 

the  note.^®''  So  where,  at  a  time  a  j)erson  signs  an  instrument  as 
surety,  there  are  no  other  signatures  thereon,  he  is  held  to  thereb}^ 
admit  the  genuineness  of  such  signatures  if  it  is  accepted  by  the  pa3'ee 
or  obligee  without  notice.^"^  Where  a  person  voluntarily  erases  his  sig- 
nature as  a  maker  or  indorser  he  will  not  be  permitted  to  prove  that  it 
was  not  genuine,  as  one,  who  voliuitarily,  without  mistake  or  accident, 
destroys  primary  evidence,  thereby  deprives  himself  of  the  production 
and  use  of  secondary  evidence.^^®  Mere  silence,  however,,  has  been  held 
insufficient  to  create  an  estoppcl.^^"  And  it  has  also  been  held  that  a 
party  is  not  estopped  from  setting  wp  the  defense  that  his  signature  is 
forged  by  the  mere  fact  that  he  has  paid  previous  notes  forged  by  the 
same  person.^'"  In  other  eases,  however,  it  has  been  held  that  a  party 
may  be  estopped  by  such  payment.^^^  Again  it  has  been  decided  that 
written  assent  given  by  a  party  to  an  extension  of  time  upon  the  giving 
by  the  maker  of  additional  security  to  the  holder  does  not  operate  as  a 
waiver  of  the  defense  of  forgery  where  it  is  provided  by  the  writing  that 
the  party  giving  such  assent  holds  himself  liable  "in  the  same  manner 
and  to  the  same  extent"  as  it  was  at  that  time.^'^^  And  it  has  been  de- 
cided that  acceptance  by  the  drawee  of  a  bill  and  his  payment  of  the 
same  does  not  estop  to  deny  that  the  signature  of  an  indorser  is  genu- 
ine, it  being  declared  that  though  an  acceptor  is  presumed  to  know 

^""Conable  v.  Smith,  61  Hun    (N.  135;  People  v.  Bank  of  North  Amer- 

Y.)   185,  15  N.  Y.  Supp.  924.  ica,  75  N.  Y.  547;   Palm  v.  Watt,  7 

""  Wayne  Agricultural  Co.  v.  Card-  Hun    (N.  Y.)    317;    Cohen  v.  Teller, 

well,   73    Ind.    555;    Helms   v.   Agri-  93  Pa.  St.  123;   Morris  v.  Bethel,  L. 

cultural   Co.,   73   Ind.   325;    Wheeler  R.  5  C.  P.  47. 

V.    Trades    Deposit   Bank,    107    Ky.        ^"^  Neal    v.    First    National    Bank, 

653,  55  S.  W.  552;  Chase  v.  Hathorn,  26  Ind.  App.  503,  60  N.  E.  164,  hold- 

61  Me.  505;  Selser  v.  Brock,  3  Ohio  ing  that  a  payment  by  a  husband 

St.  302.  to  a  bank  of  checks  forged  by  the 

""  Broadwell  v.  Stiles,  8  N.  J.   L.  wife  without  any  complaint  on  his 

58.    The  court  said:    "The  best  evi-  part,  would  preclude  a  recovery  by 

dence   is  required,   and   if   a   party  him  from  the  bank  of  the  amount 

having  such  in  his  power  volunta-  of    future    checks    forged    by    her. 

rily  destroys  it,  the  law  knows  no  Buck  v.  Wood,  85  Me.   204,  27  Atl. 

relaxation   for   him,   whatever   may  103,    holding    that    payments    on    a 

be  given  to  accident  or  misfortune,  note  to  an  innocent  holder,  without 

The  fact  of  destruection  excites  sus-  disclosing  the  forgery,  for  the  pur- 

picion     and     unfavorable     presump-  pose  of  shielding  the  forger,  when 

tion."    Per  Ewing,  J.  otherwise  he  would  have  been  pros- 

'""Purmish   v.   Burge    (Tenn.),  54  ecuted  criminally,  estopped   defend- 

S.  W.  90.  ant  from  setting  up  the  forgery. 

"» Whiteford    v.    Munroe,    17    Md.        i'-  Bell  v.  Shields,  19  N.  J.  L.  93. 


§    674]  WAIVER   AND   ESTOPPEL.  ,  824 

the  signature  of  the  drawer  he  is  not  supposed  to  know  an  indorser's 
signature  and  does  not  by  his  acceptance  admit  the  genuineness  of,  or 
guaranty  the  same.^'^^ 

§674.  Same  subject — By  admission  of  signature. — An  admission 
by  a  party  that  a  signature  purporting  to  be  his  is  genuine  may  operate 
to  estop  him  from  subsequently  setting  up  the  defense  that  it  is  a 
forgery.^^*  So  a  maimer  was  held  to  be  estopped  from  denying  his 
signature  on  a  note  where  the  evidence  went  to  show  that  he  not  only 
had  adopted  and  ratified  such  signature  but  that  by  his  admissions 
and  declarations  that  the  note  was  "all  right"  and  that  if  plaintiff 
would  "hold  still"  he  would  pay  him,  he  had  knowingly  and  designedly 
induced  the  plaintiff  to  omit  taking  any  measures  to  collect  the  note 
of  the  co-maker  at  the  time  when  the  latter  had  ample  property  in  his 
hands,  and  a  resort  to  whom  for  the  collection  of  the  note  would,  in 
all  probability,  have  been  successful;  and  that  afterwards,  while  the 
plaintiff  continued  to  be  misled  by  the  assurances  of  the  defendant,  the 
co-maker  failed  in  business  and  absconded,  rendering  the  collection  of 
the  note  from  him  impossible/ "^  It  has,  however,  been  determined  that 
in  order  to  create  an  estoppel  by  an  admission  of  this  character  it  is 
necessary  that  the  instrument  should  have  been  produced  or  identified 
at  the  time  the  admission  was  made^^®  and  that  the  party  to  whom 
the  admission  was  made  acted  thereon  in  such  a  manner  as  to  create 
an  equitable  estoppel.^^'^ 

"^Kolt  V.  Ross,  54  N.  Y.  472,  13  England. — Leach   v.   Buchanan,   4 

Am.  Rep.  615.    Compare  Phillips  v.  Esp.  226. 

Im  Thurm,  L.  R.  1  C.  P.  463,  hold-  Compare  Workman  v.  Wright,  33 

Ing  that  where  one  has  been  induced  Ohio    St.    405,    31    Am.    Rep.    546; 

to  part  with  his  money  by  a  party's  Brook  v.  Hook,  L.  R.  6  Exch.  89. 

acceptance    of   a    bill    the    latter    is  ^^"^  Hefner  v.   Dawson,  63   111.  403. 

estopped  to  deny  the  genuineness  of  ""  Sheller    v.    McKenney,    17    111. 

indorsements  thereon.  App.  185. 

"'Illinois. — Hefner  v.  Dawson,  63  i"  Sheller    v.    McKenney,    17    111. 

111.    403;     Hefner    v.    Vandolah,    62  App.   185,   wherein   the   court  said: 

111.  483.  "The  foundation  of  the  doctrine  of 

Indiana. — Kuriger     v.     Joest,     22  equitable  estoppel  is  the  necessity  of 

Ind.  App.  633,  52  N.  E.  764,  54  N.  E.  preventing  the  consummation  of  the 

414.  fraud  which  would  result  if  a  per- 

Kentucky. — Rudd  v,  Matthews,  79  son  who,  by  his  words  or  conduct, 

Ky.  479.  has   induced    another   to   act   so   as 

Maine. — Casco  Bank  v.  Keene,  53  to    change    his     previous    position. 

Me.  103.  should    afterward    be    permitted    to 


825  FORGERY  AND  ALTERATIONS.        [§§'  675,  676 

§  675.  Same  subject — Failure  to  give  notice  of  forgery. — The 
drawer,  maker,  or  indorser  of  a  bill  or  note  will  not  be  estopped  by  a 
delay  of  a  few  days  in  giving  notice  of  a  forgery  to  a  holder  of  the 
paper  provided  the  position  of  the  latter  has  in  no  way  been  altered 
for  the  worse.  If,  however,  it  appears  that  the  one  whose  name  is 
forged  leads  the  holder  to  believe  in  the  genuineness  of  the  signature 
until  he  has  lost  some  opportunity  of  recovering  on  the  instrument 
which  would  have  been  available  if  he  had  known  of  the  forgery  it 
will  be  a  sufficient  alteration  of  the  holder's  position  to  estop  him  from 
setting  up  this  defense.^'^®  So  where  the  drawer  of  a  check  discovers 
that  it  has  been  paid  upon  a  forged  indorsement  notice  of  such  fact 
should  be  given,  without  unnecessary  delay  to  the  bank  which  has 
paid  it  and  if  the  drawer  waits  an  unreasonable  length  of  time  before 
giving  such  notice  he  will  not  be  permitted  to  recover  the  amount  of 
such  check  from  the  bank.^^^ 

§  676.  Same  subject — As  to  checks. — A  depositor,  by  his  failure  to 
examine  his  pass  book  and  the  returned  checks,  is  not  necessarily 
guilty  of  such  negligence  as  will  estop  him  from  showing  that  a  check 
which  has  been  returned  from  the  bank  is  a  forgery,  unless  the  bank 
has  thereby  sustained  a  loss.^*°  But  where  a  check  is  ratified  by  the 
drawer  whose  name  is  signed  thereto  he  will  be  estopped  to  deny  its 
validity  or  to  show  that  his  signature  is  forged  where  an  action  is 
brought  against  him  by  a  holder  in  good  f  aith.^^^  And  where  a  check 
which  is  presented  to  a  teller  of  a  bank  and  purports  to  be  certified  by 

deny  the  existence  of  the  state  of  See,    also,    Starr   v.    Yourtree,   17 

things  upon  the  faith  of  which  the  Md.  341. 

other  party  has  so  acted.  But  it  "^  McKenzie  v.  British  Linen  Co., 
would  certainly  be  a  novel  doctrine  44  Law  T.  N.  S.  431. 
to  hold  that  a  party  may  invoke  the  "°  United  States  v.  National  Ex- 
rule  of  equitable  estoppel,  where  he  change  Bank,  45  Fed.  163,  holding 
has  not  been  induced  to  change  a  delay  of  over  thirty  days  unreason- 
iiis   previous   position,   but   only   to  able. 

change  his  previous  condition  of  ^'^^  Janin  v.  London  &  San  Fran- 
mind.  By  merely  changing  his  con-  Cisco  Bank,  92  Cal.  14,  27  Pac.  1100; 
dition  of  mind  or  adopting  a  partic-  Bank  of  British  North  America  v. 
ular  belief,  no  rights  are  lost  or  Mechanics'  National  Bank  of  New 
put  in  jeopardy,  since  by  correcting  York  City,  91  N.  Y.  106;  Ogilvie  v. 
his  state  of  mind  when  the  truth  Mortgage  Co.,  L.  R.  App.  Cas.  257. 
is  ascertained  he  is  placed  com-  ''"^  Charles  River  National  Bank 
pletely  in  statu  quo."   Per  Bailey,  J.  v.  Davis,  100  Mass.  413. 


§  677]  WAIVER  AND  ESTOPPEL.  826 

him  is  pronounced  to  be  good,  the  bank  will  be  estopped  to  subse- 
quently show  that  the  certification  was  forged.^^- 

§  677.  As  to  statute  of  limitations. — The  statute  of  limitations  in 
the  case  of  a  certified  check  begins  to  run  from  the  time  the  bank  re- 
fuses to  pay  the  same  and  in  an  action  on  such  an  instrument  it  has 
been  decided  that  the  bank  is  not  estopped  to  plead  such  statute  by  the 
fact  that  it  has  included  the  check  as  a  part  of  its  indebtedness  in  its 
annual  statement  made  in  compliance  with  a  statute  requiring  a  bank 
to  make  a  statement  annually  of  its  accounts  with  its  customers.^^* 

^'=  Continental  National  Bank  v.  *'*' Blades  v.  Grant  County  De- 
National  Bank  of  Commerce,  50  N.  posit  Bank,  21  Ky.  Law  R.  1761,  56 
Y.  575.  S.  W.  415. 


CHAPTER  XXIX. 


DISCHAEGE. 


Sec. 

678.  What  constitutes  a  discharge — 

Under  statute. 

679.  Same  subject — Maker. 

680.  Discharge  of  surety. 

681.  Discharge  of  guarantor. 

682.  Mortgage  security. 

683.  Sale  or  surrender  of  collateral, 

or  satisfaction  of  debt. 

684.  Agrreement  and   condition — De- 

cisions generally. 

685.  Same  subject. 

686.  Payment   by  note  or  check  of 

or  by  order  on  third  person — 
Accord  and  satisfaction. 

687.  By  payment  of  other  indebted- 

ness. 

688.  By  bill,  note  or  check — Substi- 

tuted note — Renewal  note. 

689.  By  stock  or  bonds. 

690.  By     conveyance     of     land     or 

agreement  to  take  deed. 


Sec. 

691.  By  assignment,  transfer  or  sur- 

render of  property. 

692.  Surrender    of   valid   notes    for 

forged  notes. 

693.  By  work,  labor  or  services  per- 

formed or  rendered. 

694.  Tender  of  payment. 

695.  Indorsements     of     payments — 

Receipts — Cancellation. 

696.  Whether    a    purchase    or    pay- 

ment. 

697.  Payment — By  whom. 

698.  Same  subject — To  whom. 
699. 
700. 
701. 


702. 


Same  subject. 

Renunciation  by  holder. 

Right  of  party  who  discharges 
instrument. 

Discharge — Miscellaneous  deci- 
sions. 


§  678.  What  constitutes  a  discharge — Under  statute. — The  ne- 
gotiable instruments  law  provides  that:  A  negotiable  instrument  is 
discharged  (1)  By  payment  in  due  course  by  or  on  behalf  of  the  prin- 
cipal debtor;  (2)  by  payment  in  due  course  by  the  party  accommo- 
dated, where  the  instrument  is  made  or  accepted  for  accommodation; 
(3)  by  the  intentional  cancellation  thereof  by  the  holder.  (4)  By 
any  other  act  which  will  discharge  a  simple  contract  for  the  payment 
of  money;  (5)  when  the  principal  debtor  becomes  the  holder  of  the 
instrument  at  or  after  maturity  in  his  own  right.  It  is  further  pro- 
vided l)y  that  enactment  that :  A  person  secondarily  liable  on  the  in- 
strument is  discharged:  (1)  By  any  act  which  discharges  the  instru- 
ment; (2)  by  the  intentional  cancellation  of  his  signature  by  the 
holder;  (3)  by  the  discharge  of  a  prior  party;  (4)  by  a  valid  tender 
of  payment  made  by  a  prior  party;  (5)  by  a  release  of  the  principal 

827 


§   679]  DISCHARGE.  828 

debtor,  unless  the  holders  right  of  recourse  against  the  party  secon- 
darily liable  is  expressly  reserved;  (6)  by  any  agreement  binding 
upon  the  holder  to  extend  the  time  of  payment  or  to  postpone  the 
holder's  right  to  enforce  the  instrument,  unless  the  right  of  recourse 
against  such  party  is  expressly  reserved.^ 

§679.  Same  subject — Maker. — A  maker  may  be  discharged  by 
a  release  based  upon  a  sufficient  and  valid  consideration.^*  Again, 
the  satisfaction  between  the  maker  and  the  payee  of  a  note  not  pay- 
able in  bank  may  constitute  a  good  defense  in  an  action  by  the 
assignee  against  the  maker,  such  satisfaction  being  agreed  upon  be- 
fore notice  to  the  maker  that  the  note  has  been  assigned.^  And  the 
maker  may  set  up  and  rely  upon  any  defense  that  he  may  have  to  a 
note  in  the  hands  of  a  purchaser  by  mere  delivery,  or  who  takes  it  after 
maturity,  and  this  includes  a  defense  that  the  note  has  been  satisfied 
by  an  agreement  of  the  grantor  with  his  grantee  rescinding  a  sale  in 
connection  with  which  the  note  was  given.^  If  the  maker  and  the 
payee  enter  into  the  state  of  matrimony  the  marriage  is  held  to  ex- 
tinguish the  former's  liability.*  So  non-presentment  or  laches  in  pre- 
sentment of  a  claim  against  the  maker's  estate  may  constitute  a  good 
defense.^  And  if  a  note  is  transferred  after  its  maturity  to  a  co- 
partnership of  which  one  of  the  makers  of  the  paper  is  a  partner  such 
transfer  operates  to  extinguish  the  note  as  to  all  the  makers.*'  But 
where  one  of  the  joint  makers  of  a  note  receives  it  under  an  order 
of  distribution  of  the  estate  of  the  payee  the  other  debtor's  proportion 

^Negot.    Inst.    Law,    §§  200,    201,  =  Shade  v.  Creviston,  93  Ind.  591. 

Appendix  herein.  Compare    First    National    Bank    v. 

^*Ludington  v.  Bell,  77  N.  Y.  138,  Bynum,    84    N.    C.    24;    Wetmore  v. 

rev'g  43  N.  Y.  Super.  Ct.  557.  Blush,  Brayt.    (Vt.)   55;   Cowdrey  v. 

When    release    not    available    by  Vandenburgh,  101  U.  S,  572. 

maker    see:      McCann    v.    Lewis,    9  =  Shinn  v.  Fredericks,  56  111.  439. 

Cal.    246;    Smith  v.   Smith,    80    Ind.  ^Chapman   v.    Kellogg,   102    Mass. 

267;    "Washington    College   v.    Duke,  246;  Curtis  v.  Brooks,  37  Barb. '(N. 

14  Iowa  14;   Lewis  v.  Westover,  29  Y.)  476. 

Mich.  14.  °  Marshall  v.  Perkins,  72  Me.  343; 

Release  of  insolvent   maker,  see:  Pratt    v.    Lamson,    128    Mass.    529. 

Keeler  v.  Bartine,  12  Wend.   (N.  Y.)  Examine  Tinker  v.  Babcock,  107  111. 

110.  App.  78,  aff'd  204  111.  571,  68  N.  E. 

Maker  released  by  election  of  cor-  445. 

poration  to  perfect  stock  instead  of  "  Logan  County  National  Bank  v. 

enforcing  note   therefor,   see:     Ash-  Barclay,  20  Ky.  L.  Rep.  773,  46  S. 

ton  V.  Burbank,  2  Dill.  (U.  S.)   435,  W.  675. 
Fed.  Gas.  No.  582. 


81^9 


WHAT    CONSTITUTES    DISCHARGE. 


[§■  679 


of  the  obligation  is  not  extinguished  nor  is  the  note  thereby  paid.'^ 
Co-debtors  may,  however,  be  discharged  by  a  release  which  is  unquali- 
fied clearly  expressed  and  absolute  in  its  terms. ^  But  parties  who  in- 
dorse a  note  at  the  time  of  execution  may  be  liable  for  contribution 
in  the  absence  of  a  statute  to  the  contrary.**  A  judgment  against  one  of 
several  joint  debtors  on  a  joint  contract  is  at  common  law  a  bar  to 
an  action  against  them  and  this  applies  to  a  note,  as  there  is  a  merger 
of  the  entire  cause  of  action  consequent  upon  such  judgment  and  the 
joint  liability  is  thereby  extinguished.^"     The  acceptor  will  be  ex- 


^  Enscoe  v.  Fletcher,  1  Cal.  App. 
659,  82  Pac.  1075,  under  Cal.  Civ. 
Code,  §  1543.  Examine  Louis  v. 
Triscony,  58  Cal.  304;  Hawk  v. 
Johnson  (Pa.),  6  Atl.  725. 

^Illinois. — Clark  v.  Mallory,  185 
111.  227,  56  N.  E.  1099. 

Michigan. — Stevens  v.  Hannan,  88 
Mich.  13,  49  N.  W.  874,  aff' g  86  Mich. 
305,  48  N.  W.  951. 

New  Hampshire. — Young  v.  Cur- 
rier, 63  N.  H.  419. 

Texas. — Kneeland  v.  Miles  (Tex. 
Civ.  App.),  24  S.  W.  1113. 

West  Virginia. — Maslin's  Ex'rs  v. 
Hiett,  37  W.  Va.  15,  16  S.  E.  437. 

England. — Cocks  v.  Nash,  9  Bing. 
341. 

See  the  following  cases: 

Colorado. — Hochmark  v.  Richler, 
16  Colo.  263,  26  Pac.  818. 

Maine. — Bradford  v.  Prescott,  85 
Me.  482,  27  Atl.  461. 

Massachusetts. — Shaw  v.  Pratt,  22 
Pick.    (Mass.)    305. 

Oregon. — Crawford  v.  Roberts,  8 
Oreg.  324. 

Tennessee. — Richardson  v.  McLe- 
more,  5  Baxt.   (Tenn.)   586. 

England. — Nicholson  v.  Revill,  4 
Adol.  &  E.  675,  6  Nev.  &  M.  192. 

But  compare  First  National  Bank 
V.  Watkins,  154  Mass.  385,  28  N.  E. 
275;  Potter  v.  Green,  6  Allen 
(Mass.)  442;  Carrier  v.  Sears,  4 
Allen  (Mass.)  336;  Smith  v.  Bar- 
tholomew,    1     Mete.     (Mass.)     276; 


Ruggles  V.  Pattem,  8  Mass.  480; 
Young  v.  Currier,  63  N.  H.  419; 
Line  v.  Nelson,  38  N.  J.  L.  358; 
Bowman  v.  Rector  (Tenn.),  59  S. 
W.  389. 

"Caldwell  v.  Hurley,  41  Wash. 
296,    83    Pac.    318., 

"  United  States. — Mason  v.  El- 
dred,  6  Wall.  (U.  S.)  231  (except  in 
Michigan  when  the  debtors  are  part- 
ners). See  Eldred  V.  Bank,  17  Wall. 
545. 

Indiana. — Cox  v.  Maddux,  72  Ind. 
206;  Archer  v.  Heiman,  21  Ind.  29. 

Massachusetts. — Ward  v.  Johnson, 
13  Mass.  148. 

New  Hampshire. — Farwell  v.  Hil- 
liard,  3  N.  H.  318. 

Neiv  York. — Candee  v.  Smith,  93 
N.  Y.  349. 

England. — King  v.  Hoare,  13 
Mees.  &  W.  494. 

But  see  generally,  Joyce  v.  Spaf- 
ford,  101  111.  App.  422;  Giles  v. 
Canary,  99  Ind.  116;  Bute  v.  Brain- 
erd,  93  Tex.  137,  53  S.  W.  1017,  un- 
der Rev.  Stat.  1895,  art.  1203;  Ayrey 
v.  Davenport,  2  Bos.  &  P.  474. 

That  judgment  on  note  merges 
cause  of  action,  see  the  following 
cases: 

United  States. — Harrison  v.  Rem- 
ington Paper  Co.,  140  Fed.  385. 

Alabama. — Brown  v.  Foster,  4 
Ala.  282. 

Ulinois. — Brown  v.  Schurtz,  203 
111.  136,  67  N.  E.  767. 


k 


680] 


DISCHARGE. 


830 


onerated  if  there  are  funds  in  the  hands  of  the  assignee  of  the  drawer 
for  whose  accommodation  the  bill  was  accepted  and  such  funds  are 
available  for  satisfaction  of  the  bill.^^  Again,  satisfaction  of  a  bill  as 
between  a  drawer  or  indorser  and  an  indorsee,  whether  made  prior  or 
subsequent  to  the  bill  becoming  due,  does  not  necessarily  enure  as  a 
satisfaction  on  behalf  of  the  acceptor,  or  operate  to  discharge  him  from 
liability  to  the  indorsee.^^  A  release  by  an  indorser  is  not  binding 
upon  his  immediate  indorsee  ;^^  although  a  release  by  the  holder  may 
be  availed  of  as  a  bar.^* 

§  680.     Discharge  of  surety. — A  surety  may  be  relieved  of  all  lia- 
bility on  a  note  by  assigning  a  judgment  owned  by  him  to  the  payee 


Indiana. — Dunn  v.  Dills,  31  Ind. 
App.  673,  68  N.  E.  1035. 

Kansas. — Redden  v.  First  Na- 
tional Bank,  66  Kan.  747,  71  Pac. 
578. 

New  Mexico. — See  First  National 
Bank  v.  Lewinson  (N.  M.),  76  Pac. 
288. 

New  York. — Lytle  v.  Crawford, 
74  N.  Y.  Supp.  660,  69  App.  Div. 
273. 

Ohio. — Erwin  v.  Lynn,  16  Ohio 
St.  539. 

Pennsylvania. — ^Work  v.  Prall,  26 
Pa.  Super.  Ct.  104. 

When  judgment  is  not  a  merger 
or  bar,  see  the  following  cases: 

United  States. — Clark  v.  Young,  1 
Cranch  (U.  S.)  181. 

Georgia. — Taylor  v.  Jarrell,  104 
Ga.  169,  30  S.  E.  675. 

Illinois. — Mount  v.  Sholes,  120  111. 
394,  11  N.  E.  401. 

Indiana. — Yance  v.  English,  78 
Ind.  80;  Morrison  v.  Fishel,  64  Ind. 
177;    Smith  v.  Hunter,  33  Ind.  106. 

Massachusetts. — Burnham  v.  Win- 
dram,  164  Mass.  313,  41  N.  E.  305; 
Stone  V.  Wainwright,  147  Mass.  201, 
17  N.  E.  301;  Hunt  v.  Brown,  146 
Mass.  253,  15  N.  E.  587;  Fisher  v. 
Fisher,  98  Mass.  303;  Andover  Sav. 
Bank  v.  Adams,  1  Allen  (Mass.) 
28. 


Michigan. — Smith  v.  Curtiss,  38 
Mich.  393. 

Missouri. — Orrick  v.  Dunham,  79 
Mo.  174. 

Nebraska. — Sackett  v.  Montgom- 
ery, 57  Neb.  424,  77  N.  W.  1083. 

New  York. — Russel  &  Irwin  Mfg. 
Co.  V.  Carpenter,  5  Hun  (N.  Y.) 
162. 

Pennsylvania. — Rice  v.  Groff,  58 
Pa.  St.  116;  Kirkpatrick  v.  Muir- 
head,  16  Pa.  St.  (4  Harris)  117. 

Tennessee. — Bowman  v.  Rector 
(Tenn.),  59  S.  W.  389. 

Vermont. — T  remont  Bank  v. 
Paine,  2  Williams  (Vt.)   24. 

Canada. — McLennan  v.  McMonies, 
25  U.  C.  Q.  B.  114;  Bank  of  Mon- 
treal V.  Douglas,  17  U.  C.  Q.  B.  208. 

England. — Tarleton  v.  Allhusen,  2 
Adol.  &  E.  32;  Claxton  v.  Swift,  2 
Show  441. 

"Bradford  v.  Hubbard,  8  Pick 
(25  Mass.)  155.  Examine  Rolfe  v. 
Wyatt,  5  Car.  &  P.  181. 

1=  Jones  v.  Broadhurst,  9  C.  B.  (0. 
S.)  173.  Examine  Williams  v. 
Jones,  77  Ala.  294. 

^^  Russell  V.  Cornwell,  2  Root 
(Conn.)  122. 

"  Bauerman  v.  Radenius,  7  Term 
R.  663. 


i 


831 


DISCHARGE   OF    SURETY. 


[§   680 


of  the  note,  it  being  agreed  that  such  assignment  shall  so  operate. ^•''' 
A  surety  will  also  be  released  by  a  valid  binding  contract  extending 
time  without  the  surety's  notice  or  knowledge.^''  But  there  must  be 
a  clear  and  binding  agreement  for  such  extension  of  time  in  order  that 
it  shall  operate  as  a  release."  Such  extension  must  also  be  based  upon 
a  sufficient  consideration.^^  And  the  shortness  of  time  is  immaterial 
provided  the  agreement  is  certain,  clear  and  unconditional.^^  So  the 
surety's  liability  may  be  affected  by  a  contemporaneous  parol  agree- 
ment for  the  extension  of  time,  when  based  upon  a  sufficient  consider- 
ation.-** If  a  debt,  for  which  a  partner  is  surety,  is  increased  or  the 
character  thereof  changed  by  a  note  without  such  surety's  consent  the 
surety  is  discharged.^^  A  surety  is  also  discharged  where,  through 
the  creditor's  neglect  to  proceed  against  the  principal,  he  has  been 
precluded  from  recovering  the  debt  or  has  sustained  damage.-^   So  the 

"First  National  Bank  of   Indian-     87,    64    App.    Div.    331;     Hummels- 
apolis  V.  New,  146  Ind.  411,  45  N.  E. 
597. 

"  California. — Daneri  v.  Gazzola, 
139  Cal.  416,  73  Pac.  179. 

Illinois. — Wyatt  v.  Dufrene,  106 
111.  App.  214. 

Kansas. — Bank  of  Horton  v. 
Brooks,  64  Kan.  285,  67  Pac.  860. 

Kentucky. — Barber  v.  Ruggles,  27 
Ky.  L.  Rep.  1077,  87  S.  W.  785. 

Missouri. — Johnson  v.  Franklin 
Bank,  173  Mo.  171,  73  S.  W.  391; 
Steele  v.  Johnson  (Mo.  App.),  69  S. 
W.  1065. 

Nebraska. — Shuler  v.  Hummel 
(Neb.),  95  N.  W.  350. 

Wisconsin. — Fanning  v.  Murphy, 
126  Wis.  538,  105  N.  W.  1056. 

Texas. — Marshall  Nat.  Bank  v. 
Smith,  33  Tex.  Civ.  App.  555,  77  S. 
W.  237. 

See  People  v.  Grant  (Mich.),  11 
Det.  L.  News  474,  100  N.  W.  1006; 
Lazelle  v.  Miller,  40  Oreg.  549,  67 
Pac.  307;  Westbrook  v.  Belden  Nait. 
Bank,  97  Tex.  246,  77  S.  W.  942; 
Guerguin  v.  Boone,  33  Tex.  Civ.  App. 
622,  77  S.  W.  630. 

Examine  Parlin  &  Orendorff  Co. 
V.  Hudson,  198  111.  389,  65  N.  E.  93; 
Brink  v.   Stratton,   72   N.   Y.   Supp. 


town  Brownstone  Co.  v.  Knerr,  25 
Pa.  Sup.  Ct.  465. 

"Barber  v.  Ruggles,  27  Ky.  L. 
Rep.  1077,  87  S.  W.  785;  Westbay  v. 
Stone,  112  Mo.  App.  411,  87  S.  W.  34. 

Examine  Bank  of  Morehead  v. 
Blam,  24  Ky.  L.  Rep.  2425,  74  S.  W. 
209;  Johnson  v.  Franklin  Bank,  173 
Mo.  171,  73  S.  W.  391.  Compare 
Revell  V.  Thrash,  113  N.  C.  803,  44 
S.  E.  596. 

When  surety  not  released  by  ex- 
tending credit  in  excess  of  stipu- 
lated amount  in  a  contract  made 
contemporaneously  with  a  note 
given  as  collateral  security  for  a 
debt,  see  Rouss  v.  King,  69  S.  C. 
168,  48  S.  E.  220. 

"  Higgins  V.  McPherson,  118  111. 
App.  464;  Durbin  v.  Northwestern 
Scraper  Co.  (Ind.  App.),  73  N.  E. 
297;  Regan  v.  Williams,  185  Mo. 
620,  84  S.  W.  959. 

"Revell  V.  Thrash,  132  N.  C.  803, 
44  S.  E.  596. 

^  Moroney  v.  Coombes  (Tex.  Civ. 
App.),  88  S.  W.  430. 

-^  Casey-Swazy  Co.  v.  Anderson 
(Tex.  Civ.  App.),  83  S.  W.  840. 

-  Dampskibsaktieselskabet  Habil 
v.   United    States   Fidelity   &   Guar- 


681] 


DISCHARGE. 


832 


surrender  or  release  of  securities  operates  to  discharge  him.^^  And 
the  question  whether  payments  have  been  properly  applied  may  affect 
the  surety's  right  to  a  discharge.^'*  Again,  where  the  maker  is  surety 
for  the  indorser,  the  transactions  between  the  indorser  and  the  holder 
may  be  of  such  a  character  as  to  discharge  him.-^  But,  if  a  note  is 
in  no  way  varied,  he  is  not  discharged  by  the  mere  payment  by  the 
principal  of  interest  due;^®  nor  is  he  released  by  the  mere  surrender 
of  the  note  for  a  worthless  check.-" 

§  681.  Discharge  of  guarantor. — A  release  of  a  guarantor's  obliga- 
tions on  a  note  must  be  based  on  a  valid  consideration.-^  But  a  guar- 
antor is  exonerated  where,  without  his  consent  the  original  obligation 
of  the  principal  is  altered  by  an  act  of  the  creditor,  or  where  such 
creditor's  rights  or  remedies  against  the  principal  are  impaired.^® 
And  so  a  guarantor  who  has  given  his  mortgage  to  secure  a  part  of 
the  amount  of  a  note,  is  discharged  therefrom  by  the  payment  of  the 
debt  secured.^"  A  guarantor  may  also  be  released  by  an  extension  of 
time  without  his  consent,^^  or  bv  neglect  to  take  action  against  or  to 


anty  Co.  (Ala.),  39  So.  54.  Ex- 
amine Boiling  V.  Chambers,  20 
Colo.  App.  113,  77  Pac.  16;  Burge  v. 
Duden  (Mo.  App.),  78  S.  W.  653; 
Robertson  v.  Angle  (Tex.  Civ. 
App.);  76  S.  W.  317. 

^  Molaka  v.  American  Fire  Ins. 
Co.,  29  Pa.  Super.  Ct.  149.  See 
Brown  v.  First  National  Bank, 
132  Fed.  450,  66  C.  C.  A.  293;  Tram- 
mell  V.  Swift  Fertilizer  Works,  121 
Ga.  778,  49  S.  E.  739;  Gotzian  &  Co. 
V.  Heine,  87  Minn.  429,  92  N.  W. 
398;  Rouss  v.  King,  69  S.  C.  168,  48 
S.  E.  220. 

"  Eccleston  v.  Sands,  95  N.  Y. 
Supp.  1107,  108  App.  Div.  147.  See 
Mitchell  V.  Wheeler,  122  Iowa  368, 
98  N.  W.  152. 

"'  Jennings  v.  Moore,  189  Mass. 
197,  75  N.  E.  214. 

"-"Bitler's  Estate,  In  re,  30  Pa. 
Super.  Ct.  84. 

=^Hogan  V.  Kaiser,  113  Mo.  App. 
711,  88  S.  W.  1128. 

When  surety  not  discharged,  see 


generally:  Ingells  v.  Sutcliff,  36 
Kan.  444,  13  Pac.  828;  Prather  v. 
Gammon,  25  Kan.  379;  Deposit 
Bank  of  Sulphur  v.  Peak,  23  Ky.  L. 
Rep.  19,  62  S.  W.  268;  First  Na- 
tional Bank  v.  Marshall,  73  Me.  79; 
North  Ave.  Savings  Bank  v.  Hays, 
188  Mass.  135,  74  N.  E.  311. 

Surety — as  to  right  of  contribu- 
tion, see  Skiles'  Estate,  In  re,  211 
Pa.  631,  61  Atl.  245;  Adams  v.  De- 
Frehn,  27  Pa.  Sup.  Ct.  184. 

^Hale  V.  Dressen,  76  Minn.  183, 
78  N.  W.  1045.  Examine  Davis 
Sewing  Machine  Co.  v.  Buckles,  89 
111.    237. 

=°  Stanford  v.  Coram,  26  Mont. 
285,  67  Pac.  1005. 

=«  Carson  v.  Reed,  137  Cal.  253.  70 
Pac.  89. 

^•Loeff  V.  Taussig,  102  111.  App. 
398;  American  Iron  &  Steel  Mfg.  Co. 
V.  Beal,  101  Md.  423,  61  Atl.  629; 
Bank  v.  Hunt  (R.  I.),  13  Atl.  115, 
5  N.  Eng.  777. 

When  not  so  released,  see  Leon- 


833 


DISCHARGE   OF   GUARANTOR. 


[§■  681 


prosecute  the  principal  with  due  diligence.^^  gut  it  is  decided  that  the 
neglect  to  enforce  a  security,  or  the  want  of  diligence  in  collecting 
the  note,  will  not  affect  the  liability  of  a  guarantor  where  the  guar- 
anty is  an  absolute  one.^^  And  it  is  held  that  it  is  obligatory  upon  a 
guarantor  to  ascertain  whether  payment  of  the  instrument  has  been 
made  und  that  his  liability  thereon  arises  immediately  upon  the 
default  of  the  debtor  ;3*  nevertheless,  it  is  also  determined  that  he  is 
entitled  to  notice  of  the  maker's  default  within  a  reasonable  time, 
otherwise  he  will  be  entitled  to  a  discharge  to  the  extent  of  his  con- 
sequent or  resulting  damage.^^  If  the  payment  of  the  note  is  dependent 

hardt  v.  Citizens'  Bank,  56  Neb.  38, 

76  N.  W.  452;  Bank  of  Buffalo  v. 
Danziger,  65  N.  Y.  Supp.  981,  53 
App.  Div.  517;  Providence  Mach. 
Co.  V.  Browning,  70  S.  C.  148,  49  S. 
E.  325. 

'=  Getty  V.  Schantz,  101  Wis.  229, 

77  N.  W.  191. 
Examine  the  following  cases: 
United  States. — Getty  v.  Schantz, 

100  Fed.  577,  40  C.  C.  A.  560. 

Georgia. — Nance  v.  Winship  Ma- 
chine Co.,  94  Ga.  649,  21  S.  B.  901. 

Iowa. — Durand  v.  Bowen,  73  Iowa 
573,  35  N.  W.  644. 

Minnesota. — D.  M.  Osborne  &  Co. 
V.  Gullickson,  64  Minn.  218,  66  N.  W. 
965. 

Nebraska. — Rice  v.  McCague,  61 
Neb.  861,  86  N.  W.  486. 

New  York. — Chatham  National 
Bank  v.  Pratt,  135  N.  Y.  423,  48  N. 
Y.  St.  R.  478,  32  N.  E.  236,  rev'g  16 
N.  Y.  Supp.  216,  40  N.  Y.  St.  R.  789; 
Jackson  v.  Decker,  43  N.  Y.  Supp. 
957,  14  App.  Div.  415. 

North  Dakota. — Roberts,  Thorp  & 
Co.  V.  Laughlin,  4  N.  D.  167,  59  N. 
W.  967. 

South  Carolina. — Carroll  County 
Savings'  Bank  v.  Strother,  28  S.  C. 
504,  6  S.  E.  313. 

South  Dakota. — Hanna  v.  Stroud, 
13  S.  Dak.  352,  83  N.  W.  365. 

Texas. — Burrow  v.  Zapp,  69  Tex. 
474,  6  S.  W.  783. 

Joyce  Defenses — 53. 


=' Warder-Bushnell  &  Co.  v.  John- 
son, 114  Mo.  App.  571,  90  S.  W.  392. 
Compare  Fegley  v.  Jennings,  44  Fla. 
203,  32  So.  873. 

"  M.  V.  Monarch  Co.  v.  First  Na- 
tional Bank,  20  Ky.  L.  Rep.  1223, 
49  S.  W.-32,  16  Bkg.  L.  J.  151.  See 
also  Hoyt  v.  Quint,  105  Iowa  443, 
75  N.  W.  342.  Compare  German 
Savings  Bank  v.  Drake  (Iowa),  79 
N.  W.  121. 

=^Lemmert  v.  Guthrie  Bros.,  69 
Neb.  499,  9E  N.  W.  1046.  See  Chap. 
XXIII  herein. 
But  examine  the  following  cases: 
District  of  Columbia. — Hughes  v. 
Heyman,  4  App.  D.  C.  444,  22  Wash. 
L.  Rep.  737. 

Florida.— Ferst  v.  Blackwell,  39 
Fla.  621,  22  So.  892. 

Georgia.— Rogers  v.  Burr,  97  Ga. 
10,  25  S.  E.  329. 

Illinois. — Taussig  v.  Reid,  145  III. 
488,  32  N.  E.  918. 

loiva. — Hoyt  v.  Quint,  105  Iowa 
443,  75  N.  W.  342;  Davey  v. 
Waughtal,  99  Iowa  654,  68  N.  W. 
904. 

Kansas. — Bonebrake  v.  King,  49 
Kan.  296,  31  Pac.  1006. 

Kentucky.— Y&ger  v.  Kentucky 
Title  Co.,  23  Ky.  L.  Rep.  2240,  66  S. 
W.  1027. 

Maryland. — Heyman  v.  Dooley,  77 
Md.  162,  20  L.  R.  A.  257,  26  Atl.  117. 
Massachusetts. — Bishop   v.    Eaton, 
161  Mass.  496,  37  N.  E.  665. 


§    682]  DISCHARGE.  834 

upon  certain  conditions,  the  guarantor  of  payment  is  discharged  by 
acts  of  the  maker  which  preclude  the  performance  of  such  conditions.^*' 
So  the  surrender  of  one  of  several  guaranteed  notes  and  the  taking  of 
other  notes  therefor  will  release  the  guarantor  to  the  amount  of  the 
surrendered  note.-'*'  The  taking  by  the  g-uarantee  of  additional  secur- 
ity does  not,  it  is  decided,  discharge  a  guarantor.^^ 

§  682.  Mortgage  security. — Where  a  mortgage  is  merely  a  col- 
lateral security  for  the  debt  and  a  separate  obligation,  the  satisfaction 
thereof  does  not  operate  to  discharge  the  bond  where  the  debt  itself  is 
not  satisfied,  and  a  mortgage  sale  does  not  satisfy  the  bond  although 
under  the  mortgage  recitals  the  grant  is  for  better  security  and  in  dis- 
charge of  such  obligation.^^  If  a  mortgagee  of  a  negotiable  mortgage 
note  assigns  it  to  an  innocent  party  before  due,  as  security  for  goods 
sold,  he  has  no  right  to  enter  of  record  a  satisfaction  of  the  mortgage, 
although  the  note  was  given  without  any  consideration  and  such  a 
satisfaction  will  be  vacated  in  equity  and  will  constitute  no  defense  to 
an  action  on  the  instrument.**'  And  where  the  drawer  of  a  bill,  before 
it  became  due,  agreed  with  the  acceptor,  that  on  his  giving  a  certain 
mortgage  securing  for  the  amount,  he,  the  drawer,  should  deliver  up 
to  him  the  bill  as  discharged  and  fully  satisfied;  and  the  acceptor, 
executed  the  mortgage  and  received  back  the  bill  uncancelled,  the 
drawer  was  held  liable  on  the  bill  to  the  party  to  whom  the  acceptor 
afterward  indorsed  it  for  value  before  it  became  due,  and  a  plea,  in 
such  an  action,  that  the  bill  was  paid  by  the  acceptor  before  it  became 
due,  and  afterward  reissued  by  him,  can  be  supported  by  proof  only 
of  actual  payment  in  cash,  and  not  by  proof  of  an  agreement  between 

Michigan. — Roberts    v.     Hawkins,  Sullivan  v.  Field,  118  N.  C.  358,  24 

70  Mich.  566,  38  N.  W.  575,  14  West.  S.  E.  735;  Myer  v.  Reedy,  115  N.  C. 

Rep.  867.  538,  20  S.  E.  521. 

Minnesota. — Fall   v.   Youmans,   67  Oregon. — Weiler    v.    Henarie,    15 

Minn.  83,  69  N,  W.  697.  Oreg.  28,  13  Fac.  614. 

Nebraska. — Harvey   v.    First    Na-  ^'' Bagley     v.     Cohen      (Cal.),     50 

tional  Bank,  56  Neb.  320,  76  N.  W.  Pac.  4. 

870.  ='  First  National  Bank  v.  Bradley, 

New  Yo?-fc.— Central  Bank  v.  Kim-  61  Kan.  615,  60  Pac.  322. 

ball,    76    N.    Y.    Supp.    227,   73    App.  '-^  Presbyterian   Board   of   Publica- 

Div.  100;  Glens  Falls  Insurance  Co.  tion  &  S.  S.  Work  v.  Gilliford  Ind.), 

V.   Temple,   51   N.  Y.   Supp.  948,  29  38  N.  E.  404. 

App.  Div.  577.  ''  Strieker   v.   McDonnell,    213    Pa. 

North    Carolina.— A  n  d  r  e  w  s    v.  108,  62  Atl.  520. 

Pope,  126  N.  C.  472,  35  S.   E.   817;  ^"Gordon  v.  Mulhare,  13  Wis.  22. 


835  MORTGAGE  SECURITY.  [§    682 

the  drawer  and  acceptor  wliercby  the  bill  was  to  be  deemed  satisfied.*^ 
Again,  where  a  mortgage  is  given  as  collateral  security  to  be  void 
upon  the  payment  of  certain  bills  of  exchange  there  is  no  merger  of 
the  claim  upon  such  bills/-  especially  so  where  the  right  to  sue  upon 
the  note  is  expressly  reserved.*^  And  the  giving  of  a  mortg'age  by 
one  of  two  sureties  on  a  note  does  not  of  itself  discharge  another 
sujety.**  So  where  the  indorsee  sues  the  maker  of  a  promissory  note, 
a  plea  is  bad  which  sets  up  a  mortgage  as  payment  of  the  note  where 
the  very  terms  of  the  mortgage  show  that  it  was  taken  as  collateral 
security  and  not  in  satisfaction  or  as  a  merger  of  the  notes.*^  And 
where  notes  were  surrendered  to  their  maker  upon  his  executing  a 
mortgage  to  secure  the  same  indebtedness  but  there  was  no  agreement 
that  the  mortgage  was  to  be  a  satisfaction  of  the  debt,  or  that  the 
surrender  of  the  original  notes  was  to  discharge  the  original  obliga- 
tion to  pay  them,  the  original  obligation  was  held  not  to  be  dis- 
charged nor  the  debt  paid  by  the  renewal  of  the  obligation,  and  the 
surrender  of  the  original  notes,  but  in  such  case  there  was  only  an 
evidence  of  the  extension  of  the  time  of  payment,  and  not  an  abso- 
lute payment,  in  the  absence  of  an  agreement  to  the  contrary.*"  Again, 
where  a  note  of  a  third  party  is  taken  from  the  debtor,  and  indorsed 
by  the  latter  as  security  for  a  part  of  the  debt,  but  the  creditor  after- 
ward takes  a  mortgage  from  the  debtor  for  the  entire  sum  due,  fixing 
a  longer  time  for  payment  than  that  evidenced  by  the  note,  such  act 
extinguishes  the  remedy  against  the  debtor  as  indorser  of  the  note, 
where  the  mortgage  does  not  refer  to  the  note  as  being  a  security  for 
the  same  debt.*'^  And  where  notes  are  overdue,  if  a  mortgage  is  given 
and  received  as  security  for  the  total  amount  thereof,  it  is  held  that 
the  remedy  on  the  notes  is  extinguished  by  the  merger  of  the  lesser 
security  in  the  higher.**  So  indorsers  may  be  discharged  from  lia- 
bility on  notes,  even  though  not  so  intended  by  the  plaintiff,  by  the 
latter's  act  in  taking  from  the  makers  of  the  paper  a  mortgage  on  per- 
sonal property  containing  a  power  of  sale  in  case  of  default  in  pay- 

"  Morley  v.  Culverwell,  7  Mees.  &  ■'^Murray    v.    Miller,    1    Upp.    Can. 

W.  174.  Q.  B.  353. 

"Gore    Bank    v.    Eaton,    27    Upp.  '"' Hance  v.   Holiman,   69  Ark.    57, 

Can.     Q.     B.     332;     Gore     Bank    v.  60  S.  W.  730. 

M'Whirter,  18  Upp.  Can.  C.  P.  293.  ''  Mathewson  v.  Brouse,  1  U.  C.  Q. 

'=  Commercial    Bank    v.    Cuvillier,  B.  272. 

18  Upp.  Can.  Q.  B.  378.  ^'  Fraser  v.  Armstrong,  10  U.  C.  C. 

'^Kerr  v.  Hereford,  17  Upp.  Can.  P.  506. 
Q.  B.  158. 


§   682]  WSCHAEGE.  836 

ment  of  the  notes.'*''  But  where  a  mortgage  includes  property  of  the 
maker's  wife  and  a  foreclosure  and  sale  is  had  thereof  against  the 
wife's  protest,  and  the  property  did  not  belong  to  the  mortgagor,  such 
apparent  payment  is  of  no  importance  and  docs  not  constitute  a  real 
payment  so  as  to  preclude  recovery  of  the  note  against  her  husband's 
estate,  and  it  is  immaterial  that  she  had  not  recovered  judgment  for 
the  conversion  at  the  time  the  action  was  brought  on  the  note.'^''  Again, 
where  a  bill  of  exchange  was  given  for  a  loan  and  it  was  agreed  that 
the  bill  should  be  surrendered  upon  the  borrowers'  executing  a  mort- 
gage as  security  for  payment,  it  was  held  that  upon  retention  of  the 
mortgage  given  and  suing  thereon,  all  recourse  to  the  bill  was  lost.^^ 
And  where  there  is  found  to  be  fraudulent  misrepresentation  as  to 
the  mortgage  and  it  is  not  accepted  in  lieu  of  bills  and  notes,  still 
there  can  be  no  suit  upon  the  original  cause  of  action  except,  at  least, 
a  reconveyance  is  tendered.^ ^  A  mortgage  executed  and  delivered  by 
a  married  woman  in  payment  of  her  husband's  note  will  discharge 
the  note.^^  And  where  a  note  is  secured  by  a  vendor's  lien  on  real 
estate  if  the  vendor  takes  a  new  and  distinct  security  for  the  payment 
of  the  purchase  money,  as  in  case  of  taking  a  mortgage  not  only  on 
the  particular  lots  but  also  on  others,  he  waives  his  lien  and  dis- 
charges the  notes. ^*  Where  a  series  of  notes  are  secured  by  mortgage 
and  the  latter  is  foreclosed  it  does  not  operate  as  payment  except  to  the 
value  of  the  property  acquired. ^^  A  remedy  upon  a  joint  and  several 
promissory  note  is  not  taken  away  by  reason  of  a  higher  security  for 
the  same  debt,  namely  a  mortgage  with  covenant  to  pay  the  debt, 
having  been  given  by  one  of  the  makers,  as  the  remedy  given  in  such 
case  by  the  special  security,  being  confined  to  one  of  the  debtors  only 
is  not  coextensive  with  that  which  the  creditor  had  upon  the  original 
paper,  it  not  being  proven  that  such  higher  security  was  accepted  in 
place  of  such  note.^®  It  is  decided  in  a  recent  case  that  whether  or  not 
the  note  is  secured  by  mortgage  the  maker  must,  in  order  to  satisfy  it, 

^«Bank  of  British  N.  A.  v.  Jones,  ''^  Adams  v.  Nelson,  22  U.  C.  Q.  B. 

8  U.  C.  Q.  B.  86.     See  Smith  v.  Clop-  199. 

ton,  48  Miss.  66;  Parker  v.  McCrea,  ^=  Caryl  v.  "Williams,  7  Lans.    (N. 

7  U.  C.  C.  P.  124;   Smith  v.  Judson,  Y.)  416. 

4  U.  C.  Q.  B.  (O.  S.)  134.  =*  White  v.  Dougherty,  Mart.  &  Y. 

^  Handy  v.  Tracy,  150  Mass.  524,  (Tenn.)   308. 

23  N.  E.  226.  ■*=  McKean  v.  Cook,  73  N.  H.   410, 

"  Johnson   v.   Watt,   15   La.   Ann.  62  Atl.  729. 

428.  =»Ansell  v.  Baker,  15  Q.  B.  (Adol. 

&  El.  N.  S.)  20. 


837  AGREEMENTS    AND   CONDITIONS.  [§§    683,    C84 

make  payment  thereof  eitlier  to  the  then  owner  or  to  his  authorized 
agent.^^ 

§  683.     Sale  or  surrender  of  collateral,  or  satisfaction  of  debt. — 

Where  a  bank  which  holds  stock  as  collateral  security  for  notes  sells 
the  same  without  the  consent  of  the  pledgor,  it  thereby  converts  them 
to  its  own  use  and  must  credit  the  note  secured  before  the  sale  with 
the  value  of  the  stock  at  the  time  of  the  conversion.^®  And  in  a  suit 
against  the  accommodation  payee  and  indorser  of  a  note,  it  is  prima 
facie  a  defense,  that  the  plaintiff,  at  the  request  of  the  makers,  sold 
another  note  made  by  them,  for  the  purpose  of  paying,  and  realized 
enough  from  such  sale  to  pay  the  amount  owing  upon  the  note  in 
suit.^^  Again,  an  agreement  between  the  creditor  and  his  debtor 
that  the  former  will  surrender  one  or  more  of  the  collateral  notes 
pledged  to  secure  the  debt  in  consideration  of  a  present  payment 
thereon  constitutes  a  valid  contract.  Such  an  agreement  is  not  with- 
out consideration,  even  though  the  principal  debt  is  due,  and  it  is 
''the  duty  of  the  debtor  to  pay  it.*^"  Payment  of  the  collateral  may 
operate  as  a  payment  of  or  defense  to  the  original  note.^^  And  the 
satisfaction  of  the  indebtedness  or  loan  made  on  a  collateral  note  by 
the  ti'ansfer  of  property  accepted  in  full  satisfaction  of  money  loaned 
extinguishes  the  obligation  of  the  note  and  constitutes  a  defense  to  an 
action  on  the  note  by  the  apparent  maker.®^ 

§  684.  Agreements  and  conditions — Decisions  generally. — An  ex- 
ecutory agreement  as  to  the  payment  of  a  note,  constitutes  no  bar 
to  a  suit  upon  such  paper,  and  it  is  necessary  to  sustain  a  plea  of 
accord  to  prove  an  accord  which  is  not  executory  only  but  one  which 
ought  to  be  and  has  been  executed  before  the  commencement  of  the 
action.*'^  If  the  payee's  consent  to  an  agreement  to  release  is  condi- 
tional upon  the  giving  of  new  notes  and  such  condition  is  never  per- 
formed the  release  will  not  be  operative.'^'*  In  case  an  agreement  as  to 
the  mode  of  payment  of  a  note  is  in  the  nature  of  a  composition,  a 

"Marling    v.     Milwaukee     Realty  ""Post  v.  Bank,  159  111.  421,  42  N. 

Co.   (Wis.  1906),  106  N.  W.  844.  E.  976;  Babbitt  v.  Moore,  51  N.  J.  L. 

''  Pauly  v.  Wilson,  57  Fed.  548.  229,  17  Atl.  99. 

''"  Burrall  v.  Jones,  20  N.  Y.  Super.  "-  Merrill  v.   Bank,  94   Cal.   59,   29 

Ct.   (7  Bosw.)   404.  Pac.  242. 

•"*  Lincoln    Savings    Bank    &    Safe  "^  Gushing  v.  Wyman,  44  Me.  121. 

Deposit   Co.   V.    Allen,   82    Fed.    148,  "Jackson   v.   Lalicker    (Neb.),   99 

152,  27  C.  C.  A.  87.  N.  W.  32. 


§    G85]  DISCHARGE.  838 

strict  compliance  with  the  conditions  thereof  is  necessary.^^  If  a 
person,  at  the  request  of  an  insolvent  debtor,  is  induced  to  give  to  a 
purchaser  of  the  latter's  notes  a  note  in  place  thereof,  he  is  not  dis- 
charged by  an  agreement  not  to  j^rove  the  claim  against  the  in- 
solvent's estate.®®  Again,  where  a  purchase  price  note  is  given  for 
projjerty,  the  transferee  of  such  note  is  not  precluded  from  recovering 
from  both  makers  thereof  by  reason  of  the  sale  by  one  of  the  makers 
of  his  entire  interest  in  the  propert}',  and  an  agreement  by  such 
vendee  to  assume  the  obligation  evidenced  by  the  note  where  neither 
the  transferee  nor  the  payee  had  notice  of  such  agreement.®^  A  secret 
agreement  between  a  national  bank  official  and  a  director  of  such 
bank  will  not  operate  to  defeat  the  latter's  liability  to  the  bank  re- 
ceiver upon  his  purchase  price  note  for  shares  of  the  stock  of  the 
bank."^  And  an  agreement  between  a  bank  on  discounting  a  note  and 
the  payee  whereby  the  fact  of  its  being  discounted  is  concealed  from 
the  payee  is  not  of  itself  such  a  fraud  as  to  justify  its  payment  to  the 
payee  without  production  and  surrender  of  the  paper.®^  If,  under  an 
extrinsic  agreement,  certain  conditions  are  to  be  performed  before 
payment  of  a  note  to  a  transferee  he  cannot  recover  thereon  where 
such  conditions  remain  unperformed.''^  And  where  a  note  for  insur- 
ance premiums  is  given  under  an  agreement  that  if  the  policy  should 
not  be  satisfactory  the  note  would  be  returned  such  condition  must 
be  fulfilled  or  recovery  on  the  note  is  precluded  upon  the  offer  to  re- 
turn the  policy  and  a  demand  made  for  the  note."^ 

§685.  Same  subject. — Where  it  is  stipulated  in  writing  made  by 
the  payee  contemporaneously  with  the  execution  of  a  note  that  the 
payment  thereof  should  rest  in  the  maker's  discretion  and  that  he 
would  not  be  sued  thereon,  such  an  agreement  is  obligatory  not  only 
upon  the  payee  but  also  upon  his  legal  representatives,  and  operates  as 
a  release  of  the  maker  from  all  liability.'^^    And  a  stranger  is  bound 

^  Makepeace  v.   College,   10   Pick.  '"  Wilson  v.  Wright,  116  Mich.  476, 

(27  Mass.)   298.  5  Det.  L.  N.  10,  74  N.  W.  721. 

^  Jennings    v.    Moore,    189    Mass.  ^  Parker  v.  Bond,  121  Ala.  529,  25 

197,  75  N.  E.  214.  So.  898.     See  also  Bresee  v.  Cromp- 

"  McCullough  v.  Pritchett,  120  Ga.  ton,    121    N.    C.    122,    28    S.    E.    351. 

585,  48  S.  E.  148.  Compare  Maher  v.  Moore  (Del.),  42 

^Atwater  v.  Smith,  73  Minn.  507,  Atl.  721. 

76  N.  W.  253.  '-  Martin  v.   Monroe,   107  Ga.   330, 

«»Tuck  V.  National  Bank  of  Ath-  33  S.  E.  62. 
ens,  108  Ga.  446,  33  S.  E.  983. 


839  AGREEMENTS   AND    COXDITIOXS.  [§    685 

by  an  agreement  made  between  the  parties  to  an  instrument  that  it 
shall  be  paid  and  obligation  extinguished,  and  this  rule  applies  not- 
withstanding the  money  with  which  to  satisfy  the  amount  of  the  note 
is  loaned  to  the  maker  by  such  third  person."  Again  where,  under 
an  agreement,  the  acceptor  is  to  be  discharged  from  liability  upon 
delivery  before  maturity  of  a  warehouse  receipt,  such  delivery  consti- 
tutes a  sufficient  consideration  for  the  released*  In  a  Washington 
case  it  is  decided  that  payment  of  a  promissory  note  by  a  joint  maker 
who  claimed  to  have  signed  as  surety  onl}-,  is  not  shown  where  it  ap- 
pears that  the  surety,  after  giving  notice  to  the  bank  of  the  surety- 
ship, and  requesting  suit  to  be  instituted  against  the  original  maker, 
entered  into  a  written  agreement  with  the  bank,  and  with  its  presi- 
dent acting  as  a  trustee  and  not  in  his  official  capacity,  under  the 
terms  of  which  the  surety  deposited  with  the  trustee  a  sum  sufficient 
to  pay  the  note  and  costs  of  suit,  to  be  held  until  final  judgment 
against  the  principal  maker,  and  the  bank  agreed  to  at  once  institute 
a  suit  thereon  without  making  the  surety  a  party  defendant,  the 
deposit  to  be  returned  in  case  of  payment  by  the  principal  maker,  and 
the  judgment  to  be  assigned  to  the  surety  if  not  paid ;  it  being  a  pre- 
requisite to  the  banks  receiving  the  deposit  that  it  should  reduce  the 
claim  to  judgment;  and  it  being  specifically  stipulated  that  the 
transaction  should  not  be  considered  a  payment  of  the  note,  but  that 
the  deposit  shall  be  held  only  as  security  for  any  judgment  that  might 
be  obtained.'^^  Although  the  liability  of  an  indorser  becomes  fixed 
by  proper  notice  of  dishonor,  still  it  may  be  modified  by  an  agree- 
ment giving  the  indorsee  the  right  to  require  its  redemption  with 
other  like  notes  of  the  indorser's  own  notes ;  that  is,  he  may  elect  to 
have  the  paper  redeemed  in  that  manner  instead  of  insisting  upon- 
payment.'''®    A  mere  promise  to  accept  currency  which  is  rapidly  dc- 

"  Stevenson  v.  Short,  25  La.  967,        "  Capital  National  Bank  v.  Robin- 

27  So.  350.  son,    41    Wash.    454,    83    Pac.    1021, 

^^Burch   v.   Hubbard,  48   111.   164;  Root,  J.,  dissenting. 
Lord   v.    Favorite,   29    111.   149.     "If         '"Strickland   v.    Lee,   65    Md.   384, 

the   proposition    of   the    makers   to  387,  4  Atl.  884. 

discharge  the  note  after  its  matur-        See  further  as  to  agreements  and 

ity   with   the    certificate   of   deposit  conditions  affecting  discharge  satis- 

which  they  held  on  the  payees,  and  faction  and  release  of  notes,  etc.,  in 

before   they   parted    with   the   note,  general  the  following  cases: 
constituted  a  satisfaction,  the  liabil-        United    States. — Harmon    v.    Ad- 

ity  of  the  makers  has  not  been  re-  ams,  120  U.  S.  363,  7  Sup.  Ct.  553. 
vived."      A    case    of    a    note    trans-        Alabama. — Carpenter  v.  Mur- 

ferred  after  maturity.  phree,  49  Ala.  84. 


§§■  686,  687]  DISCHARGE.  840 

predating  is  without  any  consideration  and  is  a  mere  privilege  ac- 
corded to  the  debtor.'^^ 

§  686.  Payment  by  note  or  check  of  or  by  order  on  third  person — 
Accord  and  satisfaction. — While  an  agreement  between  a  creditor  and 
his  debtor  to  accept  the  payment  of  less  than  the  full  amount  due  him 
in  satisfaction  of  an  ascertained  debt  is  without  consideration  and  not 
binding  upon  the  creditor,  yet  a  contract  to  accept  a  note  of  a  third 
person  for  a  greater  or  less  amount  than  the  face  of  the  debt,  or  to 
accept  any  consideration  other  than  current  funds  in  satisfaction  of 
the  debt  constitutes  a  valid  and  enforceable  contract. '^^  It  is  also 
competent  proof  of  accord  and  satisfaction  and  a  good  defense  that  a 
debt  has  been  discharged  in  consideration  of  the  payment  of  part  of 
the  amount  by  a  third  person's  check.'^^  But  it  is  held  that  a  plea 
that  the  plaintiff  accepted  an  order  of  the  defendant  on  a  third  per- 
son for  a  certain  sum  in  satisfaction  constitutes  no  bar  to  an  action 
for  the  original  cause  of  indebtedness ;  nor  is  a  plea  good  as  an  accord 
and  satisfaction  that  the  plaintiff  agreed  to  accept  the  note  of  a  third 
l^erson  which  on  being  tendered  to  him  he  refused  to  accept.®" 

§  687.  By  payment  of  other  indebtedness. — It  is  a  good  defense 
pro  tanto,  in  an  action  upon  a  note  by  an  assignee  of  a  bankrupt 
promisee,  that  the  promisor  is  obligated  to  pay  a  bond  executed  by 
him  to  a  third  person  at  the  promisee's  request  upon  condition  that 
a  balance  should  remain  unpaid  upon  the  note  which  the  promisee 
would  not  claim  if  the  promisor  should  be  obliged  to  pay  the  bond.^^ 
So  a  verbal  agreement,  contemporaneous  with  the  execution  of  a  note, 

Connecticut. — Barber    v.    Gordon,  Bos.    &   P.   630;    Edwards   v.   Jones, 

2  Root  (Conn.)  95.  2  Mees.  &  W.  414,  7  Car.  &  P.  633,  5 

Illinois.— Hart  v.   Strong,  183   111.  Dowl.  585. 

349,  55  N.  E.  629.  "Lewis    v.     Davisson,     29    Gratt. 

ilf awe.— First    National    Bank    v.  (Va.)  216,  227. 

Marshall,  73  Me.  79;  Merrill  v.  Mow-  "Lincoln    Savings   Bank    &   Safe- 

ry,  33  Me.  455.  Deposit   Co.   v.    Allen,   82    Fed.    148, 

Massachusetts.  —  Hanchett     v.  151,   27    C.    C.   A.    87,   per    Sanborn, 

Birge,  12  Mete.    (Mass.)    545;    Nich-  C.  J. 

ols  v.  Holt,  9  Gray  (Mass.)  202.  "Guild  v.  Butler,  127  Mass.  386; 

Nebraska. — Collingwood    v.    Bank,  Brooks  v.  White,  2  Mete.  (43  Mass.) 

15  Neb.  118,  17  N.  W.  359.  283;  Lapham  v.  Barnes,  2  Vt.  213. 

Wisconsin. — Jackson  County  Bank  ^  Hawley  v.  Foote,  19  Wend.    (N. 

V.  Parsons,  112  Wis.  265,  87  N.  W.  Y.)  516. 

1083.  '^  Ward  v.  Winship,  12  Mass.  480. 

England. — Cheetham    v.    Ward,    1 


841  BILL,    XOTE   OR    CHECK.  [§    688 

that  the  note  should  be  satisfied  by  the  payment  of  certain  insurance 
premiums  and  orders  to  be  drawn  upon  the  payee,  is  a  good  plea  in 
defense.®-  But  a  verbal  promise  made  to  the  maker  of  a  note  by  the 
holder  of  it  to  surrender  it  in  payment  of  an  account  the  maker  had 
against  a  third  person  and  which  the  holder  of  the  note  was  not  liable 
for,  will  not,  unless  it  is  executed,  affect  the  note  as  a  payment. ^^ 

§  688.     By  bill,  note  or  check — Substituted  note — Renewal  note. — 

It  may  be  a  good  defense  to  an  action  upon  commercial  paper  that  the 
original  note  or  draft  has  been  paid  and  discharged  by  a  subsequent 
n6te,  as  where  it  has  been  executed  and  accepted  by  the  parties  for  the 
purpose  of  satisfaction.  The  question  of  the  parties'  intention  in 
such  case  is  an  important  factor.'^*  If  a  note  is  given  for  a  less  sum 
in  compromise  of  the  original  notes  and  upon  express  agreement  that 
if  not  paid  at  maturity  it  might  be  surrendered  to  the  maker,  and 
thereupon  the  cause  of  action  on  the  other  notes  should  revive,  the 
holder,  though  suing  upon  all  the  notes,  is  limited  to  a  recovery  upon 
the  last  note.®^  Again,  where  a  note  is  executed  to  cover  an  indebted- 
ness from  the  maker  to  the  payee  and  when  the  amount  of  indebted- 
ness is  ascertained  and  a  new  note  is  substituted  for  the  original  in 
accordance  wdth  the  terms  of  an  agreement  between  the  parties,  a 
tender  of  the  new  note  constitutes  a  pro  tanto  defense  to  an  action  on 
the  original  note  by  a  purchaser  after  maturity  with  notice  of  the 
agreement.®"  And  in  an  action  by  an  indorsee  against  the  acceptor  of 
a  bill  of  exchange  if  a  promissory  note  is  given  by  the  drawer  of  the 
bill  in  full  satisfaction  and  discharge  thereof  the  fact  that  the  note 
was  not  paid  when  due  will  not  enable  a  suit  to  be  sustained  upon  the 
bill.®^  And  where  a  note  or  bill  on  time  is  accepted  in  payment  of  the 
original  debt,  such  acceptance  suspends  the  right  of  action  on  the 

*^  Jones  v.  Snow,  64  Cal.  456.  23,  holding  that  the  acceptance  of  a 

^  Noble  V.  Edes,  51  Me.  34.  negotiable   security  may  be   in  law 

**  Belleville  Savings  Bank  v.  Born-  the    satisfaction    of    a    debt    of    a 

man,  124  111.  200,  16  N.  E.  925.     Ex-  greater   amount.      See   8   Cent.   Law 

amine  Robertson  v.  Bank,  41  Mich.  Jour.  350. 

356,  1  N.  W.  1033;    Brown  v.  Kew-  «°  Murray  v.  Reed,  17  Wash.  1,  48 

ley,  2  Bos.  &  P.  518;   Crisp  v.  Grif-  Pac.  343. 

fiths,  2  Cromp.,  M.  &  R.  159,  3  Dowl.  "  Sard  v.   Rhodes,   1  Mees.   &  W. 

752.  153,  1  Tyrwh.  &  Gr.  298;  Kearslake 

'*  Northern  Liberty  Market  Co.  v.  v.  Morgan,  5  Term  Rep.  513.     See, 

Kelly,  113  U.  S.  199,  5  Sup.  Ct.  422;  also,     Da     Costa     v.     O'Rourke,     12 

Brooks  v.  White,  2  Mete.  (43  Mass.)  Phila.    (Pa.)    223;   Crisp  v.  Griffiths, 

283;  Sibree  v.  Tripp,  15  Mees.  &  W.  2  Cromp.  M.  &  R.  159. 


§    638]  .  DISCIIAEGE.  842 

original  debt  until  the  note  or  bill  becomes  due  or  is  dishonored,  and 
this  is  so  even  in  the  absence  of  an  express  agreement  to  that  effect; 
but  sureties  on  the  original  debt  are  released  unless  they  assented  to 
the  arrangement,*®  But  in  an  action  by  a  town,  the  payee,  against 
the  indorsers  of  a  note,  who  had  received  the  money  thereon,  it  is  de- 
termined that  it  constitutes  no  equitable  defense  thereto  that  the 
defendants  have  given  the  maker  their  own  individual  note  as  an  off- 
set or  protection  for  the  one  so  discounted,  and  one  of  the  defendants 
had  paid  part  of  such  individual  note.*''  But  it  is  held  in  a  New  York 
case  that  a  sufficient  consideration  exists  in  case  of  an  agreement  of  the 
payee  to  accept  in  payment  a  note  signed  by  only  one  of  the  parties 
to  the  original  note.°°  A  widow's  note  for  a  debt  evidenced  by  a  note, 
however,  is  based  upon  no  such  sufficient  consideration  as  to  extin- 
guish the  creditor's  claim  against  an  estate,  even  though  he  had  de- 
stroyed the  original  note  in  reliance  upon  the  substituted  note.^^  And 
the  giving  of  a  new  note  by  one  of  two  joint  and  several  makers,  in- 
tended as  a  provision  for  a  former  note,  not  agreed  to  be  taken  in 
payment  and  not  in  fact  paid,  constitutes  no  defense  to  an  action 
upon  the  original  note.®^  So  it  is  held  to  be  a  question  of  intention 
whether  or  not  a  renewal  note  operates  as  a  payment,  as  the  mere  giving 

^^  Alabama.-^MoMle  Life   Ins.   Co.  Bos.  &  P.  62;  Gould  v.  Robinson,  8 

v.  Randall,  71  Ala.  220.  East.  576. 

Michigan. — Smith  v.   Sheldon,  35  Payments    by    other    notes,     see 

Mich.  42.  Sarraille   v.    Calmon.    142    Cal.    651, 

Minnesota. — Wheaton  v.  "Wheeler,  76   Pac.    497. 

27  Minn.  464.  «"  Town  of  Northborough  v.  Wood, 

Neiv     Jersey. — Morris     Canal     &  142  Mass.  551,  8  N.  E.  591. 

Banking  Co.  v.  Van  Vorst,  21  N.  J.  »» Brink  v.  Stratton,  98  N.  Y.,  Supp. 

L.  100.  421,  112  App.  Div.  299. 

New  York. — Millerd  v.  Thorn,  56  "^  Grimes    v.    Grimes,    28    Ky.    L. 

N.  Y.  402,  15  Abb.  N.  S.  371;    Hen-  Rep.  549,  89  S.  W.  548. 

derson  v.  Marvin,  31  Barb.   (N.  Y.)  »=  Bates    v.    Rosekrans,    37    N.    Y. 

297;  Myers  v.  Welles,  5  Hill  (N.  Y.)  409.     This   rule    is    declared   to   be 

463.  "well  settled." 

Vermont. — Michigan    State    Bank  Examine  Leach  v.  Funk,  97  Iowa 

V.  Leavenworth,  28  Vt.  209.  576,  66  N.  W.  768;  Agawam  National 

Virginia. — Callaway    v.    Price,    32  Bank  v.  Downing,  169  Mass.  297,  47 

Grat.    (Va.)   1.  N.  E.  1016;   Haas  v.  Bank  of  Com- 

Washington. — First     National  merce,   41   Neb.   754,   60  N.  W.   85; 

Bank  of  Seattle  v.  Harris,  7  Wash.  National     Bank     of     Commerce    v. 

139,  34  Pac.  466.  Guthrie,   11   S.  Dak.   517,  78  N.  W. 

England. — English    v.    Darley,    2  995. 


843  BY  STOCK  OR  BONDS.  [§  C80 

of  such  a  note  does  not  have  that  effect.''^  Again,  where  a  corporation 
composed  of  a  former  co-partnership  gives  to  the  payee  its  notes  in 
exchange  for  the  partnership  notes  such  substitution  of  the  new  notes 
operates  as  a  payment  of  the  co-partnership  notes  and  precludes  a  re- 
covery thereon  after  the  corporation's  insolvency."*  And  where  part- 
ners were  lial^le  on  original  bills  retained  by  a  creditor  who  agreed  to 
take  upon  dissolution  the  separate  notes  of  one  of  the  partners  for 
the  entire  amount  of  the  bills,  reserving  his  rights  against  the  other 
partners,  the  taking  and  even  the  renewal  of  such  notes  does  not  con- 
stitute a  satisfaction  of  the  joint  debt."^  In  the  absence  of  fraud  or 
collusion  payment  may  also  be  sufficiently  made  by  the  drawee's  check 
on  the  collecting  bank  where  there  are  funds  to  meet  it."'^  But  giving 
a  worthless  check  does  not  constitute  payment  although  the  note  is 
surrendered. "^  A  check  given  in  payment  of  a  note  is,  however,  held 
to  be  only  a  medium  for  securing  payment  and  not  a  payment  of 
itself.^^  Where  a  check  sent  for  the  amount  of  tbe  discount  on  a  note 
then  due  is  forwarded  by  the  maker  with  a  request  for  renewal  and 
such  extension  is  not  given,  but  the  check  is  used,  it  constitutes  a 
part  payment  to  the  amount  of  the  check  as  of  the  time  of  its  being 
received  by  the  holder.""  If  an  attorney  gives  his  personal  check  in 
payment  of  a  note,  and  presentment  thereof  is  delayed  by  request  of 
the  attorney,  the  time  when  such  check  is  given  and  the  note  sur- 
rendered fixes  that  of  payment.^*"' 

§  689.  By  stock  or  bonds.— Where  the  payee  sues  the  maker,  upon 
the  issue  of  payment,  it  may  constitute  a  defense  to  the  suit  that  by 
agreement^°^  certain  shares  of  stock  were  taken  in  full  satisfaction.^"" 
And  where  stock  is  held  as  collateral  security  for  the  payment  of  a 
note,  its  transfer  to  the  pledgee  may  constitute  payment  of  the  note 
even  though  it  has  been  transferred  to  another,  where  the  latter  is 

^^  First  National  Bank  v.  Gridley,  °'  Hogan  v.  Kaiser,  113   Mo.  App. 

93   N.   Y.    Supp.   445,    112   App.    Div.  711,  88  S.  W.  1128. 

398.     See,  also,  Fuller  Buggy  Co.  v.  "'  Cooney  v.  United  States  "Wringer 

Waldron,   99    N.    Y.    Supp.    561,    112  Co.,  101  111.  App.  468. 

App.  Div.  814.  ""Kelly  v.   Lawrence  Bros.,  79  N. 

»» Ellis   V.   Ballou,    129    Mich.    303,  Y.  Supp.  914,  78  App.  Div.  484. 

8  Det.  L.  N.  966,  88  N.  W.  898.  ""  Upson   v.    Mt.   Morris   Bank,   92 

"'  Bedford    v,    Deking,    2    Barn.    &  N.  Y.  Supp.  1101,  103  App.  Div.  367. 

Aid.  210.  ""  See  §§  684,  685  herein. 

""North    Carolina    Corp.    Commis-  "=  Brown  v.  Smith,  122  Mass.  589; 

sion  v.  Merchants'  &  Farmers'  Bank,  Baker    v.    Hawkins,    14    R.    I.    359; 

137  N.  C.  697,  50  S,  E.  308.  Hawkins  v.  Baker,  14  R.  I.  139. 


§    090]  DISCHARGE,  Si-i 

not  a  bona  fide  holder  and  had  not  acquired  the  note  until  a  long  period 
after  its  execution.^**^  Again,  although  a  right  to  pay  in  bonds  may 
exist  under  the  terms  of  a  note,  yet  it  may  be  lost  by  want  of  tender 
at  or  before  maturity  so  that  a  money  payment  is  necessary.^"* 
And  an  independent  oral  agreement  between  the  parties  to  a  note 
that  the  defendant  would  sell  and  the  plaintiff  would  buy  a  certain 
number  of  shares  of  specified  stock  at  a  named  price  and  that  the  note 
should  be  taken  as  payment  jjro  tanto  of  such  shares  is  not  a  satisfac- 
tion of  the  note  nor  a  new  contract  substituted  for  the  note  and  en- 
titling defendant  to  it,  and  is  no  defense  to  an  action  on  the  note  nor  is 
it  within  the  principle  Avhich  allows  parties  in  order  to  avoid  circuity 
of  action  to  avail  themselves  by  way  of  defense  in  certain  matters 
which  might  be  the  subject  of  a  suit.^*'^ 

§  690.     By  conveyance  of  land  or  agreement  to  take  deed. — It  may 

constitute  a  good  defense  that  land  has  been  conveyed  to  the  payee 
in  satisfaction  of  the  instrument  ;^°*'  or  that  a  deed  of  certain  lands 
has  been  executed  to  the  payee's  guardian  by  the  maker  after  the 
former's  incompetency.^"'^  But  a  deed  made  in  view  of  bankruptcy 
in  favor  of  the  principal  will  not  release  the  surety.^''^  If  the  vendor 
in  an  executory  contract  for  the  purchase  of  lands  receives  from  the 
vendee  a  quit-claim  deed  of  the  lands,  such  act  operates  as  a  rescission 
of  the  contract,  and  he  cannot  afterwards  maintain  an  action  on  notes 
which  were  given  for  the  j^urchase  price.  Thus  where  the  vendor 
in  a  land  contract  had  taken  notes  payable  to  his  own  order  for  the 
purchase  price,  which  notes  he  indorsed  to  a  bank  and  at  the  same 
time  gave  the  bank  a  deed  of  the  lands  as  security  for  the  payment 
of  the  notes,  and  the  bank  afterward  took  from  the  vendee  a  quit- 
claim deed  of  the  lands,  without  the  vendor's  knowledge,  it  was  held 
that  such  act  operated  as  a  rescission  of  the  contract,  and  that  the 
vendor  was  thereby  discharged  from  his  liability  as  indorser  of  the 
notes,  at  least  to  the  extent  of  the  value  of  the  land.  And  an  agree- 
ment between  the  vendee  and  the  bank,  at  the  time  of  the  delivery 

""Carrington  v.   Turner,  101   Md.  ""Stephens   v.   Stephens,   66   Ark. 

437,   61   Atl.    324.      Examine    Henry  356,   50   S.   W.    874;    Poor's   Exr.   v. 

"Wood's    Sons    Co.    v.    Schaefer,    173  Scott,  24  Ky.  L.  Rep.  239,  68  S.  W. 

Mass.  443,  53  N.  E.  881.  397;  Jarratt  v.  Wilson,  70  N.  C.  401. 

"*Reed  v.  Fleming,   102   111.  App.  "'Aikens  v.  Wilson,  7  Idaho  12,  59 

668.  Pac.  932. 

^''^  Hayes  v.  Allen,  160  Mass.  286,  ""  Harner  v.  Batdorf,  35  Ohio  St. 

35  N.  E.  852.  113. 


845  BY  ASSIGNMENT,  TEANSFER  OR  SURRENDER  OF  PROPERTY,  [§  691 

of  the  quit-claim  deed,  made  withoxit  the  knowledge  of  the  vendor, 
that  such  deed  should  not  affect  the  liability  of  the  vendee  on  his 
notes,  will  not  prevent  its  having  such  an  effect  upon  the  rights  of 
the  vendor  as  indorser.  To  make  such  an  agreement  binding  upon 
him  he  should  have  been  made  a  party  to  it.^"^ 

§  691.     By  assignment,  transfer  or  surrender  of  property. — If  a 

discharge  of  a  note  is  not  intended  by  an  assignment,  it  is  held  that 
it  will  not  so  operate.^^"  And  if  property  is  assigned  in  trust  to  pay 
a  note  after  certain  other  debts  have  been  paid,  such  transfer  con- 
stitutes no  bar  to  an  action  by  one  who  has  not  assented  thereto  nor 
claimed  the  benefit  of  such  assignment  and  who  had  not  executed  the 
same  or  received  any  part  of  the  proceeds  ;^^^  nor  does  such  a  convey- 
ance operate  as  payment,  or  discharge  a  surety  on  the  note.^^^  An 
order,  however,  for  the  delivery  of  personal  property  accepted  in  full 
satisfaction  of  the  note  sued  on  constitutes  a  good  defense.^^^  But 
although  a  delivery  of  goods  may  constitute  payment,  yet  such  trans- 
fer must  be  a  valid  one  in  order  to  have  that  effect;  so  in  case  of 
bankruptcy  before  surrender  of  the  notes  where  the  sale  is  declared 
void  the  consideration  for  such  surrender  has  failed. ^^*  The  per- 
formance of  a  contract  constitutes  a  defense  to  an  action  on  an  agree- 
ment that  the  maker  should  sell  goods  delivered  to  him  by  the 
payee,  and  that  the  proceeds  from  the  sale  of  such  goods  should  be 
received  by  the  latter  in  full  payment  of  the  note.  So  where  one  had 
in  his  possession  another's  goods  as  a  mere  cover  to  defraud  creditors 
and  for  further  protection  conveyed  them  to  another,  taking  his  note 
therefor  under  an  agreement  between  the  parties  that  such  prop- 
erty should  be  sold  and  the  avails  paid  over  to  the  real  owner,  and  that 
this  should  operate  as  a  payment  of  the  note,  it  was  held  that  a  per- 
formance of  the  contract  would  constitute  a  defense  to  an  action  on 
the  note  by  the  party  who  originally  held  possession  of  the  goods  to 
aid  the  owner.^^^  Again,  an  agreement  to  accept  an  interest  in  a 
claim  of  the  maker  against  the  United  States  government,  entered 
into  prior  to  the  revised  statutes,  in  a  certain  stipulated  proportion 
in  satisfaction  and  discharge  of  notes,  may  operate  as  an  extinguisli- 

"""  Ives  v.   Bank  of  Lansingburgh,         "-  Harner  v.  Batdorf,  35   Ohio  St. 

12  Mich.  361.  113. 

""Welch  V.  Kinney,  46  Oreg.  406,        "^  Pettigrew  v.  Dix,  33  Tex.  277. 
80  Pac.  648.  "*  Maxfield  v.  Jones.  76  Me.  135. 

"^Rice    V.    Catlin,    14    Pick.     (31        "'^Carpenter    v.    McClure,    37    Vt. 

Mass.)  221.  127. 


692,  693] 


DISCHARGE. 


846 


ment  of  the  debt  evidenced  by  such,  notes  without  an  actual  transfer 
or  assignment  of  such  interest  and  acceptance  thereof.^ ^^  So  a  trans- 
fer of  other  notes,  together  with  the  execution  of  a  deed  as  security, 
made  upon  the  purchase  of  defendant's  note  and  in  consideration 
thereof,  operates  pro  ianto  as  payment  even  though  it  is  not  found 
that  the  property  was  accepted  as  a  satisfaction.^^^ 

§  692.  Surrender  of  valid  notes  for  forged  notes. — Valid  notes 
of  a  town  are  not  extinguished  by  surrendering  them  and  taking  other 
notes  which  subsequently  prove  to  have  been  forged  by  the  treasurer.  ^^^ 

§  693.     By  work,  labor  or  services  performed  or  rendered. — If  all 

the  parties  agree  that  a  bill  for  work  performed  shall  be  indorsed 
on  a  note  as  part  payment,  it  so  operates  and  should  be  so  applied, 
as  such  contract  constitutes  a  good  defense.^^*'  So  a  note  may  be  paid 
by  rendering  certain  services  of  benefit  to  the  payee,  as  where  the 


"« Whitney  v.  Cook,  53  Miss.  551, 
Campbell,  J.,  said:  "The  settled  doc- 
trine is  that,  if  the  promise  or 
agreement  itself,  and  not  its  per- 
formance, is  accepted  in  satisfaction 
and  extinction  of  the  demand,  it  is 
good  as  an  accord  and  satisfaction 
without  performance.  If  "Whitney- 
had  a  claim  against  the  United 
States,  and  Cook  agreed  to  accept 
an  interest  in  this  claim  in  certain 
stipulated  proportion,  in  satisfac- 
tion and  discharge  of  the  notes 
sued  on,  and  Whitney  agreed  that 
Cook  should  have  in  satisfaction  of 
the  notes  the  stipulated  interest  in 
the  claim  against  the  United  States, 
there  is  no  rule  of  law  which  pre- 
vents the  notes  from  being  thereby 
discharged  and  extinguished  as  a 
cause  of  action  against  Whitney. 
Cook  had  a  right  to  accept  an  in- 
terest in  the  claim  of  Whitney 
against  the  United  States  in  pay- 
ment of  the  notes,  and,  if  he  did 
this,  cannot  now  maintain  an  action 
on  them.  If,  however,  the  contem- 
plation of  the  parties  was  that  per- 
formance of  the  contract  for  an  in- 


terest in  the  claim  should  be  a  dis- 
charge of  the  notes,  the  mere  agree- 
ment did  not  constitute  an  accord 
and  satisfaction,  but  performance  is 
necessary  to  complete  it.  Hevin  v. 
Carron,  11  S.  &  M.  361;  Pulliam  v. 
Taylor,  50  Miss.  251;  2  Parsons  on 
Contracts  681;  Comyns's  Dig.,  tit. 
Accord  (B)  4;  1  Smith's  Lead. 
Cas.  (7th  Am.  Ed.)  595  et  seq.;  2 
Chitty  on  Contracts  (11th  Am.  Ed.) 
1122;  2  Story  on  Contracts,  §  1354; 
1  Addison  on  Contracts,  §  378;  Bab- 
cock  V.  Hawkins,  23  Vt.  561;  Good- 
rich V.  Stanley,  24  Conn.  613;  Hall 
V.  Smith,  15  Iowa  584.  It  was  not 
necessary  that  there  should  have 
been  any  formal  or  written  assign- 
ment by  Whitney  to  Cook  of  an  in- 
terest in  tue  claim.  A  distinct  con- 
tract between  the  parties  that  the 
notes  were  paid  by  the  right  to 
share  in  the  claim  is  all  that  was 
required."     Id.  559,  560. 

"'Kerr  v.  Topping,  109  Iowa  150, 
80  N.  W.  321. 

"'Bass  V.  Inhabitants  of  Welles- 
ley   (Mass.  1906),  78  N.  E.  543. 

"=•  Jennings  v.  Davis,  31  Conn.  134. 


847  TENDER  OF  PAYMENT.  [§  694 

payor  is  to  obtain  an  assignment  to  himself  of  certain  liens  upon 
lands  and  hold  them  for  the  payors  benefit,  as  in  such  case  there 
is  an  accord  and  satisfaction,^-*'  A  non-negotiable  note  may  also  be 
paid  by  services  rendered. ^^i  jf  ^^  agreement  that  a  note  may  be 
paid  by  board  furnished  is  fully  executed,  it  constitutes  payment.^" 
But  an  agreement  to  give  credit  on  a  note  for  the  value  of  work  per- 
formed, although  enforceable  as  a  contract,  does  not  operate  as  pay- 
ment so  far  as  to  bind  an  estate,  when  such  agreement  is  made  by 
the  administratrix,  as  it  is  either  purely  personal  or  without  consider- 
ation.^2^  Again^  if  a  claim  for  services,  board  and.  lodging,  at  re- 
quest, is  relied  upon  as  a  counter-claim,  such  a  request  must,  it  is 
held,  be  proven.^^* 

§  694.  Tender  of  payment. — A  valid  tender  of  payment  made  by 
a  prior  party  discharges  one  secondarily  liable.^-^  And,  as  we  have 
stated  elsewhere,  where  a  note  is  payable  at  a  particular  place,  an 
ability  and  readiness  with  funds  to  make  payment  there  at  maturity 
of  the  note  is  equivalent  to  a  tender  of  payment.  ^^"^  If  a  tender  of  the 
amount  of  a  note  then  due  is  made  by  a  guarantor  to  the  holder,  but 
it  is  not  accepted,  and  the  guarantor  relies  upon  the  promise  of  the 
holder,  made  at  the  time  of  the  refusal,  to  resort  to  the  maker  and 
not  to  the  guarantor,  and  in  consequence  thereof  does  not  pursue 
his  remedies,  the  extent  of  his  damage  thereby  sustained  admeasures 
the  extent  to  which  he  is  discharged. ^^^  But  an  unaccepted  legal  tender 
of  an  installment  on  a  non-negotiable  note  will  not  defeat  the  maker's 
obligation  on  a  note  conditioned  for  return  of  the  note  if  such  in- 
stallment should  be  paid.^-**  Again,  where  there  exists  an  agreement 
to  accept  a  deed  for  land  in  full  settlement  of  all  claims  upon  a 
note  a  performance  of  the  agreement  should  be  averred  or  there 
should  be  a  tender  of  a  deed  in  compliance  therewith,  and  an  allega- 
tion of  readiness  and  willingness  to  perform  without  tender  is  in- 

'=» Treadwell   v.    Himmelmann,    50  Supp.    858,    49    Misc.    500;     Negot. 

Cal.  9.  Inst.  Law  N.  Y.,  §  201   (4),  Appen- 

"^Lowrey    v.    Danforth,    95    Mo.  dix  herein. 

App.  441,  69  S.  W.  39.  '="  See  §  502  herein.    See  also  un- 

"-Whittaker  v.  Ordway,  69  N.  H.  der  Negot.  Inst.  Law  N.  Y.,  §  130. 

182,  38  Atl.  789.  '=' McAllister  v.  Pitts,  58  Neb.  424, 

^-'  Cook  V.  Cook,  24  S.  C.  204.  78  N.  W.  711. 

"*01pherts    v.    Kelly,    61    N.    Y.  '=**  Wallace    v.    Randol    (Cal.),    54 

Supp.  1107,  30  Misc.  824.  Pac.  842. 

^  State  Bank  v.   Kahn,   98  N.  Y. 


§    695]  DISCHAEGE.  848 

sufficient  in  a  law  action  where  performance  is  the  essence  of  the 
contract,  and  such  allegation  is  not  a  defense.  So  in  an  action  on 
a  promissory  note,  the  execution  of  which  is  admitted,  where  as  a 
defense  an  accord  and  satisfaction  is  attempted  to  be  pleaded,  the 
plea  is  bad  when  the  performance  necessary  to  constitute  the  satisfac- 
tion is  not  alleged,  and  it  appears  upon  the  face  of  the  plea  that 
performance,  and  not  the  agreement  to  perform,  was  to  be  received  in 
satisfaction.^^* 

§  695.  Indorsements  of  payments — Receipts — Cancellation. — In- 
dorsements of  payments  may  be  shown  to  be  erroneous.  ^^*^  And  in- 
dorsements of  payments  on  a  mortgage  note  do  not  necessarily  estab- 
lish payment  of  such  note;^^^  although  if  the  payee  of  a  past-due 
mortgage  note  indorses  thereon  the  receipt  of  a  note  for  the  amount 
of  the  balance  then  due  such  indorsement  is  evidence  of  the  discharge 
of  the  original  note.^^^  So  payment  of  interest  may  be  evidenced  by 
an  indorsement  of  the  receipt  thereof  on  a  note.^^^  Again,  if  there 
is  no  surrender  or  delivery  of  a  note  to  the  maker  no  discharge  or 
release  results  from  merely  writing  the  word  paid  across  the  face 
of  the  instrument.^^*  And  receipts  from  the  payee  do  not  establish 
payment  of  a  note  indorsed  to  another  where  it  does  not  appear 
that  the  money  receipted  for  was  sent  as  payments.^^^  If  the  maker 
makes  a  partial  payment  and  obtains  the  note  in  order  to  compute 
the  balance  due  and  cancels  the  note  upon  a  claim  of  services  ren- 
dered equivalent  to  such  balance,  the  note  still  exists  as  a  binding  ob- 
ligation of  the  unpaid  portion  of  the  debt  and  evidences  the  same.^^'^ 
Again,  where  an  action  is  brought  to  obtain  the  possession  of  certain 
premises  and  notes  for  the  rent  thereof  are  surrendered  to  the  lessee, 
and  all  matters  in  controversy  are  settled  in  the  action,  the  lessor 
cannot  confer  any  right  of  action  upon  an  indorsee  by  a  subsequent 
indorsement  of  the  note,^^^    If  the  cancellation  is  made  and  renewal 

^Perdew  v.  Tillma,  62  Neb.  865,  "*Wittman   v.    Pickens,    33    Colo. 

88  N.  W.  123.  484,  81  Pac.  299.     See  McLemore  v. 

^^^  Grooms    v.    Lieurance,    98    111.  Hawkins,  46  Miss.  715. 

App.  394.  ^^  Silverstri  v.   Savieriano,   95   N. 

"1  McCaffrey     v.     Burkhardt,     97  Y.  Supp.  580. 

Minn.  1,  105  N.  W.  971.  '"  Liesmer  v.  Berg  (Mich.),  2  Det. 

"=  Cunningham      v.      Davis,      175  L.  N.  266,  63  N.  W.  999. 

Mass.  213.  56  N.  E.  2.  "'  Campbell  v.  Nixon,  25  Ind.  App. 

"=  Iberia  Cypress  Co.    v.    Cristen,  90,  56  N.  E.  248. 
112  La.  451,  36  So.  491. 


849  PAYMENT— BY    WHOM.  [§§'   696,    697 

notes  are  given,  but  the  signatures  are  forged,  such  forgery  is  a  ground 
for  setting  aside  the  cancellation  where  the  party  making  it  has  exer- 
cised proper  diligence.^ ^® 

§  696.  Whether  a  purchase  or  payment. — If  the  cashier  of  the 
collecting  bank,  who  is  not  liable  on  the  paper,  pays  it  after  it 
matures,  it  operates  as  a  purchase,  if  so  intended  by  him  and  is  not 
a  payment.  ^^'^  But  where  a  stranger  to  a  note  with  the  intention  of 
purchasing  it  goes  to  a  bank  holding  it,  and  a  person  there,  who  is 
not  an  officer  of  the  bank  stamps  it  as  paid,  and  it  is  so  taken  away 
by  the  purchaser  apd  there  is  nothing  to  show  that  the  bank  intended 
a  sale,  it  will  be  held  to  be  a  payment  and  not  a  sale  so  that  a  surety 
thereon  will  be  released.^*"  And  if  a  check  of  a  director  and  stock- 
holder in  a  corporation  is  given  for  the  amount  of  a  corporation  note 
to  a  holder  of  such  note,  by  the  corporation's  secretary  and  treasurer, 
and  such  creditor  surrenders  the  note  and  also  certain  corporate 
funds  of  greater  value  than  the  face  of  the  note,  such  check  constitutes 
a  payment  even  though  the  secretary  was  acting  without  the  creditor's 
knowledge,  as  an  agent  for  the  purchase  of  the  note,  and  there  can 
be  no  recovery  back  of  the  sum  so  paid  by  the  drawer  of  the  check.^*^ 

§  697.  Payment — By  whom. — As  stated  in  a  prior  section  the 
negotiable  instruments  law  provides  for  the  discharge  of  negotiable 
instruments  by  payment  by  or  on  behalf  of  the  principal  debtor  or 
the  party  accommodated.^*-    It  is  held  that  if  a  note  is  paid  by  the 

"'Humboldt  State  Bank  v.  Ross-  England. — Cooke    v.    Darwin,    18 

ing,  95  Iowa  1,  63  N.  W.  351.  Beav.  60. 

As  to  cancellation  and  surrender  ""  Sturgis  v.  Baker,  43  Oreg.  236, 

of  notes  generally,  see  also  the  fol-  72  Pac.  744. 

lowing  cases:  When  a  purchase  and  not  a  pay- 

California. — Steinhart  v.  Bank,  94  ment,  see  further:    Marshall  v.  Mey- 

Cal.  362,  29  Pac.  717.  ers,  96  Mo.  App.  643,  70  S.  W.  927. 

Maine. —  Maine      Mutual      Marine  "»  Riddle  v.  Russell,  117  Iowa  533, 

Ins.  Co.  V.  Pickering,  66  Me.  130.  91  N.  W.  810. 

Minnesota. — Stewart     v.     Hidden,  "^Henderson   v.    Shafer,    110    La. 

13  Minn.  (Gil.  29)  43.  Ann.  481,  34  So.  644. 

New  Jersey. — Silvers  v.  Reynolds,  "When  a  payment  and  not  a  pur- 

17  N.  J.  L.  275.  chase,    see    further:     Robertson    v. 

New    Yorfc.— Larking    v.    Harden-  Case,  8  Ohio  S.  &  C.  P.  Dec.  386,  7 

brook,    90    N.    Y.    333;     Garlock    v.  Ohio  N.  P.  127. 

Geortner,  7  Wend.  (N.  Y.)  198.  ^^  See  §  678  herein. 

Pennsylvania. — In    re    Campbell's 
Estate,  7  Pa.  St.  100. 

Joyce   Defenses — 54. 


G98] 


DISCIIAKGE. 


850 


indorse!  and  payee  and  it  is  subsequently  paid  by  a  party  liable  thereon 
and  transferred  to  a  person  who  loaned  money  for  such  last  payment 
and  it  is  assigned,  the  payee  is  not  liable  thereon  to  such  assignee.  ^*^ 
If  a  drawee,  acting  under  a  mistake  as  to  funds  in  his  hands  pays  a 
draft  he  is  concluded  thereby.^**  Again,  it  is  decided  that  a  bill  may 
be  satisfied,  at  least  by  way  of  conditional  payment,  by  a  stranger, 
and  if  the  condition  to  defeat  it  has  not  happened  then  there  is  an. 
absolute  payment. ^*^  So  under  an  Ohio  decision  the  note  may  be 
extinguished  by  payment  by  a  third  person  ;^*^  and  a  case  in  New 
Mexico  determines  that,  in  the  absence  of  an  agreement  to  purchase, 
a  stranger  may  extinguish  the  note  by  paying  the  holder  the  money 
due  thereon.^*''  But  it  is  held  that  although  a  person  pays  a  note  for 
the  maker's  benefit  he  cannot  sue  thereon.^*^ 

§  698.  Same  subject — To  whom. — The  maker  assumes  the  risk  of 
payment  of  a  note  before  its  maturity  to  an  agent  of  the  payee  where 
such  agent  has  neither  authority  to  collect  nor  possession  of  the 
paper.^*^  But  if  an  agent  is  fully  authorized  to  receive  payment  it 
may  be  made  to  him  even  though  the  note  is  not  in  his  possession. ^^^ 
And  a  mortgage  debt  is  satisfied  by  payment  to  an  authorized  agent.^^^ 
But  a  mere  authority  to  collect  interest,  vested  in  one  without  pos- 
session of  mortgage  notes,  does  not  empower  him  to  receive  payments 
on  the  principal.^^-  And  although  a  person  has  possession  of  interest 
coupons,  with  authority  to  collect  the  interest,  he  is  not  authorized 
to  collect  the  principal. ^^^    Under  a  Missouri  decision  a  note  and 


1"  Rich  V.  Goldman,  90  N.  Y.  Supp. 
364. 

Payment  by  indorser  after  suit 
brougtit:  Mechanics'  Bank  v.  Has- 
ard,  13  Johns.  (N.  Y.)  353;  Concord 
Granite  Co.  v.  French,  65  How. 
Prac.  (N.  Y.)  317. 

"*  Bank  of  Indian  Territory  v. 
First  National  Bank,  109  Mo.  App. 
665,  83  S.  W.  537. 

"•'Belshaw  v.  Bush,  11  C.  B.  (0. 
S.)  191,  207,  22  L.  J.  C.  P.  24.  See 
Kemp  v.  Balls,  10  Exch.  607; 
Grymes  v.  Blofield,  Cro.  Eliz.  541. 

^^^  Robertson  v.  Case,  8  Ohio  S.  & 
C.  P.  Dec.  386,  7  Ohio  N.  P.  127. 

"^Lee  V.  Field,  9  N.  M.  435,  54 
Pac.  873. 


"« Riddle  v.  Russell,  108  Iowa  591, 
79  N.  W.  363. 

"'Walsh  V.  Peterson,  59  Neb.  645, 
81  N.  W.  853. 

See  Englert  v.  White,  92  Iowa  97, 
60  N.  W.  224. 

^^"  Union  Stock  Yards  National 
Bank  v.  Haskell  (Neb.),  90  N.  W. 
233. 

^^'Boyd  V.  Page  (Neb.),  90  N.  W. 
646. 

^^- Thompson  v.  Buehler  (Neb.), 
95  N.  W.  854. 

"^Connecticut  Trust  Co.  v.  Trum- 
bo  (Neb.),  90  N.  W.  216. 

Burden  of  proof  of  authority  to 
collect;  payment  to  one  not  in  pos- 
session of  instrument,  see:    Thomp- 


851  PAYMENT — TO    WHOM.  [§    G98 

interest  coupons  attached,  the  coupons  providing  for  payment  of  an 
attorney's  fee  in  case  of  collection  by  suits,  and  the  principal  note 
authorizing  judgment,  not  only  for  the  amount  thereof  and  the 
coupons,  but  for  any  taxes  which  the  maker  may  not  pay  when  due, 
are  non-negotiable,  so  that  under  Revised  Statutes  1889,  §  8161,  the 
maker  is  protected  in  making  payments  to  the  payee  after  assignment 
of  which  he  had  no  notice.  Again,  the  payee  of  a  note  with  interest 
coupons  attached,  which  assigned  them  with  a  guaranty  of  payment, 
is  not  made  the  agent  of  the  assignee  to  collect  the  same  by  the 
slip  attached  thereto  providing  that  "payment  hereof,  when  made 
by  this  company  (the  payee),  being  made  as  guarantor  only,  it  is 
desired  that  any  bank  or  individual  through  whose  hands  these  papers 
may  pass  *  *  *  will  refrain  from  placing  on  *  *  *  (them) 
the  word  'paid'  *  *  *  which  might  interfere  with  the  collection 
by  the  company.""*  But  an  assignee  in  possession  of  a  note  is  not 
bound  by  a  payment  to  the  payee  even  though  he  is  given  authority 
to  collect  the  interest  coupons, ^^^  If  a  maker  has  notice  that  a  note 
is  lost,  and  without  requiring  evidence  of  title  pays  the  same  to  one  in 
possession,  who  makes  presentment  without  authority  to  collect,  he 
still  remains  liable  thereon.^^'^  And  it  may  be  generally  stated  that 
a  person  should  by  universal  custom  have  possession  of  the  note  or 
be  vested  with  authorty  to  collect  it.^^'^  If  co-trustees  are  payees  and 
one  of  them  permits  the  other  to  have  possession  of  a  note  and  he 
collects  the  note  the  maker  is  released  although  the  proceeds  are  mis- 
appropriated,^^^ Again,  a  payment  to  a  bank  in  possession  of  a  note 
is  a  payment  to  the  payee  where  the  latter  has  deposited  it  with  a 
bank  for  collection  and  it  had  been  sent  to  the  bank  where  it  was 
paid,^^^  But,  the  maker  is  not  discharged  by  paying  a  note  at  a  par- 
ticular bank  at  which  it  is  payable  where  the  latter  has  neither  pos- 

son    V.    Buehler    (Neb.),    95    N.    W.  ham  v.  McDonald,  98  Tex.  316,  83  S. 

854.  W.  372,  rev'g  80  S.  W.  871. 

When  the  evidence  shows  no  au-  ^^''  Page  Woven  Wire  Fence  Co.  v. 

thority  to  collect  by  one  not  in  pos-  Pool,   133   Mich.   323,  10   Det.   L.  N. 

session,  see:    Lay  v.  Honey   (Neb.),  208,  94  N.  W.  1053. 

89  N.  W.  998.  ^"  Stockton  v.  Fortune,  82  111.  App. 

'"Syllabus     in     Pace     v.     Gilbert  272,  aff'd   Fortune  v.   Stockton,   182 

School    (Mo.   App.    1906),   93    S.   W.  111.  454,  55  N.  E.  367, 

1124.  ^■'^Barroll  v.  Foreman,  88  Md.  188, 

'■■=>  Loizeaux   v.    Frender,   123   Wis.  40  Atl.  883. 

129,  101   N,  W.  423.     See  Cunning-  ''"Porter    v.    Roseman,    165    Ind. 

255,  74  N.  E.  1005. 


§■  699]  DISCHARGE.  853 

session  thereof  nor  authority  to  collect  it/""  So  payments  of  a  series 
of  notes  as  they  mature  to  a  private  banker  not  in  possession  thereof, 
though  such  notes  are  payable  there,  does  not  release  the  maker.^*'^ 
And  where  notes  of  a  bank's  customers  are  used  by  it  as  security  to 
obtain  loans  from  another  bank,  payment  to  the  former  does  not 
bind  the  latter,  there  being  no  agency,  even  though  when  such  notes 
were  so  paid  the  bank  by  its  customers  it  was  accustomed  to  send  such 
moneys  to  the  lender,  which  surrendered  the  notes  paid  to  the  bor- 
rower.^*'^  But  either  the  payee  or  his  authorized  agent  is  entitled  to 
receive  payment  even  though  it  is  indorsed  to  a  bank  for  collection.^®^ 

§  699.  Same  subject. — Although  a  note  was,  prior  to  the  negotia- 
ble instruments  law,  extinguished  by  payment  by  one  who  became 
a  co-maker  and  joint  promisor  by  indorsing  a  note  prior  to  its  de- 
livery, still  he  was  entitled  to  recover  against  a  joint  promisor  who 
was  liable  upon  the  paper,  as  between  the  two.^***  And  payments 
made  to  the  first  assignees  after  the  second  transfer  of  a  note  does 
not  release  the  maker  where  such  assignee  is  not  clothed  with  authority 
to  receive  such  payments  and  has  not  possession  of  the  note,  and  this 
applies  even  though  the  person  who  receives  such  payments  is  a 
trustee  under  a  trust  deed  to  secure  the  paper.^*'^  If  the  holder  of  a 
note  requests  that  payment  be  made  to  a  third  person  by  the  maker 
and  it  is  so  made  it  operates  as  a  payment  for  which  credit  should 
be  given  by  the  administratrix  of  the  holders'  estate.^®®  And  in  case 
a  note  is  given  to  a  married  woman  in  consideration  of  the  convey- 
ance of  land  and  it  is  indorsed  and  deposited  as  collateral  to  secure 
a  renewal  of  another  note  made  by  her,  the  proceeds  being  deposited 
with  the  pledgee  bank  to  her  credit,  the  maker  may  in  good  faith  pay 
the  collateral  note  to  the  pledgee  and  not  lose  his  right  to  have  the 
land  conveyed  as  per  his  contract  with  the  wife  even  though  the  pro- 
ceeds of  the  first  note  obtained  by  discounting  the  same  were  used  to 

""State    National    Bank   v.    J.    J.  Pool,  133  Mich.   323,  10   Det.  L.  N. 

Hyatt  &  Co.,  75  Ark.  170,  86  S.  W.  208,  94  N.  W.  1053. 

1002.  ^^Quimby  v.   Varnum,   190  Mass. 

^"Chapman  v.  Wagner  (Neb.),  96  211,  76  N.  E.  671. 

N.  W.  412.  "=  Maguire    v.    Donovan,    108    Mo. 

^"^  State    National    Bank    v.    J.    J.  App.  511,  84  S.  W.  156. 

Hyatt  &  Co.,  75  Ark.  170,  86  S.  W.  '*^  Baker,  In  re,  76  N.  Y.  Supp.  61, 

1002.  72    App.   Div.   211,   aff'd,    172   N.   Y. 

"'Page  Woven  Wire  Fence  Co.  v.  617,  64  N.  E.  1118. 


853  PAYMENT — TO    WHOM.  [§    699 

discharge  the  husband's  indebtedness.^®^  Payment  is  held  to  be  suf- 
ficient when  made  to  the  payee  in  possession  although  he  had  indorsed 
it  to  another  who  had  not  indorsed  it.^*^®  So  negotiable  paper  indorsed 
in  blank  by  the  payee  is  satisfied  by  payment  to  one  in  possession  when 
made  in  good  faith  without  notice  of  facts  impeaching  his  title.^^^ 
So  where  the  original  payee  of  a  note  and  the  holder's  assignor  is 
authorized  to  collect  it,  money  received  by  such  agent  constitutes 
payment  even  though  not  accounted  for  by  him  to  his  principal.^''" 
A  debt  may  be  discharged  by  payments  to  the  original  payee  by  the 
maker  even  though  the  former  is  not  in  possession  thereof  and  the 
instrument  is  not  surrendered  or  delivered  to  the  maker.  Thus,  where 
the  actual  holder  who  became  the  transferee  of  a  mortgage  note  be- 
fore maturity,  consents  to  an  extension  of  the  debt  at  maturity  and 
retains  the  benefits  arising  therefrom  and  holds  the  agreements  be- 
tween the  payor  and  the  payee  under  which  it  is  made,  but  the  maker 
has  never  been  notified  of  such  transfer  the  doctrine  of  estoppel 
applies  and  precludes  such  transferee  from  disputing  the  validity  or 
legality  of  the  payments.^^^  And  if  the  circumstances  show  that  the 
holder  authorized  the  payee  to  act  as  his  agent  in  collecting  a  note 
and  it  is  collected,  recovery  against  the  maker  by  the  holder  is 
precluded.  ^^^  So  a  payment  at  the  place  of  payment  may  be  made 
without  production  of  the  note  to  the  payee  when  justified  by  the 
entire  course  of  dealings  for  years  as  to  the  collection  of  interest, 
permitting  such  payee  to  assert  ownership,  and  failure  to  give  no- 
tice of  the  facts  as  to  the  payee's  actual  authority  or  want  of 
authority  to  act  as  agent  for  the  holder.^'^  Payments  by  the  maker 
to  the  payee  of  non-negotiable  paper  also  operate  as  a  discharge  when 
such  note  has  been  transferrd  without  notice  to  the  former.^"*  But 
payment  to  payee  when  he  is  not  the  holder  or  in  possession  of  the 
paper  will  not  operate  as  a  release  even  though  such  payee  promises 
to  obtain  surrender  of  the  note.^^^   And  if  the  maker  has  knowledge  as 

"Uohnston   v.    Gulledge,    115    Ga.  '■=  Doe  v.  Callow,  10  Kan.  581,  63 

981,  42  S.  E.  354.  Pac.  603,  aff'd  64  Kan.  886,  67  Pac. 

'"'Higley    v.     Dennis     (Tex.    Civ.  824. 

App.),  88  S.  W.  400.  ''-Fowle  v.  Outcalt,   64  Kan.   352, 

""'  Drinkall  v.   Morris   State  Bank  67  Pac.  880. 

(N.  Dak.),  88  N.  W.  724.  ^"*  Swan   v.    Craig    (Neb.),   102   N. 

^"Stuart  v.   Stonebraker,  63   Neb.  W.  471. 

554,  88  N.  W.  653.  '■'  Hunt  v.  Bessey,  96  Me.  429,  52 

"^Swan    V.    Craig    (Neb.),   102   N.  Atl.  905. 
W.  471. 


§  700] 


DISCHARGE. 


854 


to  the  actual  ownership  of  a  renewal  note  a  payment  by  him  to  the 
original  payee  without  title,  possession  or  authority  to  receive  such 
payment  does  not  effect  a  release.^'''*'  Again,  payment  to  the  original 
payee  or  intermediate  party  is  no  defense  against  a  bona  fide  holder.^''^^ 

§  700.  Renunciation  by  holder. — The  holder  may  expressly  re- 
nounce his  rights  against  any  party  to  the  instrument,  before,  or 
after  its  maturity.    An  absolute  and  unconditional  renunciation  of 


'""Grimm  v.  Grimm,  65  N.  Y. 
Supp.  1134.  aff'd,  169  N.  Y.  421,  62 
N.  E.  569. 

Payment  by  maker  of  note  and 
mortgage  to  payee  where  former 
has  not  notice  of  transfer,  see:  Gar- 
nett  V.  Myers,  91  N.  Y.  Supp.  400, 
rev'd  94  N.  Y.  Supp.  803. 

"'Prim  V.  Hammel,  134  Ala.  652, 
32  So.  1006;  Jurden  v.  Ming,  98  Mo. 
App.  205,  71  S.  W.  1075. 

See  also  the  following  cases: 

Alabama. — Capital  City  Ins.  Co. 
V.  Quinn,  73  Ala.  558;  Barbour  v. 
Washington  Fire  &  Marine  Ins.  Co., 
60  Ala.  433. 

Delaware. — Sudler  v.  Collins,  2 
Houst.    (Del.)   538. 

Florida. — Trustees  of  Internal 
Improvement  Fund  v.  Lewis,  34 
Fla.  424,  16  So.  325. 

Georgia. — Bank  of  University  v. 
Tuck,  96  Ga.  456,  23  S.  E.  467;  Wil- 
cox V.  Aultman,  64  Ga.  544,  34  Am. 
Rep.  92. 

Illinois. — Hunter  v.  Clarke  (111.), 
56  N.  E.  297;  Mobley  v.  Ryan, 
4  Peck  (111.)  51,  16  Am.  Dec.  488; 
Avery  v.  Swords,  28  111.  App.  202; 
McClelland  v.  Bartlett,  13  Bradw. 
(111.  App.)   236. 

Iowa. — City  Bank  v.  Taylor,  60 
Iowa  66,  14  N.  W.  128;  Lathrop  v. 
Donaldson,  22  Iowa  234;  Wilkinson 
V.  Sargent,  9  Iowa  521;  Commis- 
sioners Jefferson  County  v.  Fox,  1 
Morris   (Iowa)   48. 

Louisiana. — Flower    v.    Noble,    38 


La.  Ann.  938;  Doll  v.  Rizotti,  20  La. 
Ann.  263,  96  Am.  Dec.  399. 

Massachusetts. — Biggerstaff  v.  Mar- 
ston,  161  Mass.  101,  36  N.  E.  785. 

Michigan. — Williams  v.  Keyes,  90 
Mich.  290,  51  N.  W.  520. 

Mississippi. — Coffman  v.  Bank  of 
Kentucky,  41  Miss.  212,  90  Am.  Dec. 
371. 

Missouri. — Goodfellow  v.  Stiwell, 
73  Mo.  17;  Grant  v.  Kidwell,  30  Mo. 
455;  Holland  v.  Smit,  11  Mo.  App.  6. 

Nebraska. — Yenney  v.  Central 
City  Bank,  44  Neb.  402,  62  N.  W. 
872. 

New  Hampshire. — Dow  v.  Rowell, 
12  N.  H.  49. 

New  York. — Harpending  v.  Gray, 
76  Hun  (N.  Y.)  351,  27  N.  Y.  Supp. 
762;  Smith  v.  Van  Loan,  16  Wend. 
(N.  Y.)  659;  Mitchell  v.  Bristol,  10 
Wend.  (N.  Y.)  492;  Prior  v.  Ja- 
cocks,  1  Johns.  Cas.  (N.  Y.)  169. 

North  Carolina. — First  Nat.  Bank 
of  Salisbury  v.  Michael,  96  N.  C.  53. 
1  S.  E.  855. 

Ohio. — C  happen  v.  Phillips, 
Wright  (Ohio)  372. 

Pennsylvania. — Hocksher  v.  Shoe- 
maker, 47  Pa.  St.  249. 

Tennessee. — Gosling  v.  Griffin.  85 
Tenn.  737.  3  S.  W.  642. 

England. — Glasscock  v.  Balls.  24 
Q.  B.  Div.  13. 

Compare  Murray  v.  Gibson,  2  La. 
Ann.  311;  Sharps  v.  Eccles,  5  T.  B. 
Mon.    (Ky.)   69. 


855     RIGHT    OF   PARTY    WHO    DISCHARGES   INSTRUMENT.     [§§    701,    702 

his  rights  against  the  principal  debtor  made  at  or  after  the  maturity 
of  the  instrument,  discharges  the  instrument.  But  a  renunciation 
does  not  affect  the  rights  of  a  holder  in  due  course  without  notice.  A 
renunciation  must  be  in  writing,  unless  the  instrument  is  delivered  up 
to  the  person  primarily  liable  thereon."^  Under  this  statute  it  is  held 
in  New  York  that  no  valid  renunciation  is  effected  by  a  writing  found 
amoung  the  deceased  payee's  papers  signed  by  him  and  reading  as 
follows:  "The  enclosed  note  I  wish  to  be  cancelled  in  case  of  my 
death,  and  if  the  law  does  not  allow  it,  I  wish  you  to  notify  my  heirs 
that  it  is  my  wish  and  orders."^ ^^  In  a  recent  case  in  Washington 
the  word  "renunciation"  under  the  negotiable  instruments  act  of  that 
state  is  equivalent  to  the  term  "release"  and  parol  evidence  is  inad- 
missible to  show  a  release  of  a  surety  where  the  statute  permits  the 
holder  to  renounce  his  rights  "against  any  party"  to  the  instrument 
only  "in  writing."^ •'**^ 

§  701.  Right  of  party  who  discharges  instniment. — Where  the 
instrument  is  paid  by  a  party  secondarily  liable  thereon,  it  is  not  dis- 
charged; but  the  party  so  paying  it  is  remitted  to  his  former  rights 
as  regards  all  prior  parties,  and  he  may  strike  out  his  own  and  all 
subsequent  indorsements,  and  again  negotiate  the  instrument,  ex- 
cept: (1)  Where  it  is  payable  to  the  order  of  a  third  person,  and  has 
been  paid  by  the  drawer;  and  (3)  Where  it  was  made  or  accepted  for 
accommodation,  and  has  been  paid  by  the  party  accommodated."^ 

§  702.  Discharge — Miscellaneous  decisions. — Payment  may  be  valid 
though  not  made  in  money.^**^   ^  pjg^^  jg  ^^^i^  ^^^^  ^^  ^^  action  on 


178  ■ 


'Negot.    Inst.    Law.,    §  203,    Ap-        Massachusetts.— Quiinhy    v.    Var- 

pendix  herein.  num.  190  Mass.  211,  76  N.  E.  671. 

"^Leash  v.  Dew,  184  N.  Y.  599,  77        New    Jersey/.— Lawson     v.     Dunn 

N.  E.  190.  (N.  J.  Eq.),  49  Atl.  1087. 

""Baldwin  v.  Daly,  41  Wash.  416,        New  Yorfc.— Twelfth  Ward   Bank 

83Pac.  724;  Laws  1899,  p.  361,  §  122.  v.   Brooks,    71   N.   Y.   Supp.   388,   63 

"'Negot.  Inst.  Law,  §  202,  Appen-  App.   Div.  220. 
dix  herein.  Rhode  Island.— Chairman  v.  Nian- 

As   to   rights   of   parties,   see  the  tic  National  Bank    (R.   I.),  57  Atl. 

following  cases:  934. 

California. — Bradley    v.    Bush,    1        Washington.  —  Carr   v.    Jones 

Cal.  App.  516.  82  Pac.  560;   Crystal  (Wash.),  69  Pac.  646. 
V.  Hutton,  1  Cal.  App.  251,  81  Pac.        "=Root  v.  Kelley,  80  N.  Y.  Supp. 

m^-  482,  39  Misc.  530.     See,  also,  preced- 

Geor£;ia.— Woods  v.  Colony  Bank,  ing  sections  in  this  chapter. 
114  Ga.  683,  40  S.  E.  720.  When  bank  draft  not  paid  by  pass- 


§  702] 


DISCHARGE. 


856 


a  joint  note  that  after  it  fell  due  the  maker  covenanted  with  the 
plaintiff  to  pay  him  a  certain  sum  of  money,  even  though  not  alleged 
to  have  been  accepted  in  satisfaction  and  the  sum  secured  was  less  than 
the  note.^®^  But  the  indorser  of  a  note  may  be  liable  for  the  debt 
although  there  is  evidence  that  dividends  out  of  assets  of  one  of  the 
insolvent  makers  have  been  paid  to  the  plaintiff.^**  A  holder  may 
by  his  own  acts  in  precluding  the  indorser's  remedy  against  the  maker 
also  deprive  himself  of  the  right  to  enforce  the  note  against  such  in- 
dorser even  though  he  has  reserved  such  right  at  the  time  of  trans- 


ing  credits,  see:  Bernard  v.  Mercer, 
54  Kan.  630,  39  Pac.  182. 

When  payment  or  release  not 
established,  see  sections  throughout 
this  chapter  and  also  the  following 
cases: 

Arkansas. — Carpenter  v.  Rosen- 
baum,  73  Ark.  259,  82  S.  W.  1047. 

Kentucky. — Ewing  v.  Ewing,  26 
Ky.  L.  Rep.  580,  82  S.  W.  292;  Ford- 
ville  Banking  Co.  v.  Thompson,  26 
Ky.  L.  Rep.  534,  82  S.  W.  251. 

Maine. — P\irber  v.  Fogler,  97  Me. 
585,  55  Atl.  514. 

Missouri. — Slewing  v.  Tacke,  112 
Mo.  App.  414,  86  S.  W.  1103. 

Virgi?iia. — Burnham  v.  James,  100 
Va.  493.  42  S.  E.  292. 

Wisconsin. — Milwaukee  Trust  Co. 
v.  Warren,  112  Wis.  505,  87  N.  W. 
801. 

See,  also,  as  to  payment  or  release 
not  being  established,  Garthwaite  v. 
Bank   of   Tulare,    134    Cal.    237,    66 


Pac.  326;  Power  v.  Hambrick,  25 
Ky.  L.  Rep.  30,  74  S.  W.  660;  Bar- 
ber V.  Boyd,  24  Ky.  L.  Rep.  1389,  71 
S.  W.  528;  Lewis  v.  North,  62  Neb. 
552,  87  N.  W.  312;  Ashburn  v.  Evans 
(Tex.  Civ.  App.),  72  S.  W.  242. 

Examine,  also,  as  to  payment  or 
release  not  being  established,  Ox- 
ford State  Bank  v.  Holscher,  115 
Iowa  196,  88  N.  W.  360;  Golden  v. 
Vyse,  115  Iowa  726,  87  N.  W.  691; 
Shove  V.  Martine,  85  Minn,  29,  88 
N.  W.  254;  Van  Buren  County  Sav- 
ings Bank  v.  Mills,  99  Mo.  App.  65, 
72  S.  W.  497. 

^"McLeod  V.  McKay,  20  U.  C.  Q. 
B.  258. 

^**  Lyndon  Savings  Bank  v.  Inter- 
national Co.,  78  Vt.  169,  75  N.  E. 
214. 

^^  Spies  v.  National  City  Bank, 
174  N.  Y.  222,  66  N.  E.  736,  61  L.  R. 
A.  193,  aff'g  74  N.  Y.  Supp.  64,  68 
App.  Div.  70. 


APPENDIX, 


857 


NEGOTIABLE  INSTRUMENTS  LAW. 


THIS   LAW   EXISTS   IN"   THE   FOLLOWING   STATES   AND   TERRITORIES. 

ARIZONA.— Rev.  Stat.  1901,  pp.  852-879  (title  49  of  Civil  Code,  §§  3304- 
3491),  took  effect  September  1,  1901,  amended  and  corrected.  Chap.  23, 
Laws  1905,  pp.  24-27. 

COLORADO.— L,siws  1897,  pp.  210-248,  Chap.  64;  3  Mills  Annot.  Stat. 
(Rev.  Supp.  1891-1905),  pp.  103-134.  As  to  holidays  see  Laws  1903,  p. 
245;  3  Mills  Annot.  Stat.  (Rev.  Supp.  1891-1905),  p.  601. 

CONNECTICUT.— Genh  Stat.  Rev.  1902,  pp.  1028-1052  (Act  1897). 

DISTRICT  OF  COLUMBIA.— Code  (Garges,  as  amended  to  March  3, 
1905,  pp.  275-297),  §§  1304-1493. 

FLORIDA.— Genl.  Stat.  1906,  pp.  1147-1181  (Act  1897,  Holidays,  p. 
1182). 

/DAffO.— Session  Laws  1903,  pp.  380-410. 

70 WA.— Code  Supp.  Annot.  1902,  pp.  352-394.  Chap.  3-A,  §§  3060ai- 
3060al98.    Laws  1902,  Chap.  130,  pp.  81-99;  Laws  1906,  Chap.  149,  p.  108. 

EANSAS.-Dassless  Gen.  Stat.  1905,  pp.  967-990,  Chap.  70,  §§  4533- 
4732.    In  effect  June  8,  1905. 

KENTUCKY.— Acts  1904,  pp.  213-252,  Chap.  102. 

LOUISIANA.— Acts  1904,  pp.  147-174,  Act  No.  64. 

MARYLAND.— Code  Pub.  Gen.  Laws,  pp.  125-157,  Art.  XIII  (Laws  1898, 
Chap.  119). 

MASSACHUSETTS.-Rev.  Laws  1902,  pp.  628-653,  Chap.  73  (Laws  1898, 
Chap.  533). 

MICHIGAN.— Puh.  Acts  1905,  pp.  389-413,  No.  265. 

MISSOURI.— L,aws  1905,  pp.  243-265,  Laws  1907,  p.  366. 

MONTANA.— haws  1903,  pp.  237-273,  Chap.  121. 

NEBRASKA.— L,aws  1905,  pp.  389-435,  Chap.  83. 

NEW  JERSEY.— I.avfs  1902,  pp.  583-616,  Chap.  184. 

NEW  MEXICO.— L,aws  1907,  pp.  161-191,  Chap.  83. 

NEW  YORK.— Cnmming  &  Gilbert's  Gen.  Laws  &  Stat.,  pp.  2534-2586 
(Laws  1897,  Chap.  712). 

NORTH  CAROLINA.— Revisal  of  1905,  pp.  655-688,  Chap.  54,  §§  2151- 
2346  (Laws  1899,  Chap.  733,  §§  1-197);  Pub.  Laws  1907,  p.  1288,  Chap. 
897,  amending  §  2234  of  Revisal. 

NORTH  DAKOTA.— l.aws  1899,  pp.  154-180,  Chap.  113;  Rev.  Codes  1899, 
pp.  1039-1060,  Chap.  100  (Chap.  88,  Rev.  Codes  1899,  repealed.    Laws  1905, 

859 


§    1]  NEGOTIABLE   INSTRUilENTS    LAW.  8G0 

p.  246,  Chap.  138,  "Provided,  that  all  actions  that  are  now  pending  under 
the  provisions  of  said  chapter  shall  in  no  manner  be  affected  by  this  re- 
peal"). 

Oif/0.— Bates'  Annot.  Stat.  (5th  Ed.,  1787-1906),  pp.  1800a-1807,  §§  3171- 
3178g. 

OREGON.— Behnger  &  Cotton's  Annot.  Codes  &  Stat.,  pp.  1440-1469, 
§§  4403-4594  (Laws  1899,  p.  18). 

PENNSYLVANIA.— L.aws  1901,  No.  162,  pp.  194-220. 

RHODE  ISLAND.—Acts  &  Resolutions  1899,  pp.  83-117,  Chap.  674. 

TENNESSEE.— Acts  1899,  pp.  139-172,  Chap.  94,  Shannon's  Supp.  Code 
(1897-1903),  pp.  571-606. 

VTAH.—L,a.ws  1899,  pp.  122-148,  Chap.  83. 

YIRGINIA.-FoUsiTds'  Annot.  Code,  1904,  pp.  1455-1490,  Chap.  133A, 
§  2841a  (Acts  1898,  Chap.  866,  pp.  896-918). 

WASHINGTON.— BsLlUngerB  Code  Supp.  (1899-1903),  §  3650,  pp.  413- 
438  (Laws  1899,  pp.  340-373). 

WEST  TIRGINIA.—Acts  1907,  pp.  378-410,  Chap.  81  (in  effect  January 
1,  1908). 

WISCONSIN.— l.awa  1899,  pp.  681-748,  Chap.  356,  §§  1675-1684-6 
(§§  1681-9,  p.  44,  Chap.  41;  §§  1684-6-2,  p.  524,  Chap.  361;  Amended  Laws 
1901,  §  1675-24,  p.  381,  Chap.  262,  added  Laws  1905). 

WYOMING.— Tuaws  1905,  pp.  39-64,  Chap.  43. 


NEGOTIABLE  INSTRUMENTS   LAW   OF   NEW  YORK. 
(Laws  of  New  York,  1897,  Chapter  612.) 

ARTICLE 

I.  General  provisions.    (§§  1-7.) 

IL  Form  and  interpretation  of  negotiable  instruments.    (§§  20-42.) 

in.  Consideration.    (§§  50-55.) 

IV.  Negotiation.    (§§  60-80.) 

V.  Rights  of  holder.    (§§90-98.) 

VI.  Liabilities  of  parties.    (§§  110-119.) 

VII.  Presentment  for  payment.    (§§  130-148.) 

VIII.  Notice  of  dishonor.    (§§160-189.) 

IX.  Discharge  of  negotiable  instruments.    (§§  200-206.) 

X.  Bills  of  exchange;  form  and  interpretation.    (§§  210-215.) 

XI.  Acceptance.    (§§  220-230.) 

XII.  Presentment  for  acceptance.    (§§  240-248.) 

XIII.  Protest.    (§§  260-268.) 

XIV.  Acceptance  for  honor.    (§§  280-290.) 
XV.  Payment  for  honor.    (§§300-306.) 

XVI.     Bills  in  a  set.    (§§  310-315.) 
XVII.     Promissory  notes  and  checks.    (§§  320-325.) 

tion.    (§§  330-332.) 
XIX.     Laws  repealed,  when  to  take  effect.    (§§  340-341.) 


861      SHORT   TITLE —DEFIXITIOX    AXD    MEAXIXG   OF   TERMS.       [§§    1-3 


AETICLE  L 

GENERAL    PROVISIONS. 
SEC.  SEC. 

1.  Short  title.  5.  Time,  how  computed;   when  last 

2.  Definitions  and  meaning  of  terms.  day  falls  on  holiday. 

3.  Persons    primarily    liable    on    in-     6.  Application  of  chapter. 

strument.  7.  Rule    of    law    merchant;     when 

4.  Reasonable     time,     what    consti-  governs. 

tutes. 

§  1.  Short  title. — This  act  shall  be  known  as  the  negotiable  instru- 
ments law. 

§  2.  Definitions  and  meaning  of  terms. — In  this  act,  unless  the  con- 
text otherwise  requires : 

"Acceptance"  means  an  acceptance  completed  by  delivery  or  notifi- 
cation. 

"Action"  includes  counter-claim  and  set-off. 

"Bank"  includes  any  person  or  association  of  persons  carrying  on 
the  business  of  banking,  whether  incorporated  or  not. 

"Bearer"  means  the  person  in  possession  of  a  bill  or  note  which  is 
payable  to  bearer. 

"Bill"  means  bill  of  exchange,  and  "note"  means  negotiable  promis- 
sory note. 

"Delivery"  means  transfer  of  possession,  actual  or  constructive,  from 
one  person  to  another. 

"Holder"  means  the  payee  or  indorsee  of  a  bill  or  note,  who  is  in 
possession  of  it,  or  the  bearer  thereof. 

"Indorsement"  means  an  indorsement  completed  by  delivery. 

"Instrument"  means  negotiable  instrument. 

"Issue"  means  the  first  delivery  of  the  instrument,  complete  in  form 
to  a  person  who  takes  it  as  a  holder. 

"Person"  includes  a  body  of  persons,  whether  incorporated  or  not. 

"Value"  means  valuable  consideration. 

"Written"  includes  printed,  and  "writing"  includes  print. 

§3.  Person  primarily  liable  on  instrument. — The  person  "pri- 
marily" liable  on  an  instrument  is  the  person  who  by  the  terms  of  the 
instrument,  is  absolutely  required  to  pay  the  same.  All  other  parties 
are  "secondarily"  liable. 


§§    4-20]  FORM   AND   INTERPRETATION.  862 

§  4.  Reasonable  time,  what  constitutes. — In  determining  what  is 
a  "reasonable  time"  or  an  "unreasonable  time"  regard  is  to  be  had  to 
the  nature  of  the  instrument,  the  usage  of  trade  or  business  (if  any) 
with  respect  to  such  instruments,  and  the  facts  of  the  particular  case. 

§  5.  Time,  how  computed ;  when  last  day  falls  on  holiday. — Where 
the  day,  or  the  last  day,  for  doing  any  act  herein  required  or  permitted 
to  be  done  falls  on  Sunday  or  on  a  holiday,  the  act  may  be  done  on  the 
next  succeeding  secular  or  business  day. 

§  6.  Application  of  chapter. — The  provisions  of  this  act  do  not  ap- 
ply to  negotiable  instruments  made  and  delivered  prior  to  the  passage 
hereof. 

§  7.  Law  merchant ;  when  governs. — In  any  case  not  provided  for 
in  this  act  the  rules  of  the  law  merchant  shall  govern. 


AETICLE  II. 

rORM   AND   INTERPRETATION. 
SEC.  SEC, 

20.  Form  of  negotiable  instrument.      34.  Incomplete   instrument   not    de- 

21.  Certainty  as  to  sum;  what  con-  livered. 

stitutes.  35.  Delivery;   when  effectual;  when 

22.  When  promise  is  unconditional.  presumed. 

23.  Determinable  future  time;  what    36.  Construction   where   instrument 

constitutes.  is  ambiguous. 

24.  Additional  provisions  not  affect-     37.  Liability  of  persons  signing  in 

ing  negotiability.  trade  or  assumed  name. 

25.  Omissions;       Seal;       Particular    38.  Signature  by  agent;   authority; 

money.  how  shown. 

26.  When  payable  on  demand.  39.  Liability    of   person   signing   as 

27.  When  payable  to  order.  agent,  et  cetera. 

28.  When  payable  to  bearer.  40.  Signature  by  procuration;  effect 

29.  Terms  when  sufficient.  of. 

30.  Date,  presumption  as  to.  41.  Effect  of  indorsement  by  infant 

31.  Ante-dated  and  post-dated.  or  corporation. 

32.  When  date  may  be  inserted.  42.  Forged  signature;  effect  of. 

33.  Blanks,  when  may  be  filled. 

§  20.     Form  of  negotiable  instrument. — An  instrument  to  be  nego- 
tiable must  conform  to  the  f ollo-\ving  requirements : 

1.    It  must  be  in  writing  and  signed  by  the  maker  or  drawer. 


863       CERTAINTY  AS  TO  SUM — PROMISE  UNCONSTITUTIONAL.    [§§    21-24 

2.  Must  contain  an  unconditional  promise  or  order  to  pay  a  sum 
certain  in  money ; 

3.  Must  be  payable  on  demand,  or  at  a  fixed  or  determinable  future 
time; 

4.  Must  be  payable  to  order  or  to  bearer ;  and 

5.  Where  the  instrument  is  addressed  to  a  drawee,  he  must  be 
named  or  otherwise  indicated  therein  with  reasonable  certainty. 

§  21.  Certainty  as  to  sum ;  what  constitutes. — The  sum  payable  is 
a  sum  certain  within  the  meaning  of  tliis  act,  although  it  is  to  be  paid : 

1.  With  interest ;  or 

2.  By  stated  instalments ;  or 

3.  By  stated  instalments,  with  a  provision  that  upon  default  in 
payment  of  any  instalment  or  of  interest,  the  whole  shall  become  due ; 
or 

4.  With  exchange,  whether  at  a  fixed  rate  or  at  the  current  rate ;  or 

5.  With  costs  of  collection  or  an  attorney's  fee,  in  case  payment 
shall  not  be  made  at  maturity. 

§  22.  When  promise  is  unconditional. — An  unqualified  order  or 
promise  to  pay  is  unconditional  within  the  meaning  of  this  act,  though 
coupled  with : 

1.  An  indication  of  a  particular  fund  out  of  which  reimbursement 
is  to  be  made,  or  a  particular  account  to  be  debited  with  the  amount ;  or 

2.  A  statement  of  the  transaction  which  gives  rise  to  the  instru- 
ment. But  an  order  or  promises  to  pay  out  of  a  particular  fund  is  not 
unconditional. 

§  23.  Determinable  future  time ;  what  constitutes. — An  instrument 
is  payable  at  a  determinable  future  time,  within  the  meaning  of  this 
act,  which  is  expressed  to  be  payable : 

1.  At  a  fixed  period  after  date  or  sight;  or 

2.  On  or  before  a  fixed  or  determinable  future  time  specified  there- 
in; or 

3.  On  or  at  a  fixed  period  after  the  occurrence  of  a  specified  event, 
which  is  certain  to  happen,  though  the  time  of  happening  be  uncertain. 

An  instrument  payable  upon  a  contingency  is  not  negotiable,  and 
the  happening  of  the  event  does  not  cure  the  defect. 

§  24.  Additional  provisions  not  affecting  negotiability. — An  in- 
strument which  contains  an  order  or  promise  to  do  any  act  in  addition 


§§    25-27]  FOEM    AND   INTERPRETATION.  8G-i 

to  the  payment  of  money  is  not  negotiable.  But  the  negotiable  char- 
acter of  an  instrument  otherwise  negotiable  is  not  affected  by  a  pro- 
vision which: 

1.  Authorizes  the  sale  of  collateral  securities  in  case  the  instmment 
be  not  paid  at  maturity ;  or 

2.  Authorizes  a  confession  of  judgment  if  the  instrument  be  not 
paid  at  maturity ;  or 

3.  Waives  the  benefit  of  any  law  intended  for  the  advantage  or  pro- 
tection of  the  obligor ;  or 

4.  Gives  the  holder  an  election  to  require  something  to  be  done  in 
lieu  of  payment  of  money. 

But  nothing  in  this  section  shall  validate  any  provision  or  stipula- 
tion otherwise  illegal. 

§  25.  Omissions ;  seal ;  particular  money. — The  validity  and  nego- 
tiable character  of  an  instrument  are  not  affected  by  the  fact  that : 

1.  It  is  not  dated ;  or 

2.  Does  not  specify  the  value  given,  or  that  any  value  has  been 
given  therefor;  or 

3.  Does  not  specify  the  place  where  it  is  drawn  or  the  place  where 
it  is  payable ;  or 

4.  Bears  a  seal ;  or 

5.  Designates  a  particular  kind  of  current  money  in  which  payment 
is  to  be  made. 

But  nothing  in  this  section  shall  alter  or  repeal  any  statute  requir- 
ing in  certain  cases  the  nature  of  the  consideration  to  be  stated  in  the 
instrument. 

§  26.  When  payable  on  demand. — An  instrument  is  payable  on  de- 
mand: 

1.  Where  it  is  expressed  to  be  payable  on  demand,  or  at  sight,  or 
on  presentation ;  or 

2.  In  which  no  time  for  payment  is  expressed. 

•Where  an  instrument  is  issued,  accepted  or  indorsed  when  overdue, 
it  is,  as  regards  the  person  so  issuing,  accepting  or  indorsing  it,  pay- 
able on  demand. 

§  27.  When  payable  to  order. — The  instrument  is  payable  to  order 
where  it  is  drawn  payable  to  the  order  of  a  specified  person  or  to  him 
or  his  order.   It  may  be  drawn  payable  to  the  order  of: 

1.    A  payee  who  is  not  maker,  drawer  or  drawee;  or 


865  WHEX    PAYABLE   TO   BEARER.  [§§    38-32 

2.  The  drawer  or  maker ;  or 

3.  The  drawee ;  or 

4.  Two  or  more  payees  jointly ;  or 

5.  One  or  some  of  several  payees ;  or 

6.  The  holder  of  an  office  for  the  time  being. 

Where  the  instrument  is  payable  to  order  the  payee  must  be  named 
or  otherwise  indicated  therein  with  reasonable  certainty. 

§  28.  When  payable  to  bearer. — The  instrument  is  payable  to 
bearer : 

1.  When  it  is  expressed  to  be  so  payable ;  or 

2.  When  it  is  payable  to  a  person  named  therein  or  bearer ;  or 

3.  When  it  is  payable  to  the  order  of  a  fictitious  or  non-existing  per- 
son, and  such  fact  was  known  to  the  person  making  it  so  payable ;  or 

4.  When  the  name  of  the  payee  does  not  purport  to  be  the  name  of 
any  person ;  or 

.5.    When  the  only  or  last  indorsement  is  an  indorsement  in  blank. 

§  29.  Terms,  when  sufficient. — The  instrument  need  not  follow  the 
language  of  this  act,  but  any  terms  are  sufficient  which  clearly  indi- 
cate an  intention  to  conform  to  the  requirements  hereof. 

§  30.  Date,  presumption  as  to. — Where  the  instrument  or  an  ac- 
ceptance or  an}^  indorsement  thereon  is  dated,  such  date  is  deemed 
prima  facie  to  be  the  true  date  of  the  making,  drawing,  acceptance  or 
indorsement  as  the  case  may  be. 

§  31.  Ante-dated  and  post-dated. — The  instrument  is  not  invalid 
for  the  reason  only  that  it  is  ante-dated  or  post-dated,  provided  this  is 
not  done  for  an  illegal  or  fraudulent  purpose.  The  person  to  whom 
an  instrument  so  dated  is  delivered  acquires  the  title  thereto  as  of  the 
date  of  delivery. 

§  32.  When  date  may  be  inserted. — Where  an  instrument  ex- 
pressed to  be  payable  at  a  fixed  period  after  date  is  issued  undated,  or 
where  the  acceptance  of  an  instrument  payable  at  a  fixed  period  after 
siglit  is  undated,  any  holder  may  insert  therein  the  true  date  of  issue 
or  acceptance,  and  the  instrument  shall  l)e  payal^le  accordingly.  The 
insertion  of  a  wrong  date  does  not  avoid  the  instrument  in  the  hands 
of  a  subsequent  holder  in  due  course ;  but  as  to  him,  the  date  so  in- 
serted is  to  be  regarded  as  the  true  date. 
Joyce  Defexses — 55. 


§§  33-36]  roRii  axd  interpret ation.  866 

§  33.  Blanks ;  when  may  be  filled. — When  the  instrument  is  want- 
ing in  any  material  particular,  the  person  in  possession  thereof  has  a 
prima  facie  authority  to  complete  it  by  filling  up  the  blanks  therein. 
And  a  signature  on  a  blank  paper  delivered  by  the  person  making  the 
signature  in  order  that  the  paper  may  be  converted  into  a  negotiable 
instrument  operates  as  a  prima  facie  authority  to  fill  it  up  as  such  for 
any  amount.  In  order,  however,  that  any  such  instrument,  when  com- 
pleted, may  be  enforced  against  any  person  who  became  a  party  thereto 
prior  to  its  completion,  it  must  be  filled  up  strictly  in  accordance  with 
the  authority  given  and  within  a  reasonable  time.  But  if  any  such  in- 
strument, after  completion,  is  negotiated  to  a  holder  in  due  course,  it 
is  valid  and  effectual  for  all  purposes  in  his  hands,  and  he  may  enforce 
it  as  if  it  had  been  filled  up  strictly  in  accordance  with  the  authority 
given  and  within  a  reasonable  time. 

§  34.  Incomplete  instrument  not  delivered. — Where  an  incomplete 
instrument  has  not  been  delivered  it  will  not,  if  completed  and  nego- 
tiated, -u^thout  authority,  ,be  a  valid  contract  in  the  hands  of  any 
holder,  as  against  any  person  whose  signature  was  placed  thereon  be- 
fore delivery. 

§  35.  Delivery ;  when  effectual ;  when  presumed. — Every  contract 
on  a  negotiable  instrument  is  incomplete  and  revocable  until  delivery 
of  the  instrument  for  the  purpose  of  giving  effect  thereto.  As  between 
immediate  parties,  and  as  regards  a  remote  party  other  than  a  holder 
in  due  course,  the  delivery,  in  order  to  be  effectual,  must  be  made 
either  by  or  under  the  authority  of  the  party  making,  drawing,  accept- 
ing or  indorsing,  as  the  case  may  be;  and  in  such  case  the  delivery 
may  be  shown  to  have  been  conditional,  or  for  a  special  purpose  only, 
and  not  for  the  purpose  of  transferring  the  property  in  the  instrument. 
But  where  the  instrument  is  in  the  hands  of  a  holder  in  due  course, 
a  valid  delivery  thereof  by  all  parties  prior  to  him  so  as  to  make  them 
liable  to  him  is  conclusively  presumed.  And  where  the  instrument  is 
no  longer  in  the  possession  of  a  party  whose  signature  appears  thereon, 
a  valid  and  intentional  delivery  by  him  is  presumed  until  the  contrary 
is  proved. 

§  36.  Construction  where  instrument  is  ambiguous. — Where  the 
language  of  the  instrument  is  ambiguous,  or  there  are  omissions  there- 
in, the  following  rules  of  construction  apply : 

1.    WTiere  the  sum  payable  is  expressed  in  words  and  also  in  figures 


I 


I 


867  SIGXATURE   BY   AGEXT.  [§§    37-40 

and  there  is  a  discrepancy  between  the  two,  the  sum  donated  by  the 
words  is  the  sum  jDayable;  but  if  the  words  are  ambiguous  or  uncer- 
tain, references  may  be  had  to  the  figures  to  fix  the  amount ; 

2.  Where  the  instrument  provides  for  the  payment  of  interest,  with- 
out specifying  the  date  from  which  interest  is  to  run,  the  interest  runs 
from  the  date  of  the  instrument,  and  if  the  instrument  is  undated, 
from  the  issue  thereof; 

3.  Where  the  instrument  is  not  dated,  it  will  be  considered  to  be 
dated  as  of  the  time  it  was  issued ; 

4.  Where  there  is  a  conflict  between  the  written  and  printed  pro- 
visions of  the  instrument,  the  written  provisions  prevail ; 

.  5.  Where  the  instrument  is  so  ambiguous  that  there  is  a  doubt 
whether  it  is  a  bill  or  note,  the  holder  may  treat  it  as  either  at  his  elec- 
tion; 

6.  Where  a  signature  is  so  placed  upon  the  instrument  that  it  is 
not  clear  in  what  capacity  the  person  making  the  same  intended  to 
sign,  he  is  to  be  deemed  an  indorser. 

7.  Where  an  instrument  containing  the,  words  "I  promise  to  pay" 
is  signed  by  two  or  more  persons,  they  are  deemed  to  be  jointly  and 
severally  liable  thereon, 

§  37.     Liability  of  person  signing  in  trade  or  assumed  name. — No 

person  is  liable  on  the  instrument  whose  signature  does  not  appear 
thereon,  except  as  herein  otherwise  expressly  provided.  But  one  who 
signs  in  a  trade  or  assumed  name  will  be  liable  to  tlie  same  extent  as 
if  he  had  signed  in  his  own  name. 

§  38.  Signature  by  agent;  authority;  how  shown. — The  signature 
of  any  party  may  be  made  by  a  duly  authorized  agent.  No  particular 
form  of  appointment  is  necessary  for  this  purpose;  and  the  authority 
of  the  agent  may  be  established  as  in  other  cases  of  agency. 

§39.  Liability  of  person  signing  as  agent,  etc. — Where  the  in- 
strument contains  or  a  person  adds  to  his  signature  words  indicating 
that  he  signs  for  or  on  behalf  of  a  principal,  or  in  a  representative 
capacity,  he  is  not  liable  on  the  instrument  if  he  was  duly  authorized ; 
but  the  mere  addition  of  words  describing  him  as  an  agent,  or  as  fill- 
ing a  representative  character,  without  disclosing  his  principal,  docs 
not  exempt  him  from  personal  liability. 

§  40.  Signature  by  procuration;  effect  of. — A  signature  by  "proc- 
uration" operates  as  notice  that  the  agent  has  but  a  limited  authority 


§§    41-53]         CONSIDERATION   OF    NEGOTIABLE   INSTRUMENTS.  868 

to  sign,  and  the  principal  is  bound  only  in  case  the  agent  in  so  sign- 
ing acted  within  the  actual  limits  of  his  authority.. 

§  41.  Effect  of  indorsement  by  infant  or  corporation. — The  in- 
dorsement or  assignment  of  the  instrument  by  a  corporation  or  by  an 
infant  passes  the  property  therein,  notwithstanding  that  from  want  of 
capacity  the  corporation  or  infant  may  incur  no  liability  thereon. 

§  42.  Forged  signature ;  effect  of. — Where  a  signature  is  forged  or 
made  without  authority  of  the  person  whose  signature  it  purports  to 
be,  it  is  wholly  inoperative,  and  no  right  to  retain  the  instrument,  or 
to  give  a  discharge  therefor,  or  to  enforce  payment  thereof  against  any 
party  thereto,  can  be  acquired  through  or  under  such  signature,  unless 
the  party,  against  whom  it  is  sought  to  enforce  such  right,  is  precluded 
from  setting  up  the  forgery  or  want  of  authority. 


ARTICLE  III. 

CONSIDERATION  OF  NEGOTIABLE  INSTRUMENTS. 
SEC.  SEC. 

50.  Presumption  of  consideration.        53.  When  lien  on  instrument  consti- 

51.  What  constitutes  consideration.  tutes  holder  for  value. 

52.  What     constitutes     holder     for    54.  Effect  of  want  of  consideration. 

value.  55.  Liability  of  accommodation 

party. 

§  50.  Presumption  of  consideration. — Every  negotiable  instrument 
is  deemed  prima  facie  to  have  been  issued  for  a  valuable  consideration ; 
and  every  person  whose  signature  appears  thereon  to  have  become  a 
party  thereto  for  value. 

§  51.  Consideration,  what  constitutes. — Value  is  any  consideration 
sufficient  to  support  a  simple  contract.  An  antecedent  or  pre-existing 
debt  constitutes  value ;  and  is  deemed  such  whether  the  instrument  is 
payable  on  demand  or  at  a  future  time. 

§  52.  What  constitutes  holder  for  value. — "Wliere  value  has  at  any 
time  been  given  for  the  instrument,  the  holder  is  deemed  a  holder  for 
value  in  respect  to  all  parties  who  became  such  prior  to  that  time. 


i 


8G9  EFFECT   OF   ^YAXT    OF    COXSIDERATIOX.  [§§    Oo-GO 

§  53.     When  lien  on  instrument  constitutes  holder  for  value. — 

Where  the  holder  has  a  lien  on  the  instrument,  arising  either  from 
contract  or  by  implication  of  law,  he  is  deemed  a  holder  for  value  to 
the  extent  of  his  lien. 

§'  54.  Effect  of  want  of  consideration. — Absence  or  failure  of  con- 
sideration is  matter  of  defense  as  against  any  person  not  a  holder  in 
due  course ;  and  partial  failure  of  consideration  is  a  defense  pro  tanto, 
whether  the  failure  is  an  ascertained  and  liquidated  amount  or  other- 
wise. 

§  55.  Liability  of  accommodation  party. — An  accommodation  party 
is  one  who  has  signed  the  instrument  as  maker,  drawer,  acceptor  or  in- 
dorser,  without  receiving  value  therefor,  and  for  the  purpose  of  lend- 
ing his  name  to  some  other  person.  Such  a  person  is  liable  on  the  in- 
strument to  a  holder  for  value,  notwithstanding  such  holder  at  the 
time  of  taking  the  instrument  knew  him  to  be  only  an  accommodation 
party. 

ARTICLE  IV. 

NEGOTIATION. 
SEC.  SEC. 

60.  What  constitutes  negotiation.  72.  Effect  of  instrument  drawn   or 

61.  Indorsement;  how  made.  indorsed  to  a  person  as  cash- 

62.  Indorsement  must  be  of  entire  ier. 

instrument.  73.  Indorsement  where  name  is  mis- 

63.  Kinds  of  indorsement.  spelled,  et  cetera. 

64.  Special     indorsement;     indorse-    74.  Indorsement     in    representative 

ment  in  blank.  capacity. 

65.  Blank      indorsement;       how     75.  Time  of  indorsement;   presump- 

changed    to    special    indorse-  tion. 

ment.  76.  Place  of  indorsement;  presump- 

66.  When  indorsement  restrictive.  tion. 

67.  Effect     of     restrictive     indorse-  77.  Continuation  of  negotiable  char- 

ment;  rights  of  indorsee.  acter. 

68.  Qualified  indorsement.  78.  Striking  out  indorsement. 

69.  Conditional  indorsement.  79.  Transfer    without   indorsement; 

70.  Indorsement  of  instrument  pay-  effect  of. 

able  to  bearer.  80.  When  prior  party  may  negotiate 

71.  Indorsement   where    payable    to  instrument. 

two  or  more  persons. 

§  60.  What  constitutes  negotiation. — An  instrument  is  negotiated 
when  it  is  transferred  from  one  person  to  another  in  such  manner  as 


§§    61-66]  NEGOTIATION.  870 

to  constitute  the  transferee  the  holder  thereof.  If  payable  to  bearer 
it  is  negotiated  by  delivery ;  if  payable  to  order  it  is  negotiated  by  the 
indorsement  of  the  holder  completed  by  delivery. 

§  61.  Indorsement;  how  made. — The  indorsement  must  be  written 
on  the  instrument  itself  or  upon  a  paper  attached  thereto.  The  signa- 
ture of  the  indorser,  vt^ithout  additional  words,  is  a  sufficient  indorse- 
ment. 

§  62.  Indorsement  must  be  of  entire  instrument. — The  indorse- 
ment must  be  an  indorsement  of  the  entire  instrument.  An  indorse- 
ment, which  purports  to  transfer  to  the  indorsee  a  part  only  of  the 
amount  payable,  or  which  purports  to  transfer  the  instrument  to  two 
or  more  indorsees  severally,  does  not  operate  as  a  negotiation  of  the  in- 
strument. But  where  the  instrument  has  been  paid  in  part,  it  may  be 
indorsed  as  to  the  residue. 

§  63.  Kinds  of  indorsement. — An  indorsement  may  be  either  spe- 
cial or  in  blank ;  and  it  m^qy  also  be  either  restrictive  or  qualified,  or 
conditional. 

§  64.  Special  indorsement;  indorsement  in  blank. — A  special  in- 
dorsement specifies  the  person  to  whom,  or  to  whose  order  the  instru- 
ment is  to  be  payable ;  and  the  indorsement  of  such  indorsee  is  neces- 
sary to  the  further  negotiation  of  the  instrument.  An  indorsement  in 
blank  specifies  no  indorsee,  and  an  instrument  so  indorsed  is  payable 
to  bearer,  and  may  be  negotiated  by  delivery. 

§  65.     Blank  indorsement ;  how  changed  to  special  indorsement. — 

The  holder  may  convert  a  blank  indorsement  into  a  special  indorsement 
by  writing  over  the  signature  of  the  indorser  in  blank  any  contract 
consistent  with  the  character  of  the  indorsement. 

§  66.  When  indorsement  restrictive. — An  indorsement  is  restrict- 
ive, which  either: 

1.  Prohibits  the  further  negotiation  of  the  instrument;  or 

2.  Constitutes  the  indorsee  the  agent  of  the  indorser-;  or 

3.  Vests  the  title  in  the  indorsee  in  trust  for  or  to  the  use  of  some 
other  person. 

But  the  mere  absence  of  words  implying  power  to  negotiate  does  not 
make  an  indorsement  restrictive. 


1 


8'M  QUALIFIED  INDORSEMENT.  [§§'   67-73 

§  67.  Effect  of  restrictive  indorsement ;  rights  of  indorsee. — A  re- 
strictive indorsement  confers  upon  the  indorsee  the  right : 

1.  To  receive  payment  of  the  instrument; 

2.  To  bring  any  action  thereon  that  the  indorser  could  brin^ ; 

3.  To  transfer  his  rights  as  such  indorsee,  where  the  form  of  the 
indorsement  authorizes  him  to  do  so. 

But  all  subsequent  indorsees  acquire  only  the  title  of  the  first  in- 
dorsee under  the  restrictive  indorsement. 

§  68.  Qualified  indorsement.— A  qualified  indorsement  constitutes 
the  indorser  a  mere  assignor  of  the  title  to  the  instrument.  It  may  be 
made  by  adding  to  the  indorser's  signature  the  words  "without  re- 
course" or  any  words  of  similar  import.  Such  an  indorsement  does  not 
impair  the  negotiable  character  of  the  instrument. 

§■69.  Conditional  indorsement.— Where  an  indorsement  is  condi- 
tional, a  party  required  to  pay  the  instrument  may  disregard  the  con- 
:  dition,  and  make  payment  to  the  indorsee  or  his  transferee,  whether  the 
condition  has  been  fulfilled  or  not.  But  any  person  to  whom  an  instru- 
ment so  indorsed  is  negotiated,  will  hold  the  same,  or  the  proceeds 
thereof,  subject  to  the  rights  of  the  person  indorsing  conditionally. 

§  70.  Indorsement  of  instrument  payable  to  bearer. — Where  an  in- 
strument, payable  to  bearer,  is  indorsed  specially,  it  may  nevertheless 
be  further  negotiated  by  delivery ;  but  the  person  indorsing  specially 
is  liable  as  indorser  to  only  such  holders  as  make  title  through  his  in- 
dorsement. 

§  71.  Indorsement  where  payable  to  two  or  more  persons, — Where 
an  instrument  is  payable  to  the  order  of  two  or  more  payees  or  in- 
dorsees who  are  not  partners,  all  must  indorse,  unless  the  one  indors- 
ing has  authority  to  indorse  for  the  others. 

§  72.  Effect  of  instrument  drawn  or  indorsed  to  a  person  as  cash- 
ier.— Where  an  instrument  is  dra^ni  or  indorsed  to  a  person  as  "casli- 
ier"  or  other  fiscal  officer  of  a  bank  or  corporation,  it  is  deemed  prima 
facie  to  be  payable  to  the  bank  or  corporation  of  wliich  he  is  sueli 
officer;  and  may  be  negotiated  l)y  either  the  indorsement  of  the  bank 
or  corporation,  or  the  indorsement  of  the  officer. 


§§    73-80]  NEGOTIATION-,  873 

§  73.  Indorsement  where  name  is  misspelled,  et  cetera. — Where  the 
name  of  a  payee  or  indorsee  is  wrongly  designated  or  misspelled,  he 
may  indorse  the  instrument  as  therein  described,  adding,  if  he  think 
fit,  his  proper  signature. 

§  74.  Indorsement  in  representative  capacity. — Where  any  person 
is  under  obligation  to  indorse  in  a  representative  capacity,  he  may  in- 
dorsee in  such  terms  as  to  negative  personal  liability. 

§  75.  Time  of  indorsement ;  presumption. — Except  where  an  in- 
dorsement bears  date  after  the  maturity  of  the  instrument,  every  ne- 
gotiation is  deemed  prima  facie  to  have  been  effected  before  the  in- 
strument was  overdue. 

§  76.  Place  of  indorsement ;  presumption. — Except  where  the  con- 
trary appears  every  indorsement  is  presumed  prima  facie  to  have  been 
made  at  the  place  where  the  instrument  is  dated. 

§  77.  Continuation  of  negotiable  character. — An  instrument  ne- 
gotiable in  its  origin  continues  to  be  negotiable  until  it  has  been  re- 
strictively  indorsed  or  discharged  by  payment  or  otherwise. 

§  78.  Striking  out  indorsement. — The  holder  may  at  any  time 
strike  out  any  indorsement  which  is  not  necessary  to  his  title.  The  in- 
dorser  whose  indorsement  is  struck  out,  and  all  indorsers  subsequent 
to  him,  are  thereby  relieved  from  liability  on  the  instrument. 

§  79.  Transfer  without  indorsement ;  effect  of. — Where  the  holder 
of  an  instrument  payable  to  his  order  transfers  it  for  value  without  in- 
dorsing it,  the  transfer  vests  in  the  transferee  such  title  as  the  trans- 
ferer had  therein,  and  the  transferee  acquires,  in  addition,  the  right  to 
have  the  indorsement  of  the  transferer.  But  for  the  purpose  of  de- 
termining whether  the  transferee  is  a  holder  in  due  course,  the  nego- 
tiation takes  effect  as  of  the  time  when  the  indorsement  is  actually 
made. 

§  80.  When  prior  party  may  negotiate  instrument. — Where  an  in- 
strument is  negotiated  back  to  a  prior  party,  such  party  may,  subject 
to  the  provisions  of  this  act,  reissue  and  further  negotiate  the  same. 
But  he  is  not  entitled  to  enforce  payment  thereof  against  any  inter- 
vening party  to  whom  he  was  personally  liable. 


I 


I 


873  EIGHT    OF    HOLDER   TO    SUE.  [§§    90-94 

AETICLE  V. 

RIGHTS    OF    HOLDER. 

SEC.  SEC. 

90.  Right  of  holder  to  sue;  payment.     95.  What   constitutes   notice   of   de- 

91.  What  constitutes  a  holder  in  due  feet. 

course.  96.  Rights  of  holder  in  due  course. 

92.  When  person  not  deemed  holder     97.  When    subject    to    original    de- 

in  due  course.  fenses. 

93.  Notice  before  full  amount  paid.     98.  Who     deemed     holder     in     due 

94.  When  title  defective.  course. 

§  90.  Right  of  holder  to  sue;  payment. — The  holder  of  a  negotia- 
ble instr-ument  may  sue  thereon  in  his  own  name ;  and  payment  to  him 
in  due  course  discharges  the  instrument. 

§  91.  What  constitutes  a  holder  in  due  course. — A  holder  in  due 
course  is  a  holder  who  has  taken  the  instrument  under  the  following 
conditions : 

1.  That  it  is  complete  and  regular  upon  its  face; 

2.  That  he  became  the  holder  of  it  before  it  was  overdue,  and  with- 
out notice  that  it  had  been  previously  dishonored,  if  such  was  the  fact ; 

3.  That  he  took  it  in  good  faith  and  for  value ; 

4.  That  at  the  time  it  was  negotiated  to  him  he  had  no  notice  of 
any  infirmity  in  the  instrument  or  defect  in  the  title  of  the  person  ne- 
gotiating it. 

§  92.  When  person  not  deemed  holder  in  due  course. — Where  an 
instrument  payable  on  demand  is  negotiated  an  unreasonable  length 
of  time  after  its  issue,  the  holder  is  not  deemed  a  holder  in  due  course. 

§  93.  Notice  before  full  amount  paid. — Where  the  transferee  re- 
ceives notice  of  any  infirmity  in  the  instrument  or  defect  in  the  title 
of  the  person  negotiating  the  same  before  he  lias  paid  the  full  amount 
agreed  to  be  paid  therefor,  he  will  be  deemed  a  holder  in  due  course 
only  to  the  extent  of  the  amount  theretofore  paid  by  him. 

§  94.  When  title  defective. — The  title  of  a  person  who  negotiates 
an  instrument  is  defective  within  the  meaning  of  this  act  when  he  ob- 
tained the  instrument,  or  any  signature  thereto,  by  fraud,  duress,  or 
force  and  fear,  or  other  unlawful  means,  or  for  an  illegal  consideration. 


§§    95-98]  LIABILITIES    OF    PARTIES.  874 

or  when  he  negotiates  it  in  breach  of  faith,  or  under  such  circum- 
stances as  amount  to  a  fraud. 

§'95.  What  constitutes  notice  of  defect. — To  constitute  notice  of 
an  infirmity  in  the  instrument  or  defect  in  the  title  of  the  person  ne- 
gotiating the  same,  the  person  to  whom  it  is  negotiated  must  have  had 
actual  knowledge  of  the  infirmity  or  defect,  or  knowledge  of  such  facts 
that  his  action  in  taking  the  instrument  amounted  to  bad  faith. 

§  96.  Rights  of  holder  in  due  course. — A  holder  in  due  course 
holds  the  instrument  free  from  any  defect  of  title  of  prior  parties  and 
free  from  defenses  available  to  prior  parties  among  themselves,  and 
may  enforce  payment  of  the  instrument  for  the  full  amount  thereof 
against  all  parties  liable  thereon. 

§  97.  When  subject  to  original  defenses. — In  the  hands  of  any 
holder  other  than  a  holder  in  due  course,  a  negotiable  instrument  is 
subject  to  the  same  defenses  as  if  it  were  non-negotiable.  But  a  holder 
who  derives  his  title  through  a  holder  in  due  course,  and  who  is  not 
himself  a  party  to  any  fraud  or  illegality  affecting  the  instrument,  has 
all  the  rights  of  such  former  holder  in  respect  of  all  parties  prior  to 
the  latter. 

§  98.  Who  deemed  holder  in  due  course. — Every  holder  is  deemed 
prima  facie  to  be  a  holder  in  due  course;  but  when  it  is  shown  that 
the  title  of  any  person  who  has  negotiated  the  instrument  "jvas  defect- 
ive, the  burden  is  on  the  holder  to  prove  that  he  or  some  person  under 
whom  he  claims  acquired  the  title  as  holder  in  due  course.  But  the 
last-mentioned  rule  does  not  apply  in  favor  of  a  party  who  became 
bound  on  the  instrument  prior  to  the  acquisition  of  such  defective  title. 


ARTICLE  VI. 

LIABILITIES  OF   PARTIES. 

SEC.  SEC. 

110.  Liability  of  maker.  116.  Liaility  of  general  indorsers. 

111.  Liability  of  drawer.  117.  Liability  of  indorser  where  pa- 

112.  Liability  of  acceptor.  per  negotiable  by  delivery. 

113.  "When  person  deemed  indorser.  118.  Order    in   which   indorsers   are 

114.  Liability  of  irregular  indorser.  liable. 

115.  "Warranty;     where    negotiation  119.  Liability  of  agent  or  broker. 

by  delivery,  et  cetera. 


^ 


875  LIABILITY    OF   IRREGULAR   INDORSER.       [§§    110-115 

§■  110.  Liability  of  maker. — The  maker  of  a  negotiable  instrument 
by  making  it  engages  that  he  will  pay  it  according  to  its  tenor ;  and 
admits  the  existence  of  the  payee  and  his  then  capacity  to  indorse. 

§  111.  Liability  of  drawer. — The  drawer  by  drawing  the  instru- 
ment admits  the  existence  of  the  payee  and  his  then  capacity  to  in- 
dorse; and  engages  that  on  due  presentment  the  instrument  will  be 
accepted  and  paid,  or  both,  according  to  its  tenor,  and  that  if  it  be  dis- 
honored, and  the  necessary  proceedings  on  dishonor  be  duly  taken,  he 
will  pay  the  amount  thereof  to  the  holder,  or  to  any  subsequent  in- 
dorser  who  may  be  compelled  to  pay  it.  But  the  drawer  may  insert  in 
the  instrument  an  express  stipulation  negativing  or  limiting  his  own 
liability  to  the  holder. 

§  112.     Liability  of  acceptor. — The  acceptor  by  accepting  the  in- 
strument engages  that  he  will  pay  it  according  to  the  tenor  of  his  ac- 
ceptance ;  and  admits : 
,      1,    The  existence  of  the  drawer,  the  genuineness  of  his  signature, 
and  his  capacity  and  authority  to  draw  the  instrument ;  and 

2.    The  existence  of  the  payee  and  his  then  capacity  to  indorse. 

§  113.  When  person  deemed  indorser. — A  person  placing  his  sig- 
nature upon  an  instrument  otherwise  than  as  maker,  drawer  or  ac- 
ceptor is  deemed  to  be  an  indorser,  unless  he  clearly  indicates  by  ap- 
propriate words  his  intention  to  be  bound  in  some  other  capacity. 

§  114.  Liability  of  irregular  indorser. — Wliere  a  person,  not  other- 
wise a  party  to  an  instrument,  places  thereon  his  signature  in  blank 
before  delivery,  he  is  liable  as  indorser  in  accordance  with  the  follow- 
ing rules  t 

1.  If  the  instrument  is  payable  to  the  order  of  a  tliird  person,  he  is 
liable  to  the  payee  and  to  all  subsequent  parties. 

2.  If  the  instrument  is  payable  to  the  order  of  the  maker  or  drawer, 
or  is  payable  to  bearer,  he  is  liable  to  all  parties  subsequent  to  the 
maker  or  drawer. 

3.  If  he  signs  for  the  accommodation  of  the  payee  he  is  liable  to  all 
parties  subsequent  to  the  payee. 

§  115.  Warranty  where  negotiation  by  delivery,  et  cetera. — Every 
person  negotiating  an  instrument  by  delivery  or  by  a  qualified  indorse- 
ment, warrants : 


g§    116-119]  LIABILITIES   OF   PARTIES.  876 

1.  That  the  instrument  is  genuine  and  in  all  respects  what  it  pur- 
ports to  be; 

3.     That  he  has  a  good  title  to  it; 

3.  That  all  prior  parties  had  capacity  to  contract; 

4.  That  he  has  no  knowledge  of  any  fact  which  would  impair  the 
validity  of  the  instrument  or  render  it  valueless. 

But  when  the  negotiation  is  by  delivery  only,  the  warranty  extends 
in  favor  of  no  holder  other  than  the  immediate  transferee.  The  pro- 
visions of  subdivision  three  of  this  section  do  not  apply  to  persons  ne- 
gotiating public  or  corporate  securities,  other  than  bills  and  notes.    • 

§  116.  Liability  of  general  indorser. — Every  indorser  who  indorses 
without  qualification,  warrants  to  all  subsequent  holders  in  due  course : 

1.  The  matter  and  things  mentioned  in  subdivisions  one,  two  and 
three  of  the  next  preceding  section ;  and, 

2.  That  the  instrument  is  at  the  time  of  his  indorsement  valid  and 
subsisting. 

And,  in  addition,  he  engages  that  on  due  presentment,  it  shall  be 
accepted  or  paid,  or  both,  as  the  case  may  be,  according  to  its  tenor, 
and  that  if  it  be  dishonored,  and  the  necessary  proceedings  on  dishonor 
be  duly  taken,  he  will  pay  the  amount  thereof  to  the  holder,  or  to  any 
subsequent  indorser  who  may  be  compelled  to  pay  it. 

§  117.     Liability  of  indorser  where  paper  negotiable  by  delivery. — 

Where  a  person  places  his  indorsement  on  an  instrument  negotiable 
by  delivery  he  incurs  all  the  liabilities  of  an  indorser. 

§  118.  Order  in  which  indorsers  are  liable. — As  respects  one  an- 
other, indorsers  are  liable  prima  facie  in  the  order  in  which  they  in- 
dorse ;  but  evidence  is  admissible  to  show  that  as  between  or  among 
themselves  they  have  agreed  otherwise.  Joint  payees  or  joint  indorsees 
who  indorse  are  deemed  to  indorse  jointly  and  severally. 

§  119.  Liability  of  agent  or  broker. — Where  a  broker  or  other 
agent  negotiates  an  instrument  without  indorsement,  he  incurs  all  the 
liabilities  prescribed  by  section  one  hundred  and  fifteen  of  this  act, 
unless  he  discloses  the  name  of  his  principal,  and  the  fact  that  he  is 
acting  only  as  agent. 


\ 


877  WANT    OF   DEMAND   ON    PRINCIPAL   DEBTORS.       [§§    130-132 


AETICLE  VII. 

PRESENTMENT    FOR   PAYMENT. 

SEC.  SEC. 

130.  Effect  of  want  of   demand   on     140.  When  presentment  not  required 

principal  debtor.  to  charge  the  indorser. 

131.  Presentment  where  instrument     141.  When  delay  in  making  present- 

is  not  payable  on  demand.  ment  is  excused. 

132.  What    constitutes    a    sufficient     142.  When  presentment  may  be  dis- 

presentment.  pensed  with. 

133.  Place  of  presentment.  143.  When     instrument    dishonored 

134.  Instrument  must  be  exhibited.  by  non-payment. 

135.  Presentment  where  instrument  144.  Liability  of  person  secondarily 

payable  at  bank.  liable,   when  instrument  dis- 

136.  Presentment    where     principal  honored. 

debtor  is  dead.  145.  Time  of  maturity. 

137.  Presentment  to   persons   liable     146.  Time;  how  computed. 

as  partners.  147.  Rule  where  instrument  payable 

138.  Presentment  to  joint  debtors.  at  bank. 

139.  When  presentment  not  required     148.  What    constitutes    payment    in 

to  charge  the  drawer.  due  course. 

§  130.  Effect  of  want  of  demand  on  principal  debtor. — Present- 
ment for  paj^ment  is  not  necessary  in  order  to  charge  the  person  pri- 
marily liable  on  the  instrument ;  but  if  the  instrument  is,  by  its  terms, 
payable  at  a  special  place,  and  he  is  able  and  willing  to  pay  it  there 
at  maturity  and  has  funds  there  available  for  that  purpose  such  abil- 
ity and  willingness  are  equivalent  to  a  tender  of  payment  upon  his  part. 
But  except  as  herein  otherwise  provided,  presentment  for  payment  is 
necessary  in  order  to  charge  the  drawer  and  indorsers. 

§  131.     Presentment  where  instrument  is  not  payable  on  demand. — 

Where  the  instrument  is  not  payable  on  demand,  presentment  must  be 
made  on  the  day  it  falls  due.  Where  it  is  payable  on  demand,  present- 
ment must  be  made  within  a  reasonable  time  after  its  issue,  except 
that  in  a  case  of  a  bill  of  exchange,  presentment  for  payment  will  be 
sufficient  if  made  within  a  reasonable  time  after  the  last  negotiation 
thereof. 

§'  132.     What  constitutes  a  sufficient  presentment. — Presentment 

for  payment,  to  l)c  sufficient,  must  be  made : 

1.  By  the  holder,  or  by  some  person  authorized  to  receive  payment 
on  his  behalf ; 


§§    133-137]  PRESEXTilEXT    FOR   PAYMENT.  878 

2.  At  a  reasonable  hour  on  a  business  day ; 

3.  At  a  proper  place  as  herein  defined; 

4.  To  a  person  primarily  liable  on  the  instrument,  or  if  he  is  absent 
or  inaccessible,  to  any  person  found  at  the  place  where  the  presentment 
is  made. 

§  133.  Place  of  presentment. — Presentment  for  payment  is  made 
at  the  proper  place : 

1.  Where  a  place  of  payment  is  specified  in  the  instrument  and  it  is 
there  presented ; 

2.  Where  no  place  of  payment  is  specified,  but  the  address  of  the 
person  to  make  payment  is  given  in  the  instrument  and  it  is  there 
presented ; 

3.  Where  no  place  of  payment  is  specified  and  no  address  is  given 
and  the  instrument  is  presented  at  the  usual  place  of  business  or  resi- 
dence of  the  person  to  make  payment ; 

4.  In  any  other  case  if  presented  to  the  person  to  make  payment 
wherever  he  can  be  found,  or  if  presented  at  his  last-known  place  of 
business  or  residence. 

§  134.  Instrument  must  be  exhibited. — The  instrument  must  be 
exhibited  to  the  person  from  whom  payment  is  demanded,  and  when 
it  is  paid  must  be  delivered  up  to  the  party  paying  it. 

§  135.  Presentment  where  instrument  payable  at  bank. — Wliere 
the  instrument  is  payable  at  a  bank,  presentment  for  j^ayment  must  be 
made  during  banking  hours,  unless  the  person  to  make  payment  has 
no  funds  there  to  meet  it  at  any  time  during  the  day,  in  which  case 
presentment  at  any  hour  before  the  bank  is  closed  on  that  day  is  suflS- 
cient. 

§  136.  Presentment  where  principal  debtor  is  dead. — AVliere  the 
person  primarily  liable  on  the  instrument  is  dead,  and  no  place  of  pay- 
ment is  specified,  presentment  for  payment  must  be  made  to  his  per- 
sonal representative,  if  such  there  be,  and  if  with  the  exercise  of  rea- 
sonable diligence,  he  can  be  found. 

§  137.  Presentment  to  persons  liable  as  partners. — Wliere  the  per- 
sons primarily  liable  on  the  instrument  are  "liable  as  partners,  and  no 
place  of  payment  is  specified,  presentment  for  payment  may  be  made 
to  any  one  of  them,  even  though  there  has  been  a  dissolution  of  the 
firm. 


879  PRESEXTilEXT   TO    JOIXT   DEBTORS,  [§§'   138-145. 

§  138.  Presentment  to  joint  debtors. — Where  there  are  several 
persons  not  partners,  primarily  liable  on  the  instrument,  and  no  place 
of  payment  is  specified,  presentment  must  be  made  to  them  all. 

§  139.     When  presentment  not  required  to  charge  the  drawer. — 

Presentment  for  payment  is  not  required  in  order  to  charge  the  drawer 
where  he  has  no  right  to  expect  or  require  that  the  drawee  or  acceptor 
will  pay  the  instrument. 

§  140.     When  presentment  not  required  to  charge  the  indorser. — 

Presentment  for  payment  is  not-  required  in  order  to  charge  an  in- 
dorser where  the  instrument  was  made  or  accepted  for  his  accommo- 
dation, and  he  has  no  reason  to  expect  that  the  instrument  will  be  paid 
if  presented. 

§  141.     When  delay  in  making  presentment  is  excused. — Delay  in 

making  presentment  for  payment  is  excused  when  the  delay  is  caused 
by  circumstances  beyond  the  control  of  the  holder  and  not  imputaljle 
to  his  default,  misconduct  or  negligence.  When  the  cause  of  delay 
ceases  to  operate,  presentment  must  be  made  with  reasonable  diligence. 

§  142.  When  presentment  may  be  dispensed  with. — Presentment 
for  payment  is  dispensed  with : 

1.  Where  after  the  exercise  of  reasonable  diligence  presentment  as 
required  by  this  act  cannot  be  made ; 

2.  Where  the  drawee  is  a  fictitious  person ; 

3.  By  waiver  of  presentment  express  or  implied. 

§  143.  When  instrument  dishonored  by  non-payment. — The  in- 
strument is  dishonored  by  non-payment  when : 

1.  It  is  duly  presented  for  payment  and  payment  is  refused  or  can- 
not be  obtained ;  or 

2.  Presentment  is  excused  and  the  instrument  is  overdue  and  un- 
paid. 

§  144.  Liability  of  person  secondarily  liable,  when  instrument  dis- 
honored.— Subject  to  the  provisions  of  this  act,  when  the  instrument 
is  dishonored  by  non-payment,  an  immediate  right  of  recourse  to  all 
parties  secondarily  liable  thereon  accrues  to  the  holder. 

§  145.  Time  of  maturity. — Every  negotiable  instrument  is  payable 
at  the  time  fixed  therein  without  grace.    When  the  day  of  maturity 


;§  146-148] 


NOTICE    OF   DISHONOR. 


880 


falls  upon  Sunday,  or  a  holiday,  the  instrument  is  payable  on  the  next 
succeeding  business  day.  Instruments  falling  due  or  becoming  payable 
on  Saturday  are  to  be  presented  for  payment  on  the  next  succeeding 
business  day,  except  that  instruments  payable  on  demand  may,  at  the 
option  of  the  holder  be  presented  for  payment  before  twelve  o'clock 
noon  on  Saturday  when  that  entire  day  is  not  a  holiday. 

§  146.  Time;  how  computed. — Where  the  instrument  is  payable  at 
a  fixed  period  after  date,  after  sight,  or  after  the  happening  of  a  speci- 
fied event,  the  time  of  payment  is  determined  by  excluding  the  day 
from  which  the  time  is  to  begin  to  run,  and  by  including  the  date  of 
payment. 

§  147.  Rule  where  instrument  payable  at  bank. — Where  the  in- 
strument is  made  payable  at  a  bank  it  is  equivalent  to  an  order  to  the 
bank  to  pay  the  same  for  the  account  of  the  principal  debtor  thereon. 

§  148.  What  constitutes  payment  in  due  course. — Payment  is 
made  in  due  course  when  it  is  made  at  or  after  the  maturity  of  the  in- 
strument to  the  holder  thereof  in  good  faith  and  without  notice  that 
his  title  is  defective. 

AKTICLE  VIII. 

NOTICE   OF   DISHONOR. 


I 


SEC.  SEC. 

160.  To    whom    notice    of    dishonor     173. 

must  be  given. 

161.  By  whom  given.  174. 

162.  Notice  given  by  agent. 

163.  Effect  of  notice  given  on  behalf     175. 

of  holder. 
164. 'Effect  where  notice  is  given  by     176. 
party  entitled  thereto. 

165.  When  agent  may  give  notice.         177. 

166.  When  notice  sufBcient. 

167.  Form  of  notice.  178. 

168.  To  whom  notice  may  be  given. 

169.  Notice  where  party  is  dead.  179. 

170.  Notice  to  partners.  180. 

171.  Notice  to  persons  jointly  liable.     181. 

172.  Notice  to  bankrupt.  182. 


Time  within  which  notice  must 
be  given. 

Where  parties  reside  in  same 
place. 

Where  parties  reside  in  differ- 
ent places. 

When  sender  deemed  to  have 
given  due  notice. 

Deposit  in  post-office,  what  con- 
stitutes. 

Notice  to  subsequent  parties, 
time  of. 

Where  notice  must  be  sent. 

Waiver  of  notice. 

Whom  affected  by  waiver. 

Waiver  of  protest. 


881  BY    WHOM.  GIVEX.  [§§    lGO-165 

SEC.  SEC. 

183.  When  notice  dispensed  with.  187.  Notice    of   non-payment   where 

184.  Delay  in  giving  notice;  how  ex-  acceptance  refused. 

cused.  188.  Effect  of  omission  to  give  no- 

185.  When  notice  need  not  be  given  tice  of  non-acceptance. 

to  drawer.  189.  When     protest     need     not     be 

186.  When  notice  need  not  be  given  made;  when  must  be  made. 

to  indorser. 

§  160.  To  whom  notice  of  dishonor  must  be  given. — Except  as 
herein  otherwise  provided,  when  a  negotiable  instrument  has  been  dis- 
honored by  non-acceptance  or  non-payment,  notice  of  dishonor  must 
be  given  to  the  drawer  and  to  each  indorser,  and  any  drawer  or  in- 
dorser to  whom  such  notice  is  not  given  is  discharged. 

§  161.  By  whom  given. — The  notice  may  be  given  by  or  on  behalf 
of  the  holder,  or  by  or  on  behalf  of  any  party  to  the  instrument  wbo 
might  be  compelled  to  pay  it  to  the  holder,  and  who,  upon  taking  it 
up  would  have  a  right  to  reimbursement  from  the  party  to  whom  the 
notice  is  given. 

§  162.  Notice  given  by  agent. — ISTotice  of  dishonor  may  be  given 
by  an  agent  either  in  his  own  name  or  in  the  name  of  any  party  en- 
titled to  give  notice,  whether  that  party  be  his  principal  or  not. 

§'  163.  Effect  of  notice  given  on  behalf  of  holder. — Where  notice 
is  given  by  or  on  behalf  of  the  holder,  it  enures  for  the  benefit  of  all 
subsequent  holders  and  all  prior  parties  who  have  a  right  of  recourse 
against  the  party  to  whom  it  is  given, 

§  164.     Effect  where  notice  is  given  by  party  entitled  thereto. — 

Where  notice  is  given  by  or  on  behalf  of  a  party  entitled  to  give  notice, 
it  enures  for  the  benefit  of  the  holder  and  all  parties  subsequent  to  the 
party  to  whom  notice  is  given. 

§  165.  When  agent  may  give  notice. — Where  the  instrument  has 
been  dishonored  in  the  hands  of  an  agent,  he  may  either  himself  give 
notice  to  the  parties  liable  thereon,  or  he  may  give  notice  to  his  prin- 
cipal. If  he  give  notice  to  his  principal,  he  must  do  so  within  the  same 
time  as  if  he  were  the  holder,  and  the  principal  upon  the  receipt  of 
such  notice  has  himself  the  same  time  for  giving  notice  as  if  the  agent 
had  been  an  independent  holder. 
Joyce  Defenses — 56. 


§§    166-174]  NOTICE   OF  DISHONOR.  882 

§  166.  When  notice  sufl&cient. — A  written  notice  need  not  be 
signed,  and  an  insufficient  written  notice  may  be  supplemented  and 
validated  by  verbal  communication.  A  misdescription  of  the  instru- 
ment does  not  vitiate  the  notice  unless  the  party  to  whom  the  notice 
is  given  is  in  fact  misled  thereby. 

§  167.  Form  of  notice. — The  notice  may  be  in  writing  or  merely 
oral  and  may  be  given  in  any  terms  which  sufficiently  identif}^  the  in- 
strument, and  indicate  that  it  has  been  dishonored  by  non-acceptance 
or  non-payment.  It  may  in  all  cases  be  given  by  delivering  it  person- 
ally or  through  the  mails. 

§  168.  To  whom  notice  may  be  given. — iSTotice  of  dishonor  may  be 
given  either  to  the  party  himself  or  to  his  agent  in  that  behalf. 

§  169.  Notice  where  party  is  dead. — When  any  party  is  dead,  and 
his  death  is  known  to  the  party  giving  notice,  the  notice  must  be  given 
to  a  personal  representative,  if  there  be  one,  and  if  with  reasonable 
diligence,  he  can  be  found.  If  there  be  no  personal  representative,  no- 
tice may  be  sent  to  the  last  residence  or  last  place  of  business  of  the 
deceased. 

§  170.  Notice  to  partners. — Where  the  parties  to  be  notified  are 
partners  notice  to  any  one  partner  is  notice  to  the  firm  even  though 
there  has  been  a  dissolution. 

§■  171.  Notice  to  persons  jointly  liable. — Notice  to  joint  parties 
who  are  not  partners  must  be  given  to  each  of  them,  unless  one  of  them 
has  authority  to  receive  such  notice  for  the  others. 

§  172.  Notice  to  bankrupt. — Where  a  party  has  been  adjudged  a 
bankrupt  or  an  insolvent,  or  has  made  an  assignment  for  the  benefit 
of  creditors,  notice  may  be  given  either  to  the  party  himself  or  to  hie 
trustee  or  assignee. 

§  173.  Time  within  which  notice  must  be  g^ven. — Notice  may  be 
given  as  soon  as  the  instrument  is  dishonored ;  and  unless  delay  is  ex- 
cused as  hereinafter  provided,  must  be  given  within  the  times  fijxed 
by  this  act. 

§  174.     Where  parties  reside  in  the  same  place. — Where  the  person 


883  PARTIES    RESIDIXG   IN   DIFFERENT   PLACES.     [§§'    175-179 

giving  and  the  person  to  receive  notice  reside  in  the  same  place,  notice 
must  be  given  within  the  following  times : 

1.  If  given  at  the  place  of  business  of  the  person  to  receive  notice, 
it  must  be  given  before  the  close  of  business  hours  on  the  day  following ; 

2.  If  given  at  his  residence,  it  must  be  given  before  the  usual  hours 
of  rest  on  the  day  following ; 

3.  If  sent  by  mail,  it  must  be  deposited  in  the  post-office  in  time  to 
reach  him  in  usual  course  on  the  day  following. 

§'  175.  Where  parties  reside  in  different  places. — Where  the  per- 
son giving  and  the  person  to  receive  notice  reside  in  different  places, 
the  notice  must  be  given  within  the  following  times : 

1.  If  sent  by  mail,  it  must  be  deposited  in  the  post-office  in  time  to 
go  by  mail  the  day  following  the  day  of  dishonor,  or  if  there  be  no  mail 
at  a  convenient  hour  on  that  day,  by  the  next  mail  thereafter. 

2.  If  given  otherwise  than  through  the  post-office,  then  within  the 
time  that  notice  would  have  been  received  in  due  course  of  mail,  if  it 
had  been  deposited  in  the  post-office  within  the  time  specified  in  the 
last  subdivision. 

§  176.  When  sender  deemed  to  have  g^ven  due  notice. — Where  no- 
tice of  dishonor  is  duly  addressed  and  deposited  in  the  post-office,  the 
sender  is  deemed  to  have  given  due  notice,  notwithstanding  any  mis- 
carriage in  the  mails. 

§  177.  Deposit  in  post-office;  what  constitutes. — Notice  is  deemed 
to  have  been  deposited  in  the  post-office  when  deposited  in  any  branch 
post-office  or  in  any  letter-box  under  the  control  of  the  Post-office  De- 
partment. 

§  178.  Notice  to  subsequent  party;  time  of. — Where  a  party  re- 
ceives notice  of  dishonor,  he  has,  after  the  receipt  of  such  notice,  the 
same  time  for  giving  notice  to  antecedent  parties  that  the  holder  has 
after  the  dishonor. 

§  179.  Where  notice  must  be  sent. — Where  a  party  has  added  an 
address  to  his  signature,  notice  of  dishonor  must  be  sent  to  that 
address ;  but  if  he  has  not  given  such  address,  then  the  notice  must  be 
sent  as  follows : 

1.  Either  to  the  post-office  nearest  to  his  place  of  residence,  or  to 
the  post-office  where  he  is  accustomed  to  receive  his  letters ;  or 


§§    180-185]  ,    NOTICE    OF   DISHONOR.  884 

2.  If  he  live  in  one  place,  and  have  his  place  of  business  in  another, 
notice  may  be  sent  to  either  place ;  or 

3.  If  he  is  so  sojourning  in  another  place,  notice  may  be  sent  to  the 
place  where  he  is  sojourning. 

But  where  the  notice  is  actually  received  by  the  party  within  the 
time  specified  in  this  act,  it  will  be  sufficient,  though  not  sent  in  ac- 
cordance with  the  requirements  of  this  section. 

'  §  180.  Waiver  of  notice. — Notice  of  dishonor  may  be  waived, 
either  before  the  time  of  giving  notice  has  arrived,  or  after  the  omis- 
sion to  give  due  notice,  and  the  waiver  may  be  express  or  implied. 

§  181.  Whom  affected  by  waiver. — Where  the  waiver  is  embodied 
in  the  instrument  itself,  it  is  binding  upon  all  parties ;  but  where  it  is 
written  above  the  signature  of  an  indorser,  it  binds  him  only. 

§'  182.  Waiver  of  protest. — A  waiver  of  protest,  whether  in  the 
case  of  a  foreign  bill  of  exchange  or  other  negotiable  instrument,  is 
deemed  to  be  a  waiver  not  only  of  a  formal  protest,  but  also  of  pj-esent- 
ment  and  notice  of  dishonor. 

§  183.  When  notice  is  dispensed  with. — Notice  of  dishonor  is  dis- 
pensed with  when,  after  the  exercise  of  reasonable  diligence,  it  can- 
not be  given  to  or  does  not  reach  the  parties  sought  to  be  charged. 

§  184.  Delay  in  giving  notice;  how  excused. — Delay  in  giving  no- 
tice of  dishonor  is  excused  when  the  delay  is  caused  by  circumstances 
beyond  the  control  of  the  holder  and  not  imputable  to  his  default, 
misconduct  or  negligence.  "When  the  cause  of  delay  ceases  to  operate, 
notice  must  be  given  with  reasonable  diligence. 

§  185.  When  notice  need  not  be  given  to  drawer. — Notice  of  dis- 
honor is  not  required  to  be  given  to  the  drawer  in  either  of  the  follow- 
ing cases: 

1.  Where  the  drawer  and  drawee  are  the  same  person ; 

2.  Where  the  drawee  is  a  fictitious  person  or  a  person  not  having 
capacity  to  contract ; 

3.  Where  the  drawer  is  the  person  to  whom  the  instrument  is  pre- 
sented for  payment; 

4.  Where  the  drawer  has  no  right  to  expect  or  require  that  the 
drawee  or  acceptor  will  honor  the  instrument ; 

5.  Where  the  drawer  has  countermanded  payment. 


885  NOTICE   NEED   NOT   BE  GIVEN   INDORSEE,       [§§'   18G-200 

§  186.  When  notice  need  not  be  given  to  indorser. — jSTotice  of  dis- 
honor is  not  required  to  be  given  to  an  indorser  in  either  of  the  fol- 
lowing cases : 

1.  Where  the  drawee  is  a  fictitious  person  or  a  person  not  having 
capacity  to  contract,  and  the  indorser  was  aware  of  the  fact  at  the  time 
he  indorsed  the  instrument; 

2.  Where  the  indorser  is  the  person  to  whom  the  instrument  is  pre- 
sented for  payment; 

3.  Where  the  instrument  was  made  or  accepted  for  his  accommoda- 
tion. 

§  187.  Notice  of  non-payment  where  acceptance  refused. — Where 
due  notice  of  dishonor  by  non-acceptance  has  been  given,  notice  of  a 
subsequent  dishonor  by  non-payment  is  not  necessary,  unless  in  the 
meantime  the  instrument  has  been  accepted. 

§  188.     Effect  of  omission  to  give  notice  of  non-acceptance. — An 

omission  to  give  notice  of  dishonor  by  non-acceptance  docs  not  preju- 
dice the  rights  of  a  holder  in  due  course  subsequent  to  the  omission. 

§  189.     When  protest  need  not  be  made;  when  must  be  made. — 

Where  any  negotiable  instrument  has  been  dishonored  it  may  be  pro- 
tested for  non-acceptance  or  non-payment,  as  the  case  may  be;  but 
protest  is  not  required,  except  in  the  case  of  foreign  bills  of  exchange. 


ARTICLE  IX. 

DISCHARGE    OF    NEGOTIABLE   INSTRUMENTS. 
SEC.  SEC. 

200.  Instruments;   how  discharged.      204.  Cancellation;        .unintentional; 

201.  When   persons  secondarily   lia-  burden  of  proof. 

ble  on,  discharged.  205.  Alteration    of    instrument;     ef- 

202.  Right  of  party  who  discharges  feet  of. 

instrument.  206.  What  constitutes  a  material  al- 

203.  Renunciation  by  holder.  teration. 

§  200.  Instrument ;  how  discharged. — A  negotiable  instrument  is 
discharged : 

1.  By  payment  in  due  course  by  or  on  behalf  of  the  principal 
debtor ; 


§§    201-204]     DISCHARGE   OF    NEGOTIABLE  INSTRUMENTS.  886 

2.  By  payment  in  due  course  by  the  party  accommodated,  where 
the  instrument  is  made  or  accepted  for  accommodation ; 

3.  By  the  intentional  cancellation  thereof  by  the  holder; 

4.  By  any  other  act  which  will  discharge  a  simple  contract  for  the 
payment  of  money ; 

5.  When  the  principal  debtor  becomes  the  holder  of  the  instrument 
at  or  after  maturity  in  his  own  right. 

§  201.  When  persons  secondarily  liable  on,  discharged. — A  person 
secondarily  liable  on  the  instrument  is  discharged : 

1.  By  any  act  which  discharges  the  instrument; 

2.  By  the  intentional  cancellation  of  his  signature  by  the  holder; 

3.  By  the  discharge  of  a  prior  party ; 

4.  By  a  valid  tender  of  payment  made  by  a  prior  party. 

5.  By  a  release  of  the  principal  debtor,  unless  the  holder's  right  of 
recourse  against  the  party  secondarily  liable  is  expressly  reserved ; 

6.  By  any  agreement  binding  upon  the  holder  to  extend  the  time 
of  payment  or  to  postpone  the  holder's  right  to  enforce  the  instrument, 
unless  the  right  of  recourse  against  such  party  is  expressly  reserved. 

§  202.  Eight  of  party  who  discharges  instrument. — Where  the 
instrument  is  paid  by  a  party  secondarily  liable  thereon,  it  is  not  dis- 
charged ;  but  the  party  so  paying  it  is  remitted  to  his  former  rights  as 
regards  all  prior  parties,  and  he  may  strike  out  his  own  and  all  sub- 
sequent indorsements  and  again  negotiate  the  instrument,  except 

1.  Where  it  is  payable  to  the  order  of  a  third  person,  and  has  been 
paid  by  the  drawer ;  and 

2.  Where  it  was  made  or  accepted  for  accommodation,  and  has  been 
paid  by  the  party  accommodated. 

§  203.  Renunciation  by  holder. — The  holder  may  expressly  re- 
nounce his  rights  against  any  party  to  the  instrument  at,  before,  or 
after  its  maturity.  An  absolute  and  unconditional  renunciation  of  his 
rights  against  the  principal  debtor,  made  at  or  after  the  maturity  of 
the  instrument,  discharges  the  instrument.  But  a  renunciation  does 
not  affect  the  rights  of  a  holder  in  due  course  without  notice.  A  re- 
nunciation must  be  in  writing,  unless  the  instrument  is  delivered  up 
,  to  the  person  primarily  liable  thereon. 

§  204.  Cancellation ;  unintentional ;  burden  of  proof. — A  cancel- 
lation made  unintentionally,  or  under  a  mistake,  or  without  the  au- 


887  BILL    OF    EXCHANGE    DEFINED.  §§    205-210 

thority  of  the  holder,  is  inoperative ;  but  where  an  instrument  or  any 
signature  thereon  appears  to  have  been  canceled  the  burden  of  proof 
lies  on  the  party  who  alleges  that  the  cancellation  was  made  uninten- 
tionally, or  under  a  mistake  or  without  authority. 

§205.  Alteration  of  instrument;  effect  of. — Where  a  negotiable 
instrument  is  materially  altered  without  the  assent  of  all  parties 
liable  thereon,  it  is  avoided,  except  as  against  a  party  who  has  himself 
made,  authorized  or  assented  to  the  alteration  and  subsequent  in- 
dorsers.  But  when  an  instrument  has  been  materially  altered  and  is 
in  the  hands  of  a  holder  in  due  course,  not  a  party  to  the  alteration, 
he  may  enforce  payment  thereof  according  to  its  original  tenor. 

§  206.     What  constitutes  a  material  alteration. — Any  alteration 

which  changes: 

1.  The  date; 

2.  The  sum  payable,  either  for  principal  or  interest; 

3.  The  time  or  place  of  payment ; 

4.  The  number  or  the  relations  of  the  parties. 

5.  The   medium  or  currency  in  which  payment  is  to  be  made; 
Or  which  adds  a  place  of  payment  where  no  place  of  payment  is 

specified,  or  any  otlier  change  or  addition  which  alters  the  effect  of 
the  instrument  in  any  respect,  is  a  material  alteration. 


AETICLE  X. 

BILLS    OF   EXCHANGE FORM    AND   INTERPRETATION". 

SEC.  SEC. 

210.  Bill  of  exchange  defined.  213.  Inland  and  foreign  bills  of  ex- 

211.  Bill  not  an  assignment  of  funds  change. 

in  hands  of  drawee.  214.  "When   bill   may   be   treated   as 

212.  Bill  addressed  to  more  than  one  promissory  note. 

drawee.  '  215.  Referee  in  case  of  need. 

§  210.  Bills  of  exchange  defined. — A  bill  of  exchange  is  an  uncon- 
ditional order  in  writing  addressed  by  one  person  to  another,  signed 
by  the  person  giving  it,  requiring  the  person  to  whom  it  is  addressed 
to  pay  on  demand  or  at  a  fixed  or  determinable  future  time  a  sum 
certain  in  money  to  order  or  to  bearer. 


§§    211-215]  BILLS   OF   EXCHANGE.  888 

§  211.    Bill  not  an  assignment  of  funds  in  hands  of  drawee. — A 

bill  of  itself  does  not  operate  as  an  assignment  of  the  funds  in  the 
hands  of  the  drawee  available  for  the  payment  thereof  and  the  drawee 
is  not  liable  on  the  bill  unless  and  until  he  accepts  the  same. 

§  212.  Bill  addressed  to  more  than  one  drawee. — A  bill  may  be 
addressed  to  two  or  more  drawees  jointly,  whether  they  are  partners 
or  not ;  but  not  to  two  or  more  drawees  in  the  alternative  or  in  succes- 
sion. 

§213.  Inland  and  foreign  bills  of  exchange. — An  inland  bill  of 
exchange  is  a  bill  which  is,  or  on  its  face  purports  to  be,  both  drawn 
and  payable  within  the  state.  Any  other  bill  is  a  foreign  bill.  Unless 
the  contrary  appears  on  the  face  of  the  bill,  the  holder  may  treat  it 
as  an  inland  bill. 

§  214.  When  bill  may  be  treated  as  promissory  note. — Where  in 
a  bill  the  drawer  and  drawee  are  the  same  person,  or  where  the  drawee 
is  a  fictitious  person,  or  a  person  not  having  capacity  to  contract,  the 
holder  may  treat  the  instrument,  at  his  option,  either  as  a  bill  of  ex- 
change or  a  promissory  note. 

§  215.  Referee  in  case  of  need. — The  drawer  of  a  bill  and  any  in- 
dorser  may  insert  thereon  the  name  of  a  person  tO'  whom  the  holder 
may  resort  in  case  of  need,  that  is  to  say,  in  case  the  bill  is  dishonored 
by  non-acceptance  or  non-payment.    Such  person  is  called  the  referee  !?? 

in  case  of  need.  It  is  in  the  option  of  the  holder  to  resort  to  the  referee 
in  case  of  need  or  not  as  he  may  see  fit. 


ARTICLE  XI. 

ACCEPTANCE   OF    BILLS   OF    EXCHANGE. 
SEC.  SEC. 

220.  Acceptance;     how     made;      et     225.  Liability    of    drawee    retaining 

cetera.  or  destroying  bill. 

221.  Holder    entitled    to   acceptance     226.  Acceptance  of  incomplete  bill. 

on  face  of  bill.  227.  Kinds  of  acceptances. 

222.  Acceptance  by  separate  instru-     228.  What  constitutes  a  general  ac- 

ment.  ceptance. 

223.  Promise  to  accept;  when  equiv-     229.  Qualified  acceptance. 

alent  to  acceptance.  230.  Rights   of   parties  as  to  quali- 

224.  Time  allowed  drawee  to  accept.  fied  acceptance. 


» 


889  acceptance;  how  made,  [§§  220-226 

§  220.  Acceptance ;  how  made ;  et  cetera. — The  acceptance  of  a  bill, 
is  the  signification  by  the  drawee  of  his  assent  to  the  order  of  the 
drawer.  The  acceptance  must  be  in  writing  and  signed  by  the  drawee. 
It  must  not  express  that  the  drawee  will  perform  his  promise  by  any 
other  means  than  the  pajTnent  of  money. 

§  221.    Holder  entitled  to  acceptance  on  face  of  bill. — The  holder 

of  a  bill  presenting  tlie  same  for  acceptance  may  require  that  the  ac- 
ceptance be  written  on  the  bill  and  if  such  request  is  refused,  may 
treat  the  bill  as  dishonored. 

§  222.  Acceptance  by  separate  instrument. — Where  an  acceptance 
is  written  on  a  paper  other  than  the  bill  itself,  it  does  not  bind  the  ac- 
ceptor except  in  favor  of  a  person  to  whom  it  was  shown  and  who, 
on  the  faith  thereof,  receives  the  bill  for  value. 

§223.    Promise  to  accept;  when  equivalent  to  acceptance. — An 

unconditional  promise  in  writing  to  accept  a  bill  before  it  is  drawn  is 
deemed  an  actual  acceptance  in  favor  of  every  person  who,  upon  the 
faith  thereof,  receives  the  bill  for  value. 

§  224.  Time  allowed  drawee  to  accept. — The  drawee  is  allowed 
twenty-four  hours  after  presentment  in  which  to  decide  whether  or 
not  he  will  accept  the  bill;  but  the  acceptance  if  given  dates  as  of 
the  day  of  presentation. 

§  225.  Liability  of  drawee  retaining  or  destroying  bill. — Wliere 
a  drawee  to  whom  a  bill  is  delivered  for  acceptance  destroys  the  same, 
or  refuses  within  twenty-four  hours  after  such  delivery,  or  within  such 
other  period  as  the  holder  may  allow,  to  return  the  bill  accepted  or 
non-accepted  to  the  holder,  he  will  be  deemed  to  have  accepted  tlie 
same. 

§  226.  Acceptance  of  incomplete  bill. — A  bill  may  be  accepted  be- 
fore it  has  been  signed  by  the  drawer,  or  while  othenvise  incomplete, 
or  where  it  is  overdue,  or  after  it  has  been  dishonored  by  a  previous 
refusal  to  accept,  or  by  non-payment.  But  when  a  bill  payable  after 
sight  is  dishonored  by  non-acceptance  and  the  drawee  subsequently  ac- 
cepts it,  the  holder,  in  the  absence  of  any  different  agreement,  is 
entitled  to  have  the  bill  accepted  as  of  the  date  of  the  first  present- 
ment. 


§§    227-230]  BILLS   OP  EXCHANGE.  890 

§  227.  Kinds  of  acceptances. — An  acceptance  is  either  general  or 
qualified.  A  general  acceptance  assents  without  qualification  to  the 
order  of  the  drawer.  A  qualified  acceptance  in  express  terms  varies 
the  effect  of  the  bill  as  drawn. 

§  228.  What  constitutes  a  general  acceptance. — An  acceptance  to 
pay  at  a  particular  place  is  a  general  acceptance  unless  it  expressly 
states  that  the  bill  is  to  be  paid  there  only  and  not  elsewhere. 

§  229.     Qualified  accepance. — An  acceptance  is  qualified,  which  is : 

1.  Conditional,  that  is  to  say,  which  makes  payment  by  the  acceptor 
dependent  on  the  fulfillment  of  a  condition  therein  stated ; 

2.  Partial,  that  is  to  say,  an  acceptance  to  pay  part  only  of  the 
amount  for  which  the  bill  is  drawn ; 

3.  Local,  that  is  to  say,  an  acceptance  to  pay  only  at  a  particular 
place; 

4.  Qualified  as  to  time; 

5.  The  acceptance  of  some  one  or  more  of  the  drawees,  but  not 
of  all. 

§  230.  Rights  of  parties  as  to  qualified  acceptance. — The  holder 
may  refuse  to  take  a  qualified  acceptance,  and  if  he  does  not  obtain 
an  unqualified  acceptance,  he  may  treat  the  bill  as  dishonored  by  non- 
acceptance.  Where  a  qualified  acceptance  is  taken,  the  drawer  and  in- 
dorsers  are  discharged  from  liability  on  the  bill,  unless  they  have 
expressly  or  impliedly  authorized  the  holder  to  take  a  qualified  ac- 
ceptance, or  subsequently  assent  thereto.  When  the  drawer  or  an 
indorser  receives  notice  of  a  qualified  acceptance,  he  must  within  a 
reasonable  time  express  his  dissent  to  the  holder,  or  he  will  be  deemed 
to  have  assented  thereto. 

AKTICLE  XII. 

PRESENTMENT    OF   BILLS    OF   EXCHANGE    FOR   ACCEPTANCE. 

SEC.  SEC. 

240.  When  presentment  for  accept-    245.  When  presentment  is  excused. 

ance  must  be  made.  246.  When    dishonored    by    non-ac- 

241.  When    failure    to    present    re-  ceptance. 

leases  drawer  and  indorser.        247.  Duty  of  holder  where  bill  not 

242.  Presentment;   how  made.  accepted. 

243.  On  what  days  presentment  may    248.  Rights  of  holder  where  bill  not 

be  made.  accepted. 

244.  Presentment;     where    time    is 

insufficient. 


*f 


891  presentment;  how  made.  [§§  240-243 

§  240.  When  presentment  for  acceptance  must  be  made. — Pre- 
sentment for  acceptance  must  be  made : 

1.  Where  the  bill  is  payable  after  sight,  or  in  any  other  case  where 
presentment  for  acceptance  is  necessary  in  order  to  fix  the  maturity 
of  the  instrument ;  or 

2.  Where  the  bill  expressly  stipulates  that  it  shall  be  presented  for 
acceptance ;  or 

3.  Where  the  bill  is  drawn  payable  elsewhere  than  at  the  residence 
or  place  of  business  of  the  drawee. 

In  no  other  case  is  presentment  for  acceptance  necessary  in  order 
to  render  any  party  to  the  bill  liable. 

§  241.  When  failure  to  present  releases  drawer  and  indorser. — Ex- 
cept as  herein  otherwise  provided,  the  holder  of  a  bill  which  is  re- 
quired by  the  next  preceding  section  to  be  presented  for  acceptance 
must  either  present  it  for  acceptance  or  negotiate  it  within  a  reasona- 
ble time.  If  he  fails  to  do  so,  the  drawer  and  all  indorsers  are  dis- 
charged. 

§  242.  Presentment ;  how  made. — Presentment  for  acceptance 
must  be  made  by  or  on  behalf  of  the  holder  at  a  reasonable  hour,  on 
a  business  day,  and  before  the  bill  is  overdue,  to  the  drawee  or  some 
person  authorized  to  accept  or  refuse  acceptance  on  (his)*  behalf;  and 

1.  Where  a  bill  is  addressed  to  two  or  more  drawees  who  are  not 
partners,  presentment  must  be  made  to  them  all,  unless  one  has  au- 
thority to  accept  or  refuse  acceptance  for  all,  in  which  case  present- 
ment may  be. made  to  him  only; 

2.  Where  the  drawee  is  dead,  presentment  may  be  made  to  his  per- 
sonal representative; 

3.  Where  the  drawee  has  been  adjudged  a  bankrupt  or  an  insolvent, 
or  has  made  an  assignment  for  the  benefit  of  creditors,  presentment 
may  be  made  to  him  or  to  his  trustee  or  assignee. 

§  243.  On  what  days  presentment  may  be  made. — A  bill  may  be 
presented  for  acceptance  on  any  day  on  which  negotiable  instruments 
may  be  presented  for  payment  under  the  provisions  of  sections  one 
hundred  and  thirty-two  and  one  hundred  and  forty-five  of  this  act. 
When  Saturday  is  not  otherwise  a  holiday,  presentment  for  acceptance 
may  be  made  before  twelve  o'clock  noon  on  that  day. 

*  Word  "his"  not  in  original. 


§§  244-248]  BILLS  OP  exchange.  892 

§  244.  Presentment  where  time  is  insufficient. — Where  the  holder 
of  a  bill  drawn  payable  elsewhere  than  at  the  place  of  business  of  the 
residence  of  the  drawee  has  not  time  with  the  exercise  of  reasonable 
diligence  to  present  the  bill  for  acceptance  before  presenting  it  for 
payment  on  the  day  that  it  falls  due,  the  delay  caused  by  presenting 
the  bill  for  acceptance  before  presenting  it  for  pa}Tnent  is  excused 
and  does  not  discharge  the  drawers  and  indorsers. 

§  245.  Where  presentment  is  excused. — Presentment  for  accept- 
ance is  excused  and  a  bill  may  be  treated  as  dishonored  by  non- 
acceptance  in  either  of  the  following  cases : 

1.  Where  the  drawee  is  dead  or  has  absconded,  or  is  a  fictitious  per- 
son or  person  not  having  capacity  to  contract  by  bill ; 

2.  Where  after  the  exercise  of  reasonable  diligence,  presentment 
cannot  be  made ; 

3.  Where  although  presentment  has  been  irregular,  acceptance  has 
been  refused  on  some  other  ground. 

§  246.  When  dishonored  by  non-acceptance. — A  bill  is  dishonored 
by  non-acceptance : 

1.  When  it  is  duly  presented  for  acceptance,  and  such  an  accept- 
ance as  is  prescribed  by  this  act  is  refused  or  cannot  be  obtained;  or 

2.  When  presentment  for  acceptance  is  excused  and  the  bill  is  not 
accepted. 

§  247.  Duty  of  holder  where  bill  not  accepted. — Where  a  bill  is 
duly  presented  for  acceptance  and  is  not  accepted  within  the  prescribed 
time,  the  person  presenting  it  must  treat  the  bill  as  dishonored  by 
non-acceptance  or  he  loses  the  right  of  recourse  against  the  drawer  and 
indorsers. 

§  248.  Rights  of  holder  where  bill  not  accepted. — When  a  bill  is 
dishonored  by  non-acceptance,  an  immediate  right  of  recourse  against 
the  drawers  and  indorsers  accrues  to  the  holder  and  no  presentment 
for  payment  is  necessary. 


SEC. 

SEC. 

260. 

In    what   cases    protest   neces- 
sary. 

265. 

261. 

Protest;  how  made. 

266 

262. 

Protest;   by  whom  made. 

263. 

Protest;  when  to  be  made. 

267 

264. 

Protest;  where  made. 

268 

893;  peotest;  how  made.  [§§'  260-26-i 


AETICLE  XIII. 

PROTEST   OF   BILLS    OF   EXCHANGE. 

Protest  both  for  non-acceptance 
and  non-payment. 
266.  Protest  before  maturity  where 
acceptor  insolvent. 

When  protest  dispensed  with. 

Protest;    where  bill   is  lost,  et 
cetera. 

§  260.  In  what  cases  protest  necessary. — Where  a  foreign  bill  ap- 
pearing on  its  face  to  be  such  is  dishonored  by  non-acceptance,  it  must 
be  duly  protested  for  non-acceptance,  and  where  such  a  bill  has  not 
previously  been  dishonored  by  non-acceptance  is  dishonored  by  non- 
payment, it  must  be  duly  protested  for  non-payment.  If  it  is  not  so 
protested,  the  drawer  and  indorsers  are  discharged.  Where  a  bill  does 
not  appear  on  its  face  to  be  a  foreign  bill,  protest  thereof  in  case  of 
dishonor  is  unnecessary. 

§261. — Protest;  how  made. — The  protest  must  be  annexed  to  the 
bill,  or  must  contain  a  copy  thereof,  and  must  be  under  the  hand  and 
seal  of  the  notary  making  it,  and  must  specify : 

1.  The  time  and  place  of  presentment; 

2.  The  fact  that  presentment  was  made  and  the  manner  thereof; 

3.  The  cause  or  reason  for  protesting  the  bill ; 

4.  The  demand  made  and  the  answer  given,  if  any,  or  the  fact 
that  the  drawee  or  acceptor  could  not  be  found. 

§  262.     Protest;  by  whom  made. — Protest  may  be  made  by: 

1.  A  notary  public ;  or 

2.  By  any  respectable  resident  of  tlie  place  where  the  bill  is  dis- 
honored, in  the  presence  of  two  or  more  credible  witnesses. 

§  263.  Protest;  when  to  be  made. — When  a  l)il]  is  protested,  such 
protest  must  be  made  on  the  day  of  its  dislionor,  unless  delay  is  ex- 
cused as  herein  provided.  When  a  bill  has  been  duly  noted,  the  pro- 
test may  be  subsequently  extended  as  of  the  date  of  the  noting. 

§  264.  Protest ;  where  made. — A  bill  must  be  protested  at  the  place 
where  it  is  dishonored,  except  that  when  a  bill  dra\\'n  payable  at  the 


§§  265-268]  BILLS  OF  exchange.  894 

place  of  business  or  residence  of  some  person  other  than  the  drawee, 
has  been  dishonored  by  non-acceptance,  it  must  be  protested  for  non- 
payment at  the  place  where  it  is  expressed  to  be  payable,  and  no  fur- 
ther presentment  for  payment  to,  or  demand  on,  the  drawee  is  neces- 
sary. 

§  265.  Protest  both  for  non-acceptance  and  non-payment. — A  bill 
which  has  been  protested  for  non-acceptance  may  be  subsequently  pro- 
tested for  non-payment. 

§  266.  Protest  before  maturity  where  acceptor  insolvent. — Where 
the  acceptor  has  been  adjudged  a  bankrupt  or  an  insolvent  or  has 
made  an  assignment  for  the  benefit  of  creditors,  before  the  bill  ma- 
tures, the  holder  may  cause  the  bill  to  be  protested  for  better  security, 
against  the  drawer  and  indorsers. 

§  267.  When  protest  dispensed  with. — Protest  is  dispensed  with 
by  any  circumstances  which  would  dispense  with  notice  of  dishonor. 
Delay  in  noting  or  protesting  is  excused  when  delay  is  caused  by  cir- 
cumstances beyond  the  control  of  the  holder  and  not  imputable  to  his 
default,  misconduct,  or  negligence.  When  the  cause  of  delay  ceases 
to  operate  the  bill  must  be  noted  or  protested  with  reasonable  dili- 
gence. 

§  268.  Protest  where  bill  is  lost,  et  cetera. — Where  a  bill  is  lost  or 
destroyed  or  is  wrongly  detained  from  the  person  entitled  to  hold  it, 
protest  may  be  made  on  a  copy  or  written  particulars  thereof. 


ARTICLE  XIV. 

ACCEPTANCE  OF  BILLS  OF  EXCHANGE  FOR  HONOR. 
SEC.  SEC. 

280.  When  bill  may  be  accepted  for    285.  Maturity  of  bill  payable  after 

honor.  sight;  accepted  for  honor. 

281.  Acceptance     for     honor;     how    286.  Protest    of    bill    accepted    for 

made.  honor,  et  cetera. 

282.  "When  deemed  to  be  an  accept-    287.  Presentment  for  payment  to  ac- 

ance  for  honor  of  the  drawer.  ceptor  for  honor;   how  made. 

283.  Liability  of  acceptor  for  honor.     288.  When  delay  in  making  present- 

284.  Agreement      of      acceptor      for  ment  is  excused. 

honor.  289.  Dishonor  of  bill  by  acceptor  for 

honor. 


895  ACCEPTANCE   FOR   HONOR;    HOW    MADE.        [§§    280-286 

§  280.  When  bill  may  be  accepted  for  honor. — Where  a  bill  of  ex- 
change has  been  protested  for  dishonor  by  non-acceptance  or  protested 
for  better  security,  and  is  not  overdue,  any  person  not  being  a  party 
already  liable  thereon,  may,  with  the  consent  of  the  holder,  intervene : 
and  accept  the  bill  supra  protest  for  the  honor  of  any  party  liable' 
thereon  or  for  the  honor  of  the  person  for  whose  account  the  bill  is 
drawn.  The  acceptance  for  honor  may  be  for  part  only  of  the  sum 
for  which  the  bill  is  drawn ;  and  where  there  has  been  an  acceptance 
for  honor  for  one  party,  there  may  be  a  further  acceptance  by  a  differ- 
ent person  for  the  honor  of  another  party. 

§  281.  Acceptance  for  honor;  how  made. — An  acceptance  for  honor 
supra  protest  must  be  in  writing  and  indicate  that  it  is  an  acceptance 
for  honor,  and  must  be  signed  by  the  acceptor  for  honor. 

§  282.  When  deemed  to  be  an  acceptance  for  honor  of  the  drawer. 
— Where  an  acceptance  for  honor  does  not  expressly  state  for  whose 
honor  it  is  made,  it  is  deemed  to  be  an  acceptance  for  the  honor  of  the 
drawer, 

§  283.  Liability  of  acceptor  for  honor. — The  acceptor  for  honor  is 
liable  to  the  holder  and  to  all  parties  to  the  bill  subsequent  to  the 
party  for  whose  honor  he  has  accepted. 

§  284.  Agreement  of  acceptor  for  honor. — The  acceptor  for 
honor  by  such  acceptance  engages  that  he  will  on  due  presentment 
pay  the  bill  according  to  the  terms  of  his  acceptance,  provided  it  shall 
not  have  been  paid  by  the  drawee,  and  provided  also,  that  it  shall  have 
been  duly  presented  for  payment  and  protested  for  non-payment  and 
notice  of  dishonor  given  to  him. 

§  285.     Maturity  of  bill  payable  after  sight ;  accepted  for  honor. — 

Where  a  bill  payable  after  sight  is  accepted  for  honor,  its  maturity  is 
calculated  from  the  date  of  the  noting  for  r  on-acceptancc  and  not 
from  the  date  of  the  acceptance  for  bonor. 

§  286.  Protest  of  bill  accepted  for  honor,  et  cetera. — Where  a  dis- 
honored bill  has  been  accepted  for  honor  supra  protest  or  contains  a 
reference  in  case  of  need,  it  must  be  protested  for  non-payment  before 
it  is  presented  for  payment  to  the  acceptor  for  honor  or  referee  in 
case  of  need. 


§§    287-302J  BILLS   OF   EXCHANGE.  896 

§  287.     Presentment  for  payment  to  acceptor  for  honor;  how  made. 

— Presentment  for  payment  to  the  acceptor  for  honor  must  be  made 
as  follows : 

1.  If  it  is  to  be  presented  in  the  place  where  the  protest  for  non- 
payment was  made,  it  must  be  presented  not  later  than  the  day  fol- 
lowing its  maturity ; 

2.  If  it  is  to  be  presented  in  some  other  place  than  the  place  where 
it  was  protested,  then  it  must  be  forwarded  within  the  time  specified 
in  section  175. 

§  288.  When  delay  in  making  presentment  is  excused. — The  pro- 
visions of  section  141  apply  where  there  is  delay  in  making  present- 
ment to  the  acceptor  for  honor  or  referee  in  case  of  need. 

§  289.  Dishonor  of  bill  by  acceptor  for  honor. — When  the  bill  is 
dishonored  by  the  acceptor  for  honor  it  must  be  protested  for  non- 
payment by  him. 

AETICLE  XV. 

(  PAYMENT  OF  BILLS   OF  EXCHANGE  FOR  HONOR. 
SEC.  SEC. 

300.  Who    may    take    payment    for    304.  Effect    on    subsequent    parties 

honor.  where  bill  is  paid  for  honor. 

301.  Payment  for  honor;  how  made.('  305.  Where    holder    refuses    to    re- 

302.  Declaration  before  payment  for  ceive  payment  supra  protest. 

honor.  306.  Rights  of  payer  for  honor. 

303.  Preference    of   parties   offering 

to  pay  for  honor. 

§  300.  Who  may  make  paymeg]for  honor. — Where  a  bill  has  been 
protested  for  non-payment,  any'^  person  may  intervene  and  pay  it 
supra  protest  for  the  honor  of  any  person  liable  thereon  or  for  the 
honor  of  the  person  for  whose  account  it  was  drawn. 

§301.  Payment  for  honor;  how  made. — The  payment  for  honor 
supra  protest  in  order  to  operate  as  such  and  not  as  a  mere  voluntary 
payment  must  be  attested  by  a  notarial  act  of  honor  which  may  be 
appended  to  the  protest  or  form  an  extension  to  it. 

§  302.  Declaration  before  payment  for  honor. — The  notarial  act 
of  honor  must  be  founded  on  a  declaration  made  by  the  payer  for 


897  EIGHTS    OF   TAYER   FOR   IIOXOR.  [§§'   303-311 

honor  or  by  his  agent  in  that  behalf  declaring  his  intention  to  pay 
the  bill  for  honor  and  for  whose  honor  he  pays. 

§  303.     Preference  of  parties  offering  to  pay  for  honor, — Where 

two  or  more  persons  offer  to  pay  a  bill  for  the  honor  of  different  par- 
ties, the  person  whose  payment  will  discharge  most  parties  to  the  bill 
is  to  be  given  the  preference. 

§  304.     Effect  on  subsequent  parties  where  bill  is  paid  for  honor. — 

"Where  a  bill  has  been  paid  for  honor  all  parties  subsequent  to  the 
party  for  whose  honor  it  is  paid  are  discharged,  but  the  payor  for 
honor  is  subrogated  for,  and  succeeds  to,  both  the  rights  and  duties  of 
the  holder  as  regards  the  party  for  whose  honor  he  pays  and  all  par- 
ties liable  to  the  latter. 

§  305.     Where  holder  refuses  to  receive  payment  supra  protest. — 

Where  the  holder  of  a  bill  refuses  to  receive  payment  supra  protest,  he 
loses  his  right  of  recourse  against  any  party  who  would  have  been  dis- 
charged by  such  payment. 

§  306.  Rights  of  payer  for  honor. — The  payer  for  honor  on  pay- 
ing to  the  holder  the  amount  of  the  bill  and  the  notarial  expenses 
incidental  to  its  dishonor,  is  entitled  to  receive  both  the  bill  itself  and 
the  protest. 

ARTICLE  XVI. 

BILLS   IN   A   SET. 
SEC.  SEC. 

310.  Bills  in  sets  constitute  one  bill.     313.  Acceptance   of   bills    drawn    in 

311.  Rights  of  holders  where  differ-  sets. 

ent  parts  are  negotiated.  314.  Payment   by   acceptor   of   bills 

312.  Liability    of    holder    who    in-  drawn  in  sets. 

dorses  two  or  more  parts  of     315.  Effect  of  discharging  one  of  a 
a  set  to  different  persons.  set. 

§  310.  Bills  in  sets  constitute  one  bill. — Where  a  bill  is  drawn  in 
a  set,  each  part  of  the  set  being  numbered  and  containing  a  reference 
to  the  other  parts,  the  whole  of  the  parts  constitute  one  bill. 

§  311.     Rights  of  holders  where  different  parts  are  negotiated. — 
Where  two  or  more  parts  of  a  set  are  negotiated  to  different  holders  in 
Joyce  Defenses — 57. 


§§    312-320]  PROMISSORY   NOTES   AND   CHECKS.  898 

due  course,  the  holder  whose  title  first  accrues  is  as  between  such 
holders  the  true  owner  of  the  bill.  But  nothing  in  this  section  affects 
the  rights  of  a  person  who  in  due  course  accepts  or  pays  the  part  first 
presented  to  him. 

§  312.  Liability  of  holder  who  indorses  two  or  more  parts  of  a  set 
to  different  persons. — Where  the  holder  of  a  set  indorses  two  or  more 
parts  to  different  persons  he  is  liable  on  every  such  part,  and  every 
indorsor  subsequent  to  him  is  liable  on  the  part  he  has  himself  in- 
dorsed, as  if  such  parts  were  separate  bills. 

§  313.  Acceptance  of  bills  drawn  in  sets. — The  acceptance  may  be 
written  on  any  part  and  it  must  be  written  on  one  part  only.  If  the 
drawee  accepts  more  than  one  part,  and  such  accepted  parts  are  nego- 
tiated to  different  holders  in  due  course,  he  is  liable  on  every  such 
part  as  if  it  were  a  separate  bill. 

§  314.  Payment  by  acceptor  of  bills  drawn  in  sets. — When  the  ac- 
ceptor of  a  bill  drawn  in  a  set  pays  it  without  requiring  the  part  bear- 
ing his  acceptance  to  be  delivered  up  to  him,  and  that  part  at  maturity 
is  outstanding  in  the  hands  of  a  holder  in  due  course,  he  is  liable  to 
the  holder  thereon. 

§  315.  Effect  of  discharging  one  of  a  set. — Except  as  herein  other- 
wise provided,  where  any  one  part  of  a  bill  drawn  in  a  set  is  discharged 
by  payment  or  otherwise  the  whole  bill  is  discharged. 


AETICLE  XVII. 

PROMISSORY    XOTES   AND    CHECKS, 
SEC.  SEC. 

320.  Promissory  note  defined.  324.  Effect   where   holder   of   check 

321.  Check  defined.  procures  it  to  be  certified. 

322.  Within  what  time  a  check  must    325.  When  check  operates  as  an  as- 

be  presented.  signment. 

323.  Certification  of  a  check;   effect 

of. 

§  320.     Promissory  note   defined. — A   negotiable   promissory  note 
within  the  meaning  of  this  act  is  an  unconditional  promise  in  writing 


899  CHECK   DEFINED.  [§§    321-330 

made  by  one  person  to  another  signed  by  the  maker  engaging  to  pay 
on  demand  or  at  a  fixed  or  determinable  future  time,  a  sum  certain 
in  money  to  order  or  to  bearer.  Where  a  note  is  drawn  to  the  maker's 
own  order,  it  is  not  complete  until  indorsed  by  him, 

§  321.  Check  defined. — A  check  is  a  bill  of  exchange  drawn  on  a 
bank  payable  on  demand.  Except  as  herein  otherwise  provided,  the 
provisions  of  this  act  applicable  to  a  bill  of  exchange  payable  on  de- 
mand apply  to  a  check. 

§  322.  Within  what  time  a  check  must  be  presented. — A  check 
must  be  presented  for  payment  within  a  reasonable  time  after  its  issue 
or  the  drawer  will  be  discharged  from  liability  thereon  to  the  extent  of 
the  loss  caused  by  the  delay. 

§  323.  Certification  of  check;  effect  of. — Where  a  check  is  certi- 
fied by  a  bank  on  which  it  is  drawn  the  certification  is  equivalent  to 
an  acceptance. 

§  324.    Effect  where  the  holder  of  check  procures  it  to  be  certified. 

— Where  the  holder  of  a  check  procures  it  to  be  accepted  or  certified 
the  drawer  and  all  indorsers  are  discharged  from  liability  thereon. 

§  325.  When  check  operates  as  an  assignment. — A  check  of  itself 
does  not  operate  as  an  assignment  of  any  part  of  the  funds  to  the 
credit  of  the  drawer  with  the  bank,  and  the  bank  is  not  liable  to  the 
holder,  unless  and  until  it  accepts  or  certifies  the  check. 


AETICLE  XVIII. 

NOTES  GIVEN   FOR  PATENT  RIGHTS  AND  FOR  A  SPECULATIVE   CON- 
SIDERATION. 

SEC.  SEC. 

330.  Negotiable    instruments    given     332.  How  negotiable  bonds  are  made 

for  patent  rights.  non-negotiable. 

331.  Negotiable    instruments    given 

for    a   speculative    considera- 
tion. 

§  330.     Negotiable  instruments  given  for  patent  rights. — A  prom- 
issory note  or  other  negotiable  instrument,  the  consideration  of  which 


§§   331,   332]  NOTES  GIVEN   FOR  PATENT  RIGHTS.  900 

consists  wholly  or  partly  of  the  right  to  make,  use  or  sell  any  inven- 
tion claimed  or  represented  by  the  vendor  at  the  time  of  sale  to  be 
patented,  must  contain  the  words  "given  for  a  patent  right"  promi- 
nently and  legibly  written  oy  printed  on  the  face  of  such  note  or  in- 
strument above  the  signature  thereto ;  and  such  note  or  instrument  in 
the  hands  of  any  purchaser  or  holder  is  subject  to  the  same  defenses 
as  in  the  hands  of  the  original  holder ;  but  this  section  does  not  apply 
to  a  negotiable  instrument  given  solely  for  the  purchase-price  or  the 
use  of  a  patented  article. 

§  331.    Negotiable  instruments  for  a  speculative  consideration. — 

If  the  consideration  of  a  promissory  note  or  other  negotiable  instru- 
ment consists  in  whole  or  in  part  of  the  purchase-price  of  any  farm 
product,  at  a  price  greater  by  at  least  four  times  than  the  fair  market 
value  of  the  same  product  at  the  time,  in  the  locality,  or  of  the  mem- 
bership and  rights  in  an  association,  company  or  combination  to  pro- 
duce or  sell  any  farm  product  at  a  fictitious  rate,  or  of  a  contract  or 
bond  to  purchase  or  sell  any  farm  product  at  a  price  greater  by  four 
times  than  the  market  value  of  the  same  product  at  the  time  in  the 
locality,  the  words,  "given  for  a  speculative  consideration,"  or  other 
words  clearly  showing  the  nature  of  the  consideration  must  be  promi- 
nently and  legibly  written  or  printed  on  the  face  of  such  note  or  in- 
strument above  the  signature  thereof ;  and  such  note  or  instrument,  in 
the  hands  of  any  purchaser  or  holder,  is  subject  to  the  same  defenses 
as  in  the  hands  of  the  original  owner  or  holder. 

§332.     How   negotiable    bonds    are   made    non-negotiable. — The 

owner  or  holder  of  any  corporate  or  municipal  bond  or  obligation 
(except  such  as  are  designated  to  circulate  as  money,  payable  to 
bearer),  heretofore  or  hereafter  issued  in  and  payable  in  this  state, 
but  not  registered  in  pursuance  of  any  state  law,  may  make  such 
bond  or  obligation,  or  the  interest  coupon  accompanying  the  same, 
non-negotiable,  by  subscribing  his  name  to  a  statement  indorsed 
thereon,  that  such  bond,  obligation  or  coupon  is  his  property;  and 
thereon  the  principal  sum  therein  mentioned  is  payable  only  to  such 
owner  or  holder,  or  his  legal  representatives  or  assigns,  unless  such 
bond,  obligation  or  coupon  be  transferred  by  indorsement  in  blank, 
or  payable  to  bearer,  or  to  order,  with  the  addition  of  the  assignor's 
place  of  residence. 


901  .         LAWS   REPEALED.  [§§    340,    341 

AETICLE  XIX. 

LAWS  repealed;   WHEN"   TO   TAKE  EFFECT. 
SEC.  SEC. 

340.  Laws  repealed.       '  341.  When  to  take  effect. 

§340.     Laws  repealed. — The  laws  or  parts  thereof  specified  in  the 
schedule  hereto  annexed  are  hereby  repealed. 

§  341.     When  to  take  effect. — This  chapter  shall  take  effect  on  the 
first  day  of  October,  1897. 

Revised  Statutes.        Sections.  Subject-Matter. 

R.  S.,  pt.  11,  ch.  4,  tit  11.. All Bills  and  Notes. 

Laws  of —        Chap.  Sections.  Subject-Matter. 

1835 141 All ....  Notice  of  protest ;  how  given. 

1857 416 All Commercial  paper. 

1865 309 All Protest  of  foreign  bills,  etc. 

1870 438 All.... Negotiability    of    corporate    bonds, 

how  limited. 

1871 84 All.  ...Negotiable  bonds;  how  made  non- 
negotiable. 

1873 595 All...  .Negotiable  bonds;  how  made  nego- 
tiable. 

1877 65 1,  3. ..  .Negotiable    instruments    given    for 

patent  rights. 

1887 461 All.... Effect  of  holidays  upon  payment  of 

commercial  paper. 

1888 229 All One   hundredth   anniversary  of  the 

inauguration  of  George  Washing- 
ton. 

1891 262 1 Negotiable  instruments  given  for  a 

speculative  consideration. 

1894 607 All Days  of  grace  abolished. 


BILLS  OF  EXCHANGE  ACT. 


(45  and  46  Vict.  c.  61.) 


AN"    ACT    TO    CODIFY    THE    LAW    RELATING    TO    BILLS    OF    EXCHANGE, 
CHEQUES   AND   PROMISSORY   NOTES. 


PART  I. 

PRELIMINAEY. 
SEC. 

1.  Short  title. 

2.  Interpretation  of  terms. 

PART  II. 

BILLS  OF  EXCHANGE. 

Form  and  Interpretation. 

3.  Bill  of  exchange  defined. 

4.  Inland  and  foreign  bills. 

5.  Effect    where    different    parties 

to  bill  are  the  same  person. 

6.  Address  to  drawee. 

7.  Certainty  required  as  to  payee. 

8.  What  bills  are  negotiable. 

9.  Sum  payable. 

10.  Bill  payable  on  demand. 

11.  Bill  payable  at  a  future  time. 

12.  Omission  of  date  in  bill  payable 

after  date. 

13.  Ante-dating  and  post-dating. 

14.  Computation    of    time    of    pay- 

ment. 

15.  Case  of  need. 

16.  Optional  stipulation. 

17.  Definition  and  requisites  of  ac- 

ceptance. 

18.  Time  for  acceptance. 

19.  General     and    qualified     accept- 

ances. 

20.  Inchoate  instruments. 

21.  Delivery. 


Capacity  and  Authority  of  Parties. 

SEC. 

22.  Capacity  of  parties. 

23.  Signature  essential  to  liability. 

24.  Forged   or   unauthorized   signa- 

ture. 

25.  Procuration  signatures. 

26.  Persons  signing  as  agent  or  in 

representative  capacity. 

The  Consideration  for  a  Bill. 

27.  Value  and  holder  for  value. 

28.  Accommodation  bill  or  party. 

29.  Holder  in  due  course. 

30.  Presumption  of  value  and  good 

faith. 

Negotiation  of  Bills, 

31.  Negotiation  of  bill. 

32.  Requisites   of    a   valid    indorse- 

ment. 

33.  Conditional  indorsement. 

34.  Indorsement  in   blank  and  spe- 

cial indorsement. 

35.  Restrictive  indorsement. 

36.  Negotiation   of   overdue  or  dis- 

honored bill. 

37.  Negotiation  of  bill  to  party  al- 

ready liable  thereon. 

38.  Rights  of  the  holder. 

General  Duties  of  the  Holder. 

39.  When    presentment    for    accept- 

ance is  necessary. 

40.  Time  for  presenting  bill  payable 

after  sight. 


902 


903 


BILLS    OF   EXCHANGE   ACT. 


[§    1 


41.  Rules  as  to  presentment  for  ac- 

ceptance, and  excuses  for  non- 
presentment. 

42.  Non-acceptance. 

43.  Dishonor  by  non-acceptance  and 

its  consequences. 

44.  Duties    as    to    qualified    accept- 

ances. 

45.  Rules    as    to    presentment    for 

payment. 

46.  Excuses    for    delay    or    non-pre- 

sentment for  payment. 

47.  Dishonor  by  non-payment. 

48.  Notice    of    dishonor    and    effect 

of  non-notice. 

49.  Rules  as  to  notice  of  dishonor. 

50.  Excuses  for  non-notice  and  de- 

lay. 
61.  Noting  or  protest  of  bill. 

52.  Duties    of    holder    as    regards 

drawee  or  acceptor. 

LiaHlities  of  Parties. 

53.  Bill  not  assignment  of  funds  in 

hands  of  drawee. 

54.  Liability  of  acceptor. 

55.  Liability  of  drawer  or  indorser. 

56.  Stranger   signing   bill   liable   as 

indorser. 

57.  Measure  of  damages  against  par- 

ties to  dishonored  bill. 

58.  Transferor     by     delivery     and 

transferee. 

Discharge  of  Bill. 

59.  Payment  in  due  course. 

60.  Banker    paying    demand     draft 

whereon     indorsement     i  s 
forged. 

61.  Acceptor  the  holder  at  maturity. 

62.  Express  waiver. 
■  63.  Cancellation. 

64.  Alteration  of  bill. 

Acceptance  and  Payment  for  Honor. 

65.  Acceptance  for  honor  supra  pro- 

test. 

66.  Liability  of  acceptor  for  honor. 


SEC. 

67.  Presentment     to     acceptor     for 

honor. 

68.  Payment   for   honor   supra  pro- 

test. 

Lost  Instruments. 

69.  Holder's    right   to    duplicate    of 

lost  bill. 

70.  Action  on  lost  bill. 

Bill  in  a  Set. 

71.  Rules  as  to  sets. 

Conflict  of  Laws, 

72.  Rules  where  laws  conflict. 

PART  in. 

CHEQUES   ON   A  BANKEB. 

73.  Cheque  defined. 

74.  Presentment  of  cheque  for  pay- 

ment. 

75.  Revocation  of   banker's   author- 

ity. 

Crossed  Cheques. 

76.  General    and    special    crossings 

defined. 

77.  Crossing  by  drawer  or  after  is- 

sue. 

78.  Crossing    a    material     part    of 

cheque. 

79.  Duties  of  banker  as  to  crossed 

cheques. 

80.  Protection     to     banker     and 

drawer      where      cheque      is 
crossed. 

81.  Effect  of  crossing  on  holder. 

82.  Protection  to  collecting  banker. 

PART  IV. 

PROMISSOUY   XOTES. 

83.  Promissory  note  defined, 

84.  Delivery  necessary. 

85.  Joint  and  several  notes. 

86.  Note  payable  on  demand. 

87.  Presentment    of    note    for    pay- 

ment. 

88.  Liability  of  maker. 

89.  Application  of  Part  II  to  notes. 


§§    1-2]  PRELIMINARY.  904: 


PART  V.  SEC. 

96.  Repeal. 


97.  Savings. 

98.  Saving   of   summary   diligence 

in  Scotland. 

99.  Construction   with    other   acts, 

&c. 
100.  Parol  evidence  allowed  in  cer- 
tain  judicial   proceedings   in 
Scotland. 


SUPPLEMENTARY, 
SEC. 

90.  Good  faith. 

91.  Signature. 

92.  Computation  of  time. 

93.  When     noting     equivalent     tO 

protest. 

94.  Protest   when   notary   not   ac- 

cessible. 

95.  Dividend     warrants     may     be  SCHEDULES, 

crossed.  fiest  schedule. 

SECOND  schedule. 

Be  it  enacted  by  the  Queen's  Most  Excellent  Majesty,  by  and  with 
ithe  advice  and  consent  of  the  Lords  Spiritual  and  Temporal,  and 
Commons,  in  this  present  Parliament  assembled^  and  by  the  authority 
of  the  same,  as  follows : 

PART  I. 

PRELIMINARY. 

1.  Short  title. — This  act  may  be  cited  as  the  Bills  of  Exchange 
Act,  1882. 

2.  Interpretation  of  terms. — In  this  act,  unless  the  context  other- 
owise  requires, — 

"Acceptance''  means  an  acceptance  completed  by  delivery  or  notifi- 
cation. 

"Action"  includes  counter-claims  and  set-off. 

"Banker"  includes  a  body  of  persons  whether  incorporated  or  not 
who  carry  on  the  business  of  banking. 

"Bankrupt"  includes  any  person  whose  estate  is  vested  in  a  trustee 
or  assignee  under  the  law  for  the  time  being  in  force  relating  to 
bankruptcy. 

"Bearer"  means  the  person  in  possession  of  a  bill  or  note  which  is 
payable  to  bearer. 

"Bill"  means  bill  of  exchange,  and  "note"  means  promissory  note. 

"Delivery"  means  transfer  of  possession,  actual  or  constructive, 
from  one  person  to  another. 

"Holder"  means  the  payee  or  indorsee  of  a  bill  or  note  who  is  in 
possession  of  it,  or  the  bearer  thereof. 

"Indorsement"  means  an  indorsement  completed  by  delivery. 

"Issue"  means  the  first  delivery  of  a  bill  or  note,  complete  in  form 
to  a  person  who  takes  it  as  a  holder. 


905  BILLS    OF    EXCHANGE   ACT    DEFINED.  [§§    3, 

"Person"  includes  a  body  of  persons  whether  incorporated  or  not. 

"Value"  means  valuable  consideration. 

"Written"  includes  printed,  and  "writing"  includes  print. 


PART  II. 

BILLS    OF   EXCHANGE. 

Form  and  Interpretation. 

3.  Bill  of  exchange  defined. — (1)  A  bill  of  exchange  is  an  un- 
,conditional  order  in  writing,  addressed  by  one  person  to  another, 
signed  by  the  person  giving  it,  requiring  the  person  to  whom  it  is  ad- 
dressed to  pay  on  demand  or  at  a  fixed  or  determinable  future  time  a 
sum  certain  in  money  to  or  to  the  order  of  a  specified  person,  or  to 
bearer. 

(2)  An  instrument  which  does  not  comply  with  these  conditions, 
or  which  orders  any  act  to  be  done  in  addition  to  the  payment  of 
money,  is  not  a  bill  of  exchange. 

(3)  An  order  to  pay  out  of  a  particular  fund  is  not  unconditional 
within  the  meaning  of  this  section;  but  an  unqualified  order  to  pay, 
coupled  with  (a)  an  indication  of  a  particular  fund  out  of  which  the 
drawee  is  to  reimburse  himself  or  a  particular  account  to  be  debited 
with  the  amount,  or  (b)  a  statement  of  the  transaction  which  gives 
rise  to  the  bill,  is  unconditional. 

(4)  A  bill  is  not  invalid  by  reason — 

(a)  That  it  is  not  dated ; 

(b)  That  it  does  not  specify  the  value  given,  or  that  any  value  has 
been  given  therefor ; 

(c)  That  it  does  not  specify  the  place  where  it  is  drawn  or  the  place 
where  it  is  payable. 

4.  Inland  and  foreign  bills. — (1)  An  inland  bill  is  a  bill  which 
is  or  on  the  face  of  it  purports  to  be  (a)  both  drawn  and  payable 
within  the  British  Islands,  or  (b)  drawn  within  the  British  Islands 
upon  some  person  resident  therein.   Any  other  bill  is  a  foreign  bill. 

For  the  purposes  of  this  act  "British  Islands"  mean  any  part  of  the 
United  Kingdom  of  Great  Britain  and  Ireland,  the  islands  of  Man, 
Guernsey,  Jersey,  Alderney,  and  Sark,  and  the  islands  adjacent  to 
any  of  them  being  part  of  the  dominions  of  her  Majesty. 


§§    5-8]  BILLS    OF    EXCHANGE.  906 

(2)  Unless  the  contrary  appear  on  the  face  of  the  bill  the  holder 
may  treat  it  as  an  inland  bill. 

5.  Effect  where  different  parties  to  bill  are  the  same  person. — 

(1)    A  bill  may  be  drawn  payable  to,  or  to  the  order  of,  the  drawer; 
or  it  may  be  drawn  payable  to,  or  to  the  order  of,  the  drawee. 

(2)  Where  in  a  bill  drawer  and  drawee  are  the  same  person,  or 
where  the  drawee  is  a  fictitious  person  or  a  person  not  having  capacity 
to  contract,  the  holder  may  treat  the  instrument,  at  his  option,  either 
as  a  bill  of  exchange  or  as  a  promissory  note. 

6.  Address  to  drawee. — (1)  The  drawee  must  be  named  or  other- 
wise indicated  in  a  bill  with  reasonable  certainty. 

(2)  A  bill  may  be  addressed  to  two  or  more  drawees  whether  they 
are  partners  or  not,  but  an  order  addressed  to  two  drawees  in  the  al- 
ternative or  two  or  more  drawees  in  succession  is  not  a  bill  of  ex- 
change. 

7.  Certainty  required  as  to  payee. — (1)  Where  a  bill  is  not  payable 
to  bearer,  the  payee  must  be  named  or  otherwise  indicated  therein  with 
reasonable  certainty. 

(2)  A  bill  may  be  made  payable  to  two  or  more  payees  jointly,  or 
it  may  be  made  payable  in  the  alternative  to  one  of  two,  or  one  of 
some  of  several  payees.  A  bill  may  also  be  made  payable  to  the  holder 
of  an  office  for  the  time  being. 

(3)  Where  the  payee  is  a  fictitious  or  non-existing  person  the  bill 
may  be  treated  as  payable  to  bearer. 

8.  What  bills  are  negotiable. —  (1)  When  a  bill  contains  words 
prohibiting  transfer,  or  indicating  an  intention  that  it  should  not  be 
transferable,  it  is  valid  as  between  the  parties  thereto,  but  is  not  ne- 
gotiable. 

(2)  A  negotiable  bill  may  be  payable  either  to  order  or  to  bearer. 

(3)  A  bill  is  payable  to  bearer  which  is  expressed  to  be  so  payable, 
or  on  which  the  only  or  last  indorsement  is  an  indorsement  in  blank. 

(4)  A  bill  is  payable  to  order  which  is  expressed  to  be  so  payable, 
or  which  is  expressed  to  be  payable  to  a  particular  person,  and  does 
not  contain  words  prohibiting  transfer  or  indicating  an  intention  that 
it  should  not  be  transferable. 

(5)  'Where  a  bill,  either  originally  or  by  indorsement,  is  expressed 
to  be  payable  to  the  order  of  a  specified  person,  and  not  to  him  or  his 
order^  it  is  nevertheless  payable  to  him  or  his  order  at  his  option. 


907  SUM    PAYABLE — BILLS    PAYABLE   OX    DEMAND.         [§§    9-12 

9.  Sum  payable. —  (1)  The  sum  payable  by  a  bill  is  a  sum  certain 
within  the  meaning  of  this  act,  although  it  is  required  to  be  paid — 

(a)  With  interest. 

(b)  By  stated  instalments. 

(c)  By  stated  instalments,  with  a  provision  that  upon  default  in 
payment  of  any  instalment  the  whole  shall  become  due. 

(d)  According  to  an  indicated  rate  of  exchange  or  according  to 
a  rate  of  exchange  to  be  ascertained  as  directed  by  the  bill. 

(2)  Where  the  sum  payable  is  expressed  in  words  and  also  in  fig- 
ures, and  there  is  a  discrepancy  between  the  two,  the  sum  denoted  by 
the  words  is  the  amount  payable. 

(3)  Where  a  bill  is  expressed  to  be  payable  with  interest,  unless 
the  instrument  otherwise  provides,  interest  runs  from  the  date  of  the 
bill,  and  if  the  bill  is  undated,  from  the  issue  thereof. 

10.  Bill  payable  on  demand. — (1)    A  bill  is  payable  on  demand — 

(a)  Which  is  expressed  to  be  payable  on  demand,  or  at  sight,  or  on 
presentation;  or 

(b)  In  which  no  time  for  payment  is  expressed. 

(2)  Where  a  bill  is  accepted  or  indorsed  when  it  is  overdue,  it 
shall,  as  regards  the  acceptor  who  so  accepts,  or  any  indorser  who  so 
indorses  it,  be  deemed  a  bill  payable  on  demand. 

11.  Bill  payable  at  a  future  time. — A  bill  is  payable  at  a  de- 
terminable future  time  within  the  meaning  of  this  act  which  is  ex- 
pressed to  be  payable — 

(1)  At  a  fixed  period  after  date  or  sight. 

(2)  On  or  at  a  fixed  period  after  the  occurrence  of  a  specified  event 
which  is  certain  to  happen,  though  the  time  of  happening  may  be  un- 
certain. 

An  instrument  expressed  to  be  payable  on  a  contingency  is  not  a 
bill,  and  the  happening  of  the  event  does  not  cure  the  defect. 

12.  Omission  of  date  in  bill  payable  after  date. — Where  a  bill  ex- 
pressed to  be  payable  at  a  fixed  period  after  date  is  issued  undated, 
or  where  the  acceptance  of  a  bill  payable  at  a  fixed  period  after  sight  is 
undated,  any  holder  may  insert  therein  the  true  date  of  issue  or  ac- 
ceptance, and  the  bill  shall  be  payable  accordingly. 

Provided  that  (1)  where  the  holder  in  good  faith  and  by  mistake 
inserts  a  wrong  date,  and  (2)  in  every  case  where  a  wrong  date  is 
inserted,  if  the  bill  subsequently  comes  into  the  hands  of  a  holder  in 


§§    13-15]  BILLS    OF   EXCHANGE.  '908 

due  course  the  bill  shall  not  be  avoided  thereby,  but  shall  operate  and 
be  payable  as  if  the  date  so  inserted  had  been  the  true  date, 

13.  Ante-dating  and  post-dating. — (1)  Where  a  bill  or  an  ac- 
ceptance or  any  indorsement  on  a  bill  is  dated,  the  date  shall,  unless 
the  contrary  be  proved,  be  deemed  to  be  the  true  date  of  the  drawing, 
acceptance,  or  indorsement,  as  the  case  may  be. 

(2)  A  bill  is  not  invalid  by  reason  only  that  it  is  ante-dated  or  post- 
dated, or  that  it  bears  date  on  a  Sunday. 

14.  Computation  of  time  of  payment. — Where  a  bill  is  not  pay- 
able on  demand  the  day  on  which  it  falls  due  is  determined  as  follows : 

(1)  Three  days,  called  days  of  grace,  are,  in  every  case  where  the 
bill  itself  does  not  otherwise  provide,  added  to  the  time  of  payment 
as  fixed  by  the  bill,  and  the  bill  is  due  and  payable  on  the  last  day  of 
grace : 

Provided  that — 

(a)  When  the  last  day  of  grace  falls  on  Sunday,  Christmas  Day, 
Good  Friday,  or  a  day  appointed  by  Koyal  Proclamation  as  a  public 
fast  or  thanksgiving  day,  the  bill  is,  except  in  the  case  hereinafter 
provided  for,  due  and  payable  on  the  preceding  business  day ; 

(b)  When  the  last  day  of  grace  is  a  bank  holiday  (other  than 
Christmas  Day  or  Good  Friday)  under  the  Bank  Holidays  Act,  1871, 
and  acts  amending  or  extending  it,  or  when  the  last  day  of  grace  is  a 
Sunday  and  the  second  day  of  grace  is  a  bank  holiday,  the  bill  is  due 
and  payable  on  the  succeeding  business  day. 

(2)  Where  a  bill  is  payable  at  a  fixed  period  after  date,  after  sight, 
or  after  the  happening  of  a  specified  event,  the  time  of  payment  is  de- 
termined by  excluding  the  day  from  which  the  time  is  to  begin  to  run 
and  by  including  the  day  of  payment. 

(3)  Where  a  bill  is  payable  at  a  fixed  period  after  sight,  the  time 
begins  to  run  from  the  date  of  the  acceptance  if  the  bill  be  accepted, 
and  from  the  date  of  noting  or  protest  if  the  bill  be  noted  or  protested 
for  non-acceptance,  or  for  non-delivery. 

(4)  The  term  "month"  in  a  bill  means  calendar  month. 

15.  Case  of  need. — The  drawer  of  a  bill  and  any  indorser  may 
insert  therein  the  name  of  a  person  to  whom  the  holder  may  resort  in 
case  of  need,  that  is  to  say,  in  case  the  bill  is  dishonored  by  non-ac- 
ceptance or  non-payment.    Such  person  is  called  the  referee  in  case  of 


909  OPTIOXAL   STIPULATIONS.  [§§    16-19 

need.  It  is  in  the  option  of  the  holder  to  resort  to  the  referee  in  case  of 
need,  or  not,  as  he  may  think  fit. 

16.  Optional  stipulations. — The  drawer  of  a  bill,  and  any  in- 
dorser,  may  insert  therein  an  express  stipulation — 

(1)  Negativing  or  limiting  his  own  liability  to  the  holder: 

(3)    Waiving  as  regards  himself  some  or  all  of  the  holder's  duties. 

17.  Definition  and  requisites  of  acceptance. — (1)  The  accept- 
ance of  a  bill  is  the  signification  by  the  drawee  of  his  assent  to  the  or- 
der of  the  drawer. 

(2)  An  acceptance  is  invalid  unless  it  complies  with  the  following 
conditions,  namely: 

(a)  It  must  be  written  on  the  bill  and  be  signed  by  the  drawee. 
The  mere  signature  of  the  drawee  without  additional  words  is  suflB- 
cient. 

(b)  It  must  not  express  that  the  drawee  will  perform  his  promise 
by  any  other  means  than  the  payment  of  money. 

18.  Time  for  acceptance. — A  bill  may  be  accepted — 

( 1 )  Before  it  has  been  signed  by  the  drawer,  or  while  otherwise  in- 
complete : 

(2)  When  it  is  overdue,  or  after  it  has  been  dishonored  by  a  previ- 
ous refusal  to  accept,  or  by  non-payment: 

(3)  When  a  bill  payable  after  sight  is  dishonored  by  non-accept- 
ance, and  the  drawee  subsequently  accepts  it,  the  holder,  in  the  ab- 
sence of  any  difi'erent  agreement,  is  entitled  to  have  the  bill  accepted 
as  of  the  date  of  first  presentment  to  the  drawee  for  acceptance. 

19.  General  and  qualified  acceptances. — (1)  An  acceptance  is 
either  (a)  general  or  (b)  qualified. 

(2)  A  general  acceptance  assents  without  qualification  to  the  or- 
der of  the  drawer,  A  qualified  acceptance  in  express  terms  varies  the 
effect  of  the  bill  as  drawn. 

In  particular  an  acceptance  is  qualified  which  is — 

(a)  Conditional,  that  is  to  say,  which  makes  payment  by  the  ac- 
ceptor dependent  on  the  fulfillment  of  a  condition  therein  stated : 

(b)  Partial,  that  is  to  say,  an  acceptance  to  pay  part  only  of  the 
amount  for  which  the  bill  is  drawn : 

(c)  Local,  that  is  to  say,  an  acceptance  to  pay  only  at  a  particular 
specified  place: 

An  acceptance  to  pay  at  a  particular  place  is  a  general  acceptance. 


§§    20,    21]  BILLS   OF   EXCHANGE.  910 

unless  it  expressly  states  that  the  bill  is  to  be  paid  there  only  and  not 
elsewhere : 

(d)  Qualified  as  to  time: 

(e)  The  acceptance  of  some  one  or  more  of  the  drawees,  but  not 
of  all. 

20.  Inchoate  instruments. — (1)  Where  a  simple  signature  on 
a  blank  stamped  paper  is  delivered  by  the  signer  in  order  that  it  may 
be  converted  into  a  bill,  it  operates  as  a  prima  facie  authority  to  fill 
it  up  as  a  complete  bill  for  any  amount  the  stamp  will  cover,  using 
the  signature  for  that  of  the  drawer,  or  the  acceptor,  or  an  indorser; 
and,  in  like  manner,  when  a  bill  is  wanting  in  any  material  particular, 
the  person  in  possession  of  it  has  a  prima  facie  authority  to  fill  up  the 
omission  in  any  way  he  thinks  fit. 

(2)  In  order  that  any  such  instrument  when  completed  may  be 
enforceable  against  any  person  who  became  a  party  thereto  prior  to 
its  coinpletion,  it  must  be  filled  up  within  a  reasonable  time,  and 
strictly  in  accordance  with  the  authority  given.  Eeasonable  time  for 
this  purpose  is  a  question  of  fact. 

Provided  that  if  any  such  instrument  after  completion  is  negotiated 
to  a  holder  in  due  course  it  shall  be  valid  and  effectual  for  all  purposes 
in  his  hands,  and  he  may  enforce  it  as  if  it  had  been  filled  up  within 
a  reasonable  time  and  strictly  in  accordance  with  the  authority  given. 

21.  Delivery. — (1)  Every  contract  on  a  bill,  whether  it  be  the 
drawer's,  the  acceptor's,  or  an  indorser's,  is  incomplete  and  revoca- 
ble, until  delivery  of  the  instrument  in  order  -to  give  effect  thereto. 

Provided  that  where  an  acceptance  is  written  on  a  bill,  and  the 
drawee  gives  notice  to  or  according  to  the  directions  of  the  person  en- 
titled to  the  bill  that  he  has  accepted  it,  the  acceptance  then  becomes 
complete  and  irrevocable. 

(2)  As  between  immediate  parties,  and  as  regards  a  remote  party 
other  than  a  holder  in  due  course,  the  delivery — 

(a)  In  order  to  be  effectual  must  be  made  either  by  or  under  the 
authority  of  the  party  drawing,  accepting,  or  indorsing,  as  the  case 
may  be: 

(b)  May  be  shown  to  have  been  conditional  or  for  a  special  pur- 
pose only,  and  not  for  the  purpose  of  transferring  the  property  in  the 
bill. 

But  if  the  bill  be  in  the  hands  of  a  holder  in  due  course  a  valid 


911  CAPACITY   OF   PARTIES.  [§§    22-25 

delivery  of  the  bill  by  all  parties  prior  to  him  so  as  to  make  them  lia- 
ble to  him  is  conclusively  presumed. 

(3)  Where  a  bill  is  no  longer  in  the  possession  of  a  party  who 
signed  it  as  drawer,  acceptor,  or  indorser,  a  valid  and  unconditional 
delivery  by  him  is  presumed  until  the  contrary  is  proved. 

Capacity  and  Authority  of  Parties. 

22.  Capacity  of  parties. —  (1)  Capacity  to  incur  liability  as  a 
party  to  a  bill  is  co-extensive  with  capacity  to  contract. 

Provided  that  nothing  in  this  section  shall  enable  a  corporation  to 
make  itself  liable  as  drawer,  acceptor,  or  indorser  of  a  bill  unless  it  is 
competent  to  it  so  to  do  under  the  law  for  the  time  being  in  force  re- 
lating to  corporations. 

(2)  Where  a  bill  is  drawn  or  indorsed  by  an  infant,  minor,  or  cor- 
poration having  no  capacity  or  power  to  incur  liability  on  a  bill,  the 
drawing  or  indorsement  entitles  the  holder  to  receive  payment  of  the 
bill,  and  to  enforce  it  against  any  other  party  thereto. 

23.  Signature  essential  to  liability. — No  person  is  liable  as  drawer, 
indorser,  or  acceptor  of  a  bill  who  has  not  signed  it  as  such : 

Provided  that  . 

(1)  Where  a  person  signs  a  bill  in  a  trade  or  assumed  name,  he  is 
liable  thereon  as  if  he  had  signed  it  in  his  own  name : 

(2)  The  signature  of  the  name  of  a  firm  is  equivalent  to  the  sig- 
nature by  the  person  so  signing  of  the  names  of  all  persons  liable  as 
partners  in  that  firm. 

24.  Forged  or  unauthorized  signature. — Subject  to  the  provi- 
sions of  this  act,  where  a  signature  on  a  bill  is  forged  or  placed  there- 
on without  the  authority  of  the  person  whose  signature  it  purports  to 
be,  the  forged  or  unauthorized  signature  is  wholly  inoperative,  and 
no  right  to  retain  the  bill  or  to  give  a  discharge  therefor  or  to  enforce 
payment  thereof  against  any  party  thereto  can  be  acquired  through  or 
under  that  signature,  unless  the  party  against  whom  it  is  sought  to 
retain  or  enforce  payment  of  the  bill  is  precluded  from  setting  up  the 
forgery  or  want  of  authority. 

Provided  that  notliing  in  this  section  shall  affect  the  ratification  of 
an  unauthorized  signature  not  amounting  to  a  forgery. 

25.  Procuration  signatures. — A  signature  by  procuration  operates 
as  notice  that  the  agent  has  but  a   limited  authority  to  sign,   and 


§§    2G-29]  BILLS   OF   EXCHANGE.  912 

the  principal  is  only  bound  by  such  signature  if  the  agent  in  so  sign- 
ing was  acting  within  the  actual  limits  of  his  authority. 

26.  Persons  signing  as  agent  or  in  representative  capacity. — (1) 

Where  a  person  signs  a  bill  as  drawer,  indorser,  or  acceptor,  and  adds 
words  to  his  signature,  indicating  that  he  signs  for  or  on  behalf  of  a 
principal,  or  in  a  representative  character,  he  is  not  personally  liable 
thereon;  but  the  mere  addition  to  his  signature  of  words  describing 
him  as  an  agent,  or  as  filling  a  representative  character,  does  not  ex- 
empt him  from  personal  liability. 

(2)  In  determining  whether  a  signature  on  a  bill  is  that  of  the 
principal  or  that  of  the  agent  by  whose  hand  it  is  written,  the  con- 
struction most  favorable  to  the  validity  of  the  instrument  shall  be 
adopted. 

The  Consideration  for  a  Bill. 

27.  Value  and  holder  for  value. — (1)  Valuable  consideration  for 
a  bill  may  be  constituted  by — 

(a)  Any  consideration  sufficient  to  support  a  simple  contract; 

(b)  An  antecedent  debt  or  liability.  Such  a  debt  or  liability  is 
deemed  valuable  consideration  whether  the  bill  is  payable  on  demand 
or  at  a  future  time. 

(2)  Where  value  has  at  any  time  been  given  for  a  bill  the  holder 
is  deemed  to  be  a  holder  for  value  as  regards  the  acceptor  and  all  par- 
ties to  the  bill  who  became  parties  prior  to  such  time. 

(3)  Where  the  holder  of  a  bill  has  a  lien  on  it  arising  either  from 
contract  or  by  implication  of  law,  he  is  deemed  to  be  a  holder  for  value 
to  the  extent  of  the  sum  for  which  he  has  a  lien. 

28.  Accommodation  bill  or  party.— (1)  An  accommodation  party 
to  a  bill  is  a  person  who  has  signed  a  bill  as  drawer,  acceptor,  or  in- 
dorser,  without  receiving  value  therefor,  and  for  the  purpose  of  lend- 
ing his  name  to  some  other  person. 

(2)  An  accommodation  party  is  liable  on  the  bill  to  a  holder  for 
value;  and  it  is  immaterial  whether,  when  such  holder  took  the  bill, 
he  knew  such  party  to  be  an  accommodation  party  or  not. 

29.  Holder  in  due  course. — (1)  A  holder  in  due  course  is  a 
holder  who  has  taken  a  bill,  complete  and  regular  on  the  face  of  it. 
Tinder  the  following  conditions ;  namely, 

(a)    That  he  became  the  holder  of  it  before  it  was  overdue  and 


913  PRESUMPTION    OF   VALUE   AND   GOOD   FAITH.       [§§    30,    31 

without  notice  that  it  had  been  previously  dishonored,  if  such  was  the 
fact: 

(b)  That  he  took  the  bill  in  good  faith  and  for  value,  and  that  at 
the  time  the  bill  was  negotiated  to  him  he  had  no  notice  of  any  defect 
in  the  title  of  the  person  who  negotiated  it, 

(2)  In  particular  the  title  of  a  person  who  negotiates  a  bill  is  de- 
fective within  the  meaning  of  this  act  when  he  obtained  the  bill,  or 
the  acceptance  thereof,  by  fraud,  duress,  or  force  and  fear,  or  other 
unlawful  means,  or  for  illegal  consideration,  or  when  he  negotiates  it 
in  breach  of  faith,  or  under  such  circumstances  as  amount  to  a  fraud. 

(3)  A  holder  (whether  for  value  or  not),  who  derives  his  title  to 
a  bill  through  a  holder  in  due  course,  and  who  is  not  himself  a  party 
to  any  fraud  or  illegality  affecting  it,  has  all  the  rights  of  that  holder 
in  due  course  as  regards  the  acceptor  and  all  parties  to  the  bill  prior  to 
that  holder. 

30.  Presumption  of  value  and  good  faith. — (1)  Every  party 
whose  signature  appears  on  a  bill  is  pnma  facie  deemed  to  have  be- 
come a  party  thereto  for  value. 

(2)  Every  holder  of  a  bill  is  prima  facie  deemed  to  be  a  holder  in 
due  course ;  but  if  in  an  action  on  a  bill  it  is  admitted  or  proved  that 
the  acceptance,  issue,  or  subsequent  negotiation  of  the  bill  is  effected 
by  fraud,  duress,  or  force  and  fear,  or  illegality,  the  burden  of  proof 
is  shifted,  unless  and  until  the  holder  proves  that,  subsequent  to  the 
alleged  fraud  or  illegality,  value  has  in  good  faith  been  given  for  the 
bill. 

Negotiation  of  Bills. 

31.  Negotiation  of  bill. — (1)  A  bill  is  negotiated  when  it  is 
transferred  from  one  person  to  another  in  such  a  manner  as  to  con- 
stitute the  transferee  the  holder  of  the  bill. 

(2)  A  bill  payable  to  bearer  is  negotiated  by  delivery. 

(3)  A  bill  payable  to  order  is  negotiated  by  the  indorsement  of  the 
holder  com,pleted  by  delivery. 

(4)  Wliere  the  holder  of  a  bill  payable  to  his  order  transfers  it  for 
value  without  indorsing  it,  the  transfer  gives  the  transferee  such  title 
as  the  transferor  had  in  the  bill,  and  the  transferee  in  addition  ac- 
quires the  right  to  have  the  indorsement  of  the  transferor. 

(5)  Where  any  person  is  under  obligation  to  indorse  a  bill  in  a 
representative  capacity,  he  may  indorse  the  bill  in  such  terms  as  to 
negative  personal  liability. 

Joyce  Defenses — 58. 


§§    32-34]  BILLS    OF    EXCHANGE.  914 

32.  Requisites  of  a  valid  indorsement. — An  indorsement  in  order 
to  operate  as  a  negotiation,  must  comply  with  the  following  conditions, 
namely, — 

(1)  It  must  be  written  on  the  bill  itself  and  be  signed  by  the  in- 
dorser.  The  simple  signature  of  the  indorser  on  the  bill,  without  addi- 
tional words,  is  sufficient. 

An  indorsement  written  on  an  allonge,  or  on  a  "copy"  of  a  bill  is- 
sued or  negotiated  in  a  country  where  "copies"  are  recognized,  is 
deemed  to  be  written  on  the  bill  itself. 

(2)  It  must  be  an  indorsement  of  the  entire  bill.  A  partial  indorse- 
ment, that  is  to  say,  an  indorsement  which  purports  to  transfer  to  the 
indorsee  a  part  only  of  the  amount  payable,  or  which  purports  to  trans- 
fer the  bill  to  two  or  more  indorsees  severally,  does  not  operate  as  a 
negotiation  of  the  bill. 

(3)  Where  a  bill  is  payable  to  the  order  of  two  or  more  payees  or 
indorsees  who  are  not  partners  all  must  indorse,  unless  the  one  indors- 
ing has  authority  to  indorse  for  the  others. 

(4)  Where,  in  a  bill  payable  to  order,  the  payee  or  indorsee  is 
wrongly  designated,  or  his  name  is  misspelled,  he  may  indorse  the  bill 
as  therein  described,  adding,  if  he  think  fit,  his  proper  signature. 

(5)  Where  there  are  two  or  more  indorsements  on  a  bill  each  in- 
dorsement is  deemed  to  have  been  made  in  the  order  in  which  it  ap- 
pears on  the  bill,  until  the  contrary  is  proved. 

(6)  An  indorsement  may  be  made  in  blank  or  special.  It  may  also 
contain  terms  making  it  restrictive. 

33.  Conditional  indorsement. — Wliere  a  bill  purports  to  be  in- 
dorsed conditionally  the  condition  may  be  disregarded  by  the  payer, 
and  payment  to  the  indorsee  is  valid  whether  the  condition  has  been 
fulfilled  or  not. 

34.  Indorsement  in  blank  and  special  indorsement. — (1)  An  in- 
dorsement in  blank  specifies  no  indorsee,  and  a  bill  so  indorsed  becomes 
payable  to  bearer. 

(2)  A  special  indorsement  specifies  the  person  to  whom,  or  to 
whose  order,  the  bill  is  to  be  payable. 

(3)  The  provisions  of  this  act  relating  to  a  payee  apply  with  the 
necessar)'^  modifications  to  an  indorsee  under  a  special  indorsement. 

(4)  When  a  bill  has  been  indorsed  in  blank,  any  holder  may  con- 
vert the  blank  indorsement  into  a  special  indorsement  by  writing  above 
the  indorser's  signature  a  direction  to  pay  the  bill  to  or  to  the  order  of 
himself  or  some  other  person. 


915  RESTRICTIVE   IXDORSEMEXT.  [§§    35-37 

35.  Restrictive  indorsement. — (1)  An  indorsement  is  restric- 
tive which  prohibits  the  further  negotiation  of  the  bill  or  which  ex- 
presses that  it  is  a  mere  authority  to  deal  with  the  bill  as  thereby  di- 
rected  and  not  a  transfer  of  the  ownership  thereof,  as,  for  example, 
if  a  bill  be  indorsed  "Pay  D.  only,"  or  "Pay  D.  for  the  account  of  X.," 
or  "Pay  D.  or  order  for  collection." 

(2)  A  restrictive  indorsement  gives  the  indorsee  the  right  to  re- 
ceive payment  of  the  bill  and  to  sue  any  party  thereto  tliat  his  indorser 
could  have  sued,  but  gives  him  no  power  to  transfer  his  rights  as  in- 
dorsee unless  it  expressly  authorize  him  to  do  so. 

(3)  Wliere  a  restrictive  indorsement  authorizes  further  transfer, 
all  subsequent  indorsees  take  the  bill  with  the  same  rights  and  subject 
to  the  same  liabilities  as  the  first  indorsee  under  the  restrictive  in- 
dorsement. 

36.  Negotiation  of  overdue  or  dishonored  bill. — (1)  Where  a  bill 
is  negotiable  in  its  origin  it  continues  to  be  negotiable  until  it  has 
been  (a)  restrictively  indorsed  or  (b)  discharged  by  payment  or  other- 
wise. 

(2)  Where  an  overdue  bill  is  negotiated,  it  can  only  be  negotiated 
subject  to  any  defect  of  title  affecting  it  at  its  maturity,  and  thence- 
forward no  person  who  takes  it  can  acquire  or  give  a  better  title  than 
that  which  the  person  from  whom  he  took  it  had. 

(3)  A  bill  payable  on  demand  is  deemed  to  be  overdue  within  the 
meaning  and  for  the  purposes,  of  this  section,  when  it  appears  on  the 
face  of  it  to  have  been  in  circulation  for  an  unreasonable  length  of 
time.  What  is  an  unreasonable  length  of  time  for  this  purpose  is  a 
question  of  fact. 

(4)  Except  where  an  indorsement  bears  date  after  the  maturity  of 
the  bill,  every  negotiation  is  prima  facie  deemed  to  have  been  effected 
before  the  bill  was  overdue. 

(5)  Where  a  bill  which  is  not  overdue  has  been  dishonored  any 
person  who  takes  it  with  notice  of  the  dishonor  takes  it  subject  to  any 
defect  of  title  attaching  thereto  at  the  time  of  dishonor,  but  nothing 
in  this  sub-section  shall  affect  the  rights  of  a  holder  in  due  course. 

37.  Negotiation  of  bill  to  party  already  liable  thereon. — Where  a 
bill  is  negotiated  back  to  the  drawer,  or  to  a  prior  indorser  or  to  the 
acceptor,  such  party  may,  subject  to  the  provisions  of  this  act,  reissue 
and  further  negotiate  the  bill,  but  he  is  not  entitled  to  enforce  pay- 
ment of  the  bill  against  any  intervening  party  to  whom  he  was  previ- 
ously liable. 


§§    38-40]  BILLS   OF   EXCHANGE.  91G 

38.  Rights  of  the  holder. — The  rights  and  powers  of  the  holder 
of  a  bill  are  as  follows : 

(1)  He  may  sue  on  the  bill  in  his  own  name: 

(2)  Where  he  is  a  holder  in  due  course,  he  holds  the  bill  free  from 
any  defect  of  title  of  prior  parties,  as  well  as  from  mere  personal  de- 
fenses available  to  prior  parties  among  themselves,  and  may  enforce 
payment  against  all  parties  liable  on  the  bill : 

(3)  Where  his  title  is  defective  (a)  if  he  negotiates  the  bill  to  a 
holder  in  due  course,  that  holder  obtains  a  good  and  complete  title  to 
the  bill,  and  (b)  if  he  obtains  payment  of  the  bill  the  person  who  pays 
him  in  due  course  gets  a  valid  discharge  for  the  bill. 

General  Duties  of  the  Holder. 

39.  When  presentment  for  acceptance  is  necessary. — (1)  Where 
a  bill  is  payable  after  sight,  presentment  for  acceptance  is  necessary 
in  order  to  fix  the  maturity  of  the  instrument. 

(2)  Where  a  bill  expressly  stipulates  that  it  shall  be  presented  for 
acceptance,  or  where  a  bill  is  drawn  payable  elsewhere  than  at  the  resi- 
dence or  place  of  business  of  the  drawee,  it  must  be  presented  for  ac- 
ceptance before  it  can  be  presented  for  payment. 

(3)  In  no  other  case  is  presentment  for  acceptance  necessary  in 
order  to  render  liable  any  party  to  the  bill. 

(4)  "V\liere  the  holder  of  a  bill,  drawn  payable  elsewhere  than  at 
the  place  of  business  or  residence  of  the  drawee,  has  not  time,  with  the 
exercise  of  reasonable  diligence,  to  present  the  bill  for  acceptance  be- 
fore presenting  it  for  payment  on  the  day  that  it  falls  due,  the  delay 
caused  by  presenting  the  bill  for  acceptance  before  presenting  it  for 
payment  is  excused,  and  does  not  discharge  the  drawer  and  indorsers. 

40.  Time  for  presenting  bill  payable  after  sight. — (1)  Subject  to 
the  provisions  of  this  act,  when  a  bill  payable  after  sight  is  negotiated, 
the  holder  must  either  present  it  for  acceptance  or  negotiate  it  within 
a  reasonable  time. 

(2)  If  he  do  not  do  so,  the  drawer  and  all  indorsers  prior  to  that 
holder  are  discharged. 

(3)  In  determining  what  is  a  reasonable  time  within  the  meaning 
of  this  section,  regard  shall  be  had  to  the  nature  of  the  bill,  the  usage 
of  trade  with  respect  to  similar  bills,  and  the  facts  of  the  particular 
case. 


917  NON-ACCEPTANCE.  [§§'  41-43 

41.  Rules  as  to  presentment  for  acceptance,  and  excuses  for  non- 
presentment. — (1)  A  biil  is  duly  presented  for  acceptance  which  is 
presented  in  accordance  with  the  following  rules : 

(a)  The  presentment  must  be  made  by  or  on  behalf  of  the  holder 
to  the  drawee  or  to  some  person  authorized  to  accept  or  refuse  accept- 
ance on  his  behalf  at  a  reasonable  hour  on  a  business  day  and  before 
the  bill  is  overdue : 

(b)  Where  a  bill  is  addressed  to  two  or  more  drawees,  who  are  not 
partners,  presentment  must  be  made  to  them  all,  unless  one  has  au- 
thority to  accept  for  all,  then  presentment  may  be  made  to  him  only : 

(c)  Where  the  drawee  is  dead  presentment  may  be  made  to  his  per- 
sonal representative : 

(d)  Where  the  drawee  is  bankrupt,  presentment  may  be  to  him  or 
his  trustee: 

(e)  Where  authorized  by  agreement  or  usage,  a  presentment 
through  the  post-office  is  sufficient. 

(2)  Presentment  in  accordance  with  these  rules  is  excused  and  a 
bill  may  be  treated  as  dishonored  by  non-acceptance — 

(a)  Where  the  drawee  is  dead  or  bankrupt,  or  is  a  fictitious  person 
or  a  person  not  having  capacity  to  contract  by  bill : 

(b)  Where,  after  the  exercise  of  reasonable  diligence,  such  pre- 
sentment cannot  be  effected : 

(c)  Where,  although  the  presentment  has  been  irregular,  accept- 
ance has  been  refused  on  some  other  ground. 

(3)  The  fact  that  the  holder  has  reason  to  believe  that  the  bill,  on 
presentment,  will  be  dishonored  does  not  excuse  presentment. 

42.  Non-acceptance. —  (1)  When  a  bill  is  duly  presented  for  ac- 
ceptance and  is  not  accepted  within  the  customary  time,  the  person 
presenting  it  must  treat  it  as  dishonored  by  non-acceptance.  If  he  do 
not,  the  holder  shall  lose  his  right  of  recourse  against  the  drawer  and 
indorsers. 

43.  Dishonor  by  non-acceptance  and  its  consequences. — (1)  A  bill 
is  dishonored  by  non-acceptance — 

(a)  When  it  is  duly  presented  for  acceptance,  and  such  an  accept- 
ance as  is  prescribed  by  this  act  is  refused  or  cannot  be  obtained  ;  or 

(b)  When  presentment  for  acceptance  is  excused  and  the  bill  is 
not  accepted. 

(2)  Subject  to  the  provisions  of  this  act,  when  a  bill  is  dishonored 
by  non-acceptance,  an  immediate  right  of  recourse  against  the  drawer 


§§    44,    45]  BILLS    OF   EXCHANGE.  918 

and  indorsers  accrues  to  the  holder,  and  no  presentment  for  pajnnent 
is  necessary. 

44.  Duties  as  to  qualified  acceptances. — (1)  The  holder  of  a 
bill  may  refuse  to  take  a  qualified  acceptance,  and  if  he  does  not  ob- 
tain an  unqualified  acceptance  may  treat  the  bill  as  dishonored  by 
non-acceptance. 

(2)  Wliere  a  qualified  acceptance  is  taken,  and  the  drawer  or  an 
indorser  has  not  expressly  or  impliedly  authorized  the  holder  to  take 
a  qualified  acceptance,  or  does  not  subsequently  assent  thereto,  such 
drawer  or  indorser  is  discharged  from  his  liability  on  the  bill. 

The  provisions  of  this  sub-section  do  not  apply  to  a  partial  accept- 
ance, whereof  due  notice  has  been  given.  W^iere  a  foreign  bill  has 
been  accepted  as  to  part,  it  must  be  protected  as  to  the  balance. 

(3)  When  the  drawer  or  indorser  of  a  bill  receives  notice  of  a 
qualified  acceptance,  and  does  not  within  a  reasonable  time  express 
his  dissent  to  the  holder  he  shall  be  deemed  to  have  assented  thereto. 

45.  Rules  as  to  presentment  for  payment. — Subject  to  the  provi- 
sions of  this  act  a  bill  must  be  duly  presented  for  payment.  If  it  be 
not  so  presented  the  drawer  and  indorsers  shall  be  discharged. 

A  bill  is  dul}^  presented  for  payment  which  is  presented  in  accord- 
ance with  the  following  rules : — 

(1)  Where  the  bill  is  not  payable  on  demand,  presentment  must 
be  made  on  the  day  it  falls  due. 

(2)  Where  the  bill  is  payable  on  demand,  then,  subject  to  the 
provisions  of  this  act,  presentment  must  be  made  within  a  reasonable 
time  after  its  issue  in  order  to  render  the  drawer  liable,  and  within  a 
reasonable  time  after  its  indorsement,  in  order  to  render  the  indorser 
liable. 

In  determining  what  is  a  reasonable  time,  regard  shall  be  had  to 
the  nature  of  the  bill,  the  usage  of  trade  with  regard  to  similar  bills, 
and  the  facts  of  the  particular  case. 

(3)  Presentment  must  be  made  by  the  holder  or  by  some  person 
authorized  to  receive  payment  on  his  behalf  at  a  reasonable  hour  on 
a  business  day,  at  the  proper  place  as  hereinafter  defined,  either  to 
the  person  designated  by  the  bill  as  payer,  or  to  some  person  author- 
ized to  pay  or  refuse  payment  on  his  behalf  if  with  the  exercise  of 
reasonable  diligence  such  person  can  there  be  found. 

(4)  A  bill  is  presented  at  the  proper  place: — 

(a)  Where  a  place  of  payment  is  specified  in  the  bill  and  the  bill 
is  there  presented. 


919  EXCUSES    FOR   XOX-PAYilEXT.  [§    46 

(b)  Where  no  place  of  payment  is  specified,  but  the  address  of  the 
drawee  or  acceptor  is  given  in  the  bill,  and  the  bill  is  there  presented, 

(c)  Where  no  place  of  payment  is  specified,  and  no  address  given, 
and  the  bill  is  presented  at  the  drawee's  or  acceptor's  place  of  business 
if  known,  and  if  not,  at  his  ordinary  residence  if  known. 

(d)  In  any  other  case  if  presented  to  the  drawee  or  acceptor  wher- 
ever he  can  be  found,  or  if  presented  at  his  last  known  place  of  busi- 
ness or  residence. 

(5)  Wliere  a  bill  is  presented  at  the  proper  place,  and  after  the 
exercise  of  reasonable  diligence  no  person  authorized  to  pay  or  refuse 
pa}Tnent  can  be  found  there,  no  further  presentment  to  the  drawee  or 
acceptor  is  required. 

(6)  "\\T^iere  a  bill  is  drawn  upon,  or  accepted  by  two  or  more  per- 
sons who  are  not  partners,  and  no  place  of  payment  is  specified,  pre- 
sentment must  be  made  to  them  all. 

(7)  Where  the  drawee  or  acceptor  of  a  bill  is  dead,  and  no  place 
of  payment  is  specified,  presentment  must  be  made  to  a  personal 
representative,  if  such  there  be,  and  with  the  exercise  of  reasonable 
diligence  can  be  found. 

(8)  Where  authorized  by  agreement  or  usage  a  presentment 
through  the  postoffice  is  sufficient. 

46.  Excuses  for  delay  or  non-presentment  for  payment. — (1)  De- 
lay in  making  jiresentment  for  payment  is  excused  when  the  delay  is 
caused  by  circumstances  beyond  the  control  of  the  holder,  and  not  im- 
putable to  his  default,  misconduct,  or  negligence.  When  the  cause  of 
delay  ceases  to  operate  presentment  must  be  made  with  reasonable 
diligence. 

(2)    Presentment  for  payment  is  dispensed  with, — 

(a)  Where,  after  the  exercise  of  reasonable  diligence,  presentment, 
as  required  by  this  act,  cannot  l^e  effected. 

The  fact  that  the  holder  has  reason  to  believe  that  the  bill  will,  on 
presentment,  be  dishonored,  does  not  dispense  with  the  necessity  for 
presentment. 

(b)  Where  the  drawee  is  a  fictitious  person. 

(c)  As  regards  the  drawer  wliere  the  drawee  or  acceptor  is  not 
bound,  as  between  himself  and  the  drawer,  to  accept  or  pay  tlie  bill, 
and  the  drawer  has  no  reason  to  believe  that  the  bill  would  be  paid 
if  presented. 

(d)  As  regards  an  indorser,  where  the  bill  was  accepted  or  made 


§§    47-49]  BILLS   OF   EXCHANGE.  920 

for  the  accommodation  of  that  indorser,  and  he  has  no  reason  to  ex- 
pect that  the  bill  would  be  paid  if  presented. 

(e)    By  waiver  of  presentment,  express  or  implied. 

47.  Dishonor  by  non-payment. — (1)  A  bill  is  dishonored  by 
non-payment  (a)  when  it  is  duly  presented  for  payment  and  payment 
is  refused  or  cannot  be  obtained,  or  (b)  when  presentment  is  excused 
and  the  bill  is  overdue  and  unpaid. 

(2)  Subject  to  the  provisions  of  this  act,  when  a  bill  is  dishonored 
by  non-payment,  an  immediate  right  of  recourse  against  the  drawer 
and  indorsers  accrues  to  the  holder. 

48.  Notice  of  dishonor  and  effect  of  non-notice. — Subject  to  the 
provisions  of  this  act,  when  a  bill  has  been  dishonored  by  non-accept- 
ance or  by  non-payment,  notice  of  dishonor  must  be  given  to  the 
drawer  and  each  indorser,  and  any  drawer  or  indorser  to  whom  such 
notice  is  not  given  is  discharged ; 

Provided  that — 

(1)  Where  a  bill  is  dishonored  by  non-acceptance,  and  notice  of 
dishonor  is  not  given,  the  rights  of  a  holder  in  due  course  subsequent 
to  the  omission,  shall  not  be  prejudiced  by  the  omission. 

(2)  Where  a  bill  is  dishonored  by  non-acceptance,  and  due  notice 
of  dishonor  is  given,  it  shall  not  be  necessary  to  give  notice  of  a  sub- 
sequent dishonor  by  non-payment  unless  the  bill  shall  in  the  meantime 
have  been  accepted. 

49.  Rules  as  to  notice  of  dishonor. — Notice  of  dishonor  in  order 
to  be  valid  and  effectual  must  be  given  in  accordance  with  the  fol- 
lowing rules — 

(1)  The  notice  must  be  given  by  or  on  behalf  of  the  holder,  or  by 
or  on  behalf  of  an  indorser  who,  at  the  time  of  giving  it,  is  himself 
liable  on  the  bill. 

(2)  Notice  of  dishonor  may  be  given  by  an  agent  either  in  his 
own  name,  or  in  the  name  of  any  party  entitled  to  give  notice  whether 
that  party  be  his  principal  or  not. 

(3)  Where  the  notice  is  given  by  or  on  behalf  of  the  holder,  it  en- 
ures for  the  benefit  of  all  subsequent  holders  and  all  prior  indorsers 
who  have  a  right  of  recourse  against  the  party  to  whom  it  is  given. 

(4)  Where  notice  is  given  by  or  on  behalf  of  an  indorser  entitled 
to  give  notice  as  hereinbefore  provided,  it  enures  for  the  benefit  of  the 
holder  and  all  indorsers  subsequent  to  the  party  to  whom  notice  is 
given. 


921  RULES  AS   TO    NOTICE  OP   DISHONOR.  [§    49 

(5)  The  notice  may  be  given  in  writing  or  by  personal  communi- 
cation, and  may  be  given  in  any  terms  which  sufficiently  identify  the 
bill,  and  intimate  that  the  bill  has  been  dishonored  by  non-acceptance 
or  non-payment. 

(6)  The  return  of  a  dishonored  bill  to  the  drawer  or  an  indorser 
is,  in  point  of  form,  deemed  a  sufficient  notice  of  dishonor. 

(7)  A  written  notice  need  not  be  signed,  and  an  insufficient  writ- 
ten notice  may  be  supplemented  and  validated  by  verbal  communica- 
tion. A  misdescription  of  the  bill  shall  not  vitiate  the  notice  unless 
the  party  to  whom  the  notice  is  given  is  in  fact  misled  thereby. 

(8)  Wliere  notice  of  dishonor  is  required  to  be  given  to  any  per- 
son, it  may  be  given  either  to  the  party  himself,  or  to  his  agent  in  that 
behalf. 

(9)  Where  the  drawer  or  indorser  is  dead,  and  the  party  giving 
notice  knows  it,  the  notice  must  be  given  to  a  personal  representative 
if  such  there  be,  and  with  the  exercise  of  reasonable  diligence  he  can 
be  found. 

(10)  Where  the  drawer  or  indorser  is  bankrupt,  notice  may  be 
given  either  to  the  party  himself  or  to  the  trustee. 

(11)  Where  there  are  two  or  more  drawers  or  indorsers  who  are 
not  partners,  notice  must  be  given  to  each  of  them,  unless  one  of  them 
has  authority  to  receive  such  notice  for  the  others. 

(12)  The  notice  may  be  given  as  soon  as  the  bill  is  dishonored  and 
must  be  given  within  a  reasonable  time  thereafter. 

In  the  absence  of  special  circumstances  notice  is  not  deemed  to  have 
been  given  within  a  reasonable  time,  unless — 

(a)  Where  the  person  giving  and  the  person  to  receive  notice  re- 
side in  the  same  place,  and  notice  is  given  or  sent  off  in  time  to  reach 
the  latter  on  the  day  after  the  dishonor  of  the  bill. 

(b)  Where  the  person  giving  and  the  person  to  receive  notice  re- 
side in  different  places,  the  notice  is  sent  off  on  the  day  after  the  dis- 
honor of  the  bill,  if  there  be  a  post  at  a  convenient  hour  on  that  day, 
and  if  there  be  no  such  post  on  that  day  then  by  the  next  post  there- 
after, 

13)  Where  a  bill  when  dishonored  is  in  the  hands  of  an  agent,  he 
may  either  himself  give  notice  to  the  parties  liable  on  the  bill,  or  he 
may  give  notice  to  his  principal.  If  he  give  notice  to  his  principal, 
he  must  do  so  within  the  same  time  as  if  he  were  the  holder,  and  tlie 
principal  upon  receipt  of  such  notice,  has  himself  the  same  time  for 
giving  notice  as  if  the  agent  had  been  an  independent  holder. 

(14)    Where  a  party  to  a  bill  receives  due  notice  of  dishonor,  he  has 


:§§    50,   51]  BILLS   OF  EXCHAXGE.  933 

after  the  receipt  of  such  notice  the  same  period  of  time  for  giving 
notice  to  antecedent  parties  that  the  holder  has  after  the  dishonor. 

(15)  Where  a  notice  of  dishonor  is  duly  addressed  and  posted,  the 
sender  is  deemed  to  have  given  due  notice  of  dishonor,  notwithstanding 
any  miscarriage  by  the  postoffice. 

50.  Excuses  for  non-notice  and  delay. — (1)  Delay  in  giving  no- 
tice of  dishonor  is  excused  where  the  delay  is  caused  by  circumstances 
beyond  the  control  of  the  party  giving  notice,  and  not  imputable  to 
his  default,  misconduct,  or  negligence.  "Wlien  the  cause  of  delay  ceases 
to  operate  the  notice  must  be  given  with  reasonable  diligence. 

(2)    Notice  of  dishonor  is  dispensed  with — 

(a)  When,  after  the  exercise  of  reasonable  diligence,  notice  as  re- 
quired by  this  act  cannot  be  given  to  or  does  not  reach  the  drawer  or. 
indorser  sought  to  be  charged : 

(b)  By  waiver  express  or  implied.  Notice  of  dishonor  may  be 
waived  before  the  time  of  giving  notice  has  arrived,  or  after  the 
omission  to  give  due  notice : 

(c)  As  regards  the  drawer  in  the  following  cases,  namely,  (1)  where 
the  drawer  and  drawee  are  the  same  person,  (2)  where  the  drawee  is 
a  fictitious  person  or  a  person  not  having  capacity  to  contract,  (3) 
where  the  drawer  is  the  person  to  whom  the  bill  is  presented  for  pay- 
ment, (4)  where  the  drawee  or  acceptor  is  as  between  himself  and 
the  drawer  under  no  obligation  to  accept  or  pay  the  bill,  (5)  where 
the  drawer  has  countermanded  payment : 

(d)  As  regards  the  indorser  in  the  following  cases,  namely,  (1) 
where  the  drawee  is  a  fictitious  person  or  a  person  not  Having  capacity 
to  contract  and  the  indorser  was  aware  of  the  fact  at  the  time  he  in- 
dorsed the  bill,  (2)  where  the  indorser  is  the  person  to  whom  the  bill 
is  presented  for  payment,  (3)  where  the  bill  was  accepted  or  made 
for  his  accommodation. 

51.  Noting  or  protest  of  bill. — (1)  Where  an  inland  bill  has  been 
dishonored  it  may,  if  the  holder  think  fit,  be  noted  for  non-acceptance 
or  non-payment,  as  the  case  may  be;  but  it  shall  not  be  necessary  to 
note  or  protest  any  such  bill  in  order  to  preserve  the  recourse  against 
the  drawer  or  indorser. 

(2)  Where  a  foreign  bill,  appearing  on  the  face  of  it  to  be  such, 
has  been  dishonored  by  non-acceptance  it  must  be  duly  protested  for 
non-acceptance,  and  where  such  a  lull,  which  has  not  been  previously 
dishonored  by  non-acceptance,  is  dishonored  by  non-pa3^ment  it  must 


923  NOTING   OR   PROTEST    OF   BILL.  [§    51 

be  duly  protested  for  non-payment.  If  it  be  not  so  protested  the 
drawer  and  indorsers  are  discharged.  Where  a  bill  does  not  appear  on 
the  face  of  it  to  be  a  foreign  bill,  protest  thereof  in  case  of  dishonor  is 
unnecessary. 

(3)  A  bill  which  has  been  protested  for  non-acceptance  may  be 
subsequently  protested  for  non-payment. 

(4)  Subject  to  the  provisions  of  this  act,  when  a  bill  is  noted  or 
protested,  it  must  be  noted  on  the  day  of  its  dishonor.  When  a 
bill  has  been  duly  noted,  the  protest  may  be  subsequently  extended 
as  of  the  date  of  the  noting. 

(5)  Where  the  acceptor  of  a  bill  becomes  bankrupt  or  insolvent 
or  suspends  payment  before  it  matures,  the  holder  may  cause  the  bill 
to  be  protested  for  better  security  against  the  drawer  and  indorsers. 

(6)  A  bill  must  be  protested  at  the  place  where  it  is  dishonored: 
Provided  that — 

(a)  When  a  bill  is  presented  through  the  postoffice,  and  returned 
by  post  dishonored,  it  may  be  protested  at  the  place  to  which  it  is  re- 
turned and  on  the  day  of  its  return  if  received  during  business  hours, 
and  if  not  received  during  business  hours,  then  not  later  than  the  next 
business  day: 

(b)  Wlien  a  bill  drawn  payable  at  the  place  of  business  or  resi- 
dence of  some  person  other  than  the  drawee,  has  been  dishonored  by 
non-acceptance,  it  must  be  protested  for  non-payment  at  the  place 
where  it  is  expressed  to  be  payable,  and  no  further  presentment  for 
payment  to,  or  demand  on,  the  drawee  is  necessary. 

(7)  A  protest  must  contain  a  copy  of  the  bill,  and  must  be  signed 
by  the  notary  making  it,  and  must  specify — 

(a)  The  person  at  whose  request  the  bill  is  protested: 

(b)  The  place  and  date  of  protest,  the  cause  or  reason  for  pro- 
testing the  bill,  the  demand  made  and  the  answer  given,  if  an}^,  or 
the  fact  that  the  drawee  or  acceptor  could  not  be  found. 

(8)  Where  a  bill  is  lost  or  destroyed,  or  is  wrongly  detained  from 
the  person  entitled  to  hold  it,  protest  may  be  made  on  a  copv  or  writ- 
ten particulars  thereof. 

(9)  Protest  is  dispensed  with  by  any  circumstance  which  would 
dispense  with  notice  of  dishonor.  Delay  in  noting  or  protesting  is 
excused  when  the  delay  is  caused  by  circumstances  beyond  the  control 
of  the  holder,  and  not  imputable  to  his  default,  misconduct,  or  negli- 
gence. Wlicn  the  cause  of  delay  ceases  to  operate  the  bill  must  be 
noted  or  protested  with  reasonable  diligence. 


§§    52-55]  BILLS    OF   EXCHANGE.  924 

52.     Duties  of  holder  as  regards  drawee  or  acceptor. — (1)   When  a 

bill  is  accepted  generally  presentment  for  payment  is  not  necessary  in 
order  to  render  the  acceptor  liable. 

(2)  When  by  the  terms  of  a  qualified  acceptance  presentment  for 
payment  is  required,  the  acceptor,  in  the  absence  of  an  express  stipu- 
lation to  that  effect,  is  not  discharged  by  the  omission  to  present  the 
bill  for  payment  on  the  day  that  it  matures. 

(3)  In  order  to  render  the  acceptor  of  a  bill  liable  it  is  not  neces- 
sary to  protest  it,  or  that  notice  of  dishonor  should  be  given  to  him. 

(4)  Where  the  holder  of  a  bill  presents  it  for  payment,  he  shall 
exhibit  the  bill  to  the  person  from  whom  he  demands  payment,  and 
when  a  bill  is  paid  the  holder  shall  forthwith  deliver  it  up  to  the 
party  paying  it. 

Liabilities  of  Parties. 

63.  Bill  not  assignment  of  funds  in  hands  of  drawee. — (1)  A  bill, 
of  itself,  does  not  operate  as  an  assignment  of  funds  in  the  hands  of 
the  drawee  available  for  the  payment  thereof,  and  the  drawee  of  a  bill 
who  does  not  accept  as  required  by  this  act  is  not  liable  on  the  instru- 
ment.  This  sub-section  shall  not  extend  to  Scotland. 

(2)  In  Scotland,  where  the  drawee  of  a  bill  has  in  his  hands  funds 
available  for  the  pajTuent  thereof,  the  bill  operates  as  an  assignment 
of  the  sum  for  which  it  is  drawn  in  favor  of  the  holder,  from  the  time 
when  the  bill  is  presented  to  the  drawee. 

54.  Liability  of  acceptor. — The  acceptor  of  a  bill,  by  accepting  it — 

(1)  Engages  that  he  will  pay  it  according  to  the  tenor  of  his  ac- 
ceptance : 

(2)  Is  precluded  from  denying  to  a  holder  in  due  course: 

(a)  The  existence  of  the  drawer,  the  genuineness  of  his  signature, 
and  his  capacity  and  authority  to  draw  the  bill; 

(b)  In  the  case  of  a  bill  payable  to  drawer's  order,  the  then  ca- 
pacity of  the  drawer  to  indorse,  but  not  the  genuineness  or  validity  of 
his  indorsement; 

(c)  In  the  case  of  a  bill  payable  to  the  oider  of  a  third  person  the 
existence  of  the  payee  and  his  then  capacity  to  indorse,  but  not  the 
genuineness  or  validity  of  his  indorsement. 

55.  Liability  of  drawer  or  indorser. — (1)  The  drawer  of  a  bill 
by  drawing  it — 

(a)    Engages  that  on  due  presentment  it  shall  be  accepted  and 


-I 


925  STRANGER  LIABLE  TO  INDORSER.  [§§    56,   57 

paid  according  to  its  tenor,  and  that  if  it  be  dishonored  he  will  com- 
pensate the  holder  or  any  indorser  who  is  compeled  to  pay  it,  provided 
that  the  requisite  proceedings  on  dishonor  be  duly  taken ; 

(b)  Is  precluded  from  denying  to  a  holder  in  due  course  the  ex- 
istence of  the  payee  and  his  then  capacity  to  indorse. 

(2)     The  indorser  of  a  bill  by  indorsing  it — 

(a)  Engages  that  on  due  presentment  it  shall  be  accepted  and  paid 
according  to  its  tenor,  and  that  if  it  be  dishonored  he  will  compensate 
the  holder  or  a  subsequent  indorser  who  is  compelled  to  pay  it,  pro- 
vided that  the  requisite  proceedings  on  dishonor  be  duly  taken ; 

(b)  Is  precluded  from  denying  to  a  holder  in  due  course  the  genu- 
ineness and  regularity  in  all  respects  of  the  drawer's  signature  and  all 
previous  indorsements ; 

(c)  Is  precluded  from  denying  to  his  immediate  or  a  subsequent 
indorsee  that  the  bill  was  at  the  time  of  his  indorsement  a  valid  and 
subsisting  bill,  and  that  he  had  then  a  good  title  thereto. 

56.  Stranger  signing  bill  liable  as  indorser. — Where  a  person 
signs  a  bill  otherwise  than  as  drawer  or  acceptor,  he  thereby  incurs 
the  liabilities  of  an  indorser  to  a  holder  in  due  course. 

57.  Measure  of  damages  against  parties  to  dishonored  bill. — 

Where  a  bill  is  dishonored,  the  measure  of  damages,  which  shall  be 
deemed  to  be  liquidated  damages,  shall  be  as  follows: 

(1)  The  holder  may  recover  from  any  party  liable  on  the  bill, 
and  the  drawer  who  has  been  compelled  to  pay  the  bill  may  recover 
from  the  acceptor,  and  an  indorser  who  has  been  compelled  to  pay 
the  bill  may  recover  from  the  acceptor  or  from  the  drawer,  or  from 
a  prior  indorser — 

(a)  The  amount  of  the  bill : 

(b)  Interest  thereon  from  the  time  of  presentment  for  payment 
if  the  bill  is  payable  on  demand,  and  from  the  maturity  of  the  bill 
in  any  other  case : 

(c)  The  expenses  of  noting,  or,  when  protest  is  necessary,  and  the 
protest  has  been  extended,  the  expenses  of  protest. 

(2)  In  the  case  of  a  bill  which  has  been  dishonored  abroad,  in  lieu 
of  the  above  damages,  the  holder  may  recover  from  the  drawer  or  an 
indorser,  and  the  drawer  or  an  indorser  who  has  been  compelled  to 
pay  the  bill  may  recover  from  any  party  liable  to  him,  the  amount  of 
the  re-exchange  with  interest  thereon  until  the  time  of  payment. 

(3)  Where  by  this  act  interest  may  be  recovered  as  damages,  such 


§§    58-60]  BILLS    OF   EXCHANGE.  92& 

interest  may,  if  justice  requires  it,  be  withheld  wholly  or  in  part, 
and  where  a  bill  is  expressed  to  be  payable  with  interest  at  a  given  rate, 
interest  as  damages  may  or  may  not  be  given  at  the  same  rate  as  inter- 
est proper. 

58.  Transferor  by  delivery  and  transferee. — (1)  Where  the 
holder  of  a  bill  payable  to  bearer  negotiates  it  by  delivery  without  in- 
dorsing it,  he  is  called  a  "transferor  by  delivery." 

(2)  A  transferor  by  delivery  is  not  liable  on  the  instrument. 

(3)  A  transferor  by  delivery  who  negotiates  a  bill  thereby  war- 
rants to  his  immediate  transferee  being  a  holder  for  value,  that  the  bill 
is  what  it  purports  to  be,  that  he  has  a  right  to  transfer  it,  and  that 
at  the  time  of  transfer  he  is  not  aware  of  any  fact  which  renders  it 
valueless. 

Discharge  of  Bill. 

59.  Payment  in  due  course. — (1)  A  bill  is  discharged  by  payment 
in  due  course  by  or  on  behalf  of  the  drawee  or  acceptor. 

"Payment  in  due  course"  means  payment  made  at  or  after  the  ma- 
turity of  the  bill  to  the  holder  thereof  in  good  faith  and  without 
notice  that  his  title  to  the  bill  is  defective. 

(2)  Subject  to  the  provisions  hereinafter  contained,  when  a  bill  is 
paid  by  the  drawer  or  an  indorser  it  is  not  discharged ;  but 

(a)  Where  a  bill  payable  to,  or  to  the  order  of,  a  third  party  is 
paid  by  the  drawer,  the  drawer  may  enforce  payment  thereof  against 
the  acceptor,  but  may  not  re-issue  the  bill. 

(b)  Where  a  bill  is  paid  by  an  indorser,  or  where  a  bill  payable 
to  drawer's  order  is  paid  by  the  drawer,  the  party  paying  it  is  remitted 
to  his  former  rights  as  regards  the  acceptor  or  antecedent  parties,  and 
he  may,  if  he  thinks  fit,  strike  out  his  own  and  subsequent  indorse- 
ments, and  again  negotiate  the  bill. 

(3)  Where  an  accommodation  bill  is  paid  in  due  course  by  the 
party  accommodated  the  bill  is  discharged. 

60.  Banker  paying  demand  draft  whereon  Indorsement  is  forged. — 

When  a  bill  payable  to  order  on  demand  is  drawn  on  a  banker,  and 
the  banker  on  whom  it  is  drawn  pays  the  bill  in  good  faith  and  in  the 
ordinary  course  of  business,  it  is  not  incumbent  on  the  banker  to  show 
that  the  indorsement  of  the  payee  or  any  subsequent  indorsement  was 
made  by  or  under  the  authority  of  the  person  whose  indorsement  it 
purports  to  be,  and  the  banker  is  deemed  to  have  paid  the  bill  in  due 


927  EXPRESS    WAIVER — CANCELLATION.  [§§'   61-G4 

course,  although  such  indorsement  has  been  forged  or  made  without 
authority. 

61.  Acceptor  the  holder  at  maturity. — "When  the  acceptor  of  a  bill 
is  or  becomes  the  holder  of  it  at  or  after  its  maturity,  in  his  own  right,. 
the  bill  is  discharged. 

62.  Express  waiver. —  (1)  When  the  holder  of  a  bill  at  or  after  its 
maturity  absolutely  and  unconditionally  renounces  his  rights  against 
the  acceptor  the  bill  is  discharged. 

The  renunciation  must  be  in  writing,  unless  the  bill  is  delivered  up 
to  the  acceptor. 

(2)  The  liabilities  of  any  party  to  a  bill  may  in  like  manner  be 
renounced  by  the  holder  before,  at,  or  after  its  maturity ;  but  nothing 
in  this  section  shall  affect  the  rights  of  a  holder  in  due  course  without 
notice  of  the  renunciation. 

63.  Cancellation. — (1)    Where  a  bill  is  intentionally  cancelled  by 
the  holder  or  his  agent,  and  the  cancellation  is  apparent  thereon,  the  • 
bill  is  discharged. 

(2)  In  like  manner  any  party  liable  on  a  bill  may  be  discharged 
by  the  intentional  cancellation  of  his  signature  by  the  holder  or  his 
agent.  In  such  case  any  indorser  who  would  have  had  a  right  of  re- 
course against  the  party  whose  signature  is  cancelled,  is  also  discharged. 

(3)  A  cancellation  made  unintentionally,  or  under  a  mistake,  or 
without  the  authority  of  the  holder  is  inoperative;  but  where  a  bill 
or  any  signature  thereon  appears  to  have  been  canceled  the  burden 
of  proof  lies  on  the  party  who  alleges  that  the  cancellation  was  made 
unintentionally,  or  under  a  mistake,  or  without  authority. 

64.  Alteration  of  bill. — (1)  Where  a  bill  or  acceptance  is  mate- 
rially altered  without  the  assent  of  all  parties  liable  on  the  bill,  the 
bill  is  avoided  except  as  against  a  party  who  has  himself  made,  au- 
thorized, or  assented  to  the  alteration,  and  subsequent  indorsers. 

Provided  that. 

Where  a  bill  has  been  materially  altered,  Init  tlio  alteration  is  not 
apparent,  and  the  bill  is  in  the  hands  of  a  holder  in  due  course,  such 
holder  may  avail  himself  of  the  bill  as  if  it  had  not  been  altered,  and 
may  enforce  payment  of  it  according  to  its  original  tenor. 

(2)  In  particular  the  following  alterations  are  material,  namely, 
any  alteration  of  the  date,  the  sum  payaldc,  the  time  of  payment,  the 


§§    G5-C7J  BILLS    OF   EXCHANGE.  928 

place  of  payment,  and,  where  a  bill  has  been  accepted  generally,  the 
addition  of  a  place  of  payment  without  the  acceptor's  assent. 

Acceptance  and  Payment  for  Honor. 

65.  Acceptance  for  honor  supra  protest. — (1)  Where  a  bill  of  ex- 
change has  been  protested  for  dishonor  by  non-acceptance,  or  pro- 
tested for  better  security,  and  is  not  overdue,  any  person,  not  being  a 
party  already  liable  thereon,  may,  with  the  consent  of  the  holder,  in- 
tervene and  accept  the  bill  supra  protest,  for  the  honor  of  any  party 
liable  thereon,  or  for  the  honor  of  the  person  for  whose  account  the 
bill  is  drawn. 

(2)  A  bill  may  be  accepted  for  honor  for  part  only  of  the  sum  for 
which  it  is  drawn. 

(3)  An  acceptance  for  honor  supra  protest  in  order  to  be  valid 
must — 

(a)  Be  written  on  the  bill,  and  indicate  that  it  is  an  acceptance  for 
honor : 

(b)  Be  signed  by  the  acceptor  for  honor. 

(4)  Where  an  acceptance  for  honor  does  not  expressly  state  for 
whose  honor  it  is  made,  it  is  deemed  to  be  an  acceptance  for  the  honor 
of  the  drawer. 

(5)  Where  a  bill  payable  after  sight  is  accepted  for  honor,  its  ma- 
utrity  is  calculated  from  the  date  of  the  noting  for  non-acceptance, 
and  not  from  the  date  of  the  acceptance  for  honor. 

66.  Liability  of  acceptor  for  honor. — (1)  The  acceptor  for  honor 
of  a  bill  by  accepting  it  engages  that  he  will,  on  due  presentment,  pay 
the  bill  according  to  the  tenor  of  his  acceptance,  if  it  is  not  paid  by 
the  drawee,  provided  it  has  been  duly  presented  for  payment,  and 
protested  for  non-payment,  and  that  he  receives  notice  of  these  facts. 

(2)  The  acceptor  for  honor  is  liable  to  the  holder  and  to  all  parties 
to  the  bill  subsequent  to  the  party  for  whose  honor  he  has  accepted. 

67.  Presentment  to  acceptor  for  honor. — (1)  Where  a  dishonored 
bill  has  been  accepted  for  honor  supra  protest,  or  contains  a  reference 
in  case  of  need,  it  must  be  protested  for  non-payment  before  it  is  pre- 
sented for  payment  to  the  acceptor  for  honor,  or  referee  in  case  of 
need, 

(2)  Where  the  address  of  the  acceptor  for  honor  is  in  the  same  place 
where  the  bill  is  protested  for  non-payment,  the  bill  must  be  presented 


929  PAYMENT   FOR   HONOR    SUPRA   PROTEST,  [§§    68,    69 

to  him  not  later  than  the  day  following  its  maturity;  and  where  the 
address  of  the  acceptor  for  honor  is  in  some  place  other  than  the  place 
where  it  was  protested  for  non-payment,  the  bill  must  be  forwarded 
not  later  than  the  day  following  its  maturity  for  presentment  to  him. 

(3)  Delay  in  presentment  or  non-presentment  is  excused  by  any 
circumstance  which  would  excuse  delay  in  presentment  for  payment 
or  non-presentment  for  payment. 

(4)  When  a  bill  of  exchange  is  dishonored  by  the  acceptor  for 
honor  it  must  be  protested  for  non-payment  by  him. 

68.  Payment  for  honor  supra  protest. — (1)  Where  a  bill  has 
been  protested  for  non-payment,  any  person  may  intervene  and  pay 
it  supra  protest  for  the  honor  of  any  party  liable  thereon,  or  for  the 
honor  of  the  person  for  whose  account  the  bill  is  drawn. 

(2)  Where  two  or  more  persons  offer  to  pay  a  bill  for  the  honor  of 
different  parties,  the  person  whose  payment  will  discharge  most  par- 
ties to  the  bill  shall  have  the  preference. 

(3)  Payment  or  honors  supra  protest,  in  order  to  operate  as  such 
and  not  as  a  mere  voluntary  payment,  must  be  attested  by  a  notarial 
act  of  honor  which  may  be  appended  to  the  protest  or  form  an  exten- 
sion of  it. 

(4)  The  notarial  act  of  honor  must  be  founded  on  a  declaration 
made  by  the  payer  for  honor,  or  his  agent  in  that  behalf,  declaring 
his  intention  to  pay  the  bill  for  honor,  and  for  whose  honor  he  pays. 

(5)  Where  a  bill  has  been  paid  for  honor,  all  parties  subsequent 
to  the  party  for  whose  honor  it  is  paid  are  discharged,  but  the  payer 
for  honor  is  subrogated  for,  and  succeeds  to  both  the  rights  and 
duties  of,  the  holder  as  regard?  the  party  for  whose  honor  he  pays, 
and  all  parties  liable  to  that  party. 

(6)  The  payer  for  honor  on  paying  to  the  holder  the  amount  of 
the  bill  and  the  notarial  expenses  incidental  to  its  dishonor  is  entitled 
to  receive  both  the  bill  itself  and  the  protest.  If  the  holder  do  not 
on  demand  deliver  them  up  he  shall  be  liable  to  the  payer  for  honor 
in  damages. 

(7)  Where  the  holder  of  a  bill  refuses  to  receive  payment  supra 
protest  he  shall  lose  his  right  of  recourse  against  any  party  who  would 
have  been  discharged  by  such  payment. 

Lost  Instruments. 

69.  Holder's  right  to  duplicate  of  lost  bill. — Where  a  bill  has  been 
lost  before  it  is  overdue,  the  person  who  was  the  holder  of  it  may  apply 

Joyce  Defenses — 59. 


§§    70-72]  BILLS    OF   EXCHANGE.  930 

to  the  drawer  to  give  him  another  bill  of  the  same  tenor,  giving  se- 
curity to  the  drawer  if  required  to  indemnify  him  against  all  persons 
whatever  in  ease  the  bill  alleged  to  have  been  lost  shall  be  found  again. 
If  the  drawer  on  request  as  aforesaid  refuses  to  give  such  duplicate 
bill  he  may  be  compelled  to  do  so. 

70.  Action  on  lost  bill. — In  any  action  or  proceeding  upon  a  bill, 
the  court  or  judge  may  order  that  the  loss  of  the  instrument  shall  not 
be  set  up,  provided  an  indemnity  be  given  to  the  satisfaction  of  the 
court  or  judge  against  the  claims  of  any  other  person  upon  the  instru- 
ment in  question. 

Bill  in  a  Set. 

71.  Rules  as  to  sets. — (1)  Where  a  bill  is  drawn  in  a  set,  each 
part  of  the  set  being  numbered,  and  containing  a  reference  to  the  other 
parts,  the  whole  of  the  parts  constitute  one  bill. 

(2)  Where  the  holder  of  a  set  indorses  two  or  more  parts  to  differ- 
ent persons,  he  is  liable  on  every  such  part,  and  every  indorser  subse- 
quent to  him  is  liable  on  the  part  he  himself  indorsed  as  if  the 
said  parts  were  separate  bills. 

(3)  Where  two  or  more  parts  of  a  set  are  negotiated  to  different 
holders  in  due  course,  the  holder  whose  title  first  accrues  is  as  between 
such  holders  deemed  the  true  owner  of  the  bill;  but  nothing  in  this 
sub-section  shall  affect  the  rights  of  a  person  who  in  due  course  ac- 
cepts or  pays  the  part  first  presented  to  him. 

(4)  The  acceptance  may  be  written  on  any  part,  and  it  must  be 
written  on  one  part  only. 

If  the  drawee  accepts  more  than  one  part,  and  such  accepted  parts 
get  into  the  hands  of  different  holders  in  due  course,  he  is  liable  on 
every  such  part  as  if  it  were  a  separate  bill. 

(5)  When  the  acceptor  of  a  bill  drawn  in  a  set  pays  it  without  re- 
quiring the  part  bearing  his  acceptance  to  be  delivered  up  to  him, 
and  that  part  at  maturity  is  outstanding  in  the  hands  of  a  holder  in 
due  course,  he  is  liable  to  the  holder  thereof. 

(6)  Subject  to  the  preceding  rules,  where  any  one  part  of  bill 
drawn  in  a  set  is  discharged  by  payment  or  otherwise,  the  whole  bill 
is  discharged. 

Conflict  of  Laws. 

72.  Rules  where  laws  conflict. — Where  a  bill  drawn  in  one  coun- 
try is  negotiated,  accepted,  or  payable  in  another,  the  rights,  duties, 
and  liabilities  of  the  parties  thereto  are  determined  as  follows: — 


931  CHEQUE  DEFINED.  [§    73 

(1)  The  validity  of  a  bill  as  regards  requisites  in  form  is  deter- 
mined by  the  law  of  the  place  of  issue,  and  the  validity  as  regards 
requisites  in  form  of  the  supervening  contracts,  such  as  acceptance,  or 
indorsement,  or  acceptance  supra  protest,  is  determined  by  the  law 
of  the  place  where  such  contract  was  made. 

Provided  that — 

(a)  Where  a  bill  is  issued  out  of  the  United  Kingdom  it  is  not 
invalid  by  reason  only  that  it  is  not  stamped  in  accordance  with  the 
law  of  the  place  of  issue : 

(b)  Where  a  bill,  issued  out  of  the  United  Kingdom,  conforms, 
as  regards  requisites  in  form,  to  the  law  of  the  United  Kingdom,  it 
may,  for  the  purposes  of  enforcing  payment  thereof,  be  treated  as 
valid  as  between  all  persons  who  negotiate,  hold,  or  become  parties  to 
it  in  the  United  Kingdom. 

(2)  Subject  to  the  provisions  of  this  Act,  the  interpretation  of  the 
drawing,  indorsement,  acceptance,  or  acceptance  supra  protest  of  a 
bill,  is  determined  by  the  law  of  the  place  where  such  contract  is  made. 

Provided  that  where  an  inland  bill  is  indorsed  in  a  foreign  country 
the  indorsement  shall  as  regards  the  payer  be  interpreted  according 
to  the  law  of  the  United  Kingdom. 

(3)  The  duties  of  the  holder  with  respect  to  presentment  for  ac- 
ceptance or  payment  and  the  necessity  for  or  sufficiency  of  a  protest 
or  notice  of  dishonor,  or  otherwise,  are  determined  by  the  law  of  the 
place  where  the  act  is  done  or  the  bill  is  dishonored. 

(4)  Where  a  bill  is  drawn  out  of  but  payable  in  the  United  King- 
dom and  the  sum  payable  is  not  expressed  in  the  currency  of  the 
United  Kingdom,  the  amount  shall,  in  the  absence  of  some  express 
stipulation,  be  calculated  according  to  the  rate  of  exchange  for  sight 
drafts  at  the  place  of  payment  on  the  day  the  bill  is  payable. 

(5)  Where  a  bill  is  drawn  in  one  country  and  is  payable  in  an- 
other, the  due  date  thereof  is  determined  according  to  the  law  of  the 
place  where  it  is  payable. 

PAET  III. 

CHEQUES  ON   A  BANKER. 

73.  Cheque  defined. — A  cheque  is  a  bill  of  exchange  drawn  on  a 
banker  payable  on  demand. 

Except  as  otherwise  provided  in  this  part,  the  provisions  of  this 
Act  applicable  to  a  bill  of  exchange  payable  on  demand  apply  to  a 
cheque. 


§§    74-77]  CHEQUES   ON   A  BANKER.  932 

74.  Presentment  of  cheque  for  payment. — Subject  to  the  provi- 
sions of  this  Act — 

(1)  Where  a  cheque  is  not  presented  for  payment  within  a  reason- 
able time  of  its  issue,  and  the  drawer  or  the  person  on  whose  account 
it  is  drawn  had  the  right  at  the  time  of  such  presentment  as  between 
him  and  the  banker  to  have  the  cheque  paid  and  suffers  actual  damage 
through  the  delay,  he  is  discharged  to  the  extent  of  such  damage, 
that  is  to  say,  to  the  extent  to  which  such  drawer  or  person  is  a  cred- 
itor of  such  banker  to  a  larger  amount  than  he  would  have  been  had 
such  cheque  been  paid. 

(2)  In  determining  what  is  a  reasonable  time  regard  shall  be  had 
to  the  nature  of  the  instrument,  the  usage  of  trade  and  of  bankers, 
and  the  facts  of  the  particular  case, 

(3)  The  holder  of  such  cheque  as  to  which  such  drawer  or  person 
is  discharged  shall  be  a  creditor,  in  lieu  of  such  drawer  or  person, 
of  such  banker  to  the  extent  of  such  discharge,  and  entitled  to  recover 
the  amount  from  him. 

75.  Revocation  of  banker's  authority. — The  duty  and  authority  of 
a  banker  to  pay  a  cheque  drawn  on  him  by  his  customer  are  deter- 
mined by — 

(1)  Countermand  of  payment : 

(2)  Notice  of  the  customer's  death. 

Crossed  Cheques. 

76.  General  and  special  crossings  defined. — (1)  Where  a  cheque 
bears  across  its  face  an  addition  of — 

(a)  The  words  "and  company"  or  any  abbreviation  thereof  be- 
tween two  parallel  transverse  lines,  either  with  or  without  the  words 
"not  negotiable ;"  or 

(b)  Two  parallel  transverse  lines  simply,  either  with  or  without 
the  words  "not  negotiable ;" 

that  addition  constitutes  a  crossing,  •  and  the  cheque  is  crossed  gen- 
erally. 

(3)  Where  a  cheque  bears  across  its  face  an  addition  of  the  name 
of  a  banker,  either  with  or  without  the  words  "not  negotiable,"  that 
addition  constitutes  a  crossing,  and  the  cheque  is  crossed  specially 
and  to  that  banker. 

77.  Crossing  by  drawer  or  after  issue. — (1)  A  cheque  may  be 
crossed  generally  or  specially  by  the  drawer. 


I 


933  CROSSING   MATERIAL   PART   OF   CHEQUE.  [§§    78-80 

(2)  Where  a  cheque  is  uncrossed,  the  holder  may  cross  it  generally 
or  specially. 

(3)  Where  a  cheque  is  crossed  generally  the  holder  may  cross  it 
specially. 

(4)  Where  a  cheque  is  crossed  generally  or  specially,  the  holder 
may  add  the  words  "not  negotiable." 

(5)  Where  a  cheque  is  crossed  specially,  the  banker  to  whom  it  is 
crossed  may  again  cross  it  specially  to  another  banker  for  collection. 

(6)  Where  an  uncrossed  cheque,  or  a  cheque  crossed  generally,  is 
sent  to  a  banker  for  collection,  he  may  cross  it  specially  to  himself. 

78.  Crossing  a  material  part  of  cheque. — A  crossing  authorized 
by  this  act  is  a  material  part  of  the  cheque ;  it  shall  not  be  lawful  for 
any  person  to  obliterate  or,  except  as  authorized  by  this  act,  to  add  to 
or  alter  the  crossing. 

79.  Duties  of  banker  as  to  crossed  cheques. —  (1)  Wliere  a 
cheque  is  crossed  specially  to  more  than  one  banker  except  when 
crossed  to  an  agent  for  collection  being  a  banker,  the  banker  on  whom 
it  is  drawn  shall  refuse  payment  thereof. 

(2)  Where  the  banker  on  whom  a  cheque  is  drawn  which  is  so 
crossed  nevertheless  pays  the  same,  or  pays  a  cheque  crossed  generally 
otherwise  than  to  a  banker,  or  if  crossed  specially  otherwise  than  to 
the  banker  to  whom  it  is  crossed,  or  his  agent  for  collection  being  a 
banker,  he  is  liable  to  the  true  owner  of  the  cheque  for  any  loss  h  may 
sustain  owing  to  the  cheque  having  been  so  paid. 

Provided  that  where  a  cheque  is  presented  for  payment  which  does 
not  at  the  time  of  presentment  appear  to  be  crossed,  or  to  have  had 
a  crossing  which  has  been  obliterated,  or  to  have  been  added  to  or  al- 
tered otherwise  than  as  authorized  by  this  act,  the  banker  paying  the 
cheque  in  good  faith  and  without  negligence  shall  not  be  responsible 
or  incur  any  liability,  nor  shall  the  payment  be  questioned  by  reason 
of  the  cheque  having  been  crossed,  or  of  a  crossing  having  been  ob- 
literated or  having  been  added  to  or  altered  otherwise  than  as  author- 
ized by  this  act,  and  of  payment  having  been  made  otherwise  than  to 
a  banker  or  to  the  banker  to  whom  the  cheque  is  or  was  crossed,  or 
to  .his  agent  for  collection  being  a  banker,  as  the  case  may  be. 

80.  Protection  to  banker  and  drawer  where  cheque  is  crossed. 

Where  the  banker,  on  wliom  a  crossed  cheque  is  drawn,  in  good  faith 
and  without  negligence  pays  it,  if  crossed  generally,  to  a  banker,  and 


§§    81-83]  PROMISSORY    NOTES.  934 

if  crossed  specially,  to  the  banker  to  whom  it  is  crossed,  or  his  agent 
for  collection  being  a  banker,  the  banker  paying  the  cheque,  and,  if 
the  cheque  has  come  into  the  hands  of  the  payee,  the  drawer,  shall  re- 
spectively be  entitled  to  the  same  rights  and  be  placed  in  the  same 
position  as  if  payment  of  the  cheque  had  been  made  to  the  true  owner 
thereof. 

81.  Effect  of  crossing  on  holder. — Where  a  person  takes  a  crossed 
cheque  which  bears  on  it  the  words  "not  negotiable,"  he  shall  not  have 
and  shall  not  be  capable  of  giving  a  better  title  to  the  cheque  than 
that  which  the  person  from  whom  he  took  it  had. 

82.  Protection  to  collecting  banker. — Where  a  banker  in  good 
faith  and  without  negligence  receives  payment  for  a  customer  of  a 
cheque  crossed  generally  or  specially  to  himself,  and  the  customer  has 
no  title  or  a  defective  title  thereto,  the  banker  shall  not  incur  any  lia- 
bility as  to  the  true  owner  of  the  cheque  by  reason  only  of  having  re- 
ceived such  payment. 

Amended,  6  Edw.  7,  as  follows: 

An  Act  to  amend  section  eighty-two  of  the  Bills  of  Exchange  Act, 
1882  [4th  August,  1906]. 

Be  it  enacted  by  the  King's  most  excellent  Majesty,  by  and  with 
the  advice  and  consent  of  the  Lords  Spiritual  and  Temporal,  and 
Commons,  in  this  present  Parliament  assembled,  and  by  the  authority 
of  the  same,  as  follows : 

1.  A  banker  receives  payment  of  a  crossed  cheque  for  a  customer 
within  the  meaning  of  section  eighty-two  of  the  Bills  of  Exchange 
Act,  1882,  notwithstanding  that  he  credits  his  customer's  account 
with  the  amount  of  the  cheque  before  receiving  payment  thereof. 

2.  This  Act  may  be  cited  as  the  Bills  of  Exchange  (Crossed 
Cheques)  Act,  1906,  and  this  act  and  the  Bills  of  Exchange  Act,  1882, 
may  be  cited  together  as  the  Bills  of  Exchange  Acts,  1882  and  1906. 


PART  IV. 

PROMISSORY   NOTES. 

83.  Promissory  note  defined. —  (1)  A  promissory  note  is  an  un- 
conditional promise  in  writing  made  by  one  person  to  another  signed 
by  the  maker,  engaging  to  pay,  on  demand  or  at  a  fixed  or  determin- 


935    DELIVERY    NECESSARY NOTES   PAYABLE    OX   DEMAND.     [§§    84^87 

able  future  time,  a  sum  certain  in  money,  to,  or  to  the  order  of,  a 
specified  person  or  to  bearer. 

(3)  An  instrument  in  the  form  of  a  note  payable  to  maker's  order 
is  not  a  note  within  the  meaning  of  this  section  unless  and  until  it  is 
indorsed  by  the  maker, 

(3)  A  note  is  not  invalid  by  reason  only  that  it  contains  also  a 
pledge  of  collateral  security  with  authority  to  sell  or  dispose  thereof. 

(4)  A  note  which  is,  or  on  the  face  of  it,  purports  to  be,  both  made 
and  payable  within  the  British  Islands  is  an  inland  note.  Any  other 
note  is  a  foreign  note. 

84.  Belivery  necessary. — A  promissory  note  is  inchoate  and  in- 
complete until  delivery  thereof  to  the  payee  or  bearer. 

85.  Joint  and  several  notes. — (1)  A  promissory  note  may  be 
made  by  two  or  more  makers,  and  they  may  be  liable  thereon  jointly, 
or  jointly  and  severally,  according  to  its  tenor. 

(2)  Where  a  note  runs  "I  promise  to  pay"  and  is  signed  by  two 
or  more  persons  it  is  deemed  to  be  their  joint  and  several  note. 

86.  Note  payable  on  demand. —  (1)  Where  a  note  payable  on 
demand  has  been  indorsed,  it  must  be  presented  for  payment  within 
a -reasonable  time  of  the  indorsement.  If  it  be  not  so  presented  the 
indorser  is  discharged. 

(2)  In  determining  what  is  a  reasonable  time,  regard  shall  be  had  ' 
to  the  nature  of  the  instrument,  the  usage  of  trade,  and  the  facts  of 
the  particular  case. 

(3)  Where  a  note  payable  on  demand  is  negotiated,  it  is  not  deemed 
to  be  overdue,  for  the  purpose  of  affecting  the  holder  with  defects  of 
title  of  which  he  had  no  notice,  by  reason  that  it  appears  that  a  rea- 
sonable time  for  presenting  it  for  payment  has  elapsed  since  its  issue. 

87.  Presentment  of  note  for  payment. — (1)  Where  a  promissory 
note  is  in  the  body  of  it  made  payable  at  a  particular  place,  it  must  be 
presented  for  payment  at  that  place  in  order  to  render  the  maker 
liable.  In  any  other  case,  presentment  for  payment  is  not  necessary 
in  order  to  render  the  maker  liable. 

(2)  Presentment  for  payment  is  necessary  in  order  to  render  the 
indorser  of  a  note  liable. 

(3)  Where  a  note  is  in  the  body  of  it  made  payable  at  a  particular 
place,  presentment  at  that  place  is  necessary  in  order  to  render  an  in- 


§§    88--91]  SUPPLEMENTARY.  936_ 

dorser  liable;  but  when  a  place  of  payment  is  indicated  by  way  of 
memorandum  only,  presentment  at  that  place  is  sufficient  to  render 
the  indorser  liable,  but  a  presentment  to  the  maker  elsewhere,  if  suffi- 
cient in  other  respects,  shall  also  suffice. 

88.  Liability  of  maker. — The  maker  of  a  promissory  note  by 
making  it — 

( 1 )  Engages  that  he  will  pay  it  according  to  its  tenor ; 

(2)  Is  precluded  from  denying  to  a  holder  in  due  course  the  ex- 
istence of  the  payee  and  his  then  capacity  to  indorse. 

89.  Application  of  Part  II  to  notes. — (1)  Subject  to  the  pro- 
visions in  this  part,  and  except  as  by  this  section  provided,  the  pro- 
visions of  this  act  relating  to  bills  of  exchange  apply,  with  the  neces- 
sary modifications,  to  promissory  notes. 

(2)  In  applying  those  provisions  the  maker  of  a  note  shall  be 
deemed  to  correspond  with  the  acceptor  of  a  bill,  and  the  first  indorser 
of  a  note  shall  be  deemed  to  correspond  with  the  drawer  of  an  accepted 
bill  payable  to  drawer's  order. 

(3)  The  following  provisions  as  to  bills  do  not  apply  to  notes; 
namely,  provisions  relating  to — 

(a)  Presentment  for  acceptance; 

(b)  Acceptance; 

(c)  Acceptance  supra  protest; 

(d)  Bills  in  a  set. 

(4)  Where  a  foreign  note  is  dishonored,  protest  thereof  is  un- 
necessary. 

PAET  V. 

SUPPLEMENTARY. 

90.  Good  faith. — A  thing  is  deemed  to  be  done  in  good  faith, 
within  the  meaning  of  this  act,  where  it  is  in  fact  done  honestly, 
whether  it  is  done  negligently  or  not. 

91.  Signature. —  (1)  Where,  by  this  act,  any  instrument  or 
writing  is  required  to  be  signed  by  any  person,  it  is  not  necessary  that 
he  should  sign  it  with  his  own  hand,  but  it  is  sufficient  if  his  signature 
is  written  thereon  by  some  other  person  by  or  under  his  authority. 

(2)     In  the  case  of  a  corporation,  where,  by  this  act,  any  instru- 


937  COMPUTATION    OP   TIME.  [§§    92-96 

ment  or  writing  is  required  to  be  signed,  it  is  sufficient  if  the  instru- 
ment or  writing  be  sealed  with  the  corporate  seal. 

But  nothing  in  this  section  shall  be  construed  as  requiring  the  bill 
or  note  of  a  corporation  to  be  under  seal. 

92.  Computation  of  time. — Where,  by  this  act,  the  time  limited 
for  doing  any  act  or  thing  is  less  than  three  days,  in  reckoning  time, 
non-business  days  are  excluded. 

"Non-business  days"  for  the  purposes  of  this  act  mean — 

(a)  Sunday,  Good  Friday,  Christmas  Day : 

(b)  A  bank  holiday  under  the  Bank  Holidays  Act,  1871,  or  acts 
amending  it : 

(c)  A  day  appointed  by  royal  proclamation  as  a  public  fast  or 
thanksgiving  day. 

Any  other  day  is  a  business  day. 

93.  When  noting  equivalent  to  protest. — For  the  purpose  of  this 
act,  where  a  bill  or  note  is  required  to  be  protested  within  a  specified 
time  or  before  some  further  proceeding  is  taken,  it  is  sufficient  that 
the  bill  has  been  noted  for  protest  before  the  expiration  of  the  speci- 
fied time  or  the  taking  of  the  proceeding;  and  the  formal  protest 
may  be  extended  at  any  time  thereafter  as  of  the  date  of  the  noting. 

94.  Protest  when  notary  not  accessible. — Where  a  dishonored 
bill  or  note  is  authorized  or  required  to  be  protested,  and  the 
services  of  a  notary  cannot  be  obtained  at  the  place  where  the  bill  is 
dishonored,  any  householder  or  substantial  resident  of  the  place  may, 
in  the  presence  of  two  witnesses,  give  a  certificate,  signed  by  them,  at- 
testing the  dishonor  of  the  bill,  and  the  certificate  shall  in  all  respects 
operate  as  if  it  were  a  formal  protest  of  the  bill. 

The  form  given  in  Schedule  1  to  this  act  may  be  used  with  neces- 
sary modifications,  and  if  used  shall  be  sufficient. 

95.  Dividend  warrants  may  be  crossed. — The  provisions  of  this 
act  as  to  crossed  cheques  shall  apply  to  a  warrant  for  payment  of  divi- 
dend. 

96.  Repeal. — The  enactments  mentioned  in  the  second  schedule 
to  this  act  arc  hereby  repealed  as  from  the  commencement  of  this  act 
to  the  extent  in  that  schedule  mentioned. 


§§    97-100]  SUPPLEMENTAEY.  938 

Provided  that  such  repeal  shall  not  affect  anything  done  or  suf- 
fered, or  any  right,  title,  or  interest  acquired  or  accrued  before  the 
commencement  of  this  act,  or  any  legal  proceeding  or  remedy  in  re- 
spect of  any  such  thing,  right,  title,  or  interest. 

97.  Savings. —  (1)  The  rules  in  bankruptcy  relating  to  bills  of 
exchange,  promissory  notes,  and  cheques,  shall  continue  to  apply 
thereto  notwithstanding  anything  in  this  act  contained. 

(2)  The  rules  of  common  law  including  the  law  merchant,  save  in 
so  far  as  they  are  inconsistent  with  the  express  provisions  of  this  act, 
shall  continue  to  apply  to  bills  of  exchange,  promissory  notes,  and 
cheques. 

(3)  Nothing  in  this  act  or  in  any  repeal  effected  thereby  shall 
affect — 

(a)  The  provisions  of  the  Stamp  Act,  1870,  or  acts  amending  it 
or  any  law  or  enactment  for  the  time  being  in  force  relating  to  the 
revenue : 

(b)  The  provisions  of  the  Companies  Act,  1862,  or  acts  amending 
it  or  any  act  relating  to  joint  stock  bank  or  companies : 

(c)  The  provisions  of  any  act  relating  to  or  confirming  the  privi- 
leges of  the  Bank  of  Ireland  respectively : 

(d)  The  validity  of  any  usage  relating  to  dividend  warrants,  or 
the  indorsements  thereof. 

98.  Saving  of  summary  diligence  in  Scotland. — Nothing  in  this 
act  or  in  any  repeal  effected  thereby  shall  extend  or  restrict,  or  in  any 
way  alter  or  affect  the  law  and  practice  in  Scotland  in  regard  to 
summary  diligence. 

99.  Construction  with  other  acts,  &c. — Where  an  act  or  document 
refers  to  any  enactment  repealed  by  this  act,  the  act  or  document  shall 
be  construed,  and  shall  operate,  as  if  it  referred  to  the  corresponding 
provisions  of  this  act. 

100.  Parol  evidence  allowed  in  certain  judicial  proceedings  in 
Scotland. — In  any  judicial  proceeding  in  Scotland,  any  fact  relating  to 
a  bill  of  exchange,  bank  cheque,  or  promissory  note,  which  is  relevant 
to  any  question  of  liability  thereon,  may  be  proved  by  parol  evidence: 
Provided  that  this  enactment  shall  not  in  any  way  affect  the  existing 
law  and  practice  whereby  the  party  who  is,  according  to  the  tenor  of 


I 


939  PAROL   EVIDENCE  ALLOWED  IN   SCOTLAND.  [§    100 

any  bill  of  exchange,  bank  cheque,  or  promissory  note,  debtor  to  the 
holder  in  the  amount  thereof,  may  be  required,  as  a  condition  of  ob- 
taining a  sist  of  diligence,  or  suspension  of  a  charge,  or  threatened 
charge,  to  make  such  consignation,  or  to  find  such  caution  as  the  court 
or  judge  before  whom  the  cause  is  depending  may  require. 

This  section  shall  not  apply  to  any  case  where  the  bill  of  exchange, 
bank  cheque,  or  promissory  note  has  undergone  the  sesennial  prescrip- 
tion. 

SCHEDULES. 

FIEST  SCHEDULE. 

Form  of  protest  which  may  be  used  when  the  services  of  a  notary 
cannot  be  obtained. 

Know  all  men  that  I,  A.  B.  (householder),  of ,  in  the  coun- 
try of ,  in  the  United  Kingdom,  at  the  request  of  C.  D.,  there 

being  no  notary  public  available,  did  on  the day  of ,  188 — , 

at demand  payment  (or  acceptance)  of  the  bill  of  exchange 

hereunder  written,  from  E.  F.,  to  which  demand  he  made  answer 
(state  answer,  if  any)  Wherefore  I  now,  in  the  presence  of  G.  H. 
and  J.  K.,  do  protest  the  said  bill  of  exchange.  (Signed) 

A.  B. 

G.  H. 

J.  K. 

Witnesses, 

N.  B. — The  bill  itself  should  be  annexed,  or  a  copy  of  the  bill  and 

all  that  is  written  thereon  should  be  underwritten. 

SECOND  SCHEDULE. 

Specifies  what  laws  are  repealed. 


INDEX 


941 


INDEX. 


{References  are  to  Sections.} 
ABDUCTION, 

note  in  consideration  of  void,  n.  288. 

ABSCONDED, 

where  maker  has,  presentment,  degree  of  diligence,  522. 

ACCEPTANCE, 

of  instruments  on  Sunday,  29. 

of  paper  as  an  estoppel,  641. 

of  bill   of  exchange   by  infant,  infancy  as  a  defense,  67. 

by  corporation  in  violation  of  statute,  84. 

of  bill  of  exchange  by   partner,   want  of  authority,  90. 

estops  to  deny  authority  of  agent,  641. 

forgery  of,  99. 

estops  to  deny  signature  of  drawer,  641. 

does  not  estop  to  deny  signature  of  indorser,  673. 

want  of  consideration  for,  199. 

estops  to  show  want  of  consideration,  641. 

for  accommodation,  want  of  consideration,  indorsement  after  ma- 
turity, 282. 

estops  to  show  not  sufficient  funds,  641. 

presumption  from  as  to  funds  may  be  rebutted,  199. 

binds  acceptor  to  bona  fide  payee  or  holder  for  value,  199. 

for  accommodation,  want  or  failure  of  consideration,  272,  273,  274. 

discount  of  accommodation  paper  before,  276. 

of   accommodation   paper,   conflict    of   laws,    277. 

where  conditional,  347. 

absolute  on  face  cannot  be  shown  to  be  conditional,  n.  347. 

of  bill  of  exchange,  condition  affecting,  diversion,  386. 

of  order  on  committee,  500. 

where   notice  of  protest  contains  erroneous   statement  as  to  who 
accepted,  530. 

banker's  oral  agreement  to  accept  checks,  n.  581. 

estops  to  show  fraud  in  filling  blank  space  for  amount,  641. 

when  does  not  estop  to  show  usury,  641. 

certification  of  bank  check,  642. 

of  new  note  as  an  estoppel,  649. 

of  deed  with  warranty  as  an  estoppel,  664. 
See  Acceptor;   Checks;    Notice  ov  Dishonor;    Presentment  foe  Accep- 
tance. 
943 


I 


944  INDEX. 

[References  are  to  Sections."], 
ACCEPTOR, 

cannot  allege  payee  fictitious  person,  24. 

liability  of  married  woman  as,  50. 

cannot  set  up  infancy  of   drawers  of  bill  of  exchange,  68. 

of  bill  cannot  question  authority  of  drawer,  95, 

fraud  of  drawer  in  use  of  proceeds  not  available  in  favor  of,  134. 

violation  of  agreemeot  between  payee  and  drawer  no  defense,  134.  v 

that  paper  altered  before  acceptance  no  defense,  136. 

released  by  alteration  of  date,  152. 

bound  by  his  acceptance  to  bona  fide  payee  or  holder  for  value,  199. 

right  to  set  up  want  of  consideration  generally,  199. 

precluded  from  inquiring  into  consideration  between  other  parties, 

199. 
failure  of  consideration  as  defense  to  action  against,  203. 
of  purchase  price  paper,  cannot  show  want  or  failure  of  consider- 
ation, 258. 
may  show  knowledge  of  holder  of  breach  of  duty  in  transferring  to 

him,  272. 
of  paper  for  accommodation,  bona  fide  holders,  273. 
for  accommodation,  want  or  failure  of  consideration,  general  rules 

and   illustrations,    272,   273,   274. 
indorsement  for  accommodation  of,  conditions  as  to  discount,  bona  ^" 

fide  holder,  273.  '' 

of   accommodation   paper,  want  or   failure  of   consideration,   con- 
flict of  laws,  277. 
acceptance  for  accommodation,  want  of  consideration,  indorsement 

after  maturity,  282. 
of   accommodation   paper  taken   in  payment  of   pre-existing  debt, 

action  by  payee,  287. 
of  bills  for  accommodation,  pledging  of  as  collateral,  355. 
exceptions  rare  to  general  rule  as  to  liability  of,  274. 
of  bill  payable  to  order,  purchaser  without  indorsement,  275. 
usury  between  payee  and  acceptor  a  defense,  302. 
where  acceptance  conditional,  347. 
cannot  set  up  acceptance  on  condition  where  performance  prevented 

by  him,  347. 
when  may  show  that  payment  by  depended  on  condition,  320. 
breach  of  condition  as  to  payments  by  payee  no  defense,  324. 
subsequent  extension  of  time  to  may  be  shown  by  drawer,  340. 
defenses  of  against  drawer  not  available  against  bona  fide  holder, 

445. 
protest  without  presentment  to,  498. 
presentment  to  for  acceptance,  499. 

for  payment,  503. 
of  draft,  presentment  to  for  payment  not  necessary  to  charge,  503. 
insolvency  of  does  not  excuse  failure  to  give  notice  of  dishonor,  n. 

570. 
protest  unnecessary  as  to,  536. 


IXDEX.  94,5 

K  [References  are  to  Sections.^ 

■  ACCEPTOR— Continued. 

insolvency  of  does  not  excuse  failure  to  give  notice  of  dishonor.  570. 
availablity  of  set-off  in   action  against,   619. 

set-off  of  against  drawer  not  available  against  bona  fide  holder,  627. 
not  estopped  by  representations  made  by  drawer  to  purchaser,  654. 
where    performance   prevented    by,    estoppel,    659. 
laches    in    attempting    to    destroy    instrument,    estoppel,    661. 
See  Acceptance;  Particular  Defense. 
ACCEPTOR  FOR  HONOR  OR  REFEREE, 

excuses  for  delay  in  presentment  for  payment,  n.  521. 
ACCIDENT, 

where  alterations  result  of,  143. 

accidental  omission  of  name  and  subsequent  addition  of,  175. 
erasure  of  indorsement  by,  180. 
ACCOMMODATION, 

paper,  want  of  consideration,  as  to  parties  generally,  283. 

paper  falsely  represented  to  be  business  paper,  §  116. 

paper,   want   of   consideration   as   between    original   or   immediate 

parties,   269. 
check,  bona  fide  holder,  no  consideration  to  drawer  no  defense,  270. 
note,  making  of  is  loan  of  maker's  credit,  n.  270. 
paper,   discount  of  before  acceptance,  276. 

conflict  of   laws,   acceptance,   277. 
check,  want  or  failure  of  consideration,   278. 
paper  taken  after  maturity,  want  of  consideration,  bona  fide  holder 

282, 
paper,  misapplication  of,  282. 

fraudulently  put  into  circulation,  284. 
creditor  taking  is  purchaser  for  value,  285. 
note  in  payment  of  pre-existing  debt,  bona  fide  indorsee  against  in- 
dorser,  286. 

usurious  note,  not  affected  by  the  usury,  305. 
paper  as  security  for  pre-existing  debt,  247. 
paper,  transfer  of  as  security  for  antecedent  debt,  390,  391. 

one  taking  as  security  for  antecedent  debt  bona  fide  holder 

in  New  York,  391. 
transferred  as  collateral,  bona  fide  holder  against  maker,  353. 
taken  as  collateral  for  pre-existing  debt,  bona  fide  holder,  ex- 
tent of  recovery,  378. 
diverted,  bona  fide  holder,  383,  384. 

other  than  bo7ia  fide  holders,  385. 
diversion  of,  no  restrictions  imposed,  386. 
where  purpose  of  substantially  effected,  diversion,  386. 
negotiated  to  party  not  contemplated,  387,  388,  389. 
to  be  discounted  at  particular  bank,  diversion,  388,  389. 
diversion  of,  waiver,  393. 
.  notice  as  to,  483. 
Joyce  Defenses — 60. 


9-iG  INDEX. 

[References  are  to  Sections.'] 
ACCOMMODATION— Continued. 

notes,  discount  of  by  bank  on  representation,  valid  consideration, 

484. 
paper,  indorsement  by  corporation,  bona  fide  holder,  487. 
paper  for  indorser,  presentment  for  payment,  522. 
bill  or  note  given  for  accommodation  of  indorser,  when  presenta- 
tion for  payment  dispensed  with,  523. 
signing  for,  estopped  as  to  want  or  failure  of  consideration,  666. 
See  Acceptance;   Accommodation  Acceptor;  Accommodation  Indorsee; 
Accommodation  Maker. 

ACCOMMODATION  ACCEPTOR, 

of  bills  pledged  as  collateral,  355. 

want  or  failure  of  consideration,  general  rules  and   illustrations, 

272,  273,  274. 
of  draft  or  bill  taken  in  payment  of  pre-existing  debt,  action  by 

payee,  287. 

ACCOMMODATION  INDORSER, 

availability  of  defenses,  general  rule,  6,  279,  280,  281. 

in  blank,  defense  to  action  against,  10. 

fraud  of  maker  toward  no  defense  against  payee  without  notice,  126. 

sufficiency  of  consideration,  270,  271. 

discharged  by  inserting  rate  of  interest  without  his  consent,  170. 

breach  of  warranty,  280. 

occupies  position  of  surety,  281. 

indorsement  of  bill  for  accommodation  of  drawer,  agreement  not  to 

present  until  maturity,  491. 
for  maker,  presentment  for  payment,  523. 
entitled  to  notice  of  protest,  527. 
entitled  to  notice  of  dishonor,  n.  570. 
may  set  off  usury,  623. 

paying  note  to  bona  fide  holder  not  subject  to  set-off,  627. 
See  Accommodation;    Indorsement;    Indorser. 

ACCOMMODATION  MAKER, 

sufl5ciency  of  consideration,  270,  271. 

action  by  bona  fide  holder  against,  note  taken  in  payment  of  pre- 
existing debt,  284,  285. 
may  show  alteration  of  date,  152. 

not  released  by  addition  of  name  where  blank  left,  175. 
may  show  subsequent  extension  of  time  to  payee,  340. 
diversion  of  proceeds  no  defense  against  bona  fide  holder,  392. 
See  Accommodation. 

ACCOMMODATION  PARTY, 

See  Accommodation. 

ACCOMMODATION  PAYEE, 
sale  of  collateral,  683. 


I 


IXDEX.  947 

{References  are  to  Sections.^ 
ACCORD  AND  SATISFACTION, 

agreement  to  discharge  note  other  than  by  paying  money  not   333 
as  discharge,  686. 

agreement  to  accept  deed  in  settlement  of  amount  of  note,  694. 
covenant  to  accept  less  sum,  702. 

See  Discharge;   Payment;    Release:   Satisfaction 
ACCOUNT, 

note  given  in  settlement  of  as  an  estoppel,  648. 
paper  given  to  cover  shortage  in,  estoppel,  652. 

treated  as  valid  until  account  barred,  estoppel,  659. 
discharge  by  payment  of,  687. 

ACKNOWLEDGMENT, 

of  receipt  notice  of  protest  written  on  note,  526. 
ACQUITTAL, 

note  to  use  influence  in  procuring  void,  n.  288. 
ACTION, 

agreement  to  dismiss  as  consideration,  194. 

discontinuance  of  a  sufficient  consideration,  195. 

"action"  in  usury  statute  includes  actions  at  law  and  in  equity,  302. 

right  of  holder  or  owner  to  bring,  403. 

by  real  party  in  interest,  403. 

right  to  recover  generally,  legal  and  equitable  title,  404. 

on  note  discounted  in  bank,  405. 

by  pledgee  in  name  of  payee,  405, 

right  of  assignee  to  sue,  407. 

right  of  agent  to  sue,  408. 

by  holder  of  paper  indorsed  in  blank  but  who  has  no  beneficial  in- 
terest, 447. 

for  statutory  damages,  deficiency  after  sale  of  collateral  and  ap- 
plication of  proceeds  on  bill,  494. 
for  deficiency  on  bill  after  sale  of  collateral,  494. 
when  presentment,  protest  and  notice  of  dishonor  premature   509 
on  certificate  of  deposit  before  presentment  for  payment,  512.' 
brought  before  presentment  for  payment  or  demand,  512. 
as  estoppel  to  another  action  on  note,  663. 
before  presentment  for  payment. 

See  Presentment  fob  Payment 
ACTS, 

as  estoppel. 

See  Waiver  and  Estoppel 
ADDRESS, 

of  indorser,  notice  of  dishonor  to  wrong  address,  564. 

of  notice  of  dishonor,  sufl^ciency  of,  555. 

of  maker,  addition  of  to  name,  172. 

See  Presentment  fob  Payment. 


948  INDEX. 

IReferences  are  to  Sections.'] 
ADEQUACY, 

of  consideration. 

See  Consideration. 
ADMINISTRATOR, 

fraud  of  in  execution  of  note,  78. 

want  of  authority  of  to  give  or  transfer  paper,  78. 

where  transfer  by  fraudulent,  132. 

action  by  on  note  to  testator  for  advancement  of  legacy,  231. 

paper  to  procure  appointment  as  void,  n.  288. 

note  to,  unauthorized  condition  by  as  to  mode  of  payment,  335. 

demand  necessary,  though  indorser  is  administrator  of  maker's  es- 
tate, 503. 

demand  necessary,  though  indorser  made  administrator  of  maker's 
estate,  503. 

availability  of  set-off  in  action  by,  620. 

action  by  to  recover  bank  deposit,  when  note  not  a  set-off,  620. 

note  purchased  after  testator  died  insolvent  not  available  against 
as  set-off,  620. 

note  to  for  land  purchased,  claim  purchased  from  estate  not  set-off, 
620. 

payment  by  one  as  surety  not  set-off  against  administrator,  620. 

action  on  note  for  deceased's  interest  in  partnership,  what  not  set- 
off against,  620. 

right  of  set-off  against  in  action  against  surety,  639. 

ADMISSION, 

as  an  estoppel,  656,  657,  658. 

of  genuineness  of  note  not  identified  as  note  in  controversy,  644. 

by  partner  not  binding  on  firm,  657. 

by  indorser  does  not  estop  maker,  657. 

of  maker  does  not  estop  co-maker,  657. 

by  assignor  binding  on  assignee,  658. 

by  one  having  authority  to  deal  with  paper  as  his  own,  658. 

of  one  binding  on  another  where  identity  of  interest,  658. 

by  assignor  binding  on  holder  by  delivery  only,  658. 

of  signature,  estoppel  to  show  forgery,  674. 
See  Waiver  and  Estoppel. 
ADULTERY, 

note  under  agreement  not  to  prosecute  for,  void,  n.  288. 

ADVERTISING, 

loss  of  bill,  no  defense  against  one  without  notice,  395. 

AFFIDAVIT, 

of  defense,  sufficiency  of,  want  of  title,  n.  418. 

held  insufficient  against  bona  fide  holder,  442. 

"AFTER  DATE," 

•  altered  to  "after  sight,"  155. 


INDEX.  949 

IReferences  are  to  Sections.'] 
"AFTER  DUE," 

striking  out  of  in  interest  clause,  168. 

"AFTER  MATURITY," 

striking  out  of  in  interest  clause,  168. 
alteration  of  to  "after  date,"  168. 
effect  of  adding,  168. 

"AFTER  SIGHT," 

altered  to  "after  date,"  155. 

AGENT, 

when  maker  concluded  by  acts  of,  5. 

violation  by  of  instructions,  75. 

delivery  by  in  violation  of  instructions,  21. 

where  note  indorsed  in  blank  to,  23. 

want  of  authority  of  special  agent,  75. 

with  mere  authority  to  collect  cash,  want  of  authority  to  indorse,  75. 

want  of  authority  of  no  defense  against  'bona  fide  holder,  75. 

of  corporations,  want  of  authority  of,  80,  81. 

notice  as  to  powers  of,  485,  486. 
agent  of  owner  of  paper  forging  name,  103. 
fraud  of  no  defense  against  bona  fide  holder,  121. 
of  holder,  alterations  by,  141. 

alteration  by  under  mistaken  belief  as  to  authority,  143. 
alteration  by  of  place  of  payment  before  delivery,  163. 
of  maker,  addition  of  seal  by,  176. 
note  to,  want  or  failure  of  consideration,  230. 
note  for  policy  given  to  general  agent  of  insurance  company  wanr 

of  consideration,  230. 
note  indorsed  to,  want  of  consideration,  255. 
check  by  to  discharge  debt  of  principal,  230. 
of  payee  taking  note  from  purchaser  of  bona  fide  holder,  230. 
usury  of,  principal  responsible,  302. 
notice  to  of  usury,  binds  principal,  302. 
condition  in  note  that  contract  be  completed  to  acceptance  of  agent, 

346. 
liability  of  principal,  paper  indorsed  for  a  specific  purpose,  370. 
want  of  title  or  interest,  408. 
defenses  and  equities  against,  457. 
of  payee  for  collection,  defenses  against,  457. 
to  sell,  defenses  against,  457. 
where  note  executed  by  without  authority,  458. 
for  presentment,  when  liable,  497. 

must  receive  unequivocal  acceptance  or  notify  holder,  497. 
presentment  to  for  acceptance,  499. 

for  payment,  503. 
indorsement  by,  demand  on  principal  and  agent,  503. 
presentment  to  agent  of  bank  at  meeting  of  bank  agents  settle  ac- 
counts, 517. 


950  IXDEX. 

[References  are  to  Sections.'] 
AGENT — Continued. 

notice  of  dishonor  to,  547,  548. 

may  give  notice  of  dishonor,  549. 

demand  of  payment  of  check  as  owner's  agent,  n.  577. 

damages  from  negligence  of  plaintiff  as,  cannot  be  set  off,  598. 

note  to  one  as  "agent  of  the  creditors,"  set-off  of  sealed  bill  against, 
618. 

set-off  against  note  indorsed  to  general  agent  of  payee,  621. 
notes  to  or  in  hand  of,  621. 

right  of  set-off  against  note  in  hands  of  agent  of  holder  for  col- 
lection, 621. 

set-off  against  note  indorsed  to  collecting  agent,  623. 

acceptance  estops  to  deny  authority  of,  641. 

representation  by  in  connection  with  transfer,  estoppel,  653. 

payment  by,  698. 

AGREEMENT, 

not  to  present  until  maturity  bill  indorsed  for  accommodation  of 
drawer,  491. 

with  bank,  sight  draft,  holder's  loss,  presentment,  491. 

to  accept  bill,  payment  of  debt  of  another,  n.  491. 

promise  by  letter  to  accept  draft  to  be  drawn,  necessity  of  present- 
ment to  fix  maturity,  n.  491. 

as  to  acceptance  or  presentment,  491. 

to  indorse  overdue  note,  demand  in  reasonable  time,  503. 

to  pay  if  maker  does  not,  guarantor's,  presentment  for  payment,  504. 

or  understanding  that  'demand  notes  not  to  be  paid  till  expiration 
of  certain  time,  506. 

on  back  of  note  for  waiver  of  presentment  for  payment,  524. 

by  which  assignment  made  as  waiver  of  presentment  for  payment, 
525. 

effect  of  oral  agreement  of  banker  to  accept  checks,  n.  581. 

for  extension  of  time,  release  of  surety,  680. 

by  parol  to  extend  time,  release  of  surety,  680. 

and  conditions  affecting  discharge,  684. 

affecting  discharge  and  release,  684,  685. 

verbal  as  to  payment  of  other  debts,  discharge,  687. 

as  to  stocks  and  bonds  in  payment,  independent  agreement,  689. 

to  take  deed,  discharge  of  note,  690. 

with  bank  by  vendee  unknown  to  vendor,  as  affecting  discharge  of 
notes,  690. 

to  accept  deed  for  note,  averment  of  performance,  694. 

to  accept  less  sum,  702. 

effecting  discharge  of  note,  see  Discharge. 
See  Collateral  Conditions  and  Agreements;  Contract;  Presentment  for 
Acceptance;  Stipulation;  Waiver. 

AGRICULTURAL  IMPLEMENTS, 

coverture  as  defense  to  note  given  in  purchase  of.  57. 


INDEX.  951 

[References  are  to  Sections.l 
ALIENATION, 

of  affections  of  wife,  note  given  because  of  void,  n.  288. 

ALLONGE, 

indorsement  on,  404.  ' 

ALTERATIONS, 

may  be  shown  under  plea  of  non  est  factum,  135. 

create  a  new  contract,  135. 

in  contract  note  is  collateral  to,  135. 

general  rule  as  to,  135.. 

no  allegation  or  proof  of  fraud  necessary,  135. 

question  whether  material  is  one  of  law,  135. 

with  consent  of  parties  no  defense,  135. 

in  mortgage  given  to  secure  note,  135. 

where  note  restored  to  original  form,  135. 

essentials  to  defense  of,  135. 

availability  of  as  a  defense  generally,  135. 

presumption  as  to  time  of  making  where  apparent  on  face,  136. 

not  apparent  on  face,  burden  of  proof,  136. 

before  acceptance  no  defense,  action  against  acceptor,  136. 

statutory  provisions  as  to  bona  fide  holders,  136. 

rule  as  to  bona  fide  holders,  136. 

by  inserting  word  law  implies,  137. 

where  restored  to  original  form,  137. 

which  are  immaterial  not  a  defense,  137. 

addition  of  word  "west"  after  "south"  not  material,  137. 

where  mere  spoliation  no  defense,  137. 

not  rendered  material  by  intent,  137. 

retracing  pencil  writing  in  ink,  137. 

party  no  right  to  make  to  correct  mistake,  137. 

addition  of  words  "with  exchange"  not  material,  137. 

by  co-maker  or  drawer,  138. 

by  maker  without  consent  of  surety,  139. 

by  payee  or  subsequent  holder,  effect  on  rights  of  surety,  140. 

by  agent  of  holder,  141. 

by  a  third  party,  142. 

when  question  for  jury  as  to  who  made,  142. 

■where  holder  with  notice  sues  on  instrument  as  altered  by  stranger, 

142. 
by  accidental  erasure,  143. 
by  mistake  or  accident,  143. 

by  payee  in  ignorance  of  proper  manner  to  transfer,  143. 
where  bank  cashier  cancels  note  by  mistake,  143. 
by  accidental  tearing  off  signature  which  was  again  pasted  on,  143. 
accidental  stamping  of  waiver  of  demand  over  indorsement,  143. 
by  agent  under  mistaken  belief  as  to  authority,  143. 
rule  as  to  filling  in  blanks  where  Instrument  incomplete,  144,  145. 
burden  of  proof  as  to  notice  where  paper  executed  with  unfilled 
blanks,  144. 


952  INDEX. 

[References  are  to  Sections.} 
AluTERATWNS— Continued. 

where  blanks  left  for  date,  145. 

time  or  place  of  payment,  145. 

amount,  145. 

name  of  payee,  145. 
inserting  words  of  negotiability  in  blank  space  of  non-negotiable 

note,  146. 
where  instrument  complete  though  containing  blank  spaces,  146. 
as  defense  to  action  on  original  consideration  or  debt,  147,  148. 
not  fraudulent  to  make  paper  conform  to  original  agreement,  148. 
effect  of  consent  or  ratification,  149. 
what  constitutes  a  consent  to  or  ratification  of,  150. 
new  consideration  not  necessary  to  make  consent  to  binding,  150. 
of  number,  151. 

in  date  of  demand  note  material,  152. 
of  date,  152. 
of  date  of  indorsement,  152. 

to  conform  to  actual  date,  153. 
of  time  of  payment,  154,  155. 
excluding  days  of  grace,  155. 
of  time  of  payment  by  clause  "Privilege  of  extension  for  thirty 

days  given,"  155. 
of  clause  "after  sight"  to  "after  date,"  155. 
changing  time  note  to  demand  note,  155. 

erasure  of  contemporaneous  memorandum  as  to  payment,  155. 
by  inserting  statement  as  to  consideration,  156. 
in  statement  as  to  consideration,  156. 
in  form  of  promise,  157. 
of  joint  and  several  note  into  joint  one,  157. 
of  joint  note  into  joint  and  several  note,  157. 
by  adding  surname  of  payee  immaterial,  158. 
of  name  of  payee,  158. 
in  name  of  payee  defense,  though  no  fraud,  158. 

to  correct  mistake,  159. 
as  to  negotiable  words,  160. 
of  word  "order"  to  "holder,"  161. 
substitution  of  words  "or  order,"  161. 

"or  bearer,"  161. 
of  place  of  payment,  162. 

of  place  of  payment  by  agent  before  delivery,  163. 
designating  place  of  payment  releases  guarantor,  164. 
designation  of  place  of  payment  where  none  specified,  164. 
in  amount  by  stranger,  165. 
of  amount,  165. 

in  amount,  where  there  are  marginal  figures,  166. 
in  marginal  figures  expressing  amount,  166. 
by  inserting  words  "in  gold  coin,"  167. 
in  medium  of  payment,  167. 


I 


INDEX.  953 

[References  are  to  Sections.'] 
ALTERATIONS— Continued. 

in  interest  clause  does  not  defeat  recovery  on  original  considera- 
tion, 168. 

of  interest  clause  by  stranger  no  defense,  168. 

of  interest  clause,  168. 

in  interest  clause  to  conform  to  intention,  168. 

of  rate  of  interest  to  prejudice  of  party  making,  169. 

in  rate  of  interest,  169. 

in  rate  of  interest,  where  consented  to,  169. 

memorandum  on  back  of  note  of  reduction  in  rate  of  interest  not 
material,  169. 

by  addition  of  interest  clause  where  none,  170. 

where  interest  clause  added  and  erased,  170. 

by  inserting  legal  rate  of  interest  no  defense,  170. 

erasure  of  words  "upon  condition,"  171. 

by  adding  conditions,  negligence  of  maker  in  executing,  171. 

of  stipulation  as  to  attorney's  fees,  171. 

of  conditions  or  stipulations,  171. 

of  name  of  maker  releases  sureties,  172. 

or  erasure  of  maker's  signature,  172. 

by  erasure  of  corporate  signature,  not  notice  to  purchaser,  481. 

of  name  of  maker  by  addition  of  address,  172. 

of  signature  of  maker,  rule  applies  to  instrument  of  guaranty,  172. 

of  name  of  maker,  when  not  a  defense,  173. 

by  addition  of  signatures,  174. 

by  adding  name  and  liability  not  affected,  175. 

of  corporation  to  note  intended  as  corporation  note,  175. 

when  addition  of  signature  not  a  defense,  175. 

by  agent  of  maker  adding  seal,  176. 

by  addition  or  destruction  of  seal,  176. 

by  adding  private  seal,  when  not  material,  176. 

erasure,  or  addition  of  names  of  witnesses,  177. 

by  stamping  note,  178. 

by  addition  or  erasure  of  memoranda,  179. 

of  indorsement,  180. 

of  several  indorsement  to  joint,  180. 

of  indorsement  does  not  release  prior  indorsers,  180. 

erasure  of  prior  indorsement,  180. 

of  indorsement  "pay  the  bearer"  to,  formal  assignment,  180. 

erasure  of  indorsement  by  stranger,  180. 

to  correct  signature  of  surety  where  misplaced,  181. 

or  erasure  of  signature  of  surety,  181. 

addition  of  name  as  surety  or  guarantor,  182. 

notice  of  from  face  of  check,  474. 

fraudulently  made,  notice  of,  480. 

estoppel  to  show,  673,  674. 

AMBIGUITY, 

in  indorsement  may  be  explained  by  parol,  348. 


95-i  IXDEX. 

[References  are  to  Sections.} 

AMOUNT, 

of  note,  when  fraud  as  to  is  a  defense,  127. 

* 

•where  note  left  blank  as  to,  145, 

effect  of  alteration  in,  165. 
where  alteration  made  by  stranger,  165. 
alteration  in,  where  there  are  marginal  figures,  166. 
paid  for  note  extent  of  recovery  where  grossly  inadequate,  191. 
of  note,  no  defense  that  exceeds  value  of  services  which  is  consider- 
ation, 329. 
collateral  conditions  or  agreements  affecting,  332. 
parol  evidence  not  admissible  to  change,  332. 
fraud  in  filling  blank  left  for,  acceptance  estops  to  show,  641. 

"AND  CO.," 

addition  of  to  name  of  maker,  172. 

ANTECEDENT  DEBT, 

taking  of  paper  delivered  in  escrow  as  security  for,  319. 
paper  transferred  as  security  for,  diversion,  390,  391. 
note  to  be  discounted  at  bank  given  as  security  for,  391. 

indorsed  in  blank  for  discount  given  in  payment  of,  391. 
accommodation  paper  taken  as  security  for,  boria  fide  holder.  New 

York,  391. 
indorsers  of  notes  for,  to  enable  it  to  be  discounted,  liable  as  joint 

owners  without  demand,  503. 
draft  to  secure,  presentment  for  payment,  503. 
not  discharged  by  note  in  absence  of  agreement,  241. 
want  or  failure  of  consideration,  b07ia  fide  holder,  241,  242. 
See  Pre-existixg  De^t. 
ANTI-TRUST  LAW, 

corporate  certificate  of  indebtedness  issued  in  restraint  of  trade,  459. 

APPORTIONMENT, 

where  consideration  not  susceptible  of,  209. 

ARREST, 

where  note  given  to  procure  release  from  lawful  imprisonment,  108. 

paper  procured  from  one  under  illegal  arrest  or  restraint,  108. 

for  assault,  where  note  given  in  settlement  of  injury,  108. 

in  civil  suit,  note  given  in  settlement,  110. 

note  by  wife  under  threat  of  husband's  arrest,  112. 

ARTICLES  OF  INCORPORATION, 
non-compliance  with,  81. 

ARTICLES  OF  PARTNERSHIP, 

paper  given  in  violation  of,  93. 

ASSAULT, 

arrest  for,  where  note  given  in  settlement  of  injury  received,  108. 


INDEX.  955 

[References  are  to  Sections.1 
ASSESSMENTS, 

for  campaign  purposes,  note  for,  good  consideration,  228. 

on  stock  as  set-off  to  note,  purchaser  after  maturity,  422. 
ASSETS, 

of  insolvent  maker,  dividends  out  of,  indorser  still  liable,  702. 
ASSIGNEE, 

right  of  to  sue  on  paper,  407. 

suit  for  use  or  benefit  of,  453. 

defenses  or  equities  against,  447,  448. 

against,  construction  and  essentials  of  rule  generally,  448. 

negotiation  and  qualification  of  rule  as  to  defenses  against,  449. 

of  non-negotiable  paper,  defenses  against,  446. 

note,  duress  of  maker  may  be  shown,  114. 

fraud  as  defense  against,  §  119. 

consideration  of  assignment  generally,  236. 

want  or  failure  of  consideration,  237. 

action  by,  when  maker  of  note  may  show  want  of  consideration,  236. 

of  peddler's  note,  consideration  may  be  shown,  447. 

of  accommodation  paper,  notice  or  knowledge.  270,  271. 

with  notice,  subject  to  defense  of  breach  of  condition,  314. 

of  non-negotiable  paper  subject  to  defense  of  breach  of  condition, 
328. 

with  notice  of  agreement  to  release  from  or  limit  liability,  342. 

of  mortgage  notes,  defenses  against,  n.  237. 

of  non-negotiable  paper,  diversion  defense  against,  379. 

of  bank,  set-off  of  deposit  against,  422. 

want  of  title  or  interest,  407. 

of  sealed  note,  rights  of,  407. 

of  certificate  of  deposit,  subject  to  defenses,  n.  447. 

collateral  agreement  not  to  hold  maker  responsible,  n.  447. 

subject  to  defense  of  usury,  n.  447. 

of  void  note,  effect  of  forbearance  to  sue,  450. 

not  subject  to  equities  arising  after  assignment,  454. 

of  note  payable  to  order  or  bearer,  455. 

of  insolvent  firm,  notice  of  dishonor  to,  562. 

set-off  against  of  note  of  assignor,  606. 

note  made  to  one  "as  assignee,"  618. 

holding  in  trust  for  payee,  set-off  against,  623. 

set-off  against  of  amount  withheld  by  payee  of  mortgage  coupon 
bonds,  623. 

of  time  deposit  made  with  payee,  623. 

what  available  as  set-off  against  generally,  623,  624. 

of  bankrupt,  right  of  set-off  against.  626. 

in  action  by  judgment  against  payee  and  third  party  may  be  set  off 
630. 

in  insolvency,  when  surety  no  right  of  set-off  against.  639. 

of  drawer,  want  of  funds  in  hands  of,  discharge  of  acceptor,  679. 


956  INDEX. 

[References  are  to  Sections.'] 

ASSIGNEE — Continued. 

payment  to  first  assignee,  699. 
after  maturity,  see  Purchaser  After  Maturity. 
See  Discharge;   Set-off,  Recoupment  and  Counteeclaim. 

ASSIGNEE  FOR  BENEFIT  OF  CREDITORS, 

set-off  against  on  note  to  assignor,  595. 

See  Assignee;  Assignment. 
ASSIGNMENT, 

consideration  of  generally,  236. 

of  note  a  contract  which  imports  consideration,  236. 

when  form  of  immaterial,  bona  fide  holder,  collateral  security,  356. 

made  under  agreement  as  waiver  of  presentment  for  payment,  525. 

operation  of  check  as,  581. 

of  note  dated  back,  note  cannot  be  set  off,  592. 

set-off  of  claim  acquired  after  notice  of,  594. 

of  property  as  affecting  discharge  of  note,  691. 
See  Assignees;  Assignor. 
ASSIGNOR, 

admission  by  binding  on  assignee,  658. 

See  Assignee;   Assignment. 

ASSISTANT  SECRETARY, 

of  corporation,  want  of  authority  of,  81. 

ATTACHMENT, 

of  property  on  groundless  suit  to  compel  giving  of  note,  109. 

relinquishment  of  a  good  constitution,  195. 

of  goods  preventing  happening  of  contingency  note  payable  on,  321. 

'ATTORNEY, 

approval  by  of  contract  as  condition  affecting  note,  313. 
cannot  be  shown  that  note  to  conditioned  on  success  in  litigation, 
320. 

ATTORNEY  AT  LAW, 

purchase  by  of  note  for  client,  knowledge  of  attorney  of  defenses, 

230.  i- 

ATTORNEY'S  FEES,  •  J 

alteration  by  stranger  of  provision  as  to,  142. 
striking  out  of  clause  as  to,  171. 

AUTHORITY, 

want  of,  estoppel  as  to  generally,  670. 

See  Want  of  Authority. 

AVAILABILITY  OF  DEFENSES,  J 

rule  as  to  makers,  1. 

coverture  of  one  maker  does  not  release  co-maker,  1. 
that  transfer  from  payee  procured  by  undue  influence  no  defense  to 
action  against  maker,  2. 


INDEX.  957 

[References  are  to  Sections.'] 
AVAILABILITY  OF  DEFENSES— Con^nwed. 

one  joint  and  several  maker  cannot  show  he  signed  as  surety,  3. 

in  case  of  joint  and  several  makers,  3. 

defense  of  maker  not  available  to  indorser,  4. 

where  maker  concluded  by  acts  of  agent,  5. 

rule  as  to  accommodation  indorser,  6. 

bankruptcy  of  indorser  goes  to  his  personal  discharge,  6. 

in  action  on  corporation  note  or  indorsement,  7. 

when  clearing  house  rules  available,  8. 

rule  as  to  guarantor,  9. 

where  note  indorsed  in  blank,  10. 

usurious  discount  by  bank,  11. 

purchaser  of  note  from  bank  not  subject  to  defense  of  violation  of 

statute  in  discounting,  11. 
where  note  purchased  from  bank,  11. 
obligors  on  bond,  rule  as  to  where  note  is  given  in  consideration 

of  extension  of  time,  12. 
who  may  urge  coverture,  61. 
infancy,  68. 

insanity  of  payee  available  to  maker  against  indorsee,  72. 
who  may  set  up  incapacity  or  want  of  authority,  95. 
who  may  urge  forgery,  97,  98,  104. 
of  duress  as  between  parties,  113. 

against  subsequent  parties,  114. 
parties  with  notice,  115. 
of  fraud  in  favor  maker,  133. 

of  parties  other  than  maker,  134. 
consideration   personal   to  maker,   accommodation   indorser  cannot 

show,  271. 
of  usury,  302. 
of  set-off  against  third  person  beneficially  interested,  618. 

note  to  one  as  "agent  of  the  creditors,"  618. 

factor  concealing  principal,  618. 

guardian,  618. 

note  to  one  "as  assignee,"  618. 
of  set-off  generally,  618. 

in  action  against  acceptor,  619. 

by  administrator  or  executor,  620. 

against  note  to  or  in  hands  of  agent,  621. 
where  note  indorsed  to  bank  for  collection,  622. 
of  set-off   in    favor   of   accommodation    indorser   of   forfeiture    for 
usury,  623. 

generally  against  assignees  and  indorsees,  623,  624. 

in  case  of  bankrupt  and  insolvents,  626. 

against  bona  fide  holders,  627. 
husband  or  wife,  628. 

in  case  of  joint  creditors  or  debtors,  629,  630,  631,  632. 


958  IXDEX. 

[References  are  to  Sections.'] 
AVAILABILITY  OF  DEFENSES— Coniintte^Z. 

against  note  of  partner  or  firm,  634. 

purchasers  after  maturity,  635,  636,  637. 
in  actions  against  sureties,  639,  640. 
damages  for  breach  of  warranty  not  available  to  surety  or  guar- 
antor as  set-off,  601. 

See   THE  PAETICULIAR  DEFENSES. 

AWARD, 

note  executed  in  pursuance  of,  233. 


B 

BANK, 

purchaser  of  note  from,  not  subject  to  defense  of  violation  of  stat- 
ute in  discounting,  11, 

usury  in  discount  of  note  by,  11. 

vote  given  to,  organization  of  not  subject  of  inquiry,  79. 

want  of  authority  of  officials  of,  82. 

guarantee  by  of  checks  beyond  deposits,  88. 

payment  by  where  name  of  payee  forged,  102. 

distinction  between  crediting  amount  of  note  on  undrawn  deposit 
and  credit  on  pre-existing  indebtedness,  bona  fide  holder,  243. 

action  by  receiver  on  note  for  accommodation  of,  281. 

note  issued  by  in  violation  of  law,  292. 

note  to  in  transaction  violating  statute  void,  n.  288. 

charging  of  usury  by  does  not  avoid,  306. 

advancing  money  on  municipal  coupon  bonds,  right  of,  360. 

taking  note  as  collateral  for  loan,  360. 

note  to  be  used  only  at  certain  bank,  diversion,  386. 

paper  to  be  discounted  at  particular  bank,  diversion,  388,  389. 
given  as  security  for  antecedent  debt,  391. 

action  on  note  discounted  in,  405. 

indorsement  by  to  cashier,  voidable,  412. 

application  by  of  proceeds  to  credit  of  depositor,  471. 

discounting  notes  of  a  series,  bona  fide  holder,  484. 

or  cashier's  drafts,  notice,  485. 

where  note  sold  to  by  president,  486. 

agreement  to  return  sight  drafts  to,  on  certain  conditions,  present- 
ment, 491. 

presentment  by,  for  acceptance,  499. 

holder  of  note  there  payable,  presentment  for  payment,  517. 

erroneously  designated,  presentment  for  payment,  517. 

closed  and  new  bank  located  in  its  place,  personal  demand  unneces- 
sary, 517. 

presentment  for  payment  at  any  bank  at  place  of  delivery  of  note, 
517. 

branch  bank,  517. 

insolvency  or  suspicion  of,  presentment  for  payment,  518. 


INDEX.  959 

[References  are  to  Sections.'] 
BANK — Continued. 

receiver  of,  presentment  to  for  payment,  518. 

inquiry  of  cashier  of  as  to  residence,  diligence  in  presentment,  522. 

bill  payable  at,  protest  unnecessary  in  Indiana,  529. 

note  payable  at,  notice  of  dishonor  to  payee  indorsing,  544. 

cashier  of  may  protest,  533. 

usage  of  as  affecting  mode  of  giving  notice  of  dishonor,  577. 

liability  of  for  failing  to  give  notice  of  dishonor,  558. 

collecting  bill,  what  is  due  notice  of  dishonor  by,  563. 

local  custom  of,  presentment,  substituted  checks,  580. 

stock  of  not  set  off  in  action  by  on  note,  596. 

set-off  of  bills  or  notes  of,  612. 

right  of  set-off  in  action  against  on  certified  check,  619. 

note  indorsed  to  for  collection,  right  of  set-off,  622. 

dividends  on  stock  of  not  available  against,  624. 

right  of  set-off  against  receiver  of,  626. 

certification  of  check,  waiver,  642. 

payment  by  of  check,  waiver,  643. 

induced  to  discount  note  by  representations,  estoppel,  653. 

by  representation  to  honor  draft,  estoppel,  653. 
accepting  part  payment  not  estoppel,  659. 
estopped  to  deny  authority  of  cashier  to  sell  paper,  662. 
notes  given  to,  estoppel  of  directors  signing  same,  664. 
agreements  as  affecting  -discharge  generally,  684. 
secret  agreement  of  official  as  affecting  discharge  of  note,  684. 
payment  to,  discharge,  648. 
collection  of  check  through,  see  Check. 

See  Forgery;  Payment;  Presentment  foe  Payment. 

BANK  BILLS, 

purchase  of  after  maturity,  425. 

BANK  CASHIER, 

indorsement  by,  82. 
certificate  of  check  by,  82. 
cancelling  note  by  mistake,  143. 

cannot  set  off  against  bank  claim  purchased  after  its  insolvency, 
626. 

BANK  CERTIFICATE  OF  DEPOSIT, 

See  Certificate  of  Deposit. 
BANK  CHECK, 

See  Check. 
BANK  COLLECTOR, 

duty  of,  presentment  for  acceptance,  499. 

BANK  DEPOSITS, 

applicable  to  payment  of  city  warrants,  loss  of  does  not  affect,  232. 
distinction  between  crediting  amount  of  note  on  and  credit  on  pre- 
existing indebtedness,  l)ona  fide  holder,  243. 


960  INDEX. 

[References  are  to  Sections.'] 
BANK  B^FOSITS— Continued. 

right  to  set-off  where  bank  insolvent,  604. 

what  essential  to  right  to  set-off,  604. 

rule  as  to  set-off  of,  604. 

right  of  set-off  equitable  but  not  legal  against  insolvent  bank,  604. 

evidence  as  to  at  time  of  maturity  of  note,  604. 

right  of  set-off  in  action  by  depositor  to  recover,  605. 

set-off  of  judgment  in  action  by  depositor  to  recover,  605. 

set-off  of  note  not  due  in  action  to  recover,  depositor  insolvent,  607. 

when  note  not  set-off  to  action  by  administrator  to  recover,  620. 

BANK  NOTES, 

fraudulently  put  into  circulation — bona  fide  holder,  120. 
where  stolen,  398. 
want  of  title  to,  n,  412. 

BANK  OFFICIALS, 

want  of  authority  of,  82. 

BANK  TELLER, 

certification  of  check  by,  82. 

BANKER, 

bill  drawn  by  country  banker  on  town  banker  differs  from  private 

bill  of  party,  496. 
bill  drawn  by  country  banker  upon  town  banker,  unreasonable  de- 
lay, presentment,  496. 

See  Bank. 
oral  agreements  to  accept  checks,  note,  581. 
payment  to  private  banker,  698. 

BANKER'S  CHECK, 

where  draft  considered  as,  or  as  inland  bill,  laches  in  presentment, 
511. 

See  Checks. 
BANKING  HOURS, 

See  Presentment  fok  Payment. 
BANKRUPTCY, 

of  indorser  goes  to  his  personal  discharge,  6. 
proceedings,  threat  of  against  third  person,  140. 
proceedings,  note  given  to  discontinue  void,  n.  288. 
of  drawer  before  presentment  of  check;  laches,  583. 
deed  made  in  view  of,  discharge  of  note,  690. 

See  Insolvency.  f.' 

BANKRUPTCY  ACT,  V 

note  in  violation  of  as  to  fees  of  officers,  292. 

BANKRUPTCY  LAW, 

note  based  on  contract  violating  void,  n.  288. 

BANKRUPTS, 

set-off  of  bills  purchased  after  insolvency  of  drawer,  626. 
set-off  against  note  of  debt  paid  by  surety,  626. 


INDEX.  90 1 

[References  are  to  Sections.] 
BANKRUPTS— Continued. 

assignee  of  not  subject  to  set-off  of  note  purchased  after  maturity 
626. 

set-off  of  debt  to  surety  where  not  transferred  after  payee  insol- 
vent, 626. 

presentment  to  for  acceptance,  n.  499. 

notice  of  dishonor  to,  562. 

notice  to  trustee  or  assignee  of,  562. 

effect  of  new  promise  by  after  discharge,  650. 

See  Bankruptcy;    Insolvency;    Insolvents, 
BASTARD, 

infancy  no  defense  to  note  given  for  set-off,  65. 
BASTARDY, 

proceedings,  note  in  compromise  of,  301. 
BEER, 

sold  in  violation  of  laws,  note  for  void,  n.  288. 
BET, 

on  election,  note  to  secure  void,  n.  288. 

won  at  billiards,  note  for,  void,  n.  296. 

BILL  AFTER  SIGHT, 

See  Presentment  for  Acceptance. 
BILL  OP  EXCHANGE, 

statute  disabling  married  woman  from  accepting,  50. 

foreign  or  inland,  presentment  for  payment,  notice  of  dishonor.  503. 

payable  certain  time  after  date,  presentment  for  acceptance,  490. 

certain  number  of  days  after  sight,  presentment  for  accept- 
ance, 490. 
one  day  after  sight,  presentment  for  acceptance,  490. 
so  many   days  after  certain   event,   presentment  for   accept- 
ance, 490. 
post-dated,  same  as  draft  payable  certain  time  after  date,  490. 
refusal  to  accept  before  date,  not  dishonored  by,  490. 
differs  from  bill  payable  like  number  of  days  after  drawn, 
490. 
payable  at  sight,  or  so  many  days  after  sight,  or  demand,  or  after 
certain  event,  490. 

See  Notice  of  Dlshonor. 
indorsement  of  for   accommodation   of   drawer,   agreement   not   to 

present  until  maturity,  491. 
purchase  of  bill  in  consideration  of  acceptance  of  another  note,  491. 
agreement  to  accept,  payment  of  debt  of  another  note,  491. 
drawer's  promise  to  accept,  want  of  funds,  491. 

holder's  knowledge  of  want  of  funds,  presentment  for  acceptance, 
491. 

payable  at  future  time  on  day  certain,  presentment  for  acceptance, 
494. 

Joyce  Defenses — 61. 


962  INDEX. 

[References  are  to  Sections."] 
BILL  OF  EXCUANGK— Continued. 

drawn  by  country   banker  upon  town  banker  differs  from  bill   of 

private  party,  496. 
drawn  by  country  banker  upon  town  banker,  unreasonable  delay, 

presentment,  496. 
not  subject  to  protest,  528. 
See  Draft;   Inland  Bill;   Presentment  fob  Acceptance;   Pbesentment 
FOR  Payment  and  the  particular  defense. 

BILL  OF  EXCHANGE  ACT, 

who  a  holder  in  due  course  under,  n.  465. 

BILL  OF  LADING, 

where  forged  and  attached  to  bill  of  exchange,  99. 

want  of  title  or  interest,  414. 

where  made  negotiable  by  statute,  414. 

carrier  not  estopped  by  statements  in,  414. 

as  collateral  security,  acceptance,  494. 

BILLIARDS, 

note  for  bet  won  at  void,  n.  296. 

BILLIARD  TABLE, 

note  for  use  of  valid,  n.  288. 

BLANK, 

effect  of  filling,  144,  145. 

as  to  time  of  payment,  145, 

as  to  amount,  145. 

for  name  of  payee,  145. 

as  to  place  of  payment,  145. 

where  instrument  complete  though  containing  blank  spaces,  146. 

left  for  name,  filling  of  does  not  release  accommodation  maker,  175. 

in  note  as  to  time  of  payment,  effect  of  letter  as  to,  339. 

indorsement,  diversion,  bona  fide  holders,  380. 

of  paper  for  discount,  diversion,  391. 

effect  of  where  lost  or  stolen,  n.  394. 

of  note,  iona  fide  holder  of  where  stolen,  395. 

of  tax  bills,  where  stolen,  395. 

evidence  as  to,  406. 

may  be  under  Nebraska  statute,  460. 
left  in  paper,  estoppel,  661. 
indorsement  to  agent,  fraudulent  transfer,  estoppel,  645. 

negligently  left  on  check,  estoppel,  645. 
See   Alteration;    Blank   Indorsement;    Execution;    Indorsement; 
Waiver  and  Estoppel. 

BLANK  INDORSEMENT, 

as  accommodation,  defense  to  action  against  indorser,  10. 
right  of  parties,  22.  23. 


INDEX.  9G3 

[References  are  to  Sections.'] 
BLANK  INDORSEMENT— Con^i?itted. 
of  a  bill  of  exchange,  effect  of,  23. 
of  note  to  agent,  23. 
of  non-negotiable  demand,  23. 
See  Axteration;  Blank;  Indorsement;  Waiver  and  Estoppel. 

BOARD, 

where  note  of  infant  given  for,  63. 

and  lodging  as  counterclaim  to  note,  693. 

"BOHEMIAN  OATS," 

notes,  illegality  of,  296. 

contract,  paper  in  consideration  of,  void,  n.  288. 

BONA  FIDE  HOLDER, 

no  defense,  payee  signed  at  foot  of  note  with  maker's  name,  15. 

of  note  signed  after  delivery,  16. 

mistake  as  to  contents  of  note  no  defense  to  action  by,  17. 

want  of  delivery,  20. 

delivery  by  agent  in  violation  of  instructions,  21. 

rights  of  where  executed  or  indorsed  in  blank,  22,  23. 

of  instrument  payable  to  fictitious  person,  24. 

paper  executed  or  delivered  on  Sunday,  29. 

whether  subject  to  defense  that  married  woman  signed  as  surety,  48. 

subject  to  defense  of  infancy,  63. 

defense  of  coverture  at  common  law,  30. 

of  note  jointly  executed  by  husband  and  wife,  41. 

indorsement  without  assent  of  husband  as  defense  against,  54. 

of  note  by  woman  in  business  or  sole  trader,  55. 

not  subject  to  defense  of  intoxication,  69. 

subject  to  defense  of  non  compos  mentis,  71. 

of  note  for  insurance  premiums  where  statute  not  complied  with,  79. 

subject  to  defense  note  in  violation  of  express  statute,  79. 

want  of  authority  of  agent  no  defense  against,  75. 

corporate  want  of  authority  as  affected  by  illegality  or  statute,  79. 

want  of  authority  of  officer  or  agent  of  corporation,  80,  81. 

not  subject  to  defense  of  non-compliance  with  by-laws  of  corpora- 
tion, 81. 

instruments  of  corporation  ultra  vires,  84. 

note  of  corporation   in   pursuance   of  contract  prohibited   by  char- 
ter, 86. 

want  of  authority  of  municipality  to  issue  paper,  87. 

of  note  transferred  by  a  partner,  90. 

paper  given  in  violation  of  articles  of  partnership,  93. 

forged  paper,  96. 

of  school  bonds  fraudulently  issued,  98. 

where  name  of  payee  forged,  102. 

not  subject  to  defense  that  prior  indorsee's  name  forged,  104. 

note  of  married  woman,  duress,  114. 


964  INDEX. 

^References  are  to  Sections.'\ 
BONA  FIDE  UOLiBKR— Continued. 

obtained  by  duress,  burden  of  proof  on  to  show  good  faith, 
114. 
of  paper  obtained  by  duress,  114. 

injunction  will  not  lie  to  restrain  collection  of  note  by,  119. 
where  execution  or  delivery  procured  by  force  or  fraud,  13. 
where  note  fraudulently  written  over  a  signature,  23. 
taking  paper  under  suspicious  circumstances  not  subject  to  defense 

of  fraud,  119. 
paying  less  than  value  not  necessarily  subject  to  defense  of  fraud, 

119. 
of  non-negotiable  note,  fraud  as  defense  to,  119. 
where  fraud  by  payee,  -plaintiff  has  burden  of  proof  to  show  he  is, 

119. 
misrepresentations  as  to  nature  of  instrument,  25,  26. 
fraud  on  maker  unable  to  read  English,  27. 

on  maker  no  defense  where  negligent,  28. 

and  fraudulent  representations  as  defense  against,  119,  120, 
121. 
of  bank  notes  fraudulently  put  into  circulation,  120. 
rule  as  to  fraud  and  fraudulent  representations  illustrated,  120. 
where  misrepresentation  to  maker  as  to  character  of  paper,  120. 
where  note  obtained  by  fraud  deposited  with  as  collateral,  120. 
of  coupon  bonds  obtained  possession  of  by  fraud,  120. 
of  warehouse  receipts  not  affected  by  fraud  of  original  holder,  120. 
fraud  of  partner  toward  firm  no  defense  against,  121. 

pledgee  no  defense  against,  121. 

surety  upon  maker  no  defense  against,  121. 

maker  towards  co-makers  no  defense,  121. 

corporate  officer  to  corporation  no  defense  against,  121. 

principal  towards  guarantor  no  defense,  121. 

particular  parties  as  a  defense,  121. 

agent  no  defense  against,  121. 

one  holding  paper  in  trust  no  defense,  121. 
availability  against  of  false  representations  as  to  consideration,  123. 
of  certified  check,  fraud  in  connection  with,  124. 
of  paper  in  fraud  of  creditors,  125. 

fraud  in  connection  with  procuring  of  indorsement,  126. 
one  taking  in  payment  of  pre-existing  debt  is,  not  subject  defense 

of  fraud,  126. 
that  surety  induced  by  fraud  to  sign  no  defense  against,  129. 
transfer  in  fraud  of  owner  no  defense  against,  130. 
that  pledged  to  without  authority  no  defense,  130. 
that  transfer  was  by  partner  in  fraud  of  firm  no  defense,  131. 
rule  as  to  in  case  of  alterations,  136. 

statutes  providing  for  recovery  by  in  case  of  alterations,  136. 
of  paper  executed  with  unfilled  blanks,  144. 


INDEX.  9G.') 

[References  are  to  Sections.'^ 
BONA  FIDE  HOLDER— Ccnj«tnwe(Z. 

non-negotiable  note,  blank  space  filled  with  words  of  negotiability, 

146. 
of  instrument  complete,  but  containing  spaces  filled  by  prior  holder, 

146. 
of  negotiable  bond,  effect  of  alteration  of  number,  151. 
subject  to  defense  of  alteration  of  time  of  payment,  154. 
alteration  of  non-negotiable  note  to  negotiable  a  defense,  160 

place  of  payment  a  defense,  162. 
subject  to  defense  of  alteration  in  amount,  165. 
alteration  in  marginal  figures  no  defense,  166. 
in  rate  of  interest  may  be  shown,  169. 
or  addition  of  condition  or  stipulation,  171. 
no  defense  that  no  fair  consideration  between  original  parties,  191. 
when  one  not,  owing  to  inadequacy  of  consideration,  191. 
taking  at  undervalue  element  in  determining  whether  one  is,  191. 
guarantor  may  show  want  of  consideration  against,  212. 
of  check  given  by  husband  to  wife,  214. 
of  sealed,  want  of  consideration  no  defense,  217. 

of  note  to  agent,  defenses  affecting  consideration  not  available,  230. 
want  or  failure  of  consideration  no  defense,  238. 
rule  as  to  payment  of  value,  its  basis  and  qualifications,  240. 
purchase  for  less  than  face  value,  pro  tanto  recovery,  240. 
purchaser  for  value  presumed  to  be,  240. 
one  purchasing  for  less  than  face  value,  240. 

paper  in  payment  of  pre-existing  debt,  want  or  failure  of  considera- 
tion, 241,  242. 
one  taking  draft  in  payment  of  pre-existing  debt  not,  n.  242. 
distinction   between'  crediting  amount   of   note   on   undrawn   bank 

deposit  and  credit  on  pre-existing  indebtedness,  243. 
of  note  given  for  outlawed  debt  of  husband,  245. 
paper  taken  as  collateral  security  for  pre-existing  debt,  246,   247, 

248. 
paper  taken  from,  want  of  consideration,  250. 
of  corporation  paper,  want  of  consideration,  251. 
want  or  failure  of  consideration,  subsequent  to  transfer,  252. 
suit  in  name  of  original  party,  want  or  failure  of  consideration,  253. 
action  against  guarantor,  want  of  consideration,  259. 
of  purchase-price  notes,  want  or  failure  of  consideration,  260. 
of  note  given  for  worthless  article,  262. 
assignees,  notice  or  knowledge,  want  or  failure  of  consideration, 

270,  271. 
of  paper  accepted  for  accommodation,  273. 
of  paper  indorser  for  accommodation  of  acceptor,  condition  as  to 

discount,  273. 
accommodation  check,  want  or  failure  of  consideration,  278. 
paper  taken  after  maturity,  want  of  consideration,  282, 


966  -  INDEX. 

[References  are  to  Sections.'\ 
BONA  FIDE  UO'LD'ER— Continued. 

against  accommodation  maker,  note  taken  in  payment  of  pre-exist- 
ing debt,  284,  285. 

of  paper  taken  in  payment  of  precedent  debt,  285. 

against  indorser,  accommodation  note  in  payment  of  pre-existing 
debt,  286. 

payee  of  accommodation  paper  is,  287. 

of  note  based  on  illegal  or  immoral  consideration,  288. 

based  on  illegal  consideration,  exception  to  and  qualifications 
of  rule,  289. 

of  paper  for  consideration  in  violation  of  statute,  291. 

of  note  in  violation  of  constitution  and  laws,  293. 
given  for  goods  sold  in  violation  of  law,  294. 
given  to  compound  criminal  acts,  295. 

of  notes   based   on  gambling  transaction,   right  of  as   affected   by 
statute.  298. 

of  paper  based  on  usurious  contract  between  original  parties,  303. 

breach  of  collateral  conditions  no  defense,  307. 
cannot  be  shown  against,  308. 

plaintiff  has  burden  to  show  he  is  where  breach  of  condition  prece- 
dent shown,  314. 

breach  of  collateral  condition  no  defense  against,  314. 

surety  cannot  show  other  signatures  were  to  be  procured,  316.. 

of  paper  delivered  in  escrow,  317,  318. 

where  conditions  of  bond  not  performed,  323. 

of  renewal  note,  failure  of  consideration  of  original  no  defense,  324. 

not  subject  to  defense,  breach  of  collateral  agreement  not  to  do  cer- 
tain acts,  326. 

action  by  not  defeated  by  breach  of  collateral  condition,  328. 

where  consideration  agreement  to  render  services,  329. 

collateral  agreement  to  release  from  or  limit  liability   cannot  be 
shown  against,  342. 

not  affected  by  secret  agreements  as  to  indorsement,  348. 

of  accommodation  paper  taken  as  collateral,  against  maker,  353. 

accommodation  paper  taken  as  collateral  for  pre-existing  debt,  ac- 
tion against  indorser,  354. 

whether  one  taking  note  as  collateral  for  pre-existing  debt  is,  359, 
360. 

pledgee  of  note  secured  by  mortgage,  365,  366,  367. 

of  paper  indorsed  as  collateral,  defense  subsequent  to,  371. 

of  note  taken  as  collateral,  extent  of  recovery,  376,  377,  378. 

who  has  not  paid  full  value  for  paper  diverted,  380. 

diversion  as  defense  against,  380. 

burden  of  proof  to  show  where  paper  diverted,  381. 

paper  transferred  in  violation  of  statute,  382. 

accommodation  paper  diverted,  383,  384. 

of  accommodation  paper  negotiated  to  party  not  contemplated,  387, 
388,  389. 


INDEX.  9GT 

[References  are  to  Sections.] 
BONA  FIDE  'RO'LDER—Cantinued. 

of  paper  to  be  discounted  at  particular  bank,  388,  389. 

where  paper  taken  as  security  for  antecedent  debt,  diversion,  390, 

391. 
one  who  takes  accommodation  paper  as  security  for  antecedent  debt 

is  in  New  York,  391. 
diversion  of  proceeds  of  paper  no  defense  against,  392. 
where  purchaser  from  has  knowledge  of  theft,  394. 
that  instrument  lost  or  stolen  no  defense,  394. 
of  stolen  bonds  payable  to  bearer,  394. 
of  bill  lost  where  loss  advertised,  395. 
of  note  indorsed  in  blank  and  stolen,  39.5. 
of  stolen  coupon  bonds,  395. 

certified  check  indorsed  in  blank,  395. 
rights  of  do  not  extend  to  stolen  non-negotiable  paper,  397. 
of  stolen  bank  bill,  398. 

burden  of  proof  to  show  where  instrument  lost  or  stolen,  401. 
assignee  after  maturity,  execution  on  Sunday  no  defense,  421. 
purchaser  after  maturity  from,  general  rule,  433,  434. 
from  after  maturity,  usury,  434. 
after  maturity,  want  of  consideration,  434. 
from  after  maturity,  application  of  rule,  434. 
preliminary  statement,  438. 
general  rule  as  to,  439. 

where  title  acquired  by  fraud  and  without  consideration,  441. 
where  note  void  at  creation,  441. 

exceptions  to  and  qualifications  of  rule,  generally,  441. 
essentials  of  general  rule,  440. 
bonds  issued  without  authority,  441. 
of  certificate  of  deposit,  441. 
where  maker  had  no  power  to  issue,  441. 
plea  of  no7i  est  factum.,  441. 

note  based  on  illegal  or  immoral  consideration,  441. 
when  fraud  not  available  against,  n.  441. 

plea  that  purchased  after  maturity,  no  evidence  to  sustain,  442. 
affidavit  of  defense  insufficient,  442. 
generally,  particular  decisions,  442. 
right  of  not  affected  by  subsequent  information,  442. 
defenses  against  under  negotiable  instruments  law,  442. 
certified  bank  checks,  443. 
one  discounting  paper  in  good  faith,  443. 
notes  under  seal.  444. 

defenses  of  acceptor  against  drawer  not  available  against,  445. 
equities  against  generally,  445. 

transferee   or   assignee   of   non-negotiable    paper,    equities   and    de- 
fenses, 446. 
defenses  against  assignees,  447,  448. 
assignee,  equities,  construction  and  essentials  of  rule  generally,  448. 


9G8  INDEX. 

[References  are  to  Sections.'^ 
BONA  FIDE  HOLDER— Con^inwed. 

defenses  against  assignee,  negation  and  qualification  of  rule,  449. 

assignee  of  void  note,  forbearance  to  sue,  450. 

so-called  assignment,  not  subject  to  equities,  451. 

assignment  by  parol,  suit  in  own  name,  equities,  452. 

suit  for  use  or  benefit  of  assignee,  453. 

subsequent  defense  or  equities,  454. 

note  payable  to  order  or  bearer,  455. 

of  check  by  delivery,  456. 

where  bill  not  transferable  by  delivery,  456. 

transferee    without   indorsement,    456. 

of  warehouse  receipts  by  delivery,  456. 

agents  and  trustees,  457. 

where  repurchased  from  by  payee,  457. 

agent's  unauthorized  acts,  458. 

corporate  certificate  of   indebtedness   issued  in  restraint  of   trade, 

anti-trust  law,  459. 
guarantor,  guaranty,  460,  461. 

pledgee  of  note  by  holder,   pledgee's  rights,  462. 
note  payable  to  order  or  bearer,  463. 
of  paper  not  stamped,  464. 

under  negotiable  instruments  law  in  New  York,  464. 
purchase  of  paper  for  less  than  face  value,  464. 
of  paper  payable  on  demand,  464. 
of  note  based  on  gambling  transaction,  464. 

under  statutes  or  codes,  notice  or  knowledge,  bad  faith,  464,  465. 
of  note  tainted  with  illegality,  465. 
one  discounting  is,  465. 
of  note  payable  to  several  jointly,  466. 
of  note  indorsed  in  blank  before  negotiation,  466. 
where  note  indorsed  by  one  of  two  joint  payees,  466. 
joint  and  several  notes,  466. 
overdue  paper,  467,  468,  469. 

default  in  payment  of  interest,  468. 

demand  notes,  469. 
of  paper  delivered  to  impostor,  470. 

application  by  bank  of  proceeds  to  credit  of  depositor,  471. 
effect  of  notice  or  knowledge  generally,  472,  473. 
notice  or  knowledge,  matter  apparent  from  the  paper  itself,  474. 
one  may  be,  though  guilty  of  negligence,  475. 
duty  as  to  making  inquiry,  475. 
notice   or    knowledge,    suspicious    circumstances,   gross    negligence, 

bad  faith,  475,  476,  477. 
where  indorsement  made  after  notice  of  payee's  defense  478. 
notice,  fraud,  479. 

of  note  of  corporation  given  in  payment  of  dividends,  479. 
notice,  fraudulent  alteration,  480. 
erasures,  forgery,  notice,  negligence,  recovery,  481. 


INDEX.  gg() 

[References  are  to  Sections.} 
BONA  FIDE  UOhDER— Continued. 

liable  for  money  paid  to  him  on  forged  check,  481. 
knowledge,  purchase  of  married  woman's  note,  482. 
notice,  accommodation  paper,  483. 

notes  of  a  series,  484. 

corporation,  agency,  485. 
corporation  indorsement,  accommodation  paper,  487. 
notice,  purchase  of  bonds,  488. 
transferee  of,  notice,  489. 

not  subject  to  set-off  of  claim  acquired  after  notice  of  assignment, 
594. 

availability  against  as  a  set-off  of  damages  arising  from  breach  of 
warranty  or  covenant,  602. 

not  subject  to  set-off  against  payee,  627. 

set-ofe  of  acceptor  against  drawer  not  available  against,  627. 

not  subject  to  set-off  in  action  by  payee  for  use  of,  627.' 

payment  to  payee  or  intermediate  holder,  699. 
BONDS, 

of  public  corporations,  want  of  authority  to  issue,  87. 

where  school  bonds  fraudulently  issued,  98. 

effect  of  alteration  of  number  of,  151. 

stolen  and  numbers  altered,  no  defense  against  bona  fide  holder,  151. 

forbearance  to  sue  on  as  consideration,  194. 

as  consideration,  fraud,  necessity  of  offer  to  return,  211. 

consideration  not  subject  to  inquiry,  217. 

given  in  payment  of  pre-existing  debt,  241. 

to  indemnify  against  public  prosecution,  note  in  consideration   of 

void,  n.  288. 
under  seal  based  on  past  cohabitation,  300. 
non-performance  of  conditions  of,  323. 

municipal  coupon  bonds,  right  of  bank  advancing  money  on,  360. 
payable  to  bearer,  where  lost  or  stolen,  394. 
stolen,  in  hands  of  bo7ia  fide  holder,  395. 
purchaser  after  maturity  of  coupon  bonds,  426. 
issued  without  authority,  bona  fide  holder,  441. 
recitals  in,  488. 
notice  to  purchaser  of,  488. 
recitals  in  as  an  estoppel,  647. 
discharge  by  taking,  689. 

BRANCH    BANK, 

presentment  at  for  payment,  517. 
BRIBE, 

paper  given  as  to  public  officer  void,  288. 
BROKER, 

set-oiT  against  notes  to  or  in  hands  of,  621. 

where  note  put  in  hands  of  for  sale  or  advance,  set-off  against,  621. 


970  INDEX. 

[References  are  to  Sections.} 
BROKER — Continued. 

when  liable  for  money  paid  where  signature  forged,  n.  645. 
representation  by  in  connection  with  transfer,  estoppel,  653. 

BROTHER, 

threatened  prosecution  of  as  Inducing  note  by  sister,  112. 

BUILDING, 

leasing  of  as  condition  affecting  note,  313. 

BUILDING  CONTRACT, 

where  referred  to  in  note,  343. 

BURDEN  OF  PROOF, 

where  want  of  delivery  alleged,  20. 
statutory  exception  as  to  coverture,  37. 
on  married  woman  to  show  she  signed  as  surety,  45. 
in  action  by  indorsee,  check  procured  by  fraud,  119. 
where  alteration  not  apparent  on  face,  136. 
as  to  time  of  alteration  where  apparent  on  face,  136. 
as  to  notice  where  paper  executed  with  unfilled  blanks,  144. 
to  establish  collateral  conditions,  313. 

to  show  plaintiff  bona  fide  holder  where  breach  of  condition  prece- 
dent alleged,  314. 
as  to  being  bona  fide  holder  on  proof  of  delivery  in  escrow,  317. 
to  show  condition  as  to  consideration  not  performed,  322. 
a  bona  fide  holder  of  paper  diverted,  381. 
bona  fide  holder,  lost  or  stolen  paper,  401. 

BUSINESS  HOURS, 

See  Check;  Notice  of  Dishonor;  Presentment  for  Acceptance;  Pre- 
sentment FOR  Payment;  Protest. 

BUSINESS  PLACE, 

See  Presentment  for  Acceptance;  Presentment  for  Payment. 

BY-LAWS, 

of  corporation,  no  defense  against  bona  fide  holder,  81. 

as  to  manner  of  execution,  non-compliance  no  defense,  85. 


C 

CALL  NOTE, 

presentment  for  payment  before  suing  on  note  payable  on  call,  512. 

CANCELLATION, 

equity  may  decree  where  instrument  procured  by  duress,  106. 
city  or  county  certificates  stolen  after,  399. 
of  certification  of  check,  n.  581. 
as  discharge,  678. 

Indorsements  of  payment,  receipts,  695. 
See  Discharge. 


INDEX.  971 

[References  are  to  Sections.'^ 
CANDIDATE, 

for  election,  paper  in  consideration  of  withdrawal,  void,  288. 

CAPACITY, 

want  of,  estoppel  as  to  generally,  670. 

CAPITAL  STOCK  NOTE, 

indorsement  on,  of  condition  to  enforce  which  would  be  illegal,  349. 

CARDS, 

note  for  wagers  lost  at,  296. 

CARRIER, 

not  estopped  by  statement  in  bill  of  lading,  414. 

CASH, 

acceptance  by  correspondent  of  drawer's  check  in  lieu  of  note,  578. 

CASHIER, 

of  bank  cancelling  note  by  mistake,  143. 
indorsement  to  by  bank,  voidable,  412. 
of  bank,  draft  issued  by,  notice,  485. 

inquiry  of  as  to  residence,  presentment  and  demand,  522. 

may  protest,  533. 
authority  to  certify  check,  n.  581. 

of  bank  cannot  set  off  against  bank  claim  purchased  after  its  in- 
solvency, 626. 
bank  estopped  to  deny  authority  of  to  sell  paper,  662. 
addition  of  word  "cashier"  to  name  of  payee,  158. 
acts  of  as  purchase  or  payment  of  note,  696. 

CAUSA    MORTIS, 

revocation  of  indorsement  so  made,  412. 

CAVEATOR, 

note  to  withdraw  opposition  to  public  road,  void,  n.  288. 

CERTIFICATE, 

of  city  or  county  stolen  after  cancellation,  399. 

of  deposit,  defenses  against  hona  fide  holder,  441. 

of   corporate   indebtedness   issued   in   restraint   of   trade,   anti-trust 

law,  459. 
of  indebtedness  issued  by  municipality,  want  of  title,  412. 
on  face  of  municipal  bonds,  effect  of,  488. 
of  protest,  what  should  state,  532. 

should  state  person  to  whom  presented,  532. 
as  evidence,  542,  543. 
of  notary  as  showing  service  of  notice  of  dishonor,  558. 
See  Certificate  of  Deposit. 

CERTIFICATE  OF  DEPOSIT, 

where  indorsed  by  insane  person,  72. 
recital  in  as  to  receipt  of  money,  205. 
based  on  gambling  transaction,  298. 


972  INDEX. 

^References  are  to  Sections.'] 
CERTIFICATE  OF  BKSPOSIT— Continued. 
where  stolen,  397. 

defenses  against  bona  fide  holder,  441, 
purchaser  of  after  maturity,  427. 
assignee  of  subject  to  defenses,  n.  447. 
of  bank,  presentment  for  payment,  505. 

demand  not  necessary  to  start  running  of  statute  of  limita- 
tions, 505. 
with  no  interest  after  maturity,  presentment  for  payment,  506. 
payable  after  certain  time,  presentment  for  payment,  506. 
action  on  before  presentment  for  payment,  512. 
not  a  note,  606. 
not  subject  to  set-off  of  a  note,  606. 

CERTIFICATION, 

of  check,  cashier's  authority,  note,  581. 

of  forged  check,  101. 

of  check  not  indorsed,  413. 

cancellation  of  note,  581. 
bona  fide  holder,  443. 

fraud  in  connection  with  bona  fide  holder,  124. 
indorsed  in  blank,  stolen,  bona  fide  holder,  395. 
indebtedness  of  holder  of  not  available  against,  596. 
right  of  set-off  in  action  against  bank,  619. 
.certification  as  an  estoppel,  642. 

of  forged  check,  101. 

See  Certified  Checks;  Checks. 
CHARACTER, 

of  title  or  Interest  as  a  defense,  411. 

CHARTER, 

of  corporation,  note  in  pursuance  of  contract  prohibited  by,  86. 

CHATTELS, 

defective  warranty  as  defense  to  note  for  guarantor,  212. 

CHECKS, 

want  of  authority  to  draw,  73. 

to  certify,  82. 
guaranteed  beyond  deposits,  88. 
drawee  obligated  to  know  signature  of  drawei',  99. 
certified,   bona  fide  holder,  443. 
forgery  of,  certification  of,  101. 
certification  of  where  not  indorsed,  413. 

obtained  by  fraud,  burden  of  proof  in  action  by  indorsee,  119. 
given  by  husband  to  wife  in  hands  of  bona  fide  holder,  214. 
gift  of,  presented  for  payment  after  death  of  drawer,  215. 
post-dated,  accommodation  agreement,  224. 
given  by  agent  to  discharge  debt  of  principal,  230. 
given  for  notes  or  bills  purchased,  want  or  failure  of  consideration, 
224. 


INDEX.  973 

IReferences  are  to  Sections.'\ 

CHECKS — Continued. 

bona  fide  holder  of,  want  of  consideration  to  drawer  no  defense,  270. 

for  accommodation,  want  or  failure  of  consideration,  278. 

for  wages  as  to  collection  of  execution,  void,  n.  288. 

where  condition  in  body  of,  343. 

indorsed  In  blank  and  certified,  stolen,  t)07ia  fide  holder,  395. 

want  of  title  or  interest  to,  413. 

manner  of  transfer  of,  413. 

transfer  of  by  delivery,  456. 

purchaser  after  maturity,  425. 

lost,  acceptance  of  not  bad  faith,  465. 

notice  of  defect  from  inspection,  474. 

sub-contractors  as  indorsees  of,  presentment  for  payment,  511. 

where  draft  considered  as  inland  bill  or  banker's  check,  laches  in 
presentment,  511. 

insolvency  of  maker  during  delay  in  presentment  of  for  payment, 
511. 

laches  in  presentment  for  payment,  check  lost,  duplicate  given,  525. 

presentment,  reasonable  time,  diligence,  574,  575. 

deposited  in  bank  for  collection,  576,  583. 

mail,  collection  through  bank,  576. 

presentment,  parties  in  different  place,  576,  and  note, 
following  day,  n.  576. 

where  parties  reside  in  same  place,  diligence,  576,  n.  576. 

when  presentment  is  made,  577. 

demand  as  owner's  agent,  n.  577. 

presentment,    verbal    demand    good    without    physical    presence    of 
check,  n.  577. 

substituted  check,  presentment,  want  of  diligence,  578. 

mistake,  recovery  by  drawer,  note  578. 

insolvency  of  first  drawee,  second  presentment,   discharge  of  par- 
ties, n.  578. 

acceptance  by   correspondence  of  drawer's   check  in   lieu   of   cash, 
n.  578. 

indorsement  to  correspondent,  n.  578. 

guaranty,  note  578. 

title  to  check  indorsed  and  deposited,  n.  578. 

substituted  presentment  by  copy  or  description,  579. 
checks,  local  customs  of  banks,  580. 

effect  of  certification,  operation  of  check  as  assignment  or  lien,  581. 

cashier's  authority  to  certify,  n.  581. 

want  of  funds,  n.  581. 

cancellation  of  certification,  n.  581. 

effect  of  banker's  oral  agreement  to  accept,  n.  581. 

cancellation  of  certification,  n.  581. 

necessary   that  drawer  sustain   actual   loss   or   injury   from   laches 
in  presentment  of,  582. 

where  drawee  becomes  insolvent  or  bankrupt,  583. 


974  INDEX. 

[References  are  to  SecUons.} 
CHECKS— Continued. 

presentment  of,  surety,  584. 

indorser,  585. 
rights,  duties  and  liabilities  of  indorsee  and  indorser  and  effect  of 

certification  of  drawee  bank,  n.  585. 
reasonable  expectation  that  check  will  be  honored,  586. 
protest  of,  587. 
dishonor  of  check  indorsed  and  deposited,  ownership  not  affected, 

n.  587. 
notice  of  dishonor  or  non-payment,  588. 
waiver  of  presentment  for  payment,  589. 

where  certified,  indebtedness  of  holder  of  not  available  against,  596. 
certified,  right  of  set-off  in  action  against  bank,  619. 
debt  to  wife  of  drawer  of  not  a  set-off  against,  628. 
estoppel  by  certifying,  642. 
payment  of  by  bank,  waiver,  643. 
blank  indorsement  negligently  left  on,  estoppel,  645. 
forged,  estoppel  to  show,  676. 
payment  by,  686. 

payment  of  note  by,  discharge,  688. 
of  director  and  stockholder  for  corporation  note,  whether  purchase 

or  payment,  696. 
CHILD, 

infancy  no  defense  to  note  given  for  support  of  bastard  child,  65. 
note  given  under  promise  to  name  child  after  maker  of  note,  219. 

CITY  CERTIFICATES, 

stolen  after  cancellation,  399. 

CLAIM, 

against  United   States,  acceptance  of  interest  in,  as  discharge  of 
note,  691. 

CLEARING   HOUSE, 

presentment  of  check,  note  576. 

CLEARING-HOUSE  RULES, 

availability  of  as  a  defense,  8. 

CLIENT, 

purchase  by  attorney  of  note  for,  knowledge  of  attorney  of  defenses, 
230. 
CLOUD, 

on  title,  note  given  to  remove,  sufficiency  of  consideration,  195. 

CO-DEBTORS, 

-    discharge  of,  679. 

COHABITATION, 

in  the  future  a  vicious  consideration,  300. 
in  the  past  not  illegal  consideration,  300. 


INDEX.  975 

[References  are  to  Sections.'] 
COLLATERAL, 

mortgage,  effect  on  note  of  alteration  in,  135. 
matters,  equities  growing  out  of  no  defense  against  assignee,  448. 
See    Collateral    Conditions    and    Agreements;    Collateral    Security; 
Presentment  for  Payment. 

COLLATERAL  CONDITIONS  AND  AGREEMENTS, 

general  rules  as  to,  307. 

where  note  and  contemporaneous  agreement  are  mutual  and  de- 
pendent, 310. 

breach  of  no  defense  against  bona  fide  holder,  307. 

assignment  by  married  woman  as  affected  by,  308. 

joint  promisor  cannot  show  he  signed  as  surety,  308. 

where  bill  or  note  incomplete,  309. 

when  deed  may  be  construed  with  note,  310. 

contract  of  sale  and  note  may  be  construed  together,  310. 

note  to  take  effect  when  contract  of  sale  consummated,  314. 

when  mortgage  notes  will  control  mortgage,  310. 

what  must  be  alleged  when  breach  of  agreement  relied  on,  310. 

agreement  to  give  work,  310. 

lease  and  note  may  be  construed  together,  310. 

conditions  precedent  generally,  311. 

what  essential  to  rendition  condition  controlling,  311. 

affecting  delivery  to  payeee,  proof  must  be  reasonably  certain,  312. 

delivery  may  be  conditional  without  express  words,  312. 

conditional  delivery  by  maker  to  payee,  312,  313. 

no  defense  where  performance  prevented  by  maker,  313. 

to  lease  of  building  as  condition  affecting  note,  313. 

burden  of  proof  to  establish,  313. 

affecting  subscription  notes,  313. 

approval  by  attorney  of  contract  as  condition  affecting  note,  313. 

where  note  given  for  insurance  premium,  313. 

assignee  with  notice  subject  to  defense  of  breach  of,  314. 

effect  of  upon  bona  fide  holders,  314. 

plaintiff  must  show  he  is  bona  fide  holder  upon  proof  of  breach  of 
condition  precedent,  314. 

that  other  signatures  be  procured,  315,  316. 

as  to  other  signatures,  surety  may  show  breach  of,  315,  316. 

that  another  indorsement  be  procured,  315. 

where  breach  of  as  to  other  signatures  releases  surety  also  releases 
co-sureties,  315. 

to  creditor,  cannot  show  breach  of  condition  that  another  sign  as 
maker,  n.  315. 

as  to  other  signatures,  surety  may  show  breach  of  against  holder 
without  notice  of  non-negotiable  note,  316. 

as  to  other  signature,  delivery  in  escrow,  317. 

rule  as  to  delivery  in  escrow,  317. 

violation  of  where  delivered  in  escrow,  317. 


97G  INDEX. 

[References  are  to  Sections.] 
COLLATERAL  CONDITIONS  AND  AGREEMENTS— Confmuet?. 

burden  of  proof  as  to  being  bona  fide  holder  on  proof  of  delivery  in 
escrow,  317. 

delivery  in  escrow  no  defense  against  bona  fide  bolder,  317. 
no  defense  against  payee  without  notice,  318. 
where  party  takes  as  security  for  an  antecedent  debt,  319. 

evidence  that  partnership  notes  void  if  partnership  dissolved  not 
admissible,  320. 

that  note  payable  on  contingency,  admissibility  of  evidence  in  par- 
ticular cases,  320. 

as  to  note  payable  on  contingency,  where  paper  taken  with  notice 
of,  320. 

that  note  void  on  contingency,  admissibility  of  evidence  in  partic- 
ular cases,  320. 

that  instrument  to  be  void  on  contingency  cannot  be  shown,  320. 

evidence  that  not  void  on  failure  of  crops  not  admissible,  320. 

that  instrument  payable  on  contingency  cannot  be  shown,  320. 

as  to  time  of  payment,  dependent  on  contingency,  321. 

where  happening  of  contingency  prevented  by  act  of  maker,  321. 

affecting  consideration,  322. 

where  agreement  forms  consideration  of  note,  n.  322. 

as  consideration  for  note,  indorsee  with  knowledge  of,  240. 

performance  of   pre-requisite  to   liability,  want  or  failure  of  con- 
sideration, 257. 

as  to  consideration,  burden  on  maker  to  show  not  performed,  322. 

affecting  consideration,  when  breach  of  not  a  defense,  324. 

affecting  consideration,  purchaser  after  maturity,  322. 

executory  contract  as  consideration  for  note,  322. 

to  furnish  a  policy  of  insurance,  323. 

to  advance  money  to  principal  not  performed,  surety  may  show,  323. 

where  conditions  of  a  bond  not  performed,  323. 

that  certain  collateral  should  be  deposited,  323. 

evidence  as  to  indorsement  of  note  as  collateral  on  condition,  323. 

as  to  discharge  of  judgment  not  performed,  325. 

where  performance  prevented  by  maker,  325. 

non-performance  by  maker,  325. 

not  to  sell  merchandise  at  a  certain  place,  326. 

not  to  do  certain  acts,  326. 

not  to  take  possession  of  a  foreclose-mortgage  property,  326. 

not  to  sell  patent  rights,  326. 

purchase-price  notes,  327. 

as  affecting  subsequent  holders  of  purchase-price  notes,  328. 

as  to  rendering  services,  performance  prevented  by  act  of  obligor, 
329. 

affecting  consideration,  breach  of  agreement  to  render  services,  329. 

note  not  to  be  negotiated,  330. 

as  to  place  of  payment,  331. 

as  to  amount,  332. 


INDEX.  977 

[References  are  to  Sections.1 
COLLATERAL  CONDITIONS  AND  AGREEMENTS— Continued, 
changing  interest  clause  no  defense,  332. 
as  to  mode  and  manner  of  payment,  333,  334,  335. 
that  note   payable   in   services  not   admissible,   334. 
as  to  payment  of  note  to  administrator,  335. 
executed  agreement  as  a  defense,  336. 
not  to  sue,  337. 

where  simultaneous  or  subsequent  and  for  a  limited  time,  338, 
as  to  time  of  payment,  demand  note,  339. 
as  to  time  of  payment,  339. 
subsequent  agreements  extending  time,  340. 
subsequent  extension  of  time,  what  essential  to  render  it  a  defense, 

341. 
to  release  from  or  limit  liability,  342. 
effect  of  conditions  in  note,  343,  344,  345,  346. 
condition  in  note  as  to  forfeiting  of  it  not  paid  at  maturity,  344. 
substantial  performance  of  condition  in  note  may  be  sufficient,  345. 
conditional  acceptance,  347. 
acceptance   on   condition,   performance   of   condition   prevented    by 

acceptor,  347. 
conditional  or  restricted  indorsement,  348. 
waiver  of  condition,  350. 

as  to  payment  out  of  certain  fund,  no  defense,  361. 
as  to  collateral  security,  361,  362. 
not  to  hold  maker  responsible,  assignee,  n.  447. 
between  indorser  and  payee  as  to  proceeding  against  principal  first, 

654. 
See  Collateral  Security;   Diversion  and  Fraudulent  Transfer. 

COLLATERAL  SECURITY, 

lex  loci  contractus  govens  where  paper  taken  as,  247. 

original  parties,  351. 

note  may  be  shown  to  have  been  for  original  parties,  351. 

surety,  guaranty,  indemnity,  352. 

accommodation  paper,  maker,  bona  fide  holder,  353. 

accommodation  paper,  indorser,  bo7ia  fide  holder,  354. 

bills,  accommodation  acceptor,  355. 

form  of  assignment,  when   immaterial,  bona  fide  holder,  356. 

when  note  not  collateral  security  but  independent  obligation,  357. 

note  payable  to  order,  assigned  but  not  indorsed,  358. 

contemporaneous  or  future  loans,  advances,  bona  fide  holder,  359, 

360. 
agreements  and  conditions,  361,  362. 
breach  of  condition  as  to  depositing  of,  323. 
security  for  the  performance  of  illegal  contract,  363. 
note  secured  by  mortgage,  mortgage  against  maker,  surety,  364. 
note  secured  by  mortgage  or  other  instrument,   bona  fide  holder, 

pledgee,  365,  366. 
Joyce  Defenses — 62. 


978  INDEX. 

[References  are  to  Sections.'] 
COLLATERAL  SECURITY— Co??ti«wed. 

same  subject,  knowledge  or  notice,  367.  v 

for  pre-existing  debt,  'bona  fide  holder,  246,  247,  248. 
note  wrongfully  pledged  as,  247. 
exceptions  to  rule  as  to  paper  taken  as,  248. 

transferee  of  note  and  mortgage,  payment  of  or  collateral  security 
for  pre-existing  debt,  368. 

receiving  or  surrendering  collateral,  exhausting  collateral,  369. 

paper  given  or  indorsed  for  specific  purpose;    principal  and  agent, 
370. 

defense  subsequent  to  indorsement,  bona  fide  holders,  371. 

transferee  after  maturity,  pledgee,  372. 

pledgor  and  pledgee,  laches,  negligence  or  tortuous  acts,  statute  of 
limitations,  373. 

priority  of  transfer,  different  notes,  374. 

renewals,  continuance  of  security,  extinguishment  of  debt,  375. 

extent  of  recovery,  b07ia  fide  holders,  376. 

extent  of  recovery,  collateral  for  pre-existing  debt,  377. 
extent  of  recovery,  accommodation  paper,  378, 

unauthorized  collection  of  note  given  as,  76. 

note  given  for  and  diverted,  386. 

note  diverted  and  used  as,  386. 

note  intended  as  for  one  indebtedness  used  for  another,  391. 

■wrongful  transfer  of  no  defense  against  bona  fide  holder,  121. 

alteration  in  contract  to  which  note  collateral,  135. 

giving  of  as  ratification  of  alteration,  150. 

surrender  of  and  taking  note  of  third  person,  244. 

where  note  assigned  as  by  separate  instrument,  but  not  indorsed, 
247. 

note  transferred  as,  cases  of  sufficiency  of  consideration,  247. 

paper  taken  as,  additional  consideration,  249. 

right  of  holder  where  prior  indorsee  held  note  as  lien,  267. 

beneficiary  may  transfer  accommodation  paper  as,  285. 

evidence  of  indorsement  of  note  as,  323. 

payee  may  recover  on  note  indorsed  as,  409. 

note  to  used  as,  purchaser  after  maturity,  pro  tanto  recovery,  432. 

pledgee  may  sell,  462. 

bill  of  lading  as  for  acceptance,  494. 

sold  and  proceeds  applied  on  bill,  suit  for  deficiency,  494. 

holders  of,  presentment  for  payment,  gross  negligence,  reasonable 
diligence,  503. 

note  held  as,  necessity  of  pledgor  sustaining  injury,  etc.,  by  non- 
presentment,  503. 

indorsement  as  collateral  security,  presentment  for  payment,  503. 

waiver  of  presentment  for  payment  by  taking,  525. 

notice  of  dishonor  in  case  of,  n.  570. 

damages  for  negligence  in  case  of  cannot  be  set-off,  598. 


INDEX.  979 

[References  are  to  Sections.'] 
COLLATERAL  SECVRITY— Continued. 

set-off  of  value  of  converted  by  pledgee,  613. 
of  note  without  delivering  up,  613. 
of  value  of  where  sold  or  diverted,  613. 

of  value  of  where  collection  lost  by  negligence  of  pledgee,  613. 
surety  not  entitled  to  set  off  amount  collected  on,  639. 
neglect  to  enforce  discharge  of  surety  or  guarantor,  680,  681. 
surrender  of,  as  affecting  guarantor's  discharge,  681. 
discharge  of  guarantor,  681. 
taking  additional,  release  of  guarantor,  681. 
higher  security  for  debt,  discharge,  682. 
sale  or  surrender  of,  discharge  of  debt,  683. 
stock  held  as,  discharge,  689. 
married  woman's  note  as,  payment,  699. 

See  Mortgage  Security. 
COLLECTING  AGENT, 

set-off  against  note  indorsed  to,  623. 

COLLECTING  BANK, 

note  indorsed  to,  right  of  set-off,  622. 

COLLECTION, 

against  indorsee  for,  may  show  paper  in  fraud  of  creditors,  125. 
indorsee  for  may  sue  in  his  own  name,  403. 
defense  that  note  assigned  for,  407. 
paper  sent  for,  notice  of  dishonor,  545. 
of  check  through  bank,  laches,  583. 

"COLLECTOR," 

addition  of,  to  name  of  payee,  158. 

COLLEGE, 

sufficient  consideration  for  note  to,  194. 

CO-MAKER, 

alterations  by,  138. 

no  demand  on,  for  payment  necessary,  502. 

payment  by,  699. 

COMMENCEMENT, 

of  suit,  set-off  must  have  been  acquired  prior  to,  592. 

COMMERCIAL  INTERCOURSE, 

cessation  of  between  states  as  excuse  for  failing  to  give  notice  of 
dishonor,  572. 

COMMITTEE, 

acceptance  of  order  on,  500. 

notes  issued  or  held  by,  want  or  failure  of  consideration,  231. 
COMMON  LAW, 

rule  as  to  coverture,  30. 

indorsement  by  married  woman,  51. 
duress  relaxed,  105. 


980  INDEX. 

[References  are  to  Sections.'\ 
COMPOUNDING, 

criminal  acts,  note  for  void,  295. 

COMPROMISE, 

where  note  given  is,  consideration  sufficient,  195. 

of  unfounded  or  illegal  claim  not  a  good  consideration,  196. 

CONCEALMENT, 

mere  omission  to  state  facts  not  necessarily  defense,  118. 
where  fraudulent,  118. 

defense  against  holder  with  notice,  118. 
of  defect  in  article  sold,  118. 
of  facts  as  defense  to  action  against  surety,  128. 
of  material  facts  by  mortgagee,  damages  for  as  set-off,  601. 
See  Fraud  and  Fkaudulent  Representations;    Misrepresentations. 

CONDITION, 

in  note,  effect  of,  343,  344,  345,  346. 

cannot  be  extended  by  implication,  343. 
substantial  performance  of  may  be  sufficient,  344. 
given  to   aid   in   construction   of   railroads,   substantial   per- 
formance, 345. 
in  body  of  check,  343. 
in  note  as  to  time  of  taking  effect,  343. 

happening  of  contingency  prevented  by  act  of  defendant,  343. 
in  note  as  to  time  of  payment,  installment  note,  343. 
as  to  services,  n.  343. 
as  to  confirming  title,  n.  343. 
as  to  removal  of  Incumbrances,  n.  343. 
makes  it  non-negotiable,  n.  343. 
that  payee  assist  in  criminal  prosecution,  n.  343. 
as  to  forfeiting  collateral  if  not  paid  at  maturity,  344. 
that  is  payable  out  of  proceeds  of  sale  of  certain  property, 

344. 
that  contract  be  completed  to  acceptance  of  agent,  346. 
in  instrument  affecting  acceptance,  347. 
where  indorsement  conditional  or  restricted,  348. 
indorsed  on  note  to  enforce  which  would  be  illegal,  349. 
drawer  preventing  fulfillment  of  forfeits  right  to  notice  of  dishonor, 

571. 
addition  of  to  note,  171. 
in  note,  alteration  of,  171. 

performance  of   prerequisite  to   liability,  want  or  failure  of   con- 
sideration, 257. 
payment  of  note  for  engines  conditioned  on  acceptance  of,  260. 
that  bill  be  discounted  at  particular  bank,  indorsed  for  accommo- 
dation of  acceptors,  273. 
affecting  note,  waiver  of,  350. 
See  Agreement;    Collateral   Conditions   and   Agreements;    Contract; 
Discharge;   Diversion  and  Fraudulent  Transfer. 


INDEX,  981 

[References  are  to  Sections. 1 
CONDITION  PRECEDENT, 

where  agreement  to  render  services  or  labor  the  consideration,  329. 

where  notice  of  failure  of  consideration  is,  327. 

affecting  acceptance,  347. 

want  of  title  or  interest,  412. 

See    Collateral    Conditions    and    Agreements;    Conditions 

CONDUCT, 

as  estoppel. 

See  Waiver  and  Estoppel. 

CONFLICT  OF  LAWS, 

acceptance  of  accommodation  paper,  277. 

CONSENT, 

to  alteration,  effect  of,  149. 
what  constitutes,  150. 

new  consideration  not  necessary  to  render  it  binding,  150. 
by  parties  to  alteration  of  time  of  payment,  154. 
to  alteration  by  substitution  of  words  "or  order"  or  "or  bearer,"  161. 
of  party  to  alteration  in  rate  of  interest,  lb9. 

CONSIDERATION, 

generally,  presumption  as  to,  rules,  183. 

when  it  may  be  inquired  into,  184. 

showing  real  consideration,  rebutting  presumption  as  to,  184. 

evidence  rebutting,  matters  dehors  contract,  185. 

"value    received,"    consideration    not    expressed    or    expressed,    re- 
butting presumption,  186. 

showing  real  consideration,  to  what  parties  rule  applies,  197. 

defense  of  duress,  not  precluded  by,  105. 

false  representations  as  to,  122 
bo7ia  fide  holder,  123. 

alterations  as  defense  to  action  on,  147,  148. 

new  consideration  not  necessary  to  render  consent  to  alteration  bind- 
ing, 150. 

alteration  in  statement  as  to,  156. 

by  inserting  statement  as  to,  156. 

recovery  on  not  defeated  by  alteration  of  interest  clause,  168. 

face  of  note  prima  facie  evidence  of  between  indorser  and  indorsee, 
n.  191. 

compromise  settlement  or  relinquishment  note,  195. 

intention  of  as  an  estoppel,  210,  211. 

seal  imports,  217. 

of  an  assignment  generally,  236. 

moral  obligation  to  pay  pre-existing  debt  good,  n.  241. 

extension   of   time   as   for  note   transferred   to   secure   pre-existing 
debt,  247. 

always  open  to  inquiry,  262. 

contemporaneous    agreement   constituting,   evidence   of    admissible, 
310. 


982  INDEX. 

[References  are  to  Sections.l 
CONSIDERATION— Con^i«?ied. 

evidence  of  executory  contract  as  consideration  for,  322. 

collateral  conditions  or  agreements  affecting,  322. 

want  or  failure  of  growing  out  of  collateral  agreement,  322. 

collateral  agreement  forming,  n.   322. 

failure  of  non-performance  of  conditions  of  bond,  323. 

failure    of    for    original    no    defense    to    renewal    note — bona   fide 

holder,  324. 
when  breach  of  conditions  affecting  is  not  a  defense,  324. 
failure  of,  where  performance  of  agreement  prevented   by  maker, 

325. 
failure  of,  breach  of  agreement  not  to  do  certain  acts,  326. 
agreements  affecting  purchase-price  notes,  327. 
breach  of  agreement  to  render  services,  329. 
necessity  of  for  extension  of  time  of  payment,  341. 
that  none  given  but  indorsee  agent  of  indorser,  408. 
fraud  or  mistake  in,  note  under  seal,  bona  fide  holder,  444. 
may  be  shown  against  assignee  of  peddler's  note,  447. 
proof  of  essential,  action  by  transferee  without  indorsement,  456. 
when  not  necessary  for  waiver  of  presentment  for  payment,  524. 
new  consideration  not  necessary  for  waiver  by  indorser  of  notice 

of  dishonor,  n.  573. 
right  of  indorsee  to  recover  from  indorser,  n.  645. 
recitals  as  to  as  an  estoppel,  646. 
estoppel  as  to  by  new  note,  649. 
whether  essential  to  support  new  promise,  651. 
retaining  of  as  an  estoppel,  662. 
estoppel  as  to  in  general,  664. 
See  Contract;   Discharge;  Presentment  for  Payment;  Usury. 
adequacy  or  sufficiency  of, 

inadequate   or    insufficient    consideration    distinguished    from 
want  or  failure  of  consideration,  188. 

sufficient  if  consideration  is  a  benefit  or  injury,  189. 

distinction  between  valuable  consideration  other  than  money 
and  a  money  consideration,  190. 

slight  consideration,  purchasing  paper  at  undervalue,  191. 

grossly  inadequate,  recovery  only  of  amount  paid,  191. 

adequacy  in  value  unnecessary,  192. 

not  valuable,  not  bona  fide  holder,  division,  380. 

rule  as  to  inquiry  into,  fraud,  193. 

inadequacy  of  will  not  support  a  plea  of  want  of,  193. 

where  inadequacy  of  creates  presumption  of  fraud,  193. 

sufficient  consideration,  illustrations,  194. 

worthless  patent  right,  120. 

compromise,  settlement  or  relinquishment  note,  195. 

same  subject,  unfounded  or  illegal  claim,  196. 

compromise  of  forgery  claim,  197. 


INDEX. 


983 


[References  are  to  Sections.'] 
CONSIDERATION— Coji^iwited. 

want  or  failure  of  consideration, 

total  want  of  consideration,  defense  between  original  or  im- 
mediate parties,  198. 

upon  acceptance,  between  acceptor  and  other  parties,  want  of 
consideration,  199. 

indorser  and  indorsee  as  immediate  parties,  want  of  consid- 
eration, 200, 

partial  want  of  consideration,  201. 

total  failure  of  consideration,  defense  between  original  or  im- 
mediate parties,  202. 

upon  acceptance,  between  acceptor  and  other  parties,  failure 
of  consideration,  203. 

indorser  and  indorsee  as  immediate  parties,  failure  of  con- 
sideration, 204. 

consideration  acknowledged,  failure  of  consideration,  205. 

non-negotiable  paper  made  at  request  of  another,  failure  of 
consideration,  206. 

partial    failure    of    consideration,    defense,    between    original 
parties,  207. 

same  subject,  review  of  decisions,  208. 

where  number  of  notes  are  given,  partial  failure  of  considera- 
tion. 

rescinding  contract  and  restoring  consideration,  general  rule, 
210. 

same  subject,  exceptions  to  and  qualifications  of  rule,  211. 

as  to  guarantors,  212. 

guarantor  may  show,  461. 

as  to  sureties,  213. 

as  to  donor  and  donee,  214. 

as  to  donor  and  doneee,  negotiable  check  on  bank,  215. 

joint  and  joint  and  several  notes,  216. 

notes  under  seal,  217. 

notes  under  seal,  gratuitous  promise  to  pay,  218. 

renewal  notes  generally,  219. 

renewal  notes,  waiver  by  principal  precluding  defense  of  fail- 
ure of  consideration,  surety's  defense,  220. 
implied  or  expressed  consideration,  221. 
consideration  for  original  paper,  222. 

of  original  note  no  defense  to  renewal — bona  fide  holder,  324. 

renewal  notes,  discount  before  maturity,  223. 

notes  or  checks  given  for  other  notes  or  bills  purchased,  224. 

drafts  accepted  to  extinguish  other  drafts,  225. 

when  only  part  of  consideration  is  good,  action  by  payee.  226. 

defense  to  one  note  in  action  on  another,  227. 

note  given  for  political  assessments,  228. 

where  paper  sued  on  is  impossible  to  perform  in  reasonable 
time,  229. 


984  INDEX. 

[References  are  to  Sections.} 
CONSIDERATION— Oowiintted. 

as  to  agents,  230. 

as  to  trustees  of  committees,  231. 

as  to  holders  of  municipal  warrants  and  coupons  attached  to 
bonds,  232. 

third  persons  as  holders  of  notes,  233. 

note  of  third  person,  234. 

note  given  to  promote  peace  between  husband  and  wife,  note 
of  stranger,  235. 

assignees,  consideration  of  assignment,  236. 
want  or  failure  of  consideration,  237. 

want  of  consideration,  bona  fide  holder,  441,  442, 

bona  fide  indorsees  or  holders,  rule,  238. 

transfer  after  maturity,  239. 

against  purchaser  after  maturity  from  b07ia  fide  holder,  434. 

rule  as  to  payment  of  value,  its  basis  and  qualifications,  bona 
fide  indorsees  or  holders,  240. 

rule  as  to  value  continued,  payment  of  pre-existing  debt,  bona 
fide  indorsees  or  holders,  241. 

same  subject,  decisions  contra  or  qualifications,  242. 

banks,  distinctions  between  crediting  amount  of  note  on  un- 
drawn deposit  and  credit  on  pre-existing  indebtedness,  bona 
fide  holder,  243. 

parting  with  value,  surrender  by  creditor  of  debtor's  own 
note,  receiving  negotiable  note  of  third  person,  244. 

joint  note  of  husband  and  wife,  outlawed  debt  of  husband,  in- 
dorsee for  past  indebtedness,  indorsement  by  president 
payee  to  bank,  245. 

rule  as  to  value,  collateral  security  for  pre-existing  debt, 
bona  fide  indorsees  or  holders,  246. 

same  subject,  particular  decisions,  247. 
specific  exceptions,  248. 

security  for  pre-existing  debt,  additional  consideration,  249. 

intermediary  party,  holder  from  bona  fide  holder,  250. 

paper  issued  by  corporation,  bona  fide  holder,  251. 

want  or  failure  of  consideration  subsequent  to  transfer,  bona 
fide  holder,  252. 

suit  in  name  of  original  party,  bona  fide  holder,  253. 

2ex  fori,  254. 

indorsement  for  transfer  merely  or  to  .pass  title,  255. 

same  subject,  instances,  256. 

purchase-price  notes,  327. 
original  parties,  257. 
acceptor,  258. 
bona  fide  holder  or  assignee,  260. 

effect  of  judgment,  assignees,  261. 

purchase-price  notes,  property  useless  or  of  no  value,  262. 

Vendor  or  seller  without  title,  loss  of  title,  263. 


INDEX.  985 

[References  are  to  iiections.1 
CONSIDERATION— Continued. 

purchase-price  notes,  land,  warranty,  264. 
personal  property,  warranty,  265. 

where  property  for  which  note  given  is  of  some  value,  no 
failure  of  consideration,  266. 

purchase-price  notes,  guarantors,  259. 

rights  of  holder  where  prior  indorsee  held  note  as  collateral 
security  and  for  continuing  credit,  lien,  267. 

purchase-price  notes,  instances  in  general  of  want  or  failure 
of  consideration,  268. 

accommodation   paper,   consideration  as  between  original   or 
immediate  parties,  269. 

in  action  against  accommodation  maker  or  indorser,  342. 

bona  fide  holders,  assignees,  notice  or  knowledge,  270. 

same  subject,  particular  decisions,  271. 

accommodation  acceptor,  general  rules  and  illustrations,  272, 
273. 

same  subject  continued,  exceptions  and  qualifications,  274. 

bill  payable  to  order,  275. 

taking  before  acceptance,  276. 

accommodation  paper,  conflict  of  laws,  acceptance,  277. 
check,  bank  check,  278. 
indorsers,  availability  of  defenses,  general  .rule,  279. 

same  subject,  application  of  rule,  280. 

same  subject,  qualifications  of  and  exceptions  to  rule,  281. 

bona  fide  holder,  accommodation  paper  taken  after  maturity, 
want  of  consideration,  282. 

accommodation  of  other  parties  in  general,  283. 

payment  of  pre-existing  debt,  bona  fide  holder  against  accom- 
modation maker,  284. 

same  subject,  particular  rulings  and  opinions,  285. 

payment  of  pre-existing  debt,  botia  fide  indorsee  against  in- 
dorser, 286. 

payment  of  pre-existing  debt,  drafts  and  bills,  payee,  accom- 
modation acceptor,  287. 

where  set  up  payee  cannot  show  in  rebuttal  paper  in  fraud 
of  creditors,  125. 

evidence  to  establish  defense  of,  185. 

growing  out  of  failure  of  collateral  agreement,  322. 

non-performance  of  conditions  of  bond,  323. 

to  advance  money — surety  may  share,  323. 

where  performance  of  agreement  prevented  by  maker,  325. 

where  agreement  not  to  do  certain  acts,  326. 

where  notice  of  condition  precedent,  327. 

breach  of  agreement  no  defense  against  bo7ia  fide  holder,  328. 
to  render  services  or  labor,  329. 

indorsee  agent  of  indorser,  408. 


986  INDEX. 

[References  are  to  Sections.'] 
CONSIDERATION— Coniinwed. 

where  note  indorsed  by  joint  payees  to  one  of  their  number, 

466, 
damages  resulting  from  failure  of  may  be  set-off,  599. 
note  taken  with  notice  of  not  available  as  set-off,  606. 
acceptance  estops  to  show,  641. 
new  note  as  an  estoppel  to  show,  649. 
estoppel    to    assert    by    representations    in    connection    with 

transfer,  653. 
silence  not  an  estoppel,  664. 
action  in  name  of  promisee  for  assignee,  664. 
signing  for  accommodation,  estoppel,  666. 
estoppel  by  receipt  of  benefits,  667. 

conduct,  representation  or  promise,  668. 
knowledge  or  notice,  669. 
illegal  or  immoral  consideration, 

original  parties,  bona  fide  holders,  288,  441. 

exceptions  and   qualifications,  notice,  knowledge,   fraud,  etc., 

289. 
particular  cases  when  illegal  or  immoral,  288. 
effect  on  surety,  290. 

illegality  of  as  a  defense  in  action  against  joint  and  several 
.    makers,  3. 
effect  on  surety,  290. 

of  as  a  defense  in  action  against  joint  and  several  makers,  3. 
effect  of  forbearance  to  sue,  450. 

paper  given  for  consideration  in  violation  of  statute,  291,  292. 
where  constitution  and  laws  voilated,  enemy  aided,  293. 
illegal   sales,   294. 
for  note  godos  sold  in  violation  of  insolvent  laws,  bona  fide 

holder,  120. 
compounding  criminal  acts,  295. 
where  consideration  is  money  or  property  won  at  a  gambling 

device,  296. 
Same  subject,  statutory  provisions,  297. 

qualifications  of  rule,  other  instances,  298. 
particular  instances,  299,  300,  301. 
where  transferee  has  notice  of,  472. 
estoppel,  665. 

CONSPIRACY, 

in  obtaining  note,  relief  in  equity,  445. 

CONSTITUTION, 

note  for  debt  in  violation  of,  293. 

CONTINGENCY, 

See  Collateral  Coxditioxs  axd  Agreements;   Conditions. 

CONTINGENT  LIABILITY. 

not  available  as  a  set-off,  595. 


IXDEX.  987 

[References  are  to  Sections.l 
CONTRACT, 

void  as  against  public  policy,  note  in  furtherance  of  void,  n.  288. 

illegal,  note  as  security  for  performance  of,  363. 

purchase  of  bill  in  consideration  of  acceptance  of  another  note,  491. 

di-awee's  promise  to  accept  bill,  491. 

drawer  and  indorser  undertake  that  bill  be  accepted  and  paid,  495. 

breach  of,  substituted  performance,  note  as  an  estoppel,  648. 

necessity  of  binding  contract  to  discharge  surety,  680. 

performance  of  conditions  as  affecting  guarantor's  discharge,  681. 

executing  for  purchase,  deed  to  vendor,  discharge  of  notes,  690. 

performance  of  as  to  sale  of  goods  as  dischargee  of  note,  691. 

work,  labor  or  services  performed  as  rendered,  discharge  of  note, 

692. 
by  married  women,  see  Coverture;   Agreement;   Presentment  for 

Acceptance  ;    Stipulation. 

CONTRACT  OF  SALE. 

and  note  may  be  construed  together,  310. 

note  conditioned  to  take  effect  when  consummated,  n.  314. 

CONVERSION, 

bill  in  satisfaction  of,  want  or  failure  of  consideration,  242. 

of  goods,  damages  for  may  be  set  off,  598. 

of  note,  set-off  of  damages  for,  598. 

of  collateral  by  pledgee,  set-off  of  value  of,  613. 

of  paper,  see  Diversion  and  Fraudulent  Transfer. 

CONVEYANCE, 

of  land  as  a  consideration,  when  no  failure  of,  202. 

as  affecting  discharge  of  note,  690. 
or  agreement  as  to,  as  affecting  discharge  of  note,  690,  691. 
when  does  not  operate  as  payment  of  note,  691. 
See  Sale. 
COPARTNERS, 

See  Partnership. 
COPARTNERSHIPS, 

transfer  to  of  note  after  maturity,  discharge  of  note,  679. 

COPY, 

substituted  presentment  of  checks  by,  579. 

CORPORATION, 

availability  to  indorser  of  defense  in  action  on  note  of,  7. 

powers  of  officers  and  agents  of,  485.  486. 

taking  paper  of  another  corporation,  same  officers,  notice,  486. 

want  of  authority  of  officers  or  agents,  80,  81. 

notes,  diversion  by  officers  of  proceeds  of  no  defense,  392. 

want  of  authority  of  bank  officials,  82. 

of  president  of,  81. 
note  to  president,  rights  of  transferee,  486. 


988  INDEX. 

[References  are  to  Sections.'] 
CORPORATION— Contimted. 

want  of  authority  of  treasurer  of,  81. 
of  secretary  of,  81. 
of  assistant  secretary  of,  81. 

where  note  signed  by  director  of,  n.  17. 

note  by  agent  of  without  authority,  458. 

want  of  authority  of  as  affected  by  illegality  or  statute,  79. 

note  by  in  violation  of  express  statute,  bona  fide  holder,  79. 

paper  of  in  contravention  of  statute,  84. 

certificate  of  indebtedness  issued   in  restraint  of  trade,  anti-trust 
law,  459. 

formed  for  illegal  purpose,  note  given  to,  79. 

note  of  under  contract  prohibited  by  charter,  86. 

noncompliance  with  articles  of  incorporation,  81. 

with  by-laws  of.  no  defense  against  bona  fide  holder,  81. 

by-law  of  as  to  execution,  noncompliance  with  no  defense,  85. 

instruments  ultra  vires.  84. 

when  estopped  to  assert  act  ultra  vires,  85,  86. 

where  note  given  for  money  loaned  to,  86. 

who  may  show  want  of  authority  of,  95. 

as  maker  cannot  show  payee  a  fraudulent  association,  95. 

payee  of  note,  maker  cannot  deny  existence  of,  95. 

note  given  for  stock  of,  want  of  power  of  directors  to  sell,  95. 

signature  of  officer  forged,  98. 

fraud  toward  by  officer  of  no  defense  against  bona  fide  holder,  121. 

name  of  omitted  by  accident,  insertion  of  to  correct  mistake,  175. 

paper  issued  by,  bona  fide  holder,  want  of  consideration,  251. 

note,  want  of  consideration,  bona  fide  holder,  271. 

bond  of  given  in  payment  of  pre-existing  debt,  241. 

indorsement  of  ultra  vires,  effect  of,  279. 

subject  to  usury  laws,  306. 

note  to,  set-off  of  assessment  on  stock,  purchaser  after  maturity,  422. 

note  of  given  in  payment  of  dividends,  bona  fide  holder,  479. 

erasure  of  signature  of,  not  notice  to  purchaser,  481. 

stock  of  worthless,  note  of  wife  for,  notice,  482. 

note  in  payment  of  individual  debt,  notice,  485. 

paper  as  an  accommodation,  notice,  487. 

indorsement,  accommodation  paper,  bona  fide  holder,  487. 

note  payable  at  any  bank  does  not  include  loan  and  trust  corpora- 
tion, 517.  . 

maker,  transfer  of  its  property  when  presentment  for  payment  dis- 
pensed with,  522. 

maker  of  note,  insolvency  of,  when  presentment  for  payment  dis- 
pensed with,  523. 

secretary  of  may  waive  protest,  541.  , 

notice  of  dishonor  to,  sufficiency  of,  553. 

indebtedness  to  not  a  set-off  where  corporation  not  party  to  note, 
618. 


IXDEX.  989 

[References  are  to  Sections,'^ 
CORPORATION— Cow«iwMe(Z. 

acts  of  creating  estoppel,  660. 

action  against  officers  of  not  bound  by  another  action  or  similar 

note  against  corporation,  663. 
acceptance  by  of  premium  notes  for  stock,  statute,  estoppel,  664. 
estoppel  to  show  want  of  capacity  or  authority,  671. 
act  of  officer  of  in  violation  of  statute,  estoppel  to  show,  672. 

CORRESPONDENT,  , 

indorsement  of  check  to,  578  n. 

COSTS, 

when  maker  by  tender  of  payment  of  note  exonerated  from,  n.  502. 

CO-TRUSTEES, 

agency  of  one  to  collect  note,  698. 

COUNTERCLAIM, 

See  Set-Off,  Recoupment  and  Counterclaim:. 
COUNTY, 

want  of  authority  to  issue  warrants  of,  87. 

warrants,  defenses  generally,  232. 

bonds,  coupons  of,  want  of  consideration,  232. 

COUNTY  CERTIFICATES, 

stolen  after  cancellation,  399. 

COUPON  BONDS, 

stolen  and  in  hands  of  hona  fide  holder,  395. 
purchase  of  after  maturity,  426. 

COUPONS, 

of  city  and  county  bonds  and  warrants,  want  or  failure  of  consid- 
eration, 232. 
authority  to  collect  interest  coupons,  collection  of  principal,  698. 

COURT, 

note  to  secure  appearance  in  is  valid,  n.  298. 

COVENANT, 

against  incumbrances,  breach  of,  264. 

as  to  incumbrances,  when  damages  for  breach  of  not  a  set-off,  601. 

damages  for  breach  of  as  a  set-off,  601. 

unliquidated  damages  arising  from   breach  of,   when   available  as 

set-off,  594. 
damages  arising  from  breach  of,  availability  as  a  set-off  against 

hona  fide  holder,  602. 
not  to  sue,  effect  of,  337,  338. 

note  given  in  pursuance  of,  cannot  impeach  consideration,  327. 
to  accept  less  sum,  702. 

COVERTURE, 

rule  at  common  law,  30. 

where  note  given  for  money  and  supplies,  30. 


990  INDEX. 

[References  are  to  Sections.l 
COVERTURE— Continued. 

where  false  representations  made  as  to  capacity,  30. 
effect  of  new  promise  after  liusband's  death,  31. 
rule  in  equity,  English  decisions,  32. 

United  States  decisions,  33. 
wife  only  charges  property  owned  at  time  of  signing,  33. 
defense  of  as  affected  by  statute,  34. 
purchase  of  paper  of  married  woman  must  take  notice  of,  statute, 

4^2. 
statute  does  not  have  retroactive  effect,  35. 

a  defense  when  transaction  not  within  statutory  exception,  36. 
statutory  exception,  pleading,  37. 

burden  of  proof,   37. 
assent  of  husband,  38. 
note  given  for  insurance  premiums,  39. 
where  note  made  by  wife  to  husband,  40. 

under  New  York  laws  permitting  married  woman  to  contract,  40. 
where  statute  provides  wife  may  be  sued  jointly  with  husband,  40. 
where  wife  joint  maker,  not  estopped  to  show,  41. 

a  joint  maker,  41. 
where  statute  permits  husband  and  wife  to  contract,  joint  note,  41. 
in  case  of  joint  note  by  husband  and  wife  for  supplies,  41. 
where  authorization  of  husband  not  shown,  wife  joint  maker,  41. 
where  wife  elopes  from  husband,  42. 

where  husband  and  wife  live  apart,  English  decisions,  42. 
rule  where  husband  has  left  state  or  country,  43. 
where  husband  and  wife  live  apart.  United  States  decisions,  43. 
in  case  of  divorce  a  mensa  et  thoro,  43. 
generally  where  wife  signs  as  surety,  44. 

burden  of  proof  on  married  woman  to  show  she  signed  as  surety,  45. 
where  statute  forbids  married  woman  to  become  surety,  45,  46. 
when    married    woman    cannot    defend    on    ground    she    signed    as 

surety,  47. 
whether    defense    against    bona    fide    holder    that    married    woman 

signed  as  surety,  48. 
rules  as  to  determining  whether  principal  or  surety,  49. 
liability  of  married  woman  as  acceptor,  50. 
(.ommon-law  rule  as  to  indorsement  by  married  woman*,  51. 
necessity  and  effect  of  husband's  assent  to  indorsement  by  wife,  52. 
particular  statutes  as  to  assent  of  husband  to  indorsement  by  wife, 

53. 
indorsement  without  assent  of  husband,  dona  fide  holder,  54. 
general  rule  as  to  assent  of  husband  to  indorsement  by  wife,  54. 
where  "woman  a  sole  trader,  55. 

in  business,  55. 
separate  estate,  benefit,  etc.,  as  affecting,  56,  57,  58. 
note  given  in  purchase  of  horse,  57. 
in  purchase  of  lumber,  57. 


INDEX. 


991 


[References  are  to  Secti07is.'] 

COVERTURE — Continued. 

for  money  and  supplies,  57. 

for  goods  purchased  by  husband  as  wife's  agent,  57. 

for  sewing  machine,  57. 

in  purchase  of  mule,  57. 
note  to  creditor  of  husband,  57. 
where  note  given  for  property  purchased,  57. 
note  given  for  money  loaned  to  pay  off  mortgage,  57. 

in  purchase  of  stocks,  57. 

for  money  loaned  to  release  lien,  57. 

for  agricultural  implements,  57. 

for  money  loaned  to  pay  rent,  57. 
note  for  borrowed  money,  58. 
parol  evidence  not  admissible  to  s^jiow  joint  note  intended  to  charge 

wife's  estate,  59. 
estoppel  from  contents  of  note  to  assert,  59, 
intention  to  charge  separate  estate  as  affecting  defense  of,  59. 
intention  to  charge  separate  estate  may  be  presumed,  59. 
as  affecting,  consideration,  n.  264. 
what  law  governs,  60. 
who  may  urge,  61. 
a  personal  defense,  61. 

is  a  personal  defense  not  available  to  co-defendant,  1. 
of  maker,  indorser  cannot  urge,  61. 

where  there  is  a  failure  to  plead  coverture  and  judgment  is  ren- 
dered, 62. 

CREDIT, 

evidence  of  agreement  as  to  upon  not  admissible,  332. 

of  maker,  right  to  set  off  damages  caused  by  slander  on,  598. 

as  affecting  surety's  release,  n.  680. 

when  bank  draft  not  paid  by  passing,  n.  702. 

CREDITORS, 

paper  in  fraud  of,  125. 

notes  in  fraud  of  void,  n.  288. 

that  paper  in  fraud  of  defense  against  indorsee  for  collection,  125. 

a  defense  to  action  against  surety  by  executors  of  payee,  125. 
where  debtor  gives  note  of  third  person,  want  of  consideration,  234. 
surrender  by  of  debtor's  own  note,  receiving  note  of  third  person, 

244. 
taking  accommodation  note  in  payment  antecedent  debt,  purchaser 

for  value,  285. 
notes  to  founded  on  illegal  consideration  void.  n.  288. 
note  to  to  induce  acceptance  of  an  assignment  void,  n.  288. 
not  subject  to  defense  another  was  to  sign  as  maker,  n.  315. 
taking  accommodation  paper  as  collateral,  action  against  indorser, 

354. 
where  note  transferred  for  benefit  of,  456. 

given  for  conveyance  in  fraud  of,  456. 


992  INDEX. 

[References  are  to  Sections.'\ 
CREDITORS— Continued. 

note  to  one  as  agent  of  the  creditors,"  set-off  of  sealed  bill  against, 

618. 
note  given  to  aid  in  defrauding,  estoppel  to  show  fraud,  644. 
goods  transferred  in  fraud  of,  sale  of  as  discharge  of,  n.  691. 

CRIMINAL, 

note  not  to  prosecute  void,  n.  288. 

acts,  note  for  purpose  of  compounding,  void,  295. 

CRIMINAL  LAW, 

note  to  defeat  execution  of,  void,  n.  288. 

CRIMINAL  PROCESS, 

paper  procured  by  abuse  of,  109. 

CRIMINAL  PROSECUTION, 

paper  given  under  threat  of,  112. 
condition  in  note  that  payee  assist  in,  n.  343. 

CROPS, 

parol  evidence  that  note  void  on  failure  of  not  admissible,  320. 
evidence  that  note  void  on  failure  of  crops  not  admissible,  320. 

CURATOR, 

of  insolvent  indorser  may  waive  protest,  541. 

CUSTODIAN, 

of  society  funds  cannot  set  off  against  his  note  a  debt  due  to  society, 
591. 

CUSTOM, 

local  custom  of  banks,  presentment,  substituted  checks,  580. 
See  Usage. 


D 
DAMAGES, 

tort  of  infant,  where  note  given  in  satisfaction  of,  66. 

note  given  in  settlement  of,  consideration  sufficient,  195. 

action  for  statutory  damages,  deficiency  on   bill  after  sale  of  col- 
lateral, 494. 

when  maker  by  tender  of  payment  of  note  exonerated  from,  n.  502. 

when  bank  check  wrongfully  protested,  n.  582. 

to  drawer  from  laches  in  presentment  of  check,  582. 

recoupment  of,  208. 

set-off  of  claim  for  unliquidated  damages  arising  from  breach  of 
covenant,  594. 

for  taking  possession  of  property  note  given   for  right  to  set-off, 
597,  598. 

recoverable  in  action  of  tort,  right  to  set-off  of,  597,  598. 

for  conversion  of  note  may  be  set-off,  598. 


INDEX. 


993 


[References  are  to  Sections.'\ 

BAMAG'ES— Continued. 

arising  from  negligence  of  plaintiff  as  agent  cannot  be  set  off,  598. 
for  conversion  of  goods  may  be  set  off,  598. 
for  slander  on  credit  of  maker,  right  to  set-off,  598. 
for  negligence  in  case  of  collateral  cannot  be  set  off,  598. 
for  selling  property  in  violation  of  trust  cannot  be  set  off,  598. 
arising  ex  contractu  and  under  same  contract  may  be  set  off,  599. 
arising  from  fraud  or  mistake  may  be  set  off,  599. 
for  misstatement  in  inventory  as  set-off  to  note  for  interest  in  part- 
nership, 599. 
for  breach  of  contract  to  deliver  cans  as  set-off,  600. 
arising  ex  contractu  under  different  contract  cannot  be  set  off,  600. 
for  negligence  of  mortgage  in  procuring  insurance  not  a  set-off,  600. 
for  fraud  of  mortgage  in  concealing  material  facts  as  a  set-off,  601. 
for  breach  of  warranty  or  covenant  as  a  set-off,  601. 

not  available  to  surety  or  guarantor  as  set-off,  601. 
for  false  representations  as  to  land,  when  not  a  set-off,  601. 
arising  from  breach  of  warranty  as  set-off  where  note  given  with 

knowledge  but  on  promise  to  remedy,  601. 
for  breach  of  covenant  as  to  incumbrances  not  a  set-off,  601. 
arising  from  breach  of  warranty  or  covenant,  availability  as  set-off 

against  bona  fide  holder,  602. 
for  breach  of  warranty  as  set-off,  apportioning  of  pro  rata  among 

several  notes,  603. 
due  to  principal  may  be  set  off  by  surety,  640. 
See  Injury. 
DATE, 

is  a  material  part  of  contract,  152. 
effect  of  alteration  of,  152. 
alteration  in  discharges,  surety,  152. 
of  releases,  acceptor,  152. 
in  bonds,  parties  who  acquiesce,  152. 
of  to  conform  to  actual  date,  152. 

in  does  not  release  surety  where  authorized  by  him,  152. 
of  defense  to  action  against  accommodation  maker,  152. 
of  indorsement,  effect  of  alteration  of,  152. 
of  demand,  alteration  of  material,  152. 
alteration  of  by  stranger  a  mere  spoliation,  152. 
where  space  for  left  blank,  145. 

bill  payable  certain  time  after  date  same  as  part-dated  bill.  490. 
bill  payable  certain  time  after,  presentment  for  acceptance,  490. 
of  paper,  statement  of  in  notice  of  his  honor,  552. 

DAYS  OF  GRACE, 

See  Grace. 
DEATH, 

as  excuse  for  failure  to  tender  back  consideration.  211. 

of  drawer,  presentment  for  payment  of  check  after,  215. 

Joyce  Defenses — 63. 


994  INDEX. 

[References  are  to  Sections.'] 
DEATH — Continued. 

where  performance  of  condition  precedent  prevented  by,  329. 
presentment  for  payment  on  behalf  of  estate  of  holder,  511. 
of  person  primarily  liable,  present  for  payment,  519. 
See  Estate. 
DEBT, 

sale  or  surrender  of  collateral  or  satisfaction  of  debt,  discharge, 

683. 
alterations  in  note  as  defense  to  action  on,  147. 
of  another,  payment  of,  agreement  to  accept  bill,  n.  491. 
indorsers  of  note  for  antecedent  debt  to  enable  it  to  be  discounted 

liable  as  joint  owners  without  demand,  503. 
draft  to  secure  antecedent  debt,  presentment  for  payment,  503. 
of  third  person,  set-off  arising  from  agreement  to  pay,  596. 
set-off  against  note  assigned  to  avoid  payment  of,  623. 

DEBTOR, 

giving  note  of  third  person  to  creditor,  want  of  consideration,  234. 

surrender  by  creditor  of  note  of,  receiving  note  of  third  person,  244. 
See  Creditor;  Joint  Debtors. 
DECLARATION, 

as  an  estoppel,  656,  657,  658. 

DEED, 

to  remove  cloud  on  title  as  consideration,  194. 
when  may  be  construed  with  note,  310. 
with  warranty,  acceptance  of  as  an  estoppel,  664. 
in  view  of  bankruptcy,  discharge  of  note,  690. 
agreement  to  take,  discharge  of  note,  690. 

DEFINITIONS, 

protest,  526. 

DELAY, 

when  unreasonable,  presentment  for  payment,  demand  notes,  506. 
See  Laches;  Presentment  for  Acceptance;  Presentment  for  Payment. 

DELIVERY, 

procured  by  force  or  fraud,  13. 

signing  of  note  after,  16. 

want  of  as  a  defense,  20. 

want  of,  burden  of  proof,  20. 

by  agent  in  violation  of  instructions,  21. 

of  instruments  on  Sunday,  29. 

maybe  conditional  without  express  words,  312. 

to  payee  by  worker,  may  be  conditional,  312,  313. 

in  escrow,  rule  as  to,  317. 

burden  of  proof  as  to  being  b077a  fide  holder,  317. 

condition  as  to  another  signature,  317. 

no  defense  against  payee  without  notice,  318. 

right  of  party  taking  as  security  for  antecedent  debt,  319. 


INDEX.  995 

[References  are  to  Sections.l 
BEhlYERY— Continued. 

want  of,  where  stolen  good  defense,  394. 

assignment  of  note  by,  452. 

paper  may  be  transferred  by,  456. 

when  bill  not  transferable  by,  456. 

transfer  by,  nature  of  title  given,  463. 

of  paper  to  impostor,  liability  to  drawee  or  bona  fide  holder,  470. 

conditions  affecting. 

See  COLLATEBAL  CONDITIONS  AND  AGREEMENTS. 

DEMAND, 

note,  alteration  in  date  of  material,  152. 
changing  time  note  to,  155. 

time  of  payment  of  cannot  be  varied  by  collateral  agreement, 
339. 
paper,  purchaser  of  after  maturity,  435. 

word  "overdue"  construed  with  reference  to,  435. 
who  is  a  bona  fide  holder,  464. 
notes,  purchase  of  in  good  faith  when  overdue,  469. 
accidental  stamping  of  waiver  of  over  indorsement,  143. 
notes,  notice  of  dishonor,  545. 

after  sight,  presentment  for  acceptance,  n.  490. 
personal  demand,  presentment  for  payment,  499. 
note,  presentment  for  payment  in  reasonable  time,  505. 

payable  at  place  certain,  presentment  for  payment,  505,  506. 
presentment  for  payment,  notes  not  to  be  paid  till  expiration 

of  certain  time,  506. 
unreasonable  delay,  presentment  for  payment,  506. 
necessity  that  injury  or  loss  be  sustained  by  want  of  demand, 

506. 
maker's  insolvency  no  excuse  for  non-presentment,  506. 
after  date,  presentment  for  payment,  reasonable  time,  506. 
indorsement  after  maturity,  presentment  for  payment,   rea- 
sonable time,  506. 
with  interest,  presentment  for  payment,  507. 
and  demand  note  bearing  interest,  distinctions  abrogated,  pre- 
sentment, 508. 
presentment  for  payment  before  sent  on,  512. 
presentment  for  payment,  excuses,  523. 
time  of  making  protest,  534. 
See  Presentment  for  Acceptance;  Presentment  for  Payment;  Wai\-er. 

DEMURRER, 

to  plea  of  want  of  consideration,  when  properly  overruled,  199. 

DEPOSIT, 

set-off  of  against  bank  assignee,  422. 
certificate  of,  see  Certificate  of  Deposit. 


996  INDEX. 

[References  are  to  Sections."] 
DEPOSITOR, 

application  by  bank  of  proceeds  to  credit  of,  471. 

See  Bank  Deposits;  Set-off,  Recoupment  and  Counterclaim. 

DEPOSITS  IN  BANK, 

See  Bank  Deposits;  Set-off,  Recoupment  and  Counterclaim. 

DEPUTY  SHERIFF, 

paper  for  appointment  to  ofBce  of,  void,  n.  288. 
paper  for  sale  of  office  of,  void,  n.  288. 

DESTRUCTION, 

of  seal,  alteration  by,  176. 

DILIGENCE, 

to  collect  order  on  drainage  district,  presentment,  503. 

reasonable   diligence,  holders   of   collateral,   presentment   for   pay- 
ment, 503. 

required  after  excusable  cause  for  delay  in  presentment  removed, 
521. 

making  note  for  collection,  presentment  for  payment,  522. 

degree  of,  presentment  for  payment,  holder  told  that  maker  has  ab- 
sconded, 522. 

required  generally,  presentment  and  demand,  522. 

presentment  for  payment  excused  when  cannot  be  made  after  exer- 
cise of  reasonable  diligence,  522. 

what  degree  of  necessary,  inquiry  of  cashier  of  bank  as  to  residence, 
presentment,  522. 

in  giving  notice  of  dishonor,  564. 

presentment  of  check  on  following  day,  576  and  note. 
See  Checks;  Laches;  Reasonable  Time. 
DIRECTOR, 

of  corporation,  where  note  signed  by,  n.  17. 

of  bank  acting  ultra  vires,  82. 

notes  given  to  bank,  estoppel,  664. 

check  as  purchase  or  payment,  696. 

See  Corporate  Officers;   Officers. 
DISCHARGE, 

accommodation  party,  678. 

by  agreement,  678. 

release  by  indorser  not  binding  on  immediate  indorsee,  679. 

of  acceptor  by  satisfaction  of  bill,  679. 

release  by  holder,  679. 

satisfaction  of  bill  as  between  drawer  or  indorser  and  indorsee,  679. 

of  acceptor,  want  of  funds  in  assignee  of  drawer,  679. 

judgment  against  joint-debtors,  679. 

effect  of  judgment,  679. 

release  absolute  in  terms,  joint  debtors,  679. 

of  co-debtors,  or  joint  debtors,  679. 

distribution  of  estate  of  maker,  notice  given  to  joint  maker,  dis- 
charge, 679. 


INDEX.  997 

[References  are  to  Sections.'\ 
DISCHARGE— Continued. 

of  joint  makers,  679. 

maker  a   member   of  partnership  to   which   note  transferred,  dis- 
charge, 679. 

transfer  to  co-partnership  of  note  after  maturity,  679. 

what  constitutes,  maker,  679. 

by  release  based  upon  valid  consideration,  679. 

satisfaction  between  maker  and  payee,  679. 

assignee  against  maker,  defense,  679. 

maker's  defense,  purchaser  by  mere  delivery,  679. 

maker's  defenses,  purchaser  after  maturity,  679. 

by  marriage  of  parties,  679. 

satisfaction   by   agreement   with    grantor   with   grantee   rescinding 
sale,  679. 

by  release  upon  sufficient  consideration,  679. 

and  release  of  surety,  680. 

necessity  of  consideration  for  extending  time  of  payment,  release 

of  surety,  680. 
of  surety  by  neglect  to  proceed  against  principal,  680. 
of  surety,  680. 
of  guarantor,  680. 

extent  of  damage  as  affecting  discharge  of  guarantor,  681. 
mortgage  security,  682. 
of  bills  of  exchange,  mortgage  security,  682. 
agreement,  mortgage,  drawer  when  liable  on  bill,  682. 
mortgage  by  one  of  two  sureties,  682. 
of  indorsers,  mortgage  security,  682. 
of  maker,  mortgage,  682. 
married  woman's  mortgage,  682. 

sale  or  surrender  of  collateral  or  satisfaction  of  debt,  683. 
payment  of  collateral,  683. 
agreements  and  conditions  affecting,  684. 
mode  of  payment,  agreements,  684. 
of  maker,  agreements  affecting,  684. 
of  acceptor,  agreements,  685. 

satisfaction,  release  and  payment,  agreements  affecting,  684,  685. 
payment  by  note  or  check  or  by  order  on  third  person,  686. 
accord  and  satisfaction,  686. 
for  payment  of  other  indebtedness,  687. 
by  bill,  note  or  check,  substituted  note,  renewal  note,  688. 
widow's  note  for  debt,  688. 
by  taking  stocks  and  bonds,  689. 

by  conveyance  of  land  or  agreement  to  take  deed,  690. 
deed  made  in  view  of  bankruptcy,  690. 

of  surety,  deed  in  view  of  bankruptcy  in  favor  of  principal,  690. 
quit-claim  deed,  discharge  of  purchase-price  notes,  690. 
of  purchase-price  notes,  deed  from  vendor  to  vendee,  690. 
by  assignment,  transfer  or  surrender  of  property,  691. 


998  INDEX. 

[References  are  to  Sections.'] 
DISCHARGE— Continued. 

of  surety,  conveyance  of  property,  691. 

conveyance  when  not  payment  of  note,  691. 

payment  of  note  by  sale  of  goods  held  in  fund  of  creditors,  691. 

acceptance  of  claim  against  United  States,  691. 

by  transfer  of  other  notes,  691. 

of  non-negotiable  note  by  work,  labor  or  services,  693. 

by  work,  labor  or  services  performed  or  rendered,  693. 

tender  of  payment,  694. 
installment,  694. 

agreement  to  accept  deed  for  amount  of  note,  averment  of  perform- 
ance, 694. 

cancellation,  indorsements  of  payment,  receipts,  695. 

indorsement  of  payment  of  interest,  695. 

by  maker  without  owner's  consent,  695. 

attempt  to  indorse  amount  on  note  equivalent  to  claim  for  services, 
695. 

whether  act  constitutes  purchase  or  payment,  696. 

payment,  by  whom,  697. 

payment,  to  whom,  698. 

non-negotiable  paper,  payment  to  whom,  699. 

payment  as  affecting  bona  fide  holder,  699. 

remuneration  by  holder,  700. 

right  of  party  who  discharges  instrument,  701. 

payment  valid  though  not  in  money,  702. 

covenant  to  accept  less  sum,  702. 

indorser  still  liable  though  dividends  received  out  of  assets  of  in- 
solvent maker,  702. 

holder's  own  acts  may  preclude  rights  against  indorser,  702. 

when  payment  or  release  not  established,  n.  702. 

effect  of  extension  of  time,  340. 

See  Notice  of  Dishonor;  Payment;  Release,  • 

DISCONTINUANCE, 

of  action  as  a  consideration,  195. 

DISCOUNT, 

one  taking  good  title  by,  right  to  recover  on  renewals,  223. 
of  bills  by  holder  without  notice  as  to  accommodation,  273. 
condition  as  to,  indorsement  for  accommodation  of  acceptor,   bona 

fide  holder,  273. 
of  accommodation  paper  before  acceptance,  276. 
of  bill  bona  fide,  accommodation  indorser  of  consideration,  280. 
note  discounted  in  unauthorized  banking  business  void,  n.  288. 
usury  in,  no  defense  in  suit  by  transferee  against  maker,  304. 
of  paper  at  particular  bank,  condition  as  to,  diversion,  388,  389. 
paper  indorsed  in  blank  for,  diversion,  391. 
of  note  at  particular  bank,  condition  as  to  diversion,  391. 
of  note  in  bank,  action  on,  405. 


INDEX.  999 

IReferences  are  to  Sections.] 

DI SCOUNT — Continued. 

of  paper  in  good  faith,  b07ia  fide  holder,  443. 

in  good  faith,  bona  fide  holder,  465. 

of  note,  manner  of  as  notice  that  accommodation,  483. 

by  bank  of  notes  of  a  series,  484. 

of  accommodation  paper   issued  by  corporation,   bona  fide  holder, 
487. 

of  note  induced  by  representations,  estoppel,  653. 
See  Presentment  foe  Payment. 
DISEASED, 

sheep,  note  for  sale  of  valid,  n.  288. 

DISHONOR, 

post-dated  bill  not  dishonored  by  refusal  to  accept  before  date,  490. 

note  overdue,  presentment  or  demand,  when  necessary,  503. 

of  check  indorsed  and  deposited,  n.  578. 

See  Notice  of  Dishonor. 
DISMISS, 

agreement  to  dismiss  action  as  consideration,  194. 

DISMISSAL, 

of  legal  proceedings  as  a  consideration,  195. 

of  known  groundless  contest  no  consideration,  196. 

DISSOLUTION, 

of  partnership,  paper  given  in  firm  name  after,  94. 

DIVERSION  AND  FRAUDULENT   TRANSFER, 
as  a  defense  generally,  379. 
intention  as  to  no  defense,  379. 
facts  showing  should  be  pleaded,  379. 
by  principal  discharges  surety,  379. 
against  assignee  of  non-negotiable  paper,  379. 
as  against  bona  fide  holder,  380. 

where  paper  taken  in  ordinary  course  of  business,  380,  381,  382. 
evidence  and  burden  of  proof  as  to  bona  fide  holder,  381. 
transfer  in  violation  of  statute,  innocent  holder,  382. 
of  accommodation  paper,  282. 
accommodation  paper  fraudulent  put  into  circulation  after  satisfied, 

284. 
accommodation    note    transferred    as    collateral,    bona    fide    holder 

against  maker,  353. 
to  one  as  collateral,  bona  fide  holder,  362. 
accommodation  paper,  bona  fide  holder,  383,  384. 

diversion  of,  other  than  bona  fide  holders,  385. 
where  one  signs  as  surety,  385. 
of  note  to  be  used  as  collateral,  386. 

where  purpose  of  accommodation  paper  substantially  effected,  386. 
note  indorsed  to  be  used  only  at  certain  bank,  386. 
of  accommodation  paper,  where  no  instructions  imposed,  386. 
to  party  not  contemplated,  387,  388,  389. 


1000  INDEX. 

{References  are  to  Sections.} 
DIVERSION  AND  FRAUDULENT  TRANSFER— Continued, 
paper  to  be  discounted  at  particular  bank,  388,  389. 
where  transferred  as  security  for  antecedent  debt,  390,  391. 
note  intended  as  collateral  for  one  debt  used  for  another,  391. 
paper  indorsed  in  blank  for  discount,  391. 
note  to  be  discounted  at  bank,  given  as  security  for  antecedent  debt, 

391. 
diversion  of  proceeds  of  paper,  392. 

corporation  note,  diversion  by  officers  of  proceeds  no  defense,  392. 
effect  of  waiver,  393. 

by  payee  to  purchaser  after  maturity,  421. 
of  collateral,  set-off  of  value  of,  613. 
where  note  indorsed  in  blank  to  agent,  estoppel,  645. 

DIVIDENDS, 

evidence  of  agreement  that  note  payable  out  of,  not  admissible,  334. 
note  of  corporation  given  in  payment,  bona  fide  holder,  479. 
out  of  assets  of  insolvent  maker,  indorser  still  liable,  702. 

DIVORCE, 

a  mensa  et  thoro,  effect  on  note  executed  prior  to,  coverture,  43. 

legislation,  note  to  legislature  is  valid,  n.  288. 

note  given  under  agreement  to  facilitate,  void,  n.  288. 

DOMESTIC    SERVICES, 

sufficient  consideration  for  note,  194. 

DONATIO  CAUSA  MORTIS, 

note  by  donor  payable  to  donee,  defenses  to,  214. 

DONEE, 

of  note,  want  of  consideration  as  defense  against,  214. 
of  check,  right  of,  215. 

DONOR, 

of  note,  want  of  consideration  as  defense,  214. 

DOWER, 

misrepresentation  that  necessary  to  sign  note  to  release  dower  no 

defense,  117. 
release  of  by  wife  as  a  consideration,  194. 

DRAFT, 

forged  draft  as  consideration,  offer  to  return  not  necessary,  211. 

accepted  to  extinguish  other  drafts,  failure  of  consideration,  225. 

taken  in  payment  of  pre-existing  debt,  n.  242. 

in  payment  of  pre-existing  debt,  payee,  accommodation  acceptor, 
287. 

time  of  payment  of  sight  draft,  etc.,  cannot  be  known  until  accept- 
ance, 490. 

sight  draft,  in  legal  intent  draft  for  acceptance,  490. 

post-dated,  presentment  for  acceptance,  490. 

to  be  drawn,  promise  to  accept,  necessary  of  presentment,  n.  491. 


I 


INDEX.  1001 

IReferences  are  to  Sections.'] 
DRAFT — Continued. 

purchase  of  sight  drafts,  agreement  to  return  on  certain  conditions, 

presentment,  491. 
to  secure  antecedent  debt,  presentment  for  payment,  503. 
foreign  or  inland,  presentment  for  payment,  notice  of  dishonor,  503. 
when  considered  as  inland  bill  or  banker's  check,  laches,  present- 
ment, 511. 

See  Bill  of  Exchange. 
DRAINAGE  DISTRICT, 

order  on,  diligence  to  collect,  presentment  for  payment,  503. 

DRAWEE, 

See  Check. 
presentment  at  place  of  business  of,  499. 
for  payment  at  residence  of,  499. 
at  residence  of,  499. 
to  two  or  more  not  partners,  n.  499. 
where  drawee  dead,  n.  499. 
See  Presentment  for  Payment;  see  the  particular  defense. 

DRAWER, 

*    release  of,  presentment  for  acceptance,  496. 

undertakes  for  acceptance  and  payment  of  bill,  495. 
See  Check;  Presentment  for  Acceptance;  particulab  defenses 

DUE  BILL, 

mistake  in  amount  of,  question  for  jury,  n.  17. 

for  costs  before  trial  and  where  person  subsequently  acquitted,  196. 

consideration  of  a  share  in  a  store,  failure  to  deliver  goods,  257. 

where  payable  on  final  settlement,  343. 

not  negotiable,  purchaser  after  maturity,  425. 

under  seal,  bona  fide  holder,  444. 

presentment  for  payment  before  suing  on,  512. 

DURESS, 

general  rule  as  to,  105. 

common-law  rule  as  to  relaxed,  105. 

facts  showing  should  be  pleaded,  105. 

available  though  some  consideration,  105. 

equity  may  decree  cancellation,  106. 

threat  of  husband  to  commit  suicide  not,  107. 

taking  advantage  of  necessities  of  party  to  a  contract  not,  107. 

what  does  not  constitute,  107. 

coercion  into  performance  of  duty  not,  107. 

of  wife,  when  not  established,  107. 

threat  to  remove  property  not,  107. 

where  procured  from  one  under  illegal  arrest  or  restraint,  108. 

where  paper  given  to  procure  release  from  lawful  imprisonment, 
108. 

person  arrested  for  assault,  where  note  given  in  settlement  of  in- 
jury, 108. 


1002  INDEX. 

[References  are  to  Sections.1 

DURESS — Continued. 

by  abuse  of  legal  process,  109. 

property  attached  to  compel  giving  of  note,  109. 

note  to  secure  property  unlawfully  detained,  109. 

requisition  procured  to  compel  settlement  of  claim,  109. 

threat  of  bankruptcy  proceedings  against  third  person,  110. 

note  in  settlement  by  one  under  arrest  in  civil  suit,  110. 

effect  of  threat  to  sue,  110,  196. 

effect  of  threat  to  lawfully  invoke  legal  process,  110. 

threat  of  judgment  creditor  to  levy  execution,  110. 

may  exist  though  not  actual  threats  of  violence  made.  111. 

threats  of  violence  to  a  third  person  at  a  distance.  111. 

giving  of  paper  Induced  by  fear  of  violence.  111. 

note  by  wife  under  fear  of  husband's  arrest,  112. 

where  person  has  no  means  of  carrying  out  threat  of  prosecution 

or  arrest,  112. 
note  by  sister  under  threat  to  prosecute  brother,  112. 
threatened  criminal  prosecution  and  imprisonment  as  inducing,  112. 
availability  of  as  between  parties,  113. 
note  obtained  by  use  of  military  force,  113. 
note  given  under  may  be  ratified,  113. 
note  obtained  by,  burden  on  plaintiff  to  show  he  is  iona  fide  holder, 

114. 
availability  against  subsequent  parties,  114. 

of  married  woman  may  be  shown  against  bona  fide  holder,  114. 
against  bona  fide  holder,  114. 
of  principal  may  be  shown  by  surety,  114. 
of  maker  cannot  be  shown  by  indorser,  114. 
against  purchaser  after  maturity,  114. 
of  maker  may  be  shown  against  assignee  of  non-negotiable  note, 

114. 
of  principal,  where  surety  signs  with  notice  of,  115. 
availability  against  parties  with  notice,  115. 


E 

ELECTION, 

note  to  secure  payment  of  money  won  on,  void,  n.  288. 
paper  in  consideration  candidate  withdraw,  void,  n.  288. 
to  do  act  discharging  from  liability,  duty  as  to,  342.  . 

ENEMY, 

note  in  aid  of,  293. 

ENGINES, 

payment  of  purchase-price  notes  conditioned  on  acceptance  of,  260. 

EPIDEMIC, 

excuse  for  delay  in  presentment  for  payment,  521. 


INDEX.  1003 

[References  are  to  Sections.2 
EQUITABLE  ASSIGNMENT, 

operation  of  check  as,  581. 

EQUITABLE  LIEN, 

operation  of  check  as,  581. 

EQUITY, 

when  equity  will  relieve  against  mistake  of  law,  n.  17. 

rule  as  to  coverture,  English  decisions,  32. 
United  States  decisions,  33. 

may  decree  cancellation  of  instrument  procured  by  duress,  106. 
ERASURE, 

of  a  signature  or  seal  which  is  accidental,  143. 

of  name  of  released  guarantor,  where  consented  to  or  ratified,  149. 

of  contemporaneous  memorandum  as  to  time  of  payment,  155. 

of  name  of  indorsee  and  inserting  another,  158. 

of  name  of  payee  and  insertion  of  another,  158. 

of  interest  clause  added  without  consent,  170. 

of  condition  or  stipulation,  171. 

of  words  "upon  condition,"  171. 

of  maker's  signature,  172. 

of  words  in  connection  with  signatures,  when  not  material,  173. 

of  names  of  witnesses,  177. 

of  memorandum,  where  material,  179. 

of  prior  indorsement,  180. 

of  indorsement,  where  accidental,  180. 

of  indorsement  by  stranger,  180. 

of  word  "surety"  after  name  of  a  maker,  181. 

or  alteration  of  signature  of  surety,  181. 

of  signature  of  guarantor  below  maker's  and  placing  it  on  back,  181. 

of  indorsement  on  treasury  note,  where  stolen,  398. 

of  corporate  signature,  not  notice  to  purchaser,  481. 

of  parts  of  paper,  when  maker  estopped  to  show,  661. 

of  signature  estops  person  to  show  forgery,  673. 
See  Alteration. 
ESCAPE, 

note  based  on  agreement  to  indemnify  maker  against  void,  n.  288. 
ESCROW, 

rule  as  to  delivery  in,  317. 

See  Collateral  Conditions  and  Agreements;   Delivery. 
ESTATE, 

of  maker,  indorser  made  administrator  of,  demand  necessary,  503. 
demand  necessary  though  indorser  is  administrator  of,  503. 
of  holder,  presentment  for  payment  on  behalf  of,  511. 
of  deceased,  distribution  of  note  to  joint-maker,  discharge,  679. 


1004  INDEX. 

[References  are  to  Sections.'] 
ESTOPPEL, 

by  execution  or  indorsement  in  blank,  22,  23. 

by  negligence  to  set  up  fraud,  28. 

to  set  up  fraud  by  failing  to  read  before  signing,  28. 

married  woman  not  estopped  to  show  coverture  by  word  "widow" 

after   name,    30. 
wife  a  joint  maker  not  estopped  to  show  coverture,  41. 
by  contents  of  note  to  assert  coverture,  59. 

to  set  up  want  of  authority  does  not  arise  from  mere  silence,  74. 
by  ratification,  name  of  surety  forged,  74. 

to  deny  signature  does  not  arise  from  mere  promise  to  pay,  74. 
where  unauthorized   signature   ratified,   74. 
by  delivery  of  note  to  deny  signature,  74. 
of  corporation  to  show  paper  ultra  vires,  85,  86. 
of  maker  to   assert   forgery   of  name   of   payee,   102. 
to    show    failure    of    consideration,    representations    by    maker    to 

purchaser,  240. 

See  Wai\-er  and  Estoppel. 
EVIDENCE, 

want  of  delivery,  burden  of  proof,  20. 

of  misrepresentations  admissible  under  plea  of  non  est  factum,  25. 
woman  signing  with  husband  prima  facie  charged,  32. 
burden  of  proof,  statutory  exception  as  to   coverture,  37. 
on  married  woman  to  show  she  signed  as  surety,  45. 
parol  evidence  not  admissible  to  show  joint  note  intended  to  charge 

wife's  estate,   59. 
burden  of  proof  to  show  contract  of  married  woman  one  authorized 

by   statute   to   make,   59. 
of   infancy   admissible   under   plea   of   nil   debet,    63. 
of  ratification  of  infant's  note  admissible  though  not  averred,  64. 
burden   as   to   value   of   necessaries   where    mental    Incapacity    set 

up,  71. 
to  show  note  binding  where  mental  incapacity  alleged,  71. 
as  to  indorser's  mental  incapacity,  72. 
sufficiency  of  as  to  mental  incapacity  of  surety,  72. 
burden  of  proof  to  show  authority  of  partner  to  sign  firm's  name,  73. 
admission    of    enlarged   photographs  of   signature,   96. 
showing  signature  forged,  96. 

where  duress  shown  plaintiff  must  show  he  is  bona  fide  holder,  114. 
burden  of  proof  to  show  plaintiff  bona  fide  holder  where  fraud  by 

payee  shown,  119. 

in  action  by  indorsee  where  check  obtained  by  fraud,  119. 
as  to  time  alteration  made,  where  apparent  on  face,  136. 
where  alteration  not  apparent  on  face,  136. 
as  to  notice  where  paper  executed  with  unfilled  blanks,  144. 
proof  as  to  consideration  seldom  necessary,  183. 
to    rebut   presumption   as   to    consideration,    184,    185. 
rebutting  recital   "value  received,"   185. 


INDEX.  1005 

[References  are  to  Sections.'] 

EVIDENCE — Continued. 

showing  real  consideration,  to  what  parties  rule  applies,  187. 

admissible  under  an  averment  of  want  of  consideration,  198. 

of  partial  want  of  consideration,  when  not  admissible,  n.  201. 

tending  to  prove  partial  failure  of  consideration,  rule  in  Alabama, 
208. 

of  ownership,  possession  is  prima  facie,   240. 

as  to  amount  paid  by  indorsee  for  paper,  240. 

note  to  suppress  void,  n.  288. 

parol  evidence  not  admissible  to  vary  terms  of  paper,  307. 

explanatory  of   contract  where  bill  or   note   incomplete,   309. 

of  contemporaneous  agreement,  when  admissible,  310. 

of  conditional  as  to  delivery  must  be  reasonably  certain,  312. 

of    condition   affecting   delivery    to    payee,    312,    313. 

burden  of  proof  to  establish  collateral  conditions,  313. 

plaintiff  must  show  he  is  bona  fide  holder  on  proof  of  breach  of 
condition  precedent,  314. 

as  to  being  hona  fide  holder  on  proof  of  delivery  in  escrow,  317. 

as  to  particular  conditions  that  note  void  on  contingency,  320. 

that   partnership   notes    void    if    partnership    dissolved   not    admis- 
sible, 320. 

parol    evidence   that   instrument   payable   on   contingency   not   ad- 
missible,   320. 

void  on  contingency  not  admissible,  320. 

as  to  particular  conditions  that  note  payable  on  contingency,  320. 

parol  evidence  of  executory  contract  as  consideration  for  note,  322. 

burden   of   proof   to   show   condition    as   to   consideration   not   per- 
formed, 322. 

parol  evidence  of  conditions  affecting  consideration,  322. 

of  agreements  affecting  purchase-price  notes,  327. 

of  agreement  not  to  negtotiate  note,  330. 

not  admissible  to  show  different  place  of  payment,  331. 

changing  interest  clause  not  admissible,  332. 

of  agreement   as  to  credit  upon  note  not  admissible,  332. 

not  admissible  to  show  different  amount,  332. 

of  conditions  as  to  mode  or  manner  of  payment,  333,  334,  335. 

of  agreement  that  note  payable  in  labor  not  admissible,  333. 

that  note  to  be  paid  only  out  of  certain  fund  not  admissible,  333. 

of  performance  of  agreement  to  support,  336. 

of  executed  agreement  as  a  defense,  336. 

of  collateral  agreement  to  renew  note  not  admissible,  339. 

varying  time  of  payment  of  demand  note,  339. 

parol  evidence  of  agreements  to  release  from  or  limit  liability,  342. 

parol   evidence   not   admissible   to   show   absolute    acceptance    was 
conditional,  n.  347. 

parol  evidence  not  admissible  to  change  meaning  of  indorsement, 
348. 

to  show  note  executed  as  collateral,  351. 


1006  INDEX. 

[References  are  to  Sections.'] 
EVIDENCE— Confinweti. 

of  parol  agreement  or  condition,  collateral  security,  361. 

burden  of  proof  to  show  bona  fide  holder,  diversion  and  fraudulent 

transfer,   381. 

lost  or  stolen  instruments,  401. 
of  title,  possession  as,  402. 
necessity  of  proving  transfer,  404. 
to  support  plea  that  note  assigned,  405. 
of  circumstances  under  which   indorsement  made,   415. 
to    rebut   plaintiff's    prima   -facie    title   from    possession,    416. 
of  usury,  purchaser  after  maturity,  421. 
not  necessary  to  prove  demand  at  particular  place,  but  matter  of 

defense,  n.  502. 
presentment  for  payment,  proof  of  tender,  n.  502. 
burden  of  proof,  presentment  reasonable  time,   demand  note  and 
demand   note   bearing   interest,   508. 
certificate  of  protest  as,  542,  543. 

of  notary  as  to  deposit  of  notice  of  protest  in  postoffice,  555. 
of  notice  of  dishonor,  bill  specified  by  insolvent  indorser  as  part 

of    indebtedness,    558. 
as  to  bank  deposit  at  time  of  maturity  of  note,  n.  604. 
of  accord  and  satisfaction,  686. 

See  BuEDEx  of  Proof;   Pkesumptions. 

EXAGGERATION, 

does  not  constitute  fraud,  122. 

EXCESS, 

of  set-off  over  plaintiff's  claim,  right  to  judgment  for,  596. 

EXCHANGE, 

of  notes  and  checks  for  accommodation,  bank  purchasing  has  good 

title,    224. 
of    note,    each    good    consideration    for    other,    227. 
of  notes,  want  or  failure  of  consideration  subsequent  to  transfer, 

bona  fide  holder,  252. 

EXCUSES, 

delay   in   presentment  for  acceptance,   person   without   capacity   to 

contract,    501. 
demand  necessary  though  indorser  made  administrator  of  maker's 

estate,  503. 
demand    not    excused    though    note   paid    before    purchase    by    in- 
dorsee, 503. 
for    delay    In    presentment,    epidemic,    521. 
for  payment,  war,  521. 
for  payment,  diligence  after  cause  of  delay  removed  or  ceases, 

521. 
for  payment,  political  condition  of  country,  521  and  note, 
acceptor's    insolveny,    presentment    for    payment,    523. 


INDEX.  1007 

[References  are  to  Sections.'] 
EXCUSES— Continued. 

note  payable  on  demand,  presentment  for  payment,  523. 
reasonable  expectation  that  check  will  be  honored,  want  of  funds, 

586. 
for   delay,    see   Pbesentment   foe    Acceptance;    Presentment   fof. 
Payment. 

EXECUTED, 

agreement  as  a  defense,  distinguished  from  executory,  336. 
See   Collateral   Conditions   and  Agreements. 

EXECUTION, 

procured  by   force   or   fraud,   13. 

of  note,  fraud  in  connection  with,  116. 

non  est  factum,   14. 

where  payee  signs  at  foot  with  maker's  name,  15. 

signing  after  delivery,  16. 

mistakes,  17. 

mistake  of  law  no   defense,  17. 

when  equity  will  relieve  against  mistake  of  law,  n.   17. 

mistake  as  to  amount  of  due  bill  question  for  jury;  n.  17. 

where  note   signed   by   director  of   corporation,  n.   17. 

place  of  execution   not  correctly  recited   no   defense,  18. 

as    to   revenue    stamp,   19.  .  . 

in   blank,  rights  of   parties,   22,   23. 

fraud    in   writing  a  note   over  a  signature,    23. 

instruments  payable  to  fictitious  person,  24. 

misrepresentations  as  to  nature  of  instrument,  25. 

evidence   of  misrepresentations  admissible  under  plea   of  non   est 

factum,  25. 
misrepresentations  as   defense   against   bona  fide  holder,   25,   26. 

to  maker  unable  to  read  English,.  27. 
of  paper,  laches  in  estoppel,  661. 

negligence  of  maker  precludes  defense  of  fraud,  28. 
factors  in  determining  question  of  negligence  in,  28. 
when  surety  precluded    from  setting  up  defense  of   forgery,   28. 
negligence  of  maker  unable  to  read  English,  28. 

in  failing  to  read  before  signing  precludes  defense  of  fraud,  28. 

of  maker  may  preclude  defense  of  fraud,  28. 
of   instruments  on   Sunday,   29. 

of  note  on  Sunday  no  defense  against  bona  fide  assignee  after  ma- 
turity, 421. 
of   instrument  as   an   estoppel,    644. 
recitals  as  to  place  of,   estoppel,  646. 
by  one  as  maker  warrants   capacity  of  payee,  670. 
effect  of  threat  of  judgment  creditor  to  levy,  110. 
wager,  on  collection  of,  note  to  secure  void,  n.  288. 


1008  INDEX. 

[References  are  to  Sections.'] 
EXECUTOR, 

want  of   authority   of   to   give   a   transfer   paper,   78. 

of  payee,   in  action  by  against  sureties  may   show  paper   was   in 

fraud  of  creditors,  125. 

note  given  to  cover  shortage  in  account  as,  consideration,  194. 

right  of  assignee  of  to  sue,  407. 

action  by,   want  of  title,  417. 

notice  to  of  dishonor,  sufficiency  of  address,  555. 

of   indorser,   notice   of   protest   to,    559. 

availability  of  set-off  in  action  by,  620. 

EXECUTORY    AGREEMENTS, 

See  Collateral  Conditions  and  Agreements. 

EXECUTORY  CONTRACT, 

evidence  of  as  consideration  for  note,  322. 

See  Contract;    Discharge. 
EXECUTRIX, 

want  of  authority  to  indorse  note,  78. 

EXTENSION, 

of  time  as  a  consideration,  194. 

for  payment  based  on  usury  does  not  taint  original  note  and 

mortgage,  302. 
•  of  payment,  usury,  305. 
not  waiver  of  forgery,  673. 
demand  notes,  presentment  for  payment,  506. 
waiver  of  presentment  for  payment  by  request  for,  524. 
as  waiver  of  presentment  for  payment,  524. 
as  an  estoppel,  659. 

See  Renewal. 
EYESIGHT, 

of  maker  impaired,  fraud,  120. 


F 
FACTOR, 

concealing  principal,  set-off  against,  618. 

FAILURE    OF    CONSIDERATION, 

See  Consideration. 
FEDERAL   STAUTES. 

right  to  set-off  usury  as  affected  by,  615. 

FEES, 

alteration  by  stranger  of  provision  as  to  attorney's  fees,  142. 

FELONY, 

note  to  secure  acquittal  in  prosecution  for  void,  n.  288. 

FEME   COVERT, 

See  Coverture;    Married  Women. 


INDEX.  1009 

[References  are  to  Sections.'] 
FERTILIZER, 

note  tagged  as  required   by   law,  note   for   void,  n.   291. 

FICTITIOUS   PERSON, 

where   instrument  payable  to,  24. 

FIDUCIARY, 

indorsement  by  to  transfer  right  of  action,  want  of  consideration, 

255. 

FINAL  SETTLEMENT, 

where  due  bill  payable  on,  343. 

FIRE, 

cannot  show  note  payable  only  if  property  destroyed  by,  320. 
destruction   by   of   bank    does    not   excuse    notice    of    dishonor   to 
indorser,  571. 
FIRM, 

See  Partnership. 
"FIXED," 

effect  of  in  note  as  to  time  of  payment,  155. 

FORBEARANCE, 

to  sue  on  bond  as  consideration,  194. 

to  sue  on  unfounded  claim  not  a  good  consideration,  196. 

to  sue  as  consideration  for  surety  signing,  213. 

to  sue,  additional   consideration   for  note  taken   as   collateral   for 

pre-existing  debt,  249. 
to  sue  for  slander,  note  in  consideration  of,  295. 
to  sue,  effect  on  right  of  assignee  of  void  note,  450. 

FORCE, 

in  connection   with   execution  or  delivery,  13. 

"FOR  COLLECTION," 

where   paper   so   indorsed,   348. 

where   note   so   indorsed,   right   conferred,   457. 

FORECLOSE, 

breach  of  condition  not  to,  326. 

FORECLOSURE, 

of  mortgage,  discharge  of  note,   682. 

FOREIGN  BILLS, 

presentment   for  payment,  notice   of  dishonor,   503. 

what  is,   527. 

when   protest   of  necessary,   527. 

FOREIGN  DRAFTS, 

presentment   for    payment,    notice    of    dishonor,    503. 

FORGED  BILL. 

indorser  of,  when  presentation  for  payment  dispensed  with,  522. 

See  Forgery. 
Joyce  Defenses — 64. 


1010  INDEX. 

[References  are  to  Sections.'i 
FORGERY, 

general  rule  as  to,  96. 

of  name  as  surety,  ratification,  estoppel,  74. 

defense  against  bona  fide  holder,  96. 

evidence  to  show,  96. 

question  of  genuineness  of  signature  for  jury,  96. 

comparison  of  genuine  with  disputed  signature,  96. 

admission  of  enlarged  photographs  of  signature  in  evidence,  96. 

of  paper  given  as  consideration  for  note  not  defense  to  action  on  lat- 
ter, 97. 

particular  cases  when  no  defense,  97. 

of  name  of  maker  or  drawer,  98. 

of  school  bonds,  98. 

of  signature  of  officer  of  corporation,  98. 

of  a  bank  check,  loss  falls  on  bank,  99. 

of  an  acceptance,  99. 

where  drawee  obligated  to  know  signature  of  drawer,  99. 

of  bills  of  lading  attached  to  bill  of  exchange,  99. 

payment  of  or  by  forged  paper,  duty  as  to  notice,  100. 

effect  of  failure  to  give  notice  of,  675. 

money  paid  on,  may  recover  from  good-faith  holder,  481. 

payment  of  previous  forgeries  does  not  estop  to  show,  673. 

where  forged  check  certified,  101. 

bank  bound  by  acceptance  of  forged  certification,  642. 

of  name  of  payee,  102. 

where  name  of  payee  forged  and  bank  pays  check,  102. 

when  maker  estopped  to  assert  forgery  of  name  of  payee,  102. 

of  name  of  payee,  defense  against  bona  fide  holder,  102. 

by  agent  of  owner,  103. 

of  name  of  one  of  obligors  cannot  be  set  up  by  surety,  104. 

to  whom  defense  available,  104. 

when  not  available  to  surety  as  defense,  28. 

indorser  cannot  set  up  forgery  of  prior  indorser's  name,  104. 

note  given  in  settlement  of  suit  upon  forged  note,  197. 

forged  draft  as  consideration,  offer  to  return  not  necessary,  211. 

silence  does  not  estop  to  show,  673. 

estopped  to  show  by  erasing,  673. 

estoppel  to  show,  673,  674. 

by  admission  of  signature,  674. 
as  to  checks,  676. 
FRAUD, 

See  Dn-ERSiON  and  Fraudulent  Transfer;  Fraud  and  Fraudulent 
Representations  ;  Misrepresentations. 

FRAUD  AND  FRAUDULENT  REPRESENTATIONS, 
may  be  shown  in  defense,  116. 
rule  as  to  generally,  116. 
execution  or  delivery  procured  by,  13. 
fraudulent  re-issue  of  municipal  bonds,  13.    • 


«| 


INDEX.  1011 

[References  are  to  Sections.'] 
FRAUD  AND  FRAUDULENT  REPRESENTATIONS— Ccwiinue(Z. 

in  connection  with  delivery,  burden  of  proof,  20. 

in  writing  a  note  over  a  signature,  23. 

in  procuring  indorsement,  116. 

a  defense  against  one  not  bona  fide  tiolder,  116. 

contract  procured  by  fraud  or  deceit  can  not  be  enforced,  116. 

misrepresentations  as  to  nature  of  instrument,  25. 

as  to  nature  of  instrument  as  defense  against  bona  fide  holder,  25,  26. 

where  maker  unable  to  read  English,  27. 

on  maker  no  defense  where  negligent,  28. 

of  administrator  in  execution  of  note,  78. 

in  issuance  of  school  bonds,  98. 

inconsistent  with  plea  of  non  est  factum,  116. 

where  set  up  by  party  participating  in,  116. 

defense  to  action  on  renewal  note,  116. 

extent  of  injury  for  which  note  given  falsely  exaggerated,  116. 

what  constitutes  a  misrepresentation  which  is  a  defense,  117. 

as  to  liability  on  note  signed,  117. 

that  accommodation  paper  was  business  paper,  116. 

misrepresentation  no  defense  unless  damage  sustained,  117. 

mere  expression  of  opinion  not  a  defense,  117. 

as  to  legal  effect  of  order  of  arrest  no  defense,  117. 

as  to  bill  of  exchange  being  an  ordinary  note,  117. 

fraudulent  concealment,  118. 

concealment  of  defect  in  article  sold,  118. 

mere  omission  to  state  facts  not  defenses,  117. 

not  available  against  pledgee  without  notice,  119. 

when  person  bona  fide  holder  within  rule  excluding  defense  of,  119. 

against  non-negotiable  paper  in  hands  of  boi).a  fide  holder,  119. 

where  shown  on  part  of  payee  holder  must  show  he  is  bona  fide 
holder,  119. 

against  assignee  of  note,  119. 

against  purchaser  receiving  notice  after  payment  of  part  of  consid- 
eration, 119. 

where  patent  on  face  of  instrument,  119. 

as  against  bona  fide  holders  generally,  119,  120,  121. 

as  against  b07ia  fide  holder,  rules  illustrated,  120. 

in  obtaining  possession  of  coupon  bonds  no  defense  against  bona  fide 
holder,  120. 

quality  of  goods  misrepresented,  120. 

of  surety  upon  maker  no  defense  against  bona  fide  holder,  121. 

of  one  holding  paper  in  trust  no  defense  against  bona  fide  holder, 
121. 

of  partner  toward  firm  no  defense  against  bona  fide  holder,  121. 

of  pledgee  no  defense  against  bona  fide  holder,  121. 

of  corporate  officer  toward  corporation  no  defense  against  bona  fide 
holder,  121. 

of  agent  no  defense  against  bona  fide  holder,  121. 


1013  INDEX. 

[References  are  to  Sections.'] 
FRAUD  AND  FRAUDULENT  REPRESENTATIONS— ConHnMed. 

of  maker  towards  co-maker  no  defense  against  bona  fide  holder,  121. 
of  principal  towards  guarantor  no  defense  against  boria  fide  holder, 

121. 
of  particular  persons,  bona  fide  holders,  121. 
mere  exaggeration  does  not  constitute  fraud,  122, 
false  representations  as  to  consideration,  122. 
what  essential  to  render  false  representation  a  defense,  122. 
as  to  value  and  character  of  property,  122. 
as  to  making  of  improvements,  122. 

where  note  non-negotiable  defense  against  purchaser  for  value,  122. 
as  to  consideration,  bona  fide  holder,  123. 

that  paper  in  fraud  of  creditors  defense  against  indorsee  for  collec- 
tion, 125. 
in  connection  with  certified  check,  bona  fide  holder,  124. 
paper  in  fraud  of  creditors,  125. 

misrepresentations  subsequent  to  transaction  no  defense,  126. 
not  available  against  one  taking  in  payment  of  pre-existing  debt, 

126. 
in  connection  with  procuring  of  indorsement,  126. 

indorsement  no  defense  against  payee  without  notice,  126. 
in  procuring  indorsement  to  renewal  no  defense  to  original,  126. 
as  to  amount,  127. 

in  procuring  signature  of  surety,  128. 

inducing  surety  to  sign  no  defense  against  bona  fide  holder,  129. 
that  note  pledged  without  authority  no  defense,  130. 
transfer  in  fraud  of  owner  no  defense  against  bona  fide  holder,  130. 
fraudulent  transfer  by  partner  no  defense  against  bona  fide  holder, 

131. 
fraud  in  transfer  by  administrator,  132. 

that  made  from  proceeds  of  stolen  property  no  defense  to  note,  133. 
availability  o^  to  maker,  133. 

availability  in  favor  of  parties  other  than  maker,  134. 
no  allegation  or  proof  of  fraud  necessary  to  defense  of  alteration, 

135. 
presumption  of  fraud  created  by  inadequacy  of  consideration,  193. 
fraud  in  procuring  note  good  defense  in  law  or  equity,  198. 
partial  failure  of  consideration,  208. 
as  defense  where  consideration  retained,  210. 

inducing  execution,  necessity  of  offer  to  return  consideration,  211. 
as  to  value  of  property  purchased,  failure  of  consideration,  n.  257. 
concealment  of  facts  to  obtain  indorsement,  pledgee  against  pledgor, 

362. 
when  not  available  against  holder  in  good  faith,  n.  441. 
fraud  in  consideration,  note  under  seal,  bona  fide  holder,  444. 
note  for  conveyance  in  fraud  of  creditors,  456. 
goods  in  possession  of  another  to  defraud  creditors,  discharge  of 

note,  691. 


INDEX.  1013 

[References  are  to  Sections.'] 
FRAUD  AND  FRAUDULENT  REPRESENTATIONS— Cow^inwecZ. 
damages  arising  from  as  a  set-off,  599. 
of  mortgagee  in  concealing  material  facts,  damages  for  as  a  set-off, 

601. 
set-off  of  note  not  allowed  where  fraud  on  plaintiff,  609. 
estoppel  to  assert,  116. 

in  filling  blank,  acceptance  estops  to  show,  641. 
estoppel  to  show  where  note  given  to  aid  in  defrauding  creditors, 

644. 
not  estopped  to  show  though  reason  to  believe  intended  to  use  note 

for  unlawful  purpose,  644. 
new  note  as  an  estoppel  to  show,  649. 
when  representation  no  estoppel  to  show,  654. 
estoppel  to  show  by  retaining  consideration,  662. 
See  Alterations;   Fraud;   Fraud  and  Fraudulent  Representations; 
Misrepresentations. 

FRAUDULENT  TRANSFER, 

See  Diversion  and  Fraudulent  Transfer. 
FUNDS, 

deposit  of,  tender,  presentment,  502. 
want  of,  presentment  of  check,  586. 

See  Check;   Discharge. 
want  of,  see  Presentjjent  for  Acceptance;  Presentment  for  Pay- 
ment. 

FUTURES, 

See  Options. 


G 

GAMBLING, 

contract,  note  given  to  secure  election  bet  void,  n.  288. 

where  consideration  is  money  or  property  won  at,  296,  297,  298. 

as  consideration  for  note,  296,  297,  298. 

transaction,  where  note  based  on,  bona  fide  holder,  464. 

GIFT, 

of  note,  rights  acquired  under,  214. 
of  checks  by  husband  to  wife,  214. 
of  checks,  presented  for  payment  after  death  of  drawer,  215. 

GOODS, 

note  for,  warranty,  failure  of  consideration,  265. 
quality  of  misrepresented,  120. 
sale  of  prohibited  by  law,  note  for  void,  n.  288. 
sold  on  Sunday,  note  for  void,  n.  288. 

sale  of  in  violation  of  law,  bona  fide  holder  of  note  for,  294. 
attachment  of  preventing  happening  of  contingency,  note  payable 
on,  321. 


1014  INDEX. 

IReferences  are  to  Sections.'\ 
GOODS— Continued. 

damages  for  conversion  of  goods  may  be  set  off,  598. 
in  possession  as  cover  to  defraud  creditors,  sale  of,  discharge  of 
note,  691. 

See  Merchandise;  Personal  Property. 
GRACE, 

days  of,  presentment  for  acceptance,  490. 
protest  premature,  509. 

presentment  for  payment  and  notice  of  dishonor  when  pre- 
mature, 509. 
GRAIN, 

options,  note  given  on  void,  n.  288. 

GRANTEE, 

See  Dischabge;  Land;  Vendor. 
GRANTOR, 

See  Discharge;  Land;  Vendor. 

GROSS  NEGLIGENCE, 

may  not  preclude  one  from  being  a  hona  fide  holder,  475. 
See  Negligence. 
GUARANTORS, 

no  distinct  line  of  demarcation  between  sureties,  etc.,  213. 

cannot  set  up  coverture  of  maker,  61. 

alteration  making  liable  as  surety  material,  180. 

name  of  signed  below  maker  erased  and  placed  on  back,  181. 

effect  of  consent  to  or  satisfaction  of  erasure  of  name  of,  149. 

addition  of  name  as,  182. 

released  by  alteration  designating  place  of  payment,  164. 

may  show  want  or  failure  of  consideration,  212. 
failure  of  consideration,  461. 

of  purchase  price  notes,  want  or  failure  of  consideration,  259. 

may  show  defective  warranty,  212. 

fraud  of  principal  towards  no  defense  against  guarantor,  121. 

fraud  of  maker  no  defense  against  payee  without  notice,  134. 

presentment  for  payment,  504. 

agreement  to  pay  if  maker  does  not,  presentment  for  payment,  504. 

waiver  as  indorser,  even  though  guarantor,  of  presentment  for  pay- 
ment, 524. 

not  entitled  to  notice  of  dishonor,  545. 

damages  for  breach  of  warranty  not  available  to  as  a  set-off,  601. 

defenses  available  to,  460,  461. 

usury  in  inception  as  defense  to  action  against,  9. 

discharge  of,  681. 

See  the  particular  defense. 
GUARANTY, 

must  be  a  consideration  to  support,  212. 

bona  fide  holder  in  case  of  contract  of,  460,  461. 

note  executed  as  collateral,  352. 


INDEX.  1015 

[References  are  to  Sections.] 

GUARANTY— Con^iwited. 

rule  as  to  alteration  of  signature  of  maker  applies  to,  172. 
of  collection,  surrender  of  as  consideration,  194. 
writing  of  over  indorsement  releases,  182. 
check,  presentment,  n.  578. 

See   GUARANTOE. 

"GUARDIAN," 

addition  of  to  name  of  payee,  158. 
right  of  set-off  against,  618. 

H 
HEIRS, 

note  in  possession  of,  evidence  of  title,  402. 

"HOLDER," 

alteration  of  word  "order"  to,  161. 

knowledge  of  want  of  funds,  presentment  for  acceptance,  491. 

See  Presentment  for  Acceptance;  the  particular  defenses. 

HOLDER  IN  DUE  COURSE, 

See  Bona  Fide  Holder. 
HOLIDAY, 

time  of  maturity,  509,  510. 

HOMESTEAD  RIGHTS, 

when  purchaser  after  maturity  charged  with  knowledge  of,  423. 

HORSE, 

coverture  as  defense  to  note  given  for,  57. 

for  treasonable  use,  note  for  void,  293. 

note  given  for,  cannot  show  condition  as  to  return,  324. 

HUSBAND, 

assent  of  essential  to  render  wife's  note  valid,  38. 

indorsement  by  wife  for  accommodation  of,  281. 

necessity  and  effect  of  assent  to  indorsement  by  wife,  52. 

statute  requiring  written  assent  of  to  indorsement  by  wife,  52. 

particular  statutes  as  to  assent  of  to  indorsement  by  wife,  53. 

general  rule  as  to  assent  of  to  indorsement  by  wife,  54. 

indorsement  of  wife  without  assent  of,  bona  fide  holder,  54. 

coverture  as  defense  on  note  made  by  wife  to,  40. 

living  apart  from  wife,  coverture  as  a  defense,  42,  43. 

coverture  as  defense  where  wife  elopes  from,  42. 

leaving  state  or  country,  coverture  as  defense  to  wife's  notes,  43. 

right  to  personal  property  of  wife,  51. 

note  by  husband  and  wife,  coverture  no  defense  to  action  against 

husband,  61. 
coverture  where  wife  signs  as  surety  for,  44,  45,  46,  47,  48. 
unauthorized  signing  of  wife's  name  by,  73. 
agreement  to  support  and  live  with  wife  suflBcient  consideration, 

194. 


1016  INDEX. 

[References  are  to  Sections.'] 
HUSBAND— Continued. 

may  transfer  notes  to  wife  by  gift,  214. 

and  wife,  note  of  stranger  given  to  promote  peace  between,  235. 

note  given  for  outlawed  debt  of,  bona  fide  holder,  245. 

right  of  set-off  where  note  to  wife  merged  in  judgment  recovered 

by  husband,  628. 
not  subject  to  set-off  of  debt  of  wife,  action  on  note  to  her,  628. 
claim  for  medical  services  to  not  set-off  against  note  owned  by  wife, 

628. 
set-off  against  notes  transferred  to  wife  by,  628. 
liability  of  not  a  set-off  in  action  by  husband  and  wife  on  note  to 

wife,  628. 
note  to  wife  not  set-off  to  action  against,  628. 
threat  of  to  comrpit  suicide  not  duress,  107. 
note  by  wife  under  fear  of  husband's  arrest,  112. 
note  paid  by  wife's  mortgage,  682. 


I 

ILLEGAL, 

claim,  compromise  of  not  a  good  consideration,  196. 
indorsement  of  condition  to  enforce  which  would  be,  349. 
contract,  note  as  security  for  performance  of,  363. 
consideration,  estoppel,  665. 
consideration,  see  Consideration, 

ILLEGAL  ARREST, 

where  paper  procured  from  one  under,  108. 

ILLEGAL  LEVY, 

note  given  to  secure  release  of,  109. 

ILLEGALITY, 

as  affecting  corporate  want  of  authority,  79. 

in  transfer  vitiates  title,  412. 

of  consideration,  bona  fide  holder,  441. 

forbearance  to  sue,  450. 
though  taint  of  one  may  be  bona  fide  holder,  465. 
of  consideration,  where  transferee  has  notice,  472. 

estoppel,  665. 

ILLICIT  INTERCOURSE, 

as  consideration  for  note  makes  it  void,  300. 

ILLITERACY, 

of  maker  as  a  defense,  27. 

IMMATERIAL, 

alterations  no  defense,  137. 


INDEX.  .  101"^ 

[References  are  to  Sections.'\ 

IMMORAL, 

consideration,  iona  fide  holder,  441. 
consideration,  see  Considekation. 

IMPOSTOR, 

paper  delivered  to,  liability  to  bona  fide  holder  or  drawee,  470. 
estoppel,  644, 

IMPRISONMENT, 

where  lawful  and  note  given  to  procure  release,  108. 
threat  of  as  inducing  giving  of  paper,  112. 

IMPROVEMENTS, 

misrepresentation  as  to  making  of,  122. 

INCUMBRANCES, 

outstanding,  264. 

condition  in  note  as  to  removal  of,  n.  343. 

partial  failure  of  consideration,  208. 

when  damages  for  breach  of  covenant  against  not  a  set-off,  601. 

availability  as  a  set-off  of  money  paid  to  clear  land  of,  603. 

INDIAN, 

no  defense  that  maker  is,  n.  288. 

INDIAN  NATION, 

right  of  occupancy  of  lands  of  as  a  consideration,  194. 

INDIAN  RESERVATION, 

paper  for  lease  of  land  within,  void,  n.  288. 

INDIAN  TRADERS, 

license,  note  for  sale  of  interest  in  where  vendor  can  sell  none, 
void,  n.  288. 

INDORSEE, 

with  notice  of  failure  of  consideration,  n.  240. 

non-performance  of  condition  precedent  defense  under  statute,  311. 

without  notice  of  equities,  note  executed  as  collateral,  352. 

may  cancel  his  indorsement  to  bank  for  collection,  403. 

payment  of  note  by  before  purchase,  demand  not  excused,  503. 

after  maturity,  see  Purchaser  After  Maturity. 

See  Check;  see  the  particular  defense. 

INDORSEE  AFTER  MATURITY, 

See  Purchase  After  Maturitt. 
INDORSEMENT, 

fraud  in  procuring,  116,  126. 

to  renewal  no  defense  to  original,  126. 
where  unauthorized,  73. 

by  married  woman,  common-law  rule  as  to,  51. 
necessity  and  effect  of  husband's  assent  to  by  wife,  52. 
by  wife,  particular  statutes  as  to  husband's  assent,  53. 

where  statute  requires  written  assent  of  husband,  52. 
general  rule  as  to  assent  of  husband  to,  54. 


1018 


INDEX. 


[References  are  to  Sectio7is.1 
INDORSEMENT— Confinwed. 

without  assent  of  husband  as  defense  against  bona  fide  holder,  54. 

effect  of  alteration  of,  180. 

alteration  of  does  not  release  prior  indorsers,  180. 

effect  of  alteration  of  date  of,  152. 

writing  of  guaranty  over  releases,  180. 

where  several,  alteration  to  joint,  180. 

erasure  of  prior  indorsement,  180. 

by  stranger,  180. 
accidental  erasure  of,  180. 

"pay  the  bearer,"  change  of  to  formal  assignment,  180. 
fraud  in  procuring  no  defense  against  payee  without  notice,  126. 
transfer  without,  right  of  assignee,  237. 
valid  consideration  necessary  to  support,  n.  240. 
presumption  as  to  being  for  value  and  proper  purpose,  240. 
holder  without,  want  or  failure  of  consideration,  240. 
for  transfer  merely  or  to  pass  title,  want  of  consideration,  255,  256. 
for  accommodation,  want  of  consideration,  269. 
with  knowledge  that  acceptance  was  for  accommodation,  272. 
for  accommodation  of  acceptor,  condition  as  to  discount,  bona  fide 

holder,  273. 
of  corporation,  ultra  vires,  effect  of,  279. 
for  accommodation,  procured  by  false  representations,  280. 
of  paper  given  as  security  for  money  loaned  for  gambling,  297. 
upon  condition  that  another  be  procured,  315. 

collateral  be  deposited,  323. 
of  note  as  collateral  on  condition,  323. 
on  note  "renewed  for  three  months,"  effect  of,  338, 
if  ambiguous  may  be  explained,  348. 
where  conditional  or  restricted,  348. 
"for  collection,"  348. 
for  "account  of"  payee,  348. 

parol  evidence  not  admissible  to  change  meaning  of,  348. 
of  condition  to  enforce  which  would  be  illegal,  349. 
effect  of  want  of,  358. 
fraudulent  concealment  of   facts  by   pledgor  to  obtain,   action  by 

pledgee,  362. 
of  paper  for  specific  purpose,  principal  and  agent,  370. 
as  collateral  security,  defenses  subsequent  to,  bona  fide  holders,  371. 
in  blank,  transfer  as  collateral,  payment  by  maker  to  pledgor,  375. 
diversion,  bona  fide  holders,  380. 
of  paper  for  discount,  diversion,  391. 
effect  of  where  lost  or  stolen,  n.  394. 
of  note  in  blank,  bona  fide  holder  of  where  stolen,  395. 
in  blank  of  tax  bills,  where  stolen,  397. 
for  collection,  indorsee  may  sue,  403. 
after  maturity  of  note  transferred  before,  404. 
in  blank,  evidence  as  to,  406. 


INDEX. 


1019 


[References  are  to  Sections.'] 

INDORSEMENT — Continued. 

of  note  does  not  constitute  an  agency,  407. 
by  bank  to  cashier,  voidable,  412. 
causa  mortis,  subsequent  revocation,  412. 
evidence  of  circumstances  under  which  made,  415. 
of  bill  before  and  after  maturity,  distinction,  419. 
after  maturity  of  paper  transferred  before,  428. 
transfer  without,  effect  under  negotiable  instrument  law,  456. 
transferee  without,  defense  against,  456. 
may  be  in  blank  under  Nebraska  statute,  460. 
of  guaranty,  rights  under,  460,  461. 
in  blank  before  negotiation,  presumption  as  to,  466. 
after  notice  of  payee's  defense,  478. 

by  corporation,  accommodation  paper,  'bona  fide  holder,  487. 
on  note  before  delivery,  presentment  for  payment,  502.' 
of  waiver  of  protest,  effect  of,  538. 

where  essential  to  render  transfer  effects  note  transferred  by  de- 
livery cannot  be  set  off,  606. 
as  an  estoppel,  645. 

in  blank  to  agent,  fraudulent  transfer,  estoppel,  645. 
aflBrms  genuineness  of  prior  signatures,  645. 
in  blank,  negligently  left  on  check,  estoppel,  645.  , 

recitals  in  as  an  estoppel,  646. 
without  authority,  estoppel  to  show,  670. 
where  unauthorized,  see  Want  of  Authority. 
of  payments,  see  Discharge. 

See  Waiver. 
INDORSER, 

warrants  genuineness  of  prior  indorsement,  104. 
personal  defense  of  does  not  release  maker,  1. 
defense  of  maker  not  available  to,  4. 

valid  consideration  necessary  to  support  liability  of,  n.  240. 
may  show  want  of  consideration  against  his  indorsee,  200. 
may  show  failure  of  consideration  against  his  indorsee,  204. 
indorsement  merely  to  pass  title,  want  of  consideration,  255,  256. 
for  accommodation,  rule  as  to  availability  of  defenses,  6. 
availability  of  defenses,  general  rule,  279,  280,  281. 
cannot  set  up  defense  of  failure  of  consideration  to  maker,  271. 
for  accommodation  check,  failure  of  consideration,  278. 
for  accommodation,  breach  of  warranty,  280. 

occupies  position  of  surety,  281. 
action  by  hona  fide  holder,  accommodation  note  in  payment  of  pre- 
existing debt,  286. 
of  accommodation   paper  taken  as  collateral   to  pre-existing  debt, 
h(ma  fide  holder,  354. 
paper  diverted,  384. 
bankruptcy  of  does  not  release  second  indorser,  6. 
on  corporation  note,  availability  to  of  defense,  7. 


1020  IXDEX, 

[References  are  to  Sections.'] 
INDORSEE— ConfinwefZ. 

in  blank  for  accommodation,  defense  to  action  against,  10. 

defenses  available  where  indorsed  in  blank,  22,  23. 

cannot  show  coverture  of  prior-  indorser,  61. 
maker,  61. 

cannot  set  up  infancy  of  original  drawer,  68. 

intoxication  of  as  defense,  70. 

evidence  as  to  mental  incapacity  of,  72. 

mental  incapacity  of  as  defense,  72. 

cannot  show  note  by  corporation  in  violation  of  statute,  95. 

cannot  set  up  forgery  of  prior  indorser's  name,  104. 

cannot  show  duress  of  maker,  114. 

cannot  set  up  fraud  between  original  parties,  134. 

may  show  alteration  in  name  of  payee,  158. 

released  by  erasure  prior  indorsement,  180. 

may  show  alteration  of  indorsement,  180. 

release  of  by  alteration  does  not  relieve  prior  indorsers,  180. 

writing  of  guaranty  over  indorsement  releases,  180. 

may  show  breach  of  condition  as  to  another  indorsement,  315. 
that  collateral  be  deposited,  323. 

action  against  by  indorsee,  want  of  title  or  interest,  406. 

liability  under  statute  on  altered  note,  480. 

want  of  knowledge  of,  of  agreement  not  to  present  bill  for  accommo- 
dation until  maturity,  491. 

undertakes  that  bill  be  accepted  and  paid,  495. 

release  of,  presentment  for  acceptance,  496. 

when  not  discharged,  presentment  for  acceptance,  497. 

of  overdue  note,  demand  when  necessary,  503. 

made  administrator  of  maker's  estate,  demand  necessary,  503. 

of  forged  bill,  when  presentation  for  payment  dispensed  with,  522. 

of  bill  or  note  given  for  his  accommodation,  dispensing  with  pres- 
entation for  payment,  523. 

waiver  signed  by,  presentment  for  payment,  524. 

entitled  to  notice  of  protest,  527. 

when  protest  not  required,  529. 

conduct  of  as  waiver  of  protest,  537,  538. 

insolvent,  curator  may  waive  protest,  541. 

bound  by  waiver  of  protest  in  body  of  note,  538. 

president  of  bank  note  payable  at,  notice  of  protest,  541. 

discharge  by  want  of  notice  of  dishonor,  544,  545. 

notice  to  of  dishonor,  suflBciency  of  address  and  mailing,  555. 
by  mail  of  dishonor,  sufficiency  of,  558. 

dead,  to  whom  notice  of  protest  should  be  given,  559. 

time  of  giving  notice  of  dishonor  to,  563,  564. 

notice  to  of  dishonor  sent  to  wrong  address,  564. 

time  of  giving  notice  to  prior  indorser  by  successive  indorsers,  567. 

notice  of  dishonor  may  be  sent  to  place  of  business  of,  569. 

when  entitled  to  notice  of  dishonor  generally,  570,  571. 


INDEX. 


1021 


[References  are  to  Sections.] 

mBORSER— Continued. 

for  accommodation,  entitled  to  notice  of  dishonor,  n.  570. 

bound  by  waiver  of  notice  of  dishonor  above  his  signature,  573. 

waiver  by  of  notice  of  dishonor,  573. 

new  consideration  not  necessary  for  waiver  of  notice  of  dishonor 

by,  n.  573. 
presentment  of  check,  585. 

when  indorsee  may  recover  consideration  from,  n.  645. 
admission  by  does  not  estop  maker,  657. 
estoppel  of  by  release,  673. 
See  Accommodation;  Accommodation  Indorser;  Check;  Indorsement; 
KnowxEdge;  Presentment  fob  Payment;  see  the  pabticulab  defense. 

INFANCY, 

as  a  defense  generally,  63. 

principle  on  which  plea  of  founded,  63. 

note  of  infant  voidable  and  not  void,  63. 

defense  against  bona  fide  holder,  63. 

fraudulent  representation  as  to  age  does  not  exclude  defense  of,  63. 

ntoe  given  for  board,  63. 

necessaries,  63. 
no  defense  against  surety  who  pays  note  given  for  necessaries,  63. 
note  given  for  money  which  is  spent  for  necessaries,  63. 
of  payee  transferring  non-negotiable  note,  63. 
evidence  of  admissible  under  plea  of  nil  debet,  63. 
evidence    of    ratification    of    infant's    note   admissible   though    not 

averred,  64. 
effect  of  ratification,  64. 

what  constitutes  a  rati^cation  by  infant,  64. 
ratification  after  filing  plea  of,  64. 
note  given  for  support  of  bastard  child,  65. 

in  satisfaction  of  tort,  66. 
where  infant  accepts  bill  of  exchange,  67. 
where  bill  of  exchange  given  for  necessaries,  67. 
of  drawer  not  available  to  indorser,  68. 
of  one  partner  not  available  to  others,  68. 
of  payee  not  available  to  maker  against  indorsee,  68. 
of  one  of  joint  and  several  makers  no  defense  for  others,  68. 
of  drawers  of  bill  of  exchange  not  available  to  acceptor,  68. 
defense  of  a  personal  privilege,  68. 
who  may  urge,  68. 

INFANTS, 

See  Infancy. 
"IN  GOLD," 

alteration  by  inserting,  167. 

"IN  GOLD  COIN," 

alteration  by  inserting,  167. 


1022  IXDEX. 

[References  are  to  Sections.'] 
INJUNCTION, 

will  not  lie  to  restrain  collection  of  note  by  hona  fide  holder,  119. 
not  bar  to  action  on  note,  663. 

INJURY, 

by  laches  in  presentment  for  acceptance,  498. 

damage  or  loss,  necessity  of  to  pledgor  from  non-presentment,  holder 

of  note  as  collateral,  503. 
or  loss,  necessity  of  where  want  of  demand  on  demand  notes,  506. 
from  laches  in  presenting  draft,  511. 
to  drawer  from  laches  in  presentment  of  check,  582. 


INK, 


retracing  pencil  writing  with  not  material  alteration,  137 
retouching  with  of    signature  not  material  alteration,  173. 


INLAND  BILL, 

presentment  for  acceptance  of,  or  of  order,  498. 

payment,  notice  of  dishonor,  503. 
where  draft  considered  as,  or  as  banker's  check,  laches  in  present- 
ment, 511. 
necessity  of  protest,  528. 

See  Presentment  fob  Payment. 

INNOCENT  HOLDER, 

See  Bona  Fide  Holder. 
INSANITY, 

See  Mental  Incapacity  and  Insanity. 
INSOLVENCY, 

notes  of  insolvent  indorsed  at  maturity,  presentment  for  payment, 

503. 
of  maker  no  excuse  for  non-presentment,  demand  notes,  506. 

during  delay  in  presentment  for  payment  of  check,  511. 
of  bank,  presentment  for  payment,  518. 

of  corporation  maker  of  note,  presentment  for  payment,  when  dis- 
pensed with,  523. 
of  acceptor,  excuses  for  presentment  for  payment,  523. 
when  dispenses  with  presentment  for  payment,  523, 
of  maker,  indorser's  knowledge  of,  presentment  for  payment,  524. 

does  not  excuse  failure  to  give  notice  of  dishonor,  n.  570. 
of  drawee  or  acceptor  does  not  excuse  failure  to  give  notice  of  dis- 
honor, n.  570. 
of  first  drawee  of  check,  second  presentment,  discharge  of  parties, 

n.  578. 
of  drawee,  presentment  of  check,  laches,  583. 
See  Bankrupt;    Bankruptcy;    Insolvency;    Insolvent  Bank;    Insol-vent 

Laws. 
INSOLVENT, 

presentment  to  for  acceptance  note,  499. 
indorser,  curator  of  may  waive  protest,  541. 
notice  of  dishonor  to,  562. 


INDEX.  1023 

[References  are  to  Sections.'] 

INSOLVENT— Continued. 

indorser  specifying  bill  as  part  of  indebtedness,  evidence  of  notice 

of  dishonor,  558. 
exchange  of  note,  discharge,  684. 
'     maker,  dividends  out  of  assets,  indorser  still  liable,  702. 
See  Bankrupt;    Bankruptcy;    Insolvency;    Insolvent  Bank;    Insol\-ent 

Laws;  Set-off. 
INSOLVENT  BANK, 

set-off  against  of  deposits  in  action  on  note  to,  604. 

INSOLVENT,  LAWS, 

consideration  of  note  goods  sold  in  violation  of,  l)ona  fide  holder,  120. 

INSTALMENT  NOTE, 

when  note  so  construed,  343. 

legal  tender  of  amount  of,  discharge,  694. 

INSURANCE, 

policy,  note  given  to  general  agent  of  company,  want  of  considera- 
tion, 230. 
agency  business,  note  for,  failure  of  consideration,  266. 
premiums,  premiums  given  for  rebating  of  void,  n.  288. 

note  for  where  company  not  complied  with  state  requirements 
void,  n.  288. 
collateral  agreement  to  furnish  policy  of,  323. 
damages  for  failure  of  mortgagee  to  procure  not  a  set-off,  600. 

INSURANCE  PREMIUMS,  ■ 

coverture  as  defense  on  note  given  for,  39. 
non-compliance  with  statute  as  to  notes  taken  for,  79. 
condition  affecting  note  for,  313. 

INTENTION, 

to  charge  separate  estate  as  affecting  defense  of  coverture,  59. 
in  making  alteration  does  not  render  it  material,  137. 
to  divert  paper  no  defense,  379. 

INTEREST, 

payment  of  as  satisfaction  of  alteration,  150. 

alteration  in  clause  as  to,  168. 

alteration  as  to  rate  of,  169. 

inserting  legal  rate  not  material  alteration,  170. 

addition  of  interest  clause  where  none,  170. 

rate  of  stated,  cannot  show  none  to  be  paid,  332. 

in  paper,  transfer  of  after  suit  commenced,  410. 

note  payable  on  default  in  payment  of,  purchase  after  maturity, 

424. 
overdue,  effect  of  payment  of,  n.  447. 

default  in  payment  of,  paper  overdue,  purchaser  in  good  faith,  468. 
when  tender  of  payment  exonerates  from,  n.  502. 
on  note,  continuing  security,  presentment  for  payment,  reasonable 

time,  506. 


1024  INDEX. 

[References  are  to  Sections.^ 
INTEREST— Continued. 

certificate  of  deposit  with  no  interest  after  maturity,  presentment 
for  payment,  506. 
.    on  notes  payable  at  sight  or  on  demand,  presentment  for  payment, 
507. 
bearing  demand  note  and  demand  note,  distinctions  abrogated,  pre- 
sentment, 508. 
waiver  of  presentment  for  payment  by  paying,  525. 
where  usurious,  rule  as  to  recoupment  of,  614. 
recitals  as  to  as  an  estoppel,  646. 
indorsements  of  payment  of,  discharge,  695. 

authority  to  collect,  does  not  authorize  collection  of  principal,  698. 
where  usurious,  see  UsuRYy, 
want  of,  402-418. 

See  Want  of  Title  ob  Interest. 

INTEREST  CLAUSE, 

alteration  of,  168. 

addition  of  words  "with  interest,"  168. 

effect  of  adding  words  "after  maturity,"  168. 

alteration  in  by  stranger  no  defense,  168. 

altering  "after  maturity"  to  "after  date,"  168. 

alteration   by   changing   from   simple   interest  to  annual   or   semi- 
annual, 168. 

striking  out  words  "after  maturity"  in,  168. 

alteration  in  to  prejudice  of  party  making,  169. 

alteration  in  rate,  169. 

memorandum  on  back  reducing  rate  not  material,  169. 

alteration  in  rate  with  consent  of  party,  169. 

where  added  and  subsequently  erased,  170. 

addition  of,  where  none,  170. 

evidence  changing  rate  not  admissible,  332. 
See  Interest. 
INTERMEDIATE  HOLDER, 

payment  to,  bona  fide  holder,  699. 

See   PARTICULAR  DEFENSES   AND  PARTIES. 

INTOXICATION, 

what  essential  to  render  intoxication  a  defense,  69. 

no  defense  against  bona  fide  holder,  69. 

of  drawer,  69. 

where  note  subsequently  ratified,  69. 

of  maker,  69. 

of  indorser,  70. 

INVENTORY, 

damages  arising  from  misstatement  in  as  set-off  to  note  for  part- 
nership interest,  599. 


INDEX.  1025 

^References  are  to  Sections.'] 

J 
JOINT  AND  SEVERAL  MAKERS, 

availability  of  defenses  in  actions  against,  3. 
one  cannot  show  he  was  surety  merely,  3. 

JOINT  AND  SEVERAL  NOTE, 

infancy  of  one  maker  no  defense  for  others,  68. 

alteration  into  joint  one,  157. 

alteration  of  name  of  a  maker,  172. 

failure  of  consideration,  216. 

defenses  against  bona  fide  holder,  466. 

right  of  set-off  against,  629,  633. 

may  be  set  off  when,  633. 

notes,  mortgage,  discharge  of,  682. 

JOINT  CREDITORS, 

See  Set-Off,  Recoxjpment  and  Counterclaim. 

JOINT  DEBTORS, 

presentment  to  for  payment,  520. 

See  Set-Off,  Recoupment  and  Counterclaim. 
discharge  of,  679. 

JOINT  DEFENDANTS, 

one  cannot  avail  himself  of  defense  peculiar  to  co-defendant,  1. 

JOINT  INDORSEMENT, 

not  set-off  to  action  by  individual,  630. 

JOINT  MAKERS, 

personal  defense  of  one  not  available  to  other,  1. 

availability  of  defenses  in  actions  against,  3. 

when  one  may  show  he  signed  as  surety,  3. 

coverture  as  defense  where  wife  a  joint  maker,  41. 

want  of  consideration  to  one  no  defense,  216. 

extension  of  time  to  one  does  not  discharge  others,  340. 

notice  of  dishonor  to,  561. 

pro  rata  set-off  of  usury  against,  614. 

set-off  in  favor  of  one  not  available  to  both,  629. 

discharge,  679. 

JOINT  NOTE, 

alteration  of  into  joint  and  several  note,  157. 

presumption  as  to  consideration,  216. 

of  husband  and  wife,  given  for  outlawed  debt  of  husband,  bo??a  fide 

holder,  245. 
when  not  available  as  a  set-off,  608. 

JOINT  OWNERS, 

indorsers  of  note  for  antecedent  debt  to  enable  it  to  be  discounted, 
liable  as,  without  demand,  503. 

Joyce  Defense^s — 65. 


1026  INDEX. 

{References  are  to  Sections."] 
JOINT  PAYEES, 

defenses  against  indorsee  of,  466. 

debt  of  one  not  set  off  against  unless  by  agreement,  629. 

JOINT  PROMISOR, 

payment  by,  699. 

JUDGMENT, 

for  breach  of  warranty  reply  to  defense  setting  up,  261. 

against  garnishee  in  attachment  proceeding  against  payee,  action  by 
assignee,  261. 

collateral  condition  as  to  discharge  of,  not  performed,  325. 

right  of  maker  of  note  as  to  rendering  of,  415. 

for  excess  of  set-off  over  demand  of  plaintiff,  596. 

when  error  to  render  judgment  for  excess  of  set-off  action  on  one  of 
several  notes,  603. 

set-off  of  against  depositor  in  action  to  recover  bank  deposit,  605. 

for  usurious  interest  may  be  set  off,  615. 

collection  of  may  be  restrained  to  allow  set-off,  617. 

recovered  by  husband,  not  to  wife  merged  in,  right  of  set-off,  628. 

note  given  to  procure  satisfaction  of,  estoppel,  648. 

surrender  of  notes  for  rent,  discharge  of  notes,  695. 
See  Discharge. 
JUDGMENT  CREDITOR, 

threat  of  to  levy  execution,  110. 

JUDICIAL    SALE, 

note  on  condition  that  payee  does  not  bid  at,  void,  n.  288. 

"JUNIOR," 

addition  of  to  name  of  payee,  158. 

JURY, 

mistake  in  amount  of  due  bill  question  for,  n.  17. 

negligence  in  signing  instrument  question  for,  28. 

question  for,  whether  act  of  partner  within  scope  of  power,  89. 

question  of  genuineness  of  signature  for,  96. 

whether  alteration  material  not  a  question  for,  135. 

when  question  for  as  to  who  made  an  alteration,  142. 


K 

KNOWLEDGE, 

by  assignee  of  notes  that  they  are  overdue,  effect  of,  239. 

of  l)ona  fide  holder,  accommodation  paper,  270,  271. 

of  indorser  that  acceptance  was  for  accommodation,  272. 

of  holder,  accommodation  acceptance,  274. 

of  use  of  note  for  unlawful  purpose  does  not  invalidate,  n.  288. 

of  illegality  of  consideration,  289. 

of  statutory  defense  of  usury  precludes  recovery,  303. 

of  holder  of  mortgage  note  of  provisions  of  mortgagee,  367. 


INDEX. 


1027 


[References  are  to  Sections.'] 

KNOWLEDGE — Continued. 

that  paper  diverted,  person  not  bona  fide  holder,  380. 

of  infirmity  subsequent  to  transfer  to  bona  fide  holder,  442. 

as  affecting  one  claiming  to  be  bona  fide  holder,  472,  473. 

from  matters  apparent  from  paper  itself,  474. 

of  purchaser  of  married  woman's  note,  482. 

indorser's  want  of  as  to  agreement  not  to  present  bill  indorsed  for 

accomi^odation  until  maturity,  491. 
of  holder,  want  of  funds,  presentment  for  acceptance,  491. 
of  indorser  of  maker's  insolvency,  presentment  for  payment,  524. 
of  material  facts  and  laches  as  factor  in  waiver  of  presentment  for 

payment,  524,  525. 
of  dishonor  not  notice,  552. 

of  want  or  failure  of  consideration,  estoppel,  669. 
as  affecting  surety's  release  or  discharge,  680. 
of  vendor,  of  vendee's  agreement  with  bank  as  affecting  discharge 

of  note,  690. 
Of  maker,  of  ownership  as  affecting  payment,  699. 
,  See  Notice. 


L 

LABOR, 

breach  of  agreement  to  perform,  failure  of  consideration,  329. 
parol  evidence  that  note  payable  in,  not  admissible,  333. 
performed,  as  discharge  of  note,  693. 

LACHES, 

Injury  by  delay  in  presentment  for  acceptance,  498. 

injury  from  in  presenting  draft,  511. 

knowledge  of  indorser  of,  waiver,  presentment  for  payment,  524,  525. 

in  presentment  for  payment,  check  lost  and  duplicate  check  given, 

waiver,  525. 
in  presentment  of  check,  loss  or  injury  to  drawer,  582. 
insolvency  or  bankruptcy  of  drawee  before  presentment  of  check, 

583. 
as  affecting  right  to  set  off  note,  610. 
of  stockholders  of  corporation  as  an  estoppel,  660. 
as  an  estoppel,  661. 
in  presentment,  discharge,  679. 
See  Diligence;   Notice  of  Dishonor;   Presentment  fob  Acceptance; 
Presentment  for  Payment;    Protest;    Waiver. 
LADING, 

bill  of,  want  of  title  or  interest,  414. 

LAND, 

purchase  price  notes  for,  want  of  consideration  as  defense,  boiia  fide 

holder,  260. 
breach  of  warranty  as  defense  to  purchase-price  note  for,  264. 


1028  INDEX. 

[References  are  to  Sections.'\ 

LAND — Continued. 

note  for,  defect  of  title  not  entire,  266. 

deed  from  vendee  to  vendor,  discharge  of  purchase-price  notes,  690. 

conveyance  of,  discharge  of  note,  690. 

LAW, 

mistake  of  no  defense,  17. 

when  equity  will  relieve  against  mistake  of,  n.  17. 

LAW  MERCHANT, 

where  guarantors  not  bound  by,  right  as  to  defenses,  212. 

note  not  governed  by  may  be  subject  to  partial  failure  of  considera- 
tion under  statute,  217. 

note  payable  to  bank  governed  by  under  statute,  defenses,  219. 

bill  or  note  negotiable  by,  holder  with  notice  of  want  of  considera- 
tion, 233. 

when  plea  of  want  or  failure  of  consideration  insufficient  under, 
n.  238. 

note  not  governed  by,  where  maker  sells  for  less  than  face  value, 
240. 

receiving  note  for  precedent  debt  is  receiving  it  for  value  within, 
n.  241. 

paper  as  collateral  for  pre-existing  debt,  one  taking  receives  no 
"value"  within  meaning  of,  246. 

modified  by  Nebraska  statute  as  to  what  is  negotiable  instrument, 
460. 

protest  not  necessary  by,  528. 

not  changed  by  Kentucky  statute  as  to  notice  of  dishonor,  549. 

sale  of  note  not  covered  by,  may  show  want  of  consideration,  664. 

LAWYER, 

services  of  as  consideration,  when  failure  to  render  no  defense,  329. 

LEASE, 

fraud,  retention  of  consideration,  210. 
to  be  made  of  building,  condition  as  to  affecting  note,  313. 
and  note  may  be  construed  together,  310. 

seal  on  does  not  prevent  showing  failure  of  consideration  for  note, 
327. 

LEGACY, 

action  on  note  given  for  advancement  of,  231. 

LEGAL  EFFECT, 

of  order  of  arrest,  misrepresentation  as  to  not  a  defense,  117. 

LEGAL  PROCESS, 

paper  procured  by  abuse  of,  109. 
effect  of  threat  to  lawfully  invoke,  110. 

LEGISLATURE, 

note  to  in  divorce  legislation  valid,  n.  288. 


INDEX.  1029 

[References  are  to  Sections.'\ 

LETTER, 

promise  by  to  accept  bill  to  be  drawn,  necessity  of  demand,  n.  491. 

bill  sent  in  letter  before  due,  presentment,  498. 

promise  by  to  pay  as  waiver  of  preseHtment  for  payment,  525. 

as  waiver  of  protest,  540. 

as  notice  of  dishonor,  552. 

LETTER  BOX,    ^ 

on  street,  deposit  in  of  notice  of  protest  a  mailing,  556. 

LETTER  CARRIER, 

delivery  to  of  notice  of  dishonor  a  mailing,  556. 

LEVY, 

where  illegal  and  note  given  to  obtain  release  of,  109, 

LEX  FORI, 

controls  pleas  of  want  of  consideration,  254. 

LEX  LOCI  CONTRACTUS, 

governs  vote  taken  as  collateral,  247. 

LIABILITY, 

collateral  agreement  to  release  from  or  limit,  342. 

LICENSE, 

liquors  sold  without,  note  for  void,  n.  288. 

to  sell  liquor,  note  for  valid,  n.  288. 

though  prerequisite  for  loaning  business  and  not  obtained,  note  for 
loan  enforceable,  291. 
LIEN, 

note  for  money  loaned  to  release  lien,  coverture,  57. 

note  given  to  secure  release  of,  consideration,  194. 

of  prior  indorsee  holding  note  as  collateral,  267. 

operation  of  check  as,  580. 

See  Vendor's  Lien. 
LIMITATIONS, 

statute  of,  waiver,  677. 

See  Statute  of  Limitations. 
LIQUOR, 

license,  note  for  valid,  n.  288. 

sold  contrary  to  statute,  note  for  void,  n.  288. 

LIQUOR  TAX, 

loan  by  county  treasurer  for — note  for  loan  valid,  n.  288. 

LOAN, 

of  money  for  gambling,  note  for,  statute,  297. 

LOAN  AND  TRUST  CORPORATION, 

not  included  in  note  payable  at  any  bank,  517. 

LODGING. 

furnished,  counterclaim  to  note,  693. 


1030  INDEX. 

[References  are  to  Sections.} 
LOSS, 

or  injury  to  drawer  from  laches  in  presentment  of  check,  582. 
of  paper,  see  Lost  or  Stolen  Instruments;  Injuey. 

LOST  INSTRUMENTS, 

See  Lost  or  Stolen  Instruments. 

LOST  OR  STOLEN  INSTRUMENTS, 

good  defense  where  want  of  delivery,  394. 

Indorsements  in  blank,  effect  where  lost  or  stolen,  n.  394. 

bonds  payable  to  bearer,  394. 

that  instrument  lost  or  stolen  no  defense  against  bona  fide  holder, 

394. 
general  rules  and  principles,  394. 
in  case  of  assigned  note,  n.  394. 

certified  checks  indorsed  in  blank,  bona  fide  holder,  395. 
coupon  bonds  in  hands  of  bona  fide  holder,  395. 
note  indorsed  in  blank  stolen,  bona  fide  holder,  395. 
where  loss  advertised,  bona  fide  holder,  '395. 
application  of  general  rules  and  principles,  395. 
statutory  provision  as  to  holder  in  due  course  construed,  396. 
non-negotiable  paper,  397, 
tax  bills,  397. 
stock  certificate,  397. 
bank  and  treasury  notes,  398. 

city  or  county  certificates,  stolen  after  cancellation,  399. 
action  under  statute  by  owner  of,  400. 
burden  of  proof  to  show  bona  fide  holder,  401. 
bonds  stolen  before  maturity  of  coupons  and  sold  after  maturity, 

426. 
acceptance  of  lost  check,  not  bad  faith,  465. 

LOTTERY   LAW, 

note  in  compromise  of  suit  by  scire  facias  to  condemn  land  under, 
void,  n.  288. 

LOVE   AND  AFFECTION, 

as  consideration  for  note,  214. 

LUMBER, 

coverture  as  defense  to  note  given  for,  57. 


M 

MACHINE, 

breach  of  subsequent  promise  to  repair  not  available  as  set-off,  596. 

MACHINERY, 

breach  of  warranty,  failure  of  consideration,  265. 


INDEX.  1^<^1 

[References  are  to  Sections.} 

MAIL, 

excuses  for  delay  in,  presentment  for  acceptance,  501. 

sending  note  by  for  collection,  required  diligence,  presentment  for 

payment,  522. 
notice  of  dishonor  sent  by,  553,  554. 

sufficiency  of  address  and  mailing  of  notice  of  dishonor,  555. 
what  is  included  in  term  "mailing,"  notice  and  dishonor,  556. 
usage  as  affecting  giving  of  notice  of  protested  by,  557. 
mailing   notice   of    dishonor,   instances   of   when   sufficient   and    in- 
sufficient, 558. 
notice  of  dishonor  sent  by — parties  resident  in  same  town,  565. 
notice  of  dishonor  sent  by,  parties  resident  in  different  places,  566. 
cessation  of  as  excuse  for  not  giving  notice  of  dishonor,  572. 
See  Presentment  foe  Acceptance. 
MAILING, 

See  Mail. 

MAKER, 

See  the  particular  defense. 
MANAGING  OFFICER, 

of  corporation,  want  of  authority  of,  81. 

MARGINAL  FIGURES, 

as  to  amount,  alteration  in,  166. 

MARKET  OVERT, 

sale  in  gives  no  better  title  than  seller  had,  394. 

MARRIAGE, 

of  parties  to  note,  discharge,  679. 

MARRIED  WOMAN, 

purchase  of  property  valid  consideration  for  note  of,  194. 

purchase  of  note  of,  notice,  482. 

estoppel  by  indorsement  in  blank,  645. 

recital  in  note  of  that  for  benefit  of  separate  estate  estoppel,  646. 

mortgage  in  payment  of  husband's  note,  682. 

payment  of  note,  699. 

See  Cov-erture;   Duress. 
MATURITY, 

presentment  for  acceptance  to  fix  maturity,  490. 

voluntary  taking  up  note  at,  presentment  for  payment,  503. 

note  overdue,  indorser,   demand  when  necessary,   503. 

agreement  to  indorse  overdue  note,  demand,  liability,  503. 

presentment  for  payment  of  certificate  of  deposit  with  no  interest 
after  maturity,  506. 

time  of,  Sunday  or  holiday,  Saturday,  509,  510. 

purchaser  after,  discharge,  maker's  defense,  679. 

overdue  notes,  mortgage  security,  682. 
See  Dlscharge. 

of  sight  draft  secretary,  see  Presentment  for  Acceptance. 

of  bill,  see  Presentment  for  Acceptance. 


1032  INDEX, 

[References  are  to  Sections.'^ 

MEDICAL  SERVICES, 

claim  for  to  husband  not  set  off  to  note  owned  by  wife,  628. 

MEDIUM, 

of  payment,  alteration  in,  167. 

MEMORANDA, 

addition  or  erasure  of,  179. 

MENTAL  INCAPACITY  AND  INSANITY, 

admissibility  of  evidence  to  show  note  binding,  71. 

of  maker,  71. 

where  note  given  for  necessaries,  71. 

hona  fide  holder  subject  of  defense  of,  71. 

evidence  as  to  mental  incapacity  of  indorser,  72. 

when  undue  influence  no  defense,  72. 

of  indorser  or  surety,  72. 

maker  may  show  insanity  of  payee  in  action  by  indorsee,  72. 

of  surety,  sufficiency  of  evidence  as  to,  72. 

to  indorsement  of  certificate  of  deposit,  72. 

as  a  defense  generally,  71. 

not  estopped  to  show,  670. 

MERCHANDISE, 

note  in  consideration  not  to  sell  at  certain  place,  326. 
transfer  or  delivery  of  as  discharge  of  note,  691. 

MERGER, 

in  judgment,  discharge,  defenses,  bar  to  action,  679. 

MILITARY  FORCE, 

note  procured  by  use  of,  113. 

MISCONDUCT, 

of  payee  as  failure  of  consideration,  n.  257. 

MISREPRESENTATION, 
when  a  defense,  116, 

what  essential  to  rendering  misrepresentation  a  defense,  122. 
no  defense  unless  damage  sustained,  117. 
as  to  nature  of  instrument,  25. 

as  defense  against  hona  fide  holder,  25,  26. 
as  to  legal  effect  of  instrument  no  defense,  117. 
to  maker  unable  to  read  English,  27. 
as  to  capacity  does  not  prevent  defense  of  coverture,  30, 
as  to  age  does  not  exclude  defense  of  infancy,  63. 
as  to  liability  on  note  signed  no  defense,  117. 
that  bill  of  exchange  an  ordinary  note,  117. 
mere  expression  of  opinion  not  a  defense,  117. 
as  to  signature  on  note,  120. 
as  to  quality  of  goods  sold,  120. 

to  maker  as  to   character  of  paper  as   defense  against  'bona  fide 
holder,  120. 


INDEX.  1033 

[References  are  to  Sections.'] 
MISREPRESENTATION— ConHnwed. 

as  to  value  and  character  of  property,  122. 

mere  exaggeration  not  fraud,  122. 

as  to  making  of  improvements,  122. 

false  representations  as  to  consideration,  122. 

subsequent  to  transaction  no  defense,  126. 

as  to  amount  of  note,  127. 

inducing  siJrety  to  affix  his  signature,  128. 

as  to  value  of  property  purchased,  failure  of  consideration,  n.  257. 

in  procuring  accommodation  paper,  bona  fide  holder,  271. 

as  to  land,  when  damages  for  not  a  set-off,  601. 

See  Fraud  and  Fraudulent  Representations. 
MISTAKE, 

of  law  no  defense,  17. 

in  connection  with  execution,  17. 

of  law,  when  equity  will  relieve,  n.  17. 

question  for  jury  in  action  on  due  bill,  n.  17. 

in  adjustment  of  account  for  which  note  given,  bona  fide  holder, 
120. 

right  of  party  to  make  alteration  to  correct  mistake,  137. 

where  alterations  made  by,  143. 

of  bank  cashier  in  cancelling  note,  143. 

in  name  of  payee,  alteration  to  correct,  159. 

in  omitting  name  of  corporation,  insertion  to  correct,  175. 

in  omitting  name  of  witness,  subsequent  addition  of,  177. 

in  erasing  indorsement,  180.  i 

in  signing  as  surety,  alteration  to  correct,  181. 

against  bona  fide  holder  of  note  under  seal,  444. 

in  check,  recovery  by  drawer,  n.  578. 

damages  arising  from  as  a  set-off,  599. 

MONEY, 

coverture  as  defense  to  note  given  for,  30. 

loaned,  note  given  for,  coverture,  57. 

borrowed,  coverture  as  defense  to  note  given  for,  58. 

loaned  to  corporation,  note  given  for,  86. 

paid  to  clear  land  of  incumbrance,  availability  of  as  set-off,  603. 

payment  valid  though  not  made  in,  702. 

"MONEY  LOANED," 

effect  of  such  statement  in  note,  205. 

MONOPOLY, 

note  creating,  void,  n.  288. 

MORAL  OBLIGATION, 

to  pay  pre-existing  debt  a  good  consideration,  n.  241. 

MORTGAGE, 

money  loaned  to  pay  off,  coverture  as  defense  to  note  for,  57. 
execution  of  estoppel  to  deny  execution  of  notes,  74. 


1034 


INDEX. 


[References  are  to  Sections.l 
MORTGAGE — Continued. 

effect  of  alteration  in  where  given  to  secure  note,  135, 

to  secure  usurious  note  affected  by  usury,  302. 

when  mortgage  notes  will  control,  310. 

note,  cannot  show  payable  only  on  condition  property  destroyed  by 
fire,  320. 

and  note  in   connection,   collateral   agreement  as  to   collection   of, 
n.  342. 

note  secured  by,  mortgagee  against  maker,  surety,  364. 
bona  fide  holder,  pledgee,  365,  366,  367. 

and  note,  transferee  of,  payment  or  collateral  security  for  pre-exist- 
ing debt,  368. 

notes,  all  maturing  on  failure  to  pay  one,  purchaser  after  maturity, 
423. 

action  by  joint  holders  of,  note  of  one  not  a  set-off,  629. 

recitals  in  as  an  estoppel,  646. 

when  recitals  in  do  not  estop  wife,  646. 

given  to  secure  note,  representations  as  to  priority,  estoppel,  653. 

estoppel  by  permitting  sacrifice  of  property  mortgaged,  659. 

payment  of  debt.secured,  discharge  of  guarantor,  681. 

of  married  woman  in  payment  of  husband's  note,  682. 

as  payment,  682. 
See  Collateral   Security;    Mortgaged   Property;    Mortgagee;    Mortgage 
Note;  Mortgage  Sale;  Mortgage  Security;  Mortgagor. 

MORTGAGED  PROPERTY, 

condition  not  to  take  possession  of  a  purchase,  326. 
See    Collateral    Security;    Mortgage;    Mortgagee;    Mortgage   Note; 
Mortgage  Sale;  Mortgage  Security;  Mortgagor. 

MORTGAGEE, 

damages  for  negligence  of  in  procuring  insurance  not  a  set-off,  600. 
damages  for  fraud  of  in  concealing  material  facts  as  a  set-off,  601. 
discharge  of  note,  mortgage  security,  682. 
See  Mortgage;   Mortgaged  Property;    Mortgage  Note;    Mortgage  Sale; 
Mortgage  Security;  Mortgagor. 
MORTGAGE   NOTE, 

when  mortgage  controlled  by,  310. 

evidence  of  contemporaneous  agreement  extending  time  of  payment, 
339. 
See  Collateral  Security;  Mortgage;  Mortgaged  Property;  Mortgagee: 
Mortgage  Sale;  Mortgage  Security;  Mortgagor, 

MORTGAGE  SALE, 

discharge  of  note,  682. 
See  Collateral  Security;  Mortgage;  Mortgaged  Property;  Mortgagee; 
Mortgage  Note;  Mortgage  Security;  Mortgagor. 


IXDEX.  1035 

[References  are  to  Sections."] 
MORTGAGE  SECURITY, 

discharge  of  note,  682. 
See  Collateral  Security;  Mortgage;  Mortgaged  Property;  Moetgagee; 
Mortgage  Note;  Mortgage  Sale;  Mortgagor. 
MORTGAGOR. 

discharge  ©f  note,  mortgage  security,  682. 
See  Collateral  Security;  Mortgage;   Morto.^ged  Property;  Mortgagee; 
Mortgage  Note;   Mortgage  Sale. 
MULE, 

coverture  as  defense  to  note  given  for,  57. 
See  Municipality. 
MUNICIPAL  BONDS, 

fraudulently  reissued  after  cancellantion,  13. 

MUNICIPAL  CORPORATIONS, 

See  Municipality. 
MUNICIPALITY, 

unauthorized  paper  issued  by  treasurer,  84. 
power  of  to  issue  paper  generally,  87. 
want  of  authority  to  issue  paper,  87. 

warrants  and  coupons  attached  to  bonds  of,  want  or  failure  of  con- 
sideration, 232. 
warrants  of,  defenses  generally,  n.  232. 
note  for  debt  of  created  in  violation  of  constitution,  293. 
coupon  bonds,  right  of  bank  advancing  money  on,  360. 
recital  in  bonds  of,  488. 
effect  of  certificate  on  face  of,  488. 
estopped  by  recitals  in  bonds,  647. 


N 
NAME, 

addition  of  words  "and  Co."  to,  158,  172. 
of  payee,  where  blank  left  for,  145. 

alteration  in,  158. 

alteration  in  a  defense  though  no  fraud,  158. 

altered  by  adding  word  "cashier,"  158. 

altered  by  adding  word  "collector,"  158. 

altered  by  adding  word  "guardian,"  158. 

altered  by  adding  word  "junior,"  158. 

alteration  by  adding  surname  immaterial,  158- 
of  indorsee  erased  and  another  inserted,  158. 
of  partnership,  immaterial  alteration  in,  158. 
of  maker,  alteration  of,  172. 
addition  of  address  to  name  of  maker,  172. 
of  maker,  addition  of  "President  A.  B.  Association,"  172. 
of  maker,  when  alteration  not  a  defense,  173. 
alteration  by  addition  of,  174. 
when  addition  of  not  a  defense,  175. 


1036  INDEX, 

[References  are  to  Sections.'\ 
NAME — Continued. 

where  addition  of  does  not  affect  liability,  175. 

of  witnesses,  erasure  of,  177. 

of  surety,  erasure  or  alteration  of,  181. 

addition  of,  182. 
of  guarantor,  addition  of,  182. 

See  Altebation. 
NATIONAL  BANK, 

See  Bank;  Bank  Deposits. 
NECESSARIES, 

coverture  as  defense  to  note  for,  30,  41. 
infancy  as  defense  to  note  for,  63. 

note  of  infant  for,  infancy  no  defense  against  surety,  63. 
where  infant  accepts  bill  given  for,  67. 
where  person  n&n  compos  mentis  gives  note  for,  71. 
See  Supplies. 
NEGLIGENCE, 

of  maker  may  preclude  defense  of  fraud,  28. 

in  signing,  factors  in  determining,  28, 

of  maker  unable  to  read  English,  27. 

of  maker  in  executing  note,  so  conditions  may  be  added,  171. 

failure  of  maker  to  read  before  signing,  28. 

in  signing  instrument  question  for  jury,  28, 

of  pledge  in  respect  to  collateral,  373, 

mere  suspicion  not  evidence  of,  475. 

though  gross  does  not  prevent  from  being  bona  fide  holder,  475. 

holders  of  collateral,  delay  in  presentment  must  amount  to  gross 

negligence,  503. 
in  case  of  collateral,  damages  for  cannot  be  set  off,  598. 
of  plaintiff  as  agent,  damages  for  cannot  be  set  off,  598. 
of  pledgee  causing  loss  of  collection  of  collateral,  set-off  of  value 

of,  613. 
of  mortgagee  in  procuring  Insurance,  damages  for  not  a  set-off,  600. 
of  bank  in  certifying  check,  estoppel,  642. 
in  leaving  blank  indorsement  on  check,  estoppel,  645. 
See  Diligence;   Laches, 

NEGOTIABLE   INSTRUMENTS  LAW, 

pre-existing  debt  a  good  consideration,  n.  241. 

defense  under  against  bona  fide  holder,  442. 

effect  under  of  transfer  with  indorsement,  456. 

who  is  holder  in  due  course  under,  464. 

of  Congress,  bona  fide  holder  under,  464. 

necessity  of  protest  under,  527. 

as  to  time  of  giving  notice  of  dishonor,  563. 
See  "Appendix,"  this  volume. 
"NEGOTIATE," 

popular  meaning  of,  n.  439, 


INDEX.  1037 

[References  are  to  Sections.1 

NEGOTIATION, 

presentment  or  negotiation  in  reasonable  time,  496. 

NEW  PROMISE, 

after  husband's  death  does  not  prevent  defense  of  coverture,  31. 

to  pay  as  waiver  by  indorser  of  protest,  538. 

estoppel  by,  650. 

of  bankrupt  after  discharge,  650. 

estoppel  by,  limitation  of  rule,  651. 

whether  consideration  necessary,  651. 

NEW  YORK  CODE, 

set-off  of  bill  or  note  under,  607. 

NIL  DEBET, 

evidence  of  infancy  admissible  under  plea  of,  63. 

NON  COMPOS  MENTIS, 

See  Mental  Incapacity  and  Insanity. 

NON  EST  FACTUM, 
as  a  defense,  14. 

evidence  of  misrepresentations  admissible  under  plea  of,  25. 
may  show  alterations  of  plea  of,  135. 
defense  of  fraud  inconsistent  with  plea  of,  116. 
plea  of  against  bona  fide  holder,  441. 

NON-NEGOTIABLE, 

note,  fraud  as  defense  to  against  purchase  for  value,  122. 

inserting  words  of  negotiability  in  blank  space,  146. 
change  of  to  negotiable  a  material  alteration,  180. 
paper  made  at  request  of  another,  failure  of  consideration,  206. 
note,  defenses  against  assignee,  237. 

want  of  consideration  bona  fide  holder,  271. 
Surety  may  show  against  -holder  without  notice  that  other  signa- 
tures were  to  be  obtained,  316. 
breach  of  condition  may  be  shown  against  assignee  of,  328. 
one  containing  condition  is,  343. 
paper,  diversion  defense  against  assignee,  379. 
where  lost  or  stolen,  397. 

note  indorsed  in  blank,  possession  not  evidence  of  title,  402. 
paper,  purchaser  after  maturity,  425. 
note,  purchaser  after  maturity,  429. 
paper,  defense  against  assignee  of,  446. 

when  form  of  indorsement  makes  it  negotiable  to  extent  of  re- 
quiring demand,  503. 
demand  unnecessary,  503. 
note,  notice  of  dishonor  unnecessary,  n.  570. 

discharge  of  by  work,  labor  or  services,  693. 
paper,  payment  of  to  whom,  699. 


1038  INDEX. 

[References  are  to  Sections.^ 
NON-PAYMENT, 

See  Notice  of  Dishonor. 
NON-PERFORMANCE, 

performance  of  agreement  to  render  services  prevented  by  act  of 
obligor,  329. 

NOTARY, 

presentment  for  payment  by,  n.  511. 

sufficiency  of  protest  to  protect,  532. 

protest  may  be  made  by,  533. 

certificate  of  protest  of  as  evidence,  542,  543. 

duty   under   statute   to   give  notice  of   dishonor,   statute   does   not 

change  law  merchant,  549. 
may  sign  notice  of  dishonor,  551. 

evidence  of  as  to  deposit  of  notice  of  dishonor  in  postofBce,  i55. 
certificate  of  notary  as  to  mailing  notice  of  dishonor,  558. 

NOTE  ON  DEMAND, 

See  Demand  Note. 
NOTES  OF  A  SERIES, 

presentment  for  payment,  505. 

secured  by  mortgage,  discharge,  682. 
See  Series. 
NOTICE, 

duty  as  to  in  case  of  payment  of  or  by  forged  paper,  101. 

that  sureties  signed  for  special  purpose,  213. 

to  bona  fide  holder,  accommodation  paper,  270,  271. 

to  holder,  accommodation  acceptance,  274. 

of  illegality  of  consideration,  289. 

to  agent  of  usury  binds  principal,  302. 

of  statutory  defense  of  usury  precludes  recovery,  303. 

of  failure  of  consideration,  where  condition  precedent,  327. 

to  holder  of  mortgage  note  of  provisions  of  mortgage,  367. 

where  one  purchases  after  maturity,  420. 

to  transferee  of  illegality  of  consideration,  472. 

as  affecting  one  claiming  to  be  bona  fide  holder,  472,  473. 

as  to  insufficient  stamping  of  note,  474. 

by  matter  apparent  from  paper  itself,  474. 

suspicious  circumstances  not,  475. 

of  payee's  defense,  indorsement  after,  478. 

of  fraudulent  alteration,  480. 

none  where  corporate  signature  erased,  481. 

one  purchasing  married  woman's  note,  482. 

that  paper  accommodation  from  manner  of  discount,  483. 

as  to  accommodation  paper,  483. 

as  to  corporation  paper,  485,  486. 

corporation  taking  paper  of  another  corporation,  same  officers,  486. 

that  corporation  paper  for  accommodation,  487. 

purchaser  of  bonds,  488. 


I 


INDEX.  1039 

[References  are  to  Sections.l 
liOTlCE— Continued. 

where  recitals  in  bonds,  488. 

to  transferee  of  bona  fide  holder,  489. 

of  assignment  or  transfer,  cannot  set  off  claim  acquired  after,  594. 

of  want  or  failure  of  consideration,  estoppel,  669. 

of  forgery,  effect  of  failure  to  give,  675. 

of  protest,  see  Protest. 

of  dishonor,  see  Notice  of  Dishonor;  Protest. 

as  affecting  surety's  release  or  discharge,  680. 

as  affecting  guarantor's  discharge,  681. 

NOTICE  OF  DISHONOR, 

where  bill  payable  at  sight  or  so  many  days  after  sight  or  demand, 
or  after  certain  event,  490. 

notice  of  non-acceptance,  when  unnecessary,  494. 

received  by  drawer,  not  discharged  for  want  of  notice  of  non-accept- 
ance, n.  494. 

when  necessary  to  be  given  on  bill,  495. 

notice  to  drawer  without  presentment  to  acceptor,  498. 

indorser  of  overdue  note,  503. 

necessary  on  all  drafts  foreign  or  inland,  reasonable  time,  503. 

premature,  days  of  grace,  509. 

when  premature,  509. 

discharge  of  drawer  or  indorser,  544,  545. 

to  whom  must  be  given,  544,  545,  546. 

duty  of  holder  as  to,  544,  545. 

surety  not  entitled  to,  545. 

notes  of  a  series,  545. 

duty  as  to  notice  of  non-acceptance,  545. 

to  co-makers,  545. 

of  note  payable  in  annual  installments,  545. 

of  paper  sent  for  collection,  545. 

guarantor  not  entitled  to,  545. 

of  order  for  payment  of  money,  545. 

to  indorser  after  maturity,  545. 

notice  to  all  other  parties  necessary  after  non-acceptance  at  holder's 
election,  notwithstanding  subsequent  acceptance,  546. 

to  agent,  547. 

to  whom  notice  may  be  given,  547,  548. 

must  be  given  by  holder  to  charge  drawer,  549. 

by  whom  may  be  given,  549. 

must  be  given  by  one  with  authority,  549. 

may  be  given  by  agent,  549. 

statute  imposing  on  notaries  duty  to  give,  549. 

by  member  of  firm  to  partner,  549. 

effect  of,  given  on  behalf  of  holder  by  party  entitled  to  give,  550, 

form  of,  551. 

where  unsigned  by  notary  sending,  551. 


1040  iin)EX. 

[References  are  to  Sections.J 
NOTICE  OF  BISHO'NOR— Continued. 
when  sufficient  in  general,  551. 
notary  may  sign,  551. 
notice  personally  or  by  mail,  551. 
may  be  in  writing,  n.  551. 
should  describe  instrument,  552. 
effect  of  misdescription  of  note,  552. 
form,  contents  and  sufficiency  of  continued,  652. 
letter  as,  552. 

knowledge  of  dishonor  not  notice,  552. 
no  particular  form  necessary,  552. 
when  personal  notice  necessary,  553. 
time  of  receiving  as  affecting  sufficiency,  553. 
manner  or  mode,  oral,  written  and  personal  notice,  553. 
to  cashier  of  hotel  corporation  not  sufficient,  553. 
should  be  personal  to  surety,  553. 
may  be  given  orally,  553. 

manner  or  mode  continued,  notice  by  mail,  554. 
to  personal  representative  or  executors,  555. 
sufficient  if  received  though  improperly  addressed,  555. 
manner  and  mode  continued,  sufficiency  of  address  and  mailing,  555. 
'       not  mailing  to  correct  address,  n.  555. 

manner  and  mode  continued,  what  is  included  in  term  mailing,  556. 

mailing  notice  to  a  customer,  557. 
liability  of  collecting  bank  for  failing  to  give,  558. 
mailing  of  continued,  instances  of  when  sufficient  and  insufficient, 

558. 
time  of  mailing  as  affecting  sufficiency,  558. 
service  of  shown  by  notarial  certificate,  558. 
to  whom  given,  where  party  dead,  559. 
to  one  of  several  partners,  560. 
to  partners,  560. 

waiver  by  one  partner  of,  n.  560. 
to  persons  jointly  liable,  561. 
to  bankrupt,  562. 

to  trustee  or  assignee  of  insolvent  firm,  562. 
time  within  which  notice  must  be  given,  563. 
by  collecting  bank,  what  is  due  notice,  563. 
to  indorser,  sent  to  wrong  address,  564. 
diligence  as  to  giving,  reasonable  time,  564. 
circumstances  affecting  time  of  giving,  564. 
time  of  giving  where  parties  reside  in  same  place,  565. 

controlled  by  statute,  565. 

by  mail  where  residing  in  same  place,  565. 

where  parties  reside  in  different  places,  566. 

subsequent  and  antecedent  parties,  567. 

to  prior  indorser  by  successive  indorsers,  567. 

where  last  indorser  receives  notice  on  Saturday,  568. 


INDEX.  1041 

[References  are  to  Sections.'] 
NOTICE  OF  BlSUOlSiOR— Continued. 

received  on  Saturday,  form  of  notice  sent  by  last  indorser,  pleading, 
568. 
'  sufficiency  of  averment  of,  568. 

may  be  sent  to  residence,  569. 

where  notice  must  be  sent,  569. 

may  be  sent  to  place  of  business,  569. 

necessity  of  to  indorser  generally,  570. 

■when  dispensed  with,  drawer,  indorser,  excuses,  570,  571. 

unnecessary  where  note  non-negotiable,  n.  570. 

accommodation  indorser  entitled  to,  n.  570. 

insolvency  of  drawee  and  acceptor  does  not  excuse  failure  to  give, 
n.  570. 

in  case  of  collateral  security,  n.  570. 

insolvency  of  maker  does  not  excuse  failure  to  give,  n.  570. 

right  of  drawer  to,  571. 

to  indorser  not  excused  by  destruction  of  bank  by  fire,  571. 

right  to  forfeited  by  drawer  who  prevents  performance  of  condi- 
tions, 571. 

failure  to  give  caused  by  cessation  of  commercial  intercourse  be- 
tween states,  572. 

caused  by  cessation  of  waste,  572. 

no  new  consideration  necessary  for  waiver  of  by  indorser,  n.  573. 

delay  in  giving  excuses,  circumstances  beyond  holder's  control,  572. 

waiver  of  by  promise  to  pay,  573. 

where  waiver  of  binds  indorser  only,  573. 

note  waived  by  taking  security,  573. 

what  essential  to  establish  waiver  of,  573. 

waiver  of,  573. 

waived  by  waiver  of  presentment,  573. 

of  check,  588. 

NOTICE  OF  NON-ACCEPTANCE, 

See  Notice  of  Dishonor. 
NOTICE  OF  PROTEST, 

See  Notice  of  Dishonor;  Protest. 
NUMBER, 

effect  of  alteration  of,  151. 

O 

OFFICER, 

paper  to  corruptly  influence  void,  n.  288. 

of  corporation,  diversion  by  of  proceeds  of  corporate  note,  392. 

of  corporation,  paper  issued  by,  notice,  485,  486. 

of  society  cannot  set  off  debt  due  to  it  in  action  on  his  note,  591. 

of  corporation,  act  of  in  violation  of  statute,  estoppel  to  show,  672. 

of  corporations,  see  Corporations;  Want  of  Authority. 

Joyce  Defenses — 66. 


1042  INDEX. 

[References  are  to  Sections.'] 
OPTIONS, 

note  given  on  grain  options  void,  n.  288. 
note  for,  statute,  bona  fide  holder,  398. 

ORAL  AGREEMENT,  see  Agreement. 

"OR  BEARER," 

effect  of  substitution  of  words  "or  bearer,"  161. 

"OR  ORDER," 

effect  of  substitution  of  words  "or  order,"  161. 

ORDER, 

alteration  of  word  "order"  to  "holder,"  161. 
for  payment  of  money  which  refers  to  building  contract,  343. 
presentment  for  acceptance  of,  498. 
on  committee,  acceptance  of,  500. 

on  another  for  sum  due,  presentment  for  payment,  503. 
upon  drainage  district,  diligence  to  collect,   presentment  for  pay- 
ment, 503. 
for  payment  of  money,  notice  of  dishonor,  545. 
on  third  person,  payment  by,  686. 
for  delivery  of  personality  as  discharge  of  note,  691. 

OVERDUE, 

construed  with  reference  to  demand  paper,   435. 
paper,  bona  fide  holder,  467,  468,  469. 

OVERDUE  NOTE,  see  Dishonor;  Maturity. 

OWNER,  see  Agent. 

OWNERSHIP,  see  Title. 

P 

PAROL, 

assignment,  suit  in  own  name,  equities,  452. 
See  Assignments. 
PAROL  AGREEMENTS, 
See  Collateral  Conditions  and  Agreements;  Evidence;  Parol  Evidence. 

PAROL  EVIDENCE, 

to  rebut  presumption  as  to  consideration,  185. 

not  admissible  to  vary  terms  of  paper,  307. 

of  condition  affecting  delivery  to  payee,  312,  313. 

that  partnership  notes  void  if  partnership  dissolved  not  admissible; 

320. 
that  instrument  payable  on  contingency  not  admissible,  320. 
in  particular  cases  that  note  payable  on  contingency,  320. 

void  on  contingency,  320. 
that  instrument  void  on  contingency  not  admissible,  320. 
that  note  void  on  failure  of  crops  not  admissible,  320. 
of  conditions  affecting  consideration,  322. 


IXDEX.  1043 

[References  are  to  Sections.'] 
PAROL  EYIBENCE— Continued. 

of  executory  contract  as  consideration  for  note,  322. 

as  to  place  of  payment,  331. 

of  agreement  as  to  credit  upon  note  not  admissible,  332. 

changing  interest  clause  not  admissible,  332. 

not  admissib,le  to  change  amount,  332. 

of  conditions  as  to  mode  or  manner  of  payment,  333,  334,  335. 

that  note  payable  in  labor  not  admissible,  333. 

to  be  paid  only  out  of  certain  fund  not  admissible,  333. 
of  executed  agreement  as  a  defense,  336. 
varying  time  of  payment  of  demand  note,  339. 
of  collateral  agreement  to  renew  note  not  admissible,  339. 

to  release  from  or  limit  liability,  342. 
not  admissible  to  show  absolute  acceptance  was  conditional,  n.  347. 

change  meaning  of  indorsement,  348. 
to  show  note  executed  as  collateral,  351. 
of  conditions  or  agreements,  collateral  security,  361. 
See  Evidence. 
PARTIAL  PAYMENT, 

as  waiver  of  presentment,  525. 

PARTNERS, 

infancy  of  one  partner  not  available  to  other,  68. 

unauthorized  indorsement  by  one  of  firm  name,  73. 

where  paper  given  in  violation  of  articles  of  partnership,  93. 

accommodation  note  by  in  firm  name,  89. 

want  of  authority  of,  89. 

authority  of  to  execute  paper  generally,  89. 

want  of  authority  of  a  question  for  jury,  89. 

to  give  firm  note  for  individual  loan,  90. 
acceptance  of  bill  of  exchange  by,  90. 
when  want  of  authority  of  may  be  shown,  91. 
where  note  executed  to  firm  by,  92. 
paper  given  in  firm  name  after  dissolution,  94. 
presentment  to  for  payment,  520. 
waiver  by  of  presentment  for  payment  after  dissolution  of  firm,  525. 

See   PARTiN'EKSIIlP. 

PARTNERSHIP, 

fraud  of  partner  toward  firm  no  defense  against  hona  fide  holder,  121. 
fraudulent  transfer  by  partner  no  defense  against  bona  fide  holder, 

131. 
immaterial  alteration  in  changing  name,  158. 
interest  of  retiring  partner  in  is  good  consideration,  262. 
note  for  purchase  of  co-partner's  interest,  failure  of  consideration, 

266. 

accommodation  of  partner,  want  of  consideration,  271. 
acceptance  by  one  partner  binds  other,  272. 
discount  of  note  of  partner,  274. 


1044  INDEX. 

[References  are  to  Sections.^ 
PARTNERSHIP— ConimwecZ. 

note  indorsed  for  accommodation  of,  transferee  with  notice,  280. 

note  in  name  of  for  debt  of  a  partner,  want  of  consideration,  281. 

cannot  show  note  of  to  be  paid  if  firm  prosperous,  320. 

notes,  evidence  that  void  in  case  of  dissolution  of  partnership  not 
admissible,  320. 

statement  of  one  partner  no  release  to  indorser,  n.  342. 

want  of  title  in  action  against,  n.  418. 

note  by  to  member  of,  purchaser  after  maturity,  421. 

right  of  holding  note  to  a  member  and  not  indorsed,  456. 

when  member  of  may  waive  protest,  541. 

notice  of  dishonor  to,  560. 

waiver  by  a  partner  of  notice  of  protest,  n.  560. 

insolvent,  notice  of  dishonor  to  trustee  or  assignee,  562. 

debt  due  to  not  available  against  note  of  partner,  591. 

set-off  of  note  of  partner  in  suit  against,  592. 

note  given  for  interest,  right  to  set  off  damages  for  plaintiff  forcibly 
taking  possession  of,  597,  598. 

set-off  of  damages  arising  from  misstatements,  599. 
what  not  a  set-off  to  action  on,  620. 

set-off  against  purchaser  after  maturity  of  firm  note  indorsed  to 
partner,  634. 

right  of  set-off  against  partner's  individual  note,  634. 

account  as  a  set-off,  634. 

admission  by  partner  not  binding  on,  657. 

when  bound  by  note  of  partner  in  firm  name  executed  after  dissolu- 
tion, 670. 

bound  by  guaranty  of  a  partner,  670. 

when  estopped  to  show  forgery,  673. 

See  Pabtkek;  Want  of  AxJTHORrnr. 
PART  PAYMENT, 

acceptance  of  not  an  estoppel,  659. 

PATENTED  MACHINERY, 

defense  to  note  given  for,  210. 

PATENT  RIGHT, 

which  is  worthless  as  consideration,  120. 
statute  as  to  notes  for,  non-compliance  with,  292. 
note  in  consideration  of  agreement  not  to  sell,  326. 

PAYEE, 

infancy  of  not  available  to  maker  against  indorsee,  68. 
payment  to,  698,  699. 

See  Discharge;  see  the  particular  defense. 
PAYMENT, 

of  or  by  forged  paper,  duty  as  to  notice,  100. 
where  blank  left  for  time  or  place  of,  145. 
of  interest,  as  ratification  of  alteration,  150. 
alteration  shortening  time  of,  154. 


INDEX.  1^^^ 

[References  are  to  Sections.'] 

PAYMENT — Continued. 

extending  time  of,  154. 

of  time  of,  154,  155. 

excluding  days  of  grace,  155. 

of  time  note  to  demand  note,  155. 

of  "after  siglit"  to  "after  date,"  155. 
erasure  of  contemporaneous  memorandum  as  to  time  of,  155. 
alteration  as  to  place  of,  162. 

by  agent  before  delivery,  163. 
alteration  by  designating  place  of  payment  where  none  specified.  164. 

inserting  words  "in  gold,"  167. 

in  medium  of,  167. 
contract  to  extend  time  does  not  necessarily  import  consideration, 

222 
to  assignor  of  note  for  pre-existing  debt  may  reduce  recovery,  242. 
where  time  of  dependent  on  contingency  the  happening  of  which 

maker  prevents,  321. 
presumption  as  to  place  of  where  none  stated,  331. 
evidence  not  admissible  to  show  different  place  of,  331. 
effect  of  conditions  as  to  mode  or  manner  of,  333,  334,  335. 
only  out  of  certain  fund,  parol  evidence  showing  agreement  not  ad- 
missible, 333. 
of  note  to  administrator,  unauthorized  condition  as  to  mode  ot,  66i). 
evidence  of  performance  of  agreement  as  to,  336. 
collateral  conditions  or  agreement  as  to  time  of,  demand  note,  339. 
blank  in  note  as  to  time  of,  effect  of.  letter  as  to,  339. 
collateral  condition  or  agreement  as  to  time  of,  339. 
where  no  time  of  specified  in  note,  339. 
subsequent  agreement  extending  time  of,  340. 

extension  of  time  of,  necessity  of  consideration,  341. 
agreement  extending  time  of,  what  essential  to  this  defense, 
341. 
conditions  in  note  as  to,  343,  344,  345,  346. 
of  note  in  installments,  343. 

effect  of  conditions  in  note  as  to,  343. 

collateral  agreement  as  to,  out  of  certain  fund,  no  defense,  361. 

of  note  to  corporation  by  assessments  on  stock,  set-off,  422. 

bill  of  lading  as  collateral  security  for,  494. 

of  bill,  drawer  undertakes  for  acceptance  and  payment  of  bill,  495. 

of  note  by  indorsee  before  purchase,  demand  not  excused,  503. 

of  part,  acceptance  of  not  an  estoppel,  659. 

application  of,  discharge  of  surety,  680. 

extension  of  time  of,  release  of  surety,  680. 

mortgage  as,  682. 

and  discharge,  mortgage  security,  682. 

of  collateral,  discharge  of  debt,  683. 

See    COLLATEKAL    CONDITIONS    AND    AGREEMENTS;     DISCHARGE;     PRESENTMENT 

FOR  PAYJIENT. 


1046  INDEX. 

[References  are  to  Sections.] 
PEACE, 

between  husband  and  wife,  note  of  stranger  given  to  promote,  235. 

PEDDLER'S  NOTE, 

validity  of,  292. 

consideration  may  be  shown  against  assignee,  447. 

PENCIL, 

retracing  pencil  writing  in  ink  not  material  alteration,  137. 
paper  written  in,  alteration,  estoppel,  661. 

PERFORMANCE, 

of  conditions,  where  prevented  by  maker,  325. 

of  a  collateral  agreement  as  a  defense,  336. 

of  condition  in  note,  where  substantial  may  be  sufficient,  344. 

prevented  by  acceptor,  347. 
of  conditions  prevented  by  drawer,  right  to  notice  of  dishonor  for- 
feited, 571. 
where  prevented  by  acceptor,  659. 

PERSONAL  PROPERTY, 

notes  for,  warranty,  failure  of  consideration,  265. 

where  property  for  which  note  is  given  has  some  value,  no  failure 

of  consideration,  266. 
transfer,  assignment  or  conveyance  of  as  discharge  of  note,  691. 
See  Goods;  Machixery;  Merchandise. 
PHOTOGRAPHS, 

enlarged  photographs  of  signature  as  evidence,  96. 

PHYSICIAN, 

where  services  of  consideration,  that  not  qualified  to  practice  no  de- 
fense, 329. 
PLACE, 

of  payment,  evidence  not  admissible  to  show  different  place,  331. 
of  making  protest,  535. 

to  which  notice  of  dishonor  may  be  sent,  569. 

of  presentment,  see  Presentment  for  Acceptance;  Presentment  for 
Payment. 

PLACE  OF  BUSINESS, 

See  Presentment  for  Acceptance;   Presentment  for  Payment. 

PLEADING, 

statutory  exception  as  to  coverture,  37. 

infant's  note,  ratification  may  be  proved  though  not  averred,  64. 

of  facts  showing  duress,  necessary,  105. 

of  want  of  consideration  to  part  of  cause  of  action,  201. 

partial  want  of  consideration  may  be  shown  if  properly  pleaded, 

n.  201. 
what  necessary  to  allege  when  breach  of  agreement  relied  on,  310. 
of  facts  showing  fraudulent  diversion,  379. 
must  sufficiently  show  title,  402. 


INDEX, 


1047 


[References  are  to  Sections."] 

PLEADING — Continued. 

denial  of  transfer,  404. 

that  note  assigned,  proof  to  support,  405. 

in  action  by  indorsee  against  indorser,  406. 

plea  puis  darrein  continuance  that  title  transferred  since  suit  com- 
menced, 410. 

not  necessary"  to  aver  demand  at  particular  place  where  note  pay- 
able but  matter  of  defense,  n.  502. 

presentment  for  payment,  demand  not,  reasonable  time,  508. 

injury  or  loss  from  non-presentment  for  payment  at  particular  place 

averment  of  due  notice  of  dishonor,  568. 

performance  of  agreement  to  accept  deed  for  note,  694. 

covenant  to  accept  less  sum,  702. 

PLEDGE, 

of  notes  fraudulently  obtained,  usury  in  loan,  302, 

See  Collateral  Security;  Pledgee;  Pledgor, 
PLEDGEE, 

without  notice,  fraud  no  defense  against,  119. 

fraud  of  no  defense  against  bona  fide  holder,  121. 

that  note  pledged  without  authority  no  defense,  130. 

of  note  secured  by  mortgage,  b07ia  fide  holder,  365,  366,  367, 

of  collateral,  rights  and  duties  of,  369. 

purchaser  after  maturity  from,  372. 

must  use  ordinary  diligence  in  preserving  pledge,  373. 

bona  fide  holder,  extent  of  recovery,  376,  377,  378. 

action  by  in  name  of  payee,  405. 

of  note,  rights  of,  462. 

set-off  of  value  of  collateral  diverted  by,  613. 

set-off  of  value  of  collateral  where  collection  by  negligence  of,  613. 

not  subject  to  set-off  against  wife  of  payee,  628. 

payment  to,  699. 
See  Collateral  Security;  Pledge;  Pledgor;  see  the  particular  defense. 

PLEDGOR, 

concealment  by  of  facts  to  obtain  indorsement,  action  by  pledgee,  362. 
and  pledgee,  laches,  negligence  or  tortious  acts,  statute  limitations, 

373. 
necessity  of  loss,  injury  or  damage  to  by  non-presentment,  holder 

of  note  as  collateral,  503. 

See  Collateral  Security;  Particular  Defense. 

POLITICAL  ASSESSMENTS, 

note  given  for,  no  want  of  consideration,  228. 

POLITICAL  CONDITION, 

of  country,  excuses  for  delay,  presentment  for  payment,  521  and  note. 


1048  INDEX. 

[References  are  to  Sections.^ 
POSSESSION, 

as  evidence  of  title,  402, 
prima  facie  evidence  of  ownership,  240. 
title,  evidence  to  rebut,  416. 

POST-DATED  BILL, 

differs  from  bill  payable  like  number  of  days  after  drawn,  490. 
same  as  draft  payable  certain  time  after  date,  490. 

POST-DATED  DRAFT, 
protest,  490. 
drawee  cannot  retain  funds  to  meet  it  as  against  other  bills  payable 

before,  490. 
presentment  for  acceptance,  490. 

POST-OFFICE, 

evidence  of  deposit  of  notice  of  dishonor  in,  555. 
See  Mail, 
PRE-EXISTING  DEBT, 

constitutes  value  for  transfer  of  paper,  n.  246. 

one  taking  in  payment  of  a  bona  fide  holder,  not  subject  defense  of 

fraud,  126. 
debt  of  husband  outlawed,  note  given  for  bona  fide  holder,  245. 
paper  taken  as  collateral  security,  bona  fide  holder,  246,  247,  248. 
note  taken  in  payment  for,  bona  fide  holder  against  accommodation 

maker,  284.  285. 
accommodation  note  in  payment  of,  bona  fide  indorsee  against  in- 

dorser,  286. 

paper  transferred  as  security  for,  bona  fide  holder,  354. 
whether  one  taking  note  as  collateral  for  is  bona  fide  holder,  359, 

360. 
note  taken  as  collateral  for,  bona  fide  holder,  extent  of  recovery, 

377. 
want  or  failure  of  consideration,  bona  fide  holder,  241,  242. 
note  transferred  as  security,  cases  of  sufficiency  of  consideration, 

247. 
not  discharged  by  note  in  absence  of  agreement,  241. 
accommodation  paper  given  as  security  for,  247. 
where  note  assigned  by  separate  instrument  but  not  indorsed,  col- 
lateral security,  247. 
where  note  wrongfully  pledged  as  collateral  for,  247. 
paper  taken  as  security  for,  exceptions  to  general  rule,  248. 
paper  taken  as  collateral  for  additional  consideration,  249. 
drafts  and  bills  in  payment  of,  payee,  accommodation  acceptor,  287. 
accommodation  acceptor,  bills  pledged  as  collateral  for,  355. 
transferee  of  note  and  mortgage  as  payment  of  or  collateral  for, 

368. 

See  ANTECEDE^'T  Debt;  Collateral  Security. 


INDEX.  1049 

[References  are  to  Sections.'] 
PREMIUMS, 

for  insurance,  coverture  as  defense  to  note  given  for,  39. 

non-compliance  with  statute  as  to  notes  taken  for,  79. 
condition  affecting  note  for,  313. 

PRESENTMENT  FOR  ACCEPTANCE,  490-501. 

where  bill  payable  so  many  days  after  certain  event,  490. 

presentment  t©  fix  maturity  of  instrument,  490. 
where  bill  expressly  stipulates  for,  490. 

when  unnecessary,  490,  494. 

no  debt  accrues  on  bill  after  sight  until  presentment,  490. 

when  made,  bill  payable  after  sight,  490. 

where  bill  payable  one  day  after  sight,  n.  490. 
at  certain  time  after  date,  490. 

when  presentment  must  be  made,  490. 

where  bill  payable  so  many  days  after  sight,  490. 

post-dated  bill  differs  from  bill  payable  like  number  of  days  after 
drawn,  490. 

same  as  draft  payable  certain  time  after  date,  490. 

cannot  be  dishonored  by  refusal  to  accept  before  date,  490. 

drawee   cannot   retain   funds   to   meet  post-dated   draft  as  against 
other  bills  payable  before,  490. 

time   of  payment  of  sight  draft,  etc.,  cannot  be  known  until  ac- 
ceptance, 490. 

sight  draft,  in  legal  intent  draft  for  acceptance,  days  of  grace,  490. 

in  case  of  post-dated  draft,  490. 

note  on  demand  after  sight,  n.  490. 

where  bill  is  drawn  payable  elsewhere  than  at  residence  or  place  of 
business  of  drawee,  490. 

sight  drafts,  when  holder  must  bear  loss,  presentment,  agreement 
with  bank,  491. 

agreement  with  bank  as  to  return  of  sight  drafts,  reasonable  time 
for  presentment,  491. 

agreement  to  accept,  payment  of  debt  of  another,  n.  491. 

bill  taken  on  drawee's  promise  to  accept,  want  of  funds,  491. 

want  of  funds,  holder's  knowledge  as  to,  491. 

agreement  as  to  acceptance  or  presentment,  491. 

indorsement  of  bill  for  accommodation  of  drawer,  agreement  not 
to  present  until  maturity  unknown  to  indorser,  491. 

when  indorser  not  discharged,  491. 

promise  by  letter  to  accept  draft  to  be  drawn,  necessity  of  present- 
ment, acceptance  to  fix  maturity,  n.  491. 

purchase  of  bill  in  consideration  of  acceptance  of  another,  n.  491. 

acceptance  not  refused,  time  desired,  want  of  funds,  492. 

presentment  after  refusal  to  accept,  493. 

of  bill  payable  in  fixed  period  from  date;  time  of  presentment,  494, 
495,  498. 

bill  of  lading  as  collateral  security;  acceptance,  494. 


1050  INDEX. 

[References  are  to  Sections.'\ 
PRESENTMENT  FOR  ACCEPTANCE— CojiHJiwert. 

when  presentment  not  necessary  until  maturity  of  bill,  494. 

refusal  to  accept;   sale  of  collateral  and  proceeds  applied  on  bill; 
suit  for  deficiency,  494. 

unnecessary  when  bill  payable  at  certain  period  or  given  time  after 
date,  494. 

unnecessary  where  bill  payable  at  future  time  on  day  certain,  494. 

when  unnecessary,  495. 

acceptance  refused  when  bill  presented  before  due,  495. 

effect  of  presentment  made  unnecessary,  495. 
when  made  before  maturity,  495. 

what  constitutes  reasonable  time  as  to  presentment,  496. 

to  fix  maturity,  presentment  in  reasonable  time,  496. 

bill  payable  at  sight  or  certain  number  of  days  after  sight,  present- 
ment or  negotiation  in  reasonable  time,  496. 

presentment  or  negotiation  in  reasonable  time,  496. 

release  of  drawer  and  indorser,  496. 

bill  drawn  by  country  banker  on  town  bank  differs  from  bill  of  pri- 
vate party  and  is  part  of  circulation,  496. 

on  town  banker  payable  after  sight,  question  of  unreasonable 
delay,  496. 

keeping  of  bill  drawn  by  banker  on  banker;  laches  in  presentment, 
496. 

effect  of  unreasonable  delay  in  presenting  bill,  n.  496. 

of  sight  drafts  and  the  like,  reasonable  time,  496  and  note. 

necessity  for  presentment  or  putting  of  bill  in  circulation,  496  and 
note. 

agent  for  presentment,  when  liable,  497. 

agent    for    presentment    must    receive    unequivocal    acceptance    or 
notify  holder,  497. 

when  indorser  not  discharged,  497. 

where   holder  keeps   indorsed  bill   without  actual  presentment,  al- 
though informing  drawee  that  he  holds  it,  497. 

how  made,  by  whom,  497. 

before  bill  overdue,  498. 

place,  498. 

time,  on  business  day,  498. 

draft  on  party  with  place  of  business  but  not  payable  at  particular 
place,  498. 

when  drawer  discharged  draft  on  party  with  place  of  business  but 
payable  at  no  particular  place,  498. 

presence  of  instrument  in  place,  when  sufficient  presentment,  498. 

at  residence  or  place  of  business,  498. 

of  order  or  inland  bill,  when  made  at  any  time,  498. 

bill  sent  in  letter  to  drawee  before  due,  498. 

bill  payable  at  particular  time,  498. 

no  particular  place  in  city  or  town,  498. 

injury  sustained  by  drawer  by  delay,  498. 


INDEX.  1051 

[References  are  to  Sections.^ 
PRESENTMENT  FOR  ACCEPTANCE— Confinued. 

must  be  made  to  drawee  or  some  person  authorized,  499, 

to  two  or  more  drawees  not  partners,  n.  499. 

how  made,  to  whom,  499. 

duty  of  bank  collector,  499. 

presentment  by  bank,  499. 

at  place  of  business  of  drawee,  499. 

at  residence  of  "drawee,  499. 

personal  demand,  499. 

to  acceptor,  499. 

to  agent,  499. 

where  drawee  bankrupt  or  insolvent,  n.  499. 

where  drawee  dead,  n.  499. 

acceptance  of  order  on  committee,  500. 

excuses,  inability  to  make  by  reasonable  diligence,  501. 

person  without  capacity  to  contract,  501. 

where  drawee  dead  or  absconded,  501. 

where  drawee  fictitious  person,  501. 

where  irregular  and  acceptance  refused  on  other  grounds,  501. 

delay  in  mail,  501. 
miscarriage  in  mail,  laches,  ordinary  diligence,  501. 

PRESENTMENT  FOR  PAYMENT, 

of  check  after  death  of  drawer,  215. 

presentment  necessary  only  when  bill  due  without  presentment  for 

acceptance,  494,  495. 
at  place  of  business  of  drawee,  499. 
at  residence  of  drawee,  499. 
personal  demand,  499. 

necessary  in  order  to  charge  drawer  and  indorsers,  502. 
no  demand  on  co-makers  necessary,  502. 

not  necessary  to  one  signing  on  back  of  note  before  delivery,  502. 
ability  and  willingness  to  pay  at  particular  time,  tender,  502. 
not  necessary  to  charge  persons  primarily  liable,  502. 

as  to  third  person  signing  face  of  note,  502. 
want  of  demand  on  principal  debtor,  when  presentment  necessary  to 

charge  drawer  and  indorser,  502. 
deposit  of  funds  at  particular  place  where  note  payable,  tender,  502. 
instrument  payable  at  particular  place,  what  equivalent  to  tender, 

502. 
when  tender  exonerates  from  interest,  costs  and  damages,  n.  502. 
when  not  necessary  to  aver  or  prove  demand  at  particular  place  but 

matter  of  defense,  n.  502. 
demand  necessary  though  indorser  made  administrator  of  maker's 

estate,  503. 
want  of  demand,  agent,  acceptor,  instances,  503. 
demand  when  necessary,  indorser  of  overdue  note,  503. 
indorsers  of  note  for  antecedent  debt  to  enable  it  to  be  discounted 
liable  as  joint  owners  without  demand,  503. 


1052  INDEX. 

[References  are  to  Sections.^ 
PRESENTMENT  FOR   PAYMENT— Continued. 

indorsement  by  agent,  demand  on  principal  and  agent,  503. 

acceptor  of  draft,  not  necessary  to  charge,  503. 

when  form  indorsement  of  non-negotiable  paper  makes  it  negotiable 
to  extent  of  requiring  demand,  503. 

holders  of  collateral,  delay  must  amount  to  gross  negligence,  only 
reasonable  diligence,  503. 

non-negotiable  notes,  demand  unnecessary,  503. 

of  draft  to  secure  antecedent  debt,  503. 

what  is  reasonable  time  for,  503. 

order  on  another  for  sum  due,  503. 

necessity  of  pledgor  sustaining  damage,  injury  or  loss,  by  non-pre- 
sentment, holder  of  new  note  as  collateral,  503. 

indorsement  as  collateral  security,  503. 

made  in  reasonable  time,  indorser  of  overdue  note,  503. 

demand   in   reasonable  time,  liability  under  agreement  to   indorse 
overdue  note,  503. 

voluntary  taking  up  at  maturity  by  party  procuring  note  to  be  dis- 
counted, 503. 

necessary  as  to  all  drafts,  foreign  or  inland,  reasonable  time,  503. 

order  upon  drainage  district,  diligence  to  collect,  503. 

not  necessary,  indorsement  of  insolvent's  note  at  maturity,  503. 

demand  not  excused  though  note  paid  before  purchase  by  indorsee, 
503. 

sureties  and  guarantors,  parties  primarily  liable,  demand,  504. 

sureties,  note  not  presented  to  principal  maker,  504. 

time  of  presentment  where  note  is  not  and.  is  payable  on  demand, 
reasonable  time,  505,  506. 

of  demand  note,  reasonable  time,  how  determined,  505,  506. 

demand  not  necessary  on  bank  certificate  of  deposit  to  start  run 
ning  statute  of  limitations,  505. 

demand  note,  presentment  in  reasonable  time,  505. 

notes  of  a  series,  505. 

on  bill  sufficient  if  made  in  reasonable  time  after  last  negotiation, 
505. 

bank  certificate  of  deposit,  505. 

demand  note  payable  at  place  certain,  505. 

necessity  that  injury  or  loss  be  sustained  by  want  of  demand, 

506. 
delay  when  unreasonable,  506. 

of  certificate  of  deposit,  with  no  interest  after  maturity,  506. 

of  note  payable  on  demand  after  date,  reasonable  time,  506. 

reasonable  time,  credit  or  indulgence  to  maker  not  a  factor  in  de- 
termining what  is  a,  506. 

demand  notes,  indorsement  after  maturity,  reasonable  time,  506. 

of  demand  notes,  understanding  that  note  not  to  be  paid  till  after 
expiration  of  certain  time,  506. 


f 


INDEX.  1053 

[References  are  to  Sections.'] 
PRESENTMENT  FOR   PAYMENT— Continued. 

maker's  insolvency  no  excuse  for  non-presentment  in  reason- 
able time,  506. 
note  intended  as  continuing  security  with  interest,  reasonable  time, 

506. 
of  certificate  of  deposit  payable  after  certain  time,  506. 
of  notes  payable  at  sight  or  on  demand  with  interest,  reasonable 

time,  507.       "^ 
demand  note  and  demand  note  bearing  interest,  distinctions  abro- 
gated by  statute,  reasonable  time,  question  of  law  of  fact,  pleading, 
burden  of  proof,  508. 
time  of  maturity,  Sunday  or  holiday,  Saturday,  509,  510. 
premature,  days  of  grace,  509. 
on  day  preceding  Sunday,  etc.,  510. 
injury  from  laches  in  presenting  draft,  511. 

where  draft  considered  as  inland  bill  or  banker's  check,  laches,  511. 
waiver  as  to  time,  511. 

by  person  on  behalf  of  estate  of  holder,  511. 
insolvency  of  maker  during  delay  in  presentment  of  check,  511. 
at  reasonable  hour  on  business  day,  511. 
before  twelve  o'clock  at  night,  511. 

by  sub-contractors  as  indorsees  of  checks,  reasonable  time,  511. 
by  one  wrongfully  in  possession,  511. 
by  one  in  possession  of  bill,  511. 
by  whom,  holder  or  person  authorized,  511. 
by  holder  in  possession,  511. 

in  case  where  no  established  business  hours  at  place  payable,  511. 
sufficiency  of  presentment,  by  whom  made,  time,  when  made,  511. 
by  notary,  n.  511. 

sufficiency  of  demand,  bringing  suit,  512. 
before  suing,  note  payable  at  bank,  512. 
on  note  payable  on  call,  512. 
extended  for  indefinite  time,  512. 
before  suing  on  due-bill,  512. 
demand  note,  512. 
certificate  of  deposit,  512. 
sufficiency   of  presentment,  exhibition   and  delivery  up  of  instru- 
ment, 513. 
waiver  of  exhibition  of  instrument,  513. 
place  of  presentment,  514,  515. 
where  place  for,  specified,  514. 
where  address  given  in  instrument,  514. 
where  no  place  specified,  514. 
where  no  address  given,  514. 
at  usual  place  of  business  or  residence,  514. 
wherever  person  to  pay  can  be  found,  514. 
at  last  known  place  of  business  or  residence,  514. 


1054  INDEX. 

[References  are  to  Sections.'] 
PRESENTMENT  FOR  PAYMENT — Continued. 

where  city  or  town  designated  without  other  specification,  instru- 
ment payable  generally,  515. 

at  residence  or  place  of  business  of  maker  when  no  particular  place 
is  specified,  515. 

where  town  specified  but  not  any  particular  place  therein,  515.  K 

place  specified  by  terms  of  instrument,  515. 

calling  at  particular  place  after  close  of  business  hours  insufficient, 
515. 

personal  demand  unnecessary  where  note  payable  at  particular  place, 
515. 

note  payable  at  particular  place,  515. 

presumption  as  to  residence  at  certain  place  designated  on  note,  515. 
.     at  certain  place,  due  diligence  required,  515. 

need  not  be  made  at  corner  of  street,  515. 

at  last  known  place  of  residence,  515. 

at  former  place  of  business  without  further  inquiry  insufficient,  515. 

in  case  of  removal  of  maker's  place  of  business,  515. 

in  case  of  removal  from  state,  515. 

made  personally  without  objection  to  place  of  demand,  515. 

where  instrument  payable  at  bank,  516,  517. 

note  in  possession  of  cashier  of  bank,  where  payable,  516. 

sufficient  where  note  presented  at  bank  where  payable,  516. 

to  cashier  of  bank,  516. 

at  particular  place  specified,  whether  necessary  to  be  made  there,  516. 

during  banking  hours,  516. 

at  particular  place  specified,  loss  or  injury  by  non-presentment  a 
matter  of  defense,  n.  516. 

where  bank  at  which  note  payable  is  holder,  517. 

admittance  obtained  to  bank  after  banking  hours,  517. 

to  bank  entered,  517. 

when  sufficient  at  any  bank  at  place  of  delivery  of  note,  517. 

bank  erroneously  designated  as  located,  517. 

of  draft  at  bank  some  distance  from  drawer's   place  of  business, 
term  "via"  after  drawer's  name,  etc.,  517. 

at  branch  bank,  517. 

of  note  transferred  as  collateral  to  another  bank,  517. 

to  agent  at  meeting  of  agents  of  several  banks  for  settlement  of  ac- 
counts, 517. 

demand  made  only  by  letter  written  by  bank  at  which  payable,  517. 

during  banking  hours  before  noon  and  subsequent  deposit  of  money 
before  noon,  517. 

note  payable  at  any  bank  does  not  include  loan  and  trust  corpora- 
tion, 517. 

where  bank  closed  and  new  bank  in  its  place,  personal  demand  un- 
necessary, 517. 

to  receiver  of  bank,  518. 

insolvency  or  suspension  of  bank,  518. 


INDEX.  1055 

[References  are  to  Sections.'] 
PRESENTMENT  FOR   PAYMENT — Continued. 
to  whom,  person  primarily  liable  dead,  519. 

persons  primarily  liable  partners,  joint  debtors,  520. 
excuses,  epidemic,  521. 

circumstances  beyond  holder's  control,  521. 
for  delay,  presentment  to  acceptor  for  honor  or  referee,  n.  521. 
reasonable  diligence  required  after  uncontrollable  cause  of  de- 
lay ceases  to  operate,  521. 
for  delay,  existing  war,  521. 
in  presentment,  521. 

political  condition  of  country,  521  and  note, 
when  presentment  dispensed  with,  drawer,  indorser,  522,  523. 
for  delay,  waiver,  522,  524,  525. 
when   dispensed   with,   reasonable   expectation   that   paper   will   be 
honored,  want  of  funds,  522,  523. 

transfer  of  its  property  by  corporation  maker,  522. 
mailing  note  for  collection,  required  diligence  exercised,  522. 
degree  of  diligence  required,  522. 
when  dispensed  with  generally,  522. 

dispensed  with,  instrument  made  for  accommodation  of  indorser, 
522. 

indorser  of  forged  bill,  522. 
excused  where,  after  reasonable  diligence,  presentment  cannot  be 

made,  522. 
excuses,  where  drawee  is  fictitious  person,  522. 

degree  of  diligence  necessary,   inquiring  of  cashier  of  bank  as  to 
residence,  522. 

holder  told  that  maker  has  absconded,  522. 
when   dispensed    with   where   no   right   to   require   or   expect  that 
drawee  or  acceptor  will  pay,  522. 

indorser  of  bill  or  note  given  for  his  accommodation,  523. 
insolvency,  523. 

insolvency  of  corporation  maker,  523. 
excuses,  note  payable  on  demand,  523. 

acceptor's  insolvency,  523. 
when  dispensed  with,  accommodation  indorsers  for  the  maker,  523. 
waiver  of  presentment  and  demand,  524,  525. 

signed  by  indorser,  524. 
indorsement  of  waiver  on  note,  524. 
"protest   waived"   and    "waiver   of    protest"    and   the   like    include 

waiver  of  demand,  524. 
where  note  stipulates  for  waiver,  524. 
waiver,  extension  of  time  of  payment,  524. 

mere  request  for  time,  524. 
indorser's  knowledge  of  maker's  insolvency,  524. 
knowledge  of  indorser  of  material  facts  and  laches,  waiver,  524,  525. 
waiver  as  indorser  even  though  guarantor,  524. 
when  no  consideration  necessary  for  waiver,  524. 


1056  INDEX. 

[References  are  to  Sections.'i 
PRESENTMENT  FOR  PAYMENT— Continued. 
waiver  in  body  of  note,  524. 
agreement  for  waiver  on  back  of  note,  524. 
waiver  by  partner  after  dissolution  of  firm,  525. 

by  taking  security,  collateral,  525. 

laches  and  check  lost,  duplicate  check  given,  525. 

by  paying  interest,  525. 

by  request  not  to  do  anything  with  note,  525. 

by  agreement  by  which  assignment  made,  525. 

request  for  renewal,  525. 

promise  by  letter  to  pay,  525. 

by   acknowledging    indebtedness,   or   by  partial   payment  or 
promise  to  pay,  knowledge  of  material  facts,  525. 
protest  must  specify  time  and  place  of,  530. 
protest  should  specify  fact  that  presentment  made  and  manner  of 

making,  530. 
protest  should  state  place  and  manner  of,  530,  532. 
waiver  of  waives  notice  of  dishonor,  573. 
substituted  presentment,  see  Checks. 
when  dispensed  with,  see  Excuses. 

PRESIDENT, 

of  corporation,  want  of  authority,  81. 

addition  to  name  of  maker  of  "President  A.  B.  Association,"  172. 

of  bank  selling  note  to  bank,  486. 

of  bank  indorser  of  note,  notice  of  protest,  541. 

PRESUMPTION, 

as  to  writing  embodying  agreement  of  parties,  342. 
as  to  consideration,  183. 

evidence  rebutting,  showing  seal,  consideration,  184. 
evidence  rebutting,  matters  dehors  contract,  185. 
raised  by  words  "value  received,"  186. 
as  to  consideration,  "value  received,"  consideration  expressed  or  not 

expressed,  186. 
of  fraud  created  by  inadequacy  of  consideration,  193. 
as  to  consideration,  joint  notes,  216. 
as  to  time  of  alteration  where  apparent  on  face,  136. 
as  to  place  of  payment  where  none  stated,  331. 
by  acceptance  as  to  funds  may  be  rebutted,  199. 
as  to  holder  of  non-negotiable  note,  consideration  paid  by  another, 

208. 
that  purchaser  for  value  is  dona  fide  holder,  240. 
that  all  indorsements  are  for  value  and  proper  purpose,  240. 
that  drawee  has  funds,  when  rebutted,  274. 

under  statute  as  to  valid  delivery  under  statute,  stolen  paper,  396. 
where  indorsed  in  blank  before  negotiation,  466. 
arising  from  certificate  of  protest  of  notary,  542,  543. 


INDEX.  1037 

[References  are  to  Sections.'] 
PRIMA  FACIE, 

consideration  for  assignment  is  amount  of  note,  236. 

evidence  of  ownership,  possession  is,  240. 

face  of  note  fixes  sum  received  by  indorser,  255. 

evidence  of  title,  possession  as,  402. 

right  to  recover,  holder  has,  403. 

evidence  of  contract  of  indorsement,  name  signed  in  blank,  406. 

title  from  possession,  evidence  to  rebut,  416. 

See  Burden  of  Proof;  Evidence;  Presumptions. 

PRINCIPAL, 

fraud  of  toward  guarantor  no  defense  against  bona  fide  holder,  121. 

demand  on,  indorsement  by  agent,  503. 

set-off  against  factor  who  conceals,  618. 

right  of  set-off  in  actions  by  or  against  principal  or  surety,  632. 

neglect  to  proceed  against,  discharge  of  surety,  680. 

neglect  to  prosecute,  discharge  of  guarantor,  681. 

See  Agent;   Principal  and  Surety;   Surety. 

PRINCIPAL  AND  SURETY, 

right  of  set-off  in  action  by  or  against,  632. 
See  Principal;  Sltiety. 
PRIVATE  SEAL, 

when  addition  of  not  material,  176. 

"PRIVILEGE  OF  EXTENSION  FOR  THIRTY  DAYS  GIVEN," 
alteration  of  note  by  this  clause,  155. 

PROCEEDINGS, 

collateral  condition  as  to  stay  of  not  performed,  325. 

PROCEEDS, 

of  paper,  diversion  of,  392. 

PROCESS, 

paper  procured  by  abuse  of  legal  process,  109. 
effect  of  threat  to  invoke  legal  process,  110. 

PROMISE, 

alteration  in  form  of,  157. 
estoppel  by  new  promise,  650. 

See  New  Promise;  Waiver  and  Estoppex. 

PROSECUTION, 

note  to  suppress  void,  n.  288. 

for  crime,  note  for  dismissal  of  void,  295. 

PROSTITUTE, 

clothes  washed  for,  may  recover,  301. 

PROSTITUTION, 

paper  as  price  of  void,  300. 
Joyce  Defenses — 67. 


1058  INDEX. 

[References  are  to  Sections.'\ 
PRO  TANTO, 

recovery,    where    inadequate    consideration,   and    transaction    sus- 
picious, 191. 

where  partial  want  of  consideration,  201. 

defense,  partial  failure  of  consideration,  208. 

failure  of  consideration,  208,  209. 

recovery,  one  purchasing  note  for  less  than  face  value,  240. 
purchaser  after  maturity,  432. 
PROTEST, 

in  case  of  post-dated  draft,  490. 

without  presentment  to  acceptor,  498. 

when  premature,  509. 

premature,  days  of  grace,  509. 

"protest  waived"  and  "waiver  of  protest,"  etc.,  include  waiver  of  de- 
mand, 524. 

and  want  of  protest,  526-543. 

object  of,  526. 

defined,  526. 

in  what  cases  necessary,  527. 

indorsee  entitled  to  notice  of,  527. 

of  foreign  bill  necessary,  527. 

necessity  of  under  negotiable  instruments  law,  527. 

of  promissory  note  unnecessary,  528. 

in  what  cases  unnecessary,  528,  529. 

how  made,  form,  contents  and  suflSciency  of,  530. 

a  notice  of  need  not  follow  any  particular  form,  530. 

signature  to  need  not  be  in  writing,  531. 

statement  in  certificate  as  to  place  addressed,  532. 

what  certificate  should  contain,  532. 

what  sufiicient  to  protect  notary,  532. 

by  whom  made,  533. 

made  by  a  notary  public,  533. 

cashier  of  bank  may,  533. 

of  paper  maturing  on  Sunday,  534. 

of  demand  note,  time  of,  534. 

when  to  be  made,  534. 

time  of  making  as  affected  by  statute,  534. 
where  days  of  grace,  534. 

w^here  to  be  made,  535. 

when  dispensed  with,  excuses,  536. 

unnecessary  as  to  -acceptor,  536. 

waiver  of  generally,  537-541. 

conditional  waiver  of,  537. 

waiver  of  by  conduct  of  indorser,  537,  538. 
promise  to  pay,  indorser,  538. 

where  waiver  of  stamped  on  back  of  note,  538. 

waiver  of  in  body  of  note  binds  indorser,  538. 

what  waiver  of  includes,  539. 


INDEX.  10oi> 

[References  are  to  Sections.'] 

PROTEST — Continued. 

particular  cases  of  waiver  of,  540. 
waiver  of  by  extension  of  time,  540. 

of  by  letter,  540. 

of  by  offer  of  renewal  note,  540. 

of  consequent  upon  telegram,  540. 

parties,  541. 
secretary  of  eorporation  may  waive,  541. 
curator  pf  insolvent  indorser  may  waive,  541. 

notice  of  to  indorser  who  is  president  of  bank  note  payable  at,  541. 
when  member  of  firm  may  waive,  541. 
certificate  of  as  evidence,  542,  543. 
notice  of  to  agent,  548. 
to  whom  notice  of  may  be  given,  548. 
notice  of  by  mail  sufficient,  554. 
giving  notice  of,  where  indorser  dead,  559. 
damages  when  bank  check  wrongfully  protested,  n.  582. 
of  check,  587. 

See  Notice  of  Dishonor. 

PUBLIC, 

funds,  note  for  illegal  use  of,  surety  may  show  illegality,  290. 
offense,  note  for  personal  injury  and  including  compromise  of,  void, 
n.  288. 

PUBLIC  CORPOHATIONS, 

See  CoTTTrTT:  Municipality. 
PUBLIC  LANDS, 

when  note  in  consideration  of  sale  of  void,  n.  288. 

PUBLIC  OFFICE, 

paper  in  consideration  of  resignation  from  void,  n.  288. 
paper  to  secure  consideration  of  sale  of  void,  n.  288. 
paper  to  procure  appointment  to  void,  n.  288. 

PUBLIC    OFFICER, 

only  authorized  to  receive  cash,  receipt  of  paper  by,  77. 

want  of  authority  to  issue  paper,  83. 

paper  to  corruptly  influence,  void,  n.  288. 

paper  given  to  deceive,  estoppel,  652. 

act  of  in  violation  of  statute,  estoppel  to  show,  672. 

PUBLIC  POLICY, 

note  void  where  consideration  contrary  to,  288, 

notes  contrary  to  void,  n.  288. 

note  against,  notice  of  to  transferee,  472. 

PURCHASE, 

of  sight  drafts,  agreement  t9  return  on  certain  conditions,  present- 
ment, 491. 
of  bill  in  consideration  of  acceptance  of  another,  n.  491. 
by  indorsee,  note  paid  before,  demand  not  excused,  503. 
or  payment,  what  is,  discharge  of  note,  696. 


1060  INDEX. 

IReferences  are  to  Sections.'] 
PURCHASE  PRICE, 

paper,  acceptor  cannot  show  want  or  failure  of  consideration,  258. 
partial  failure  of  consideration,  208. 

notes,  action  against  guarantor,  want  or  failure  of  consitleration, 
259. 

bona  fide  holder  or  assignee,  260. 

property  useless  or  of  no  value,  262. 

land,  warranty,  264. 

personal  property,  warranty,  failure  of  consideration,  265. 

instances  in  general  of  want  or  failure  of  consideration,  268. 

PURCHASE    PRICE    NOTES, 

original  parties,  want  or  failure  of  consideration,  257. 
effect  upon  subsequent  holders  of  conditions,  328. 
collateral  conditions  and  agreements  affecting,  327. 

PURCHASER, 

by  mere  delivery,  maker's  defense,  discharge,  679, 

PURCHASER    AFTER    MATURITY, 

general  rule  as  to,  419,  420. 

principle  on  which  rule  founded,  419. 

buys  at  his  peril,  420. 

note  overdue,  circumstance  of  suspicion,  420. 

general  rules  not  founded  on  question  of  title,  419. 

distinction  between  bill  indorsed  before  and  after  maturity,  419. 

limitation  of  general  rule,  431. 

paper  executed  under  duress,  114. 

want  or  failure  of  consideration,  239. 

of  accommodation  paper,  want  of  consideration,  282. 

subject  to  defense  of  breach  of  condition,  310. 
as  to  other  signatures,  315. 

evidence  of  conditions  affecting  consideration,  322. 

of  note,  cannot  defeat  by  agreement  as  to  liability,  334. 

where  taken  as  collateral  security  by,  372. 

from  pledgee,  372. 

of  note  by  firm  to  a  member  of,  421. 

application  of  general  rules  generally,  421,  422. 

fraudulent  transfer  by  payee,  421. 

usury  may  be  shown,  421. 
»  no  defense  note  executed  on  Sunday,  421. 

set-off  against  under  statute,  422. 

set-off  and  recoupment,  422. 

when  charged  with  knowledge  of  homestead  rights,  423. 

where  series  of  notes  mature  on  failure  to  pay  one,  423. 

of  note  payable  on  default  in  payment  of  interest,  424. 

of  bank  bills,  425. 

of  checks,  425. 

of  non-negotiable  due  bill,  425. 

of  coupon  bonds,  426. 


INDEX.  '  10(!1 

[References  are  to  Sections.'] 
PURCHASER  AFTER  MATURITY— Continued. 

of  certificate  of  deposit,  427. 

where  transferred  before  but  not  indorsed  until  after  maturity,  428. 

of  non-negotiable  note,  429. 

effect  of  statute  providing  that  suit  by  assignee  shall  be  without 
prejudice,  430. 

statute  may  provide  for  defense  arising  out  of  collateral  matters, 
431. 

pro  tanto  recovery  by,  432. 

of  note  to  be  used  as  collateral,  pro  tanto  recovery,  432>. 

from  bona  fide  holder,  general  rule,  433,  434. 
usury,  434. 

application  of  rule,  434. 
want  of  consideration,  434. 

of  demand  paper,  435. 

word  'overdue"  construed  with  reference  to  demand  paper,  435. 

defenses  and  equities  between  maker  and  indorser  or  intermediate 
holder,  436. 

secret  equity  in  favor  of  entire  stranger,  437. 

plea  that  plaintiff  was,  no  evidence  to  sustain,  442. 

in  good  faith,  467,  468,  469. 

overdue  paper,  default  in  payment  of  interest,  468. 

of  demand  notes,  469. 

claim  as  set-off  against  must  have  been  acquired  before  suit  com- 
menced, 592. 

of  firm  note  indorsed  to  a  partner,  set-off  against,  634. 

right  of  set-off  against,  635,  636.  637. 

general  rules  as  to  set-off  against,  635. 

subject  to  set-off  available  against  his  indorser,  635. 

not  subject  to  set-off  not  available  against  his  indorser,  635. 

no  recovery  against  for  excess  of  set-off,  636. 

not  subject  to  set-off  of  indebtedness  arising  out  of  suit  pending  on 
appeal,  636. 

of  note  payable  without  defalcation   or  discount,   right  of   set-off 
against,  636. 

bank  draft  payable  on  demand,  right  of  set-off  against,  636. 

set-off  against  note  repurchased  by  payee  after  maturity,  636. 

not  subject  to  set-offs  arising  out  of  other  transactions,  637. 

estopped  by  admission  of  prior  holder,  658. 

defense  of  maker,  discharge,  679. 


Q 

QUESTION  OF  LAW, 

materiality  of  alteration  is,  135. 

QUITCLAIM, 

agreement  to  as  consideration,  194. 


1062  •  INDEX, 

[References  are  to  Sections.'] 
QUITCLAIM  DEED, 

See  Deed. 

R 

RAILROADS, 

notes  given  to  aid  in  construction  of,  performance  of  conditions  in, 
345. 

RATE  OF  INTEREST, 

effect  of  alteration  in,  169. 

addition  of  by  inserting  where  none  stated,  170. 
See  Interest;   Interest  Clause. 
RATIFICATION, 

by  infant,  what  constitutes,  64. 

as  affecting  defense  of  infancy,  64. 
after  filing  plea  of  infancy,  64. 
of  note  executed  by  intoxicated  person,  69. 
of  unauthorized  signature,  estoppel,-  74. 
of  note  executed  under  duress,  113. 
of  an  alteration,  effect  of,  149. 
of  alteration,  by  making  partial  payment,  150. 

by  giving  collateral,  150. 

by  payment  of  interest,  150. 

by  subsequent  promise  to  pay,  150. 

by  requesting  and  obtaining  an  extension  of  time,  150. 

by  recognition  of  liability,  150. 

what  constitutes,  150. 
by  corporation  of  ofHcers'  acts,  485. 

See  Waiver  and  Estoppel. 

REASONABLE  DILIGENCE, 

See  Diligence. 

REASONABLE  EXPECTATION, 

that  paper  will  be  honored,  want  of  funds,  presentment  for  pay- 
ment, 522,  523. 

REASONABLE  TIME, 

for  presentment  for  payment,  what  is,  503. 

how  determined,  demand  notes,  505,  506. 

presentment  in,  demand  notes,  maker's  insolvency,  excuses,  506. 

credit  or  indulgence  to  maker  not  a  factor  in  determining  what  is, 

presentment,  506. 
note  as  continuing  security  with  interest,  presentment  for  payment, 

506. 
presentment  for  payment  of  notes  payable  at  sight  or  on  demand 
with  interest,  507. 

demand  note  and  demand  note  bearing  interest,  508. 
See  Checks;  Presentment  for  Acceptance;  Presentment  fob  Payment. 


f 


INDEX.  10G3 

[References  are  to  Sections.'] 
REBELLION, 

note  in  aid  of  void,  293. 

RECEIPT, 

cancellation,  indorsement  of  payment,  695. 

RECEIVER, 

of  payee  bank,  maker  may  show  want  of  consideration  in  action  by, 

198. 
of  bank,  action  liy  on  note  for  accommodation  of  bank,  281. 
presentment  to  for  payment,  518. 
right  of  set-off  against,  626. 
estopped  by  representation  of  maker  in  connection  with  transfer, 
653. 

RECITALS, 

as  to  place  of  execution  cannot  be  contradicted,  18. 

"value  received,"  evidence  to  rebut,  185,  186. 

in  certificate  of  deposit  as  to  receipt  of  money,  205. 

in  note  that  for  "money  loaned,"  205. 

in  renewal  note  expressing  receipt  of  value,  want  of  consideration, 
221. 

of   value    received,    want   of    consideration   no    defense,    bona    fide 
holder,  260. 

in  municipal  bonds,  488. 

in  school  district  bonds,  488. 

suflBciency  of  in  notice  of  dishonor,  552. 

as  to  consideration,  estoppel,  646. 

in  collateral  mortgage  as  an  estoppel,  646. 

that  note  by  married  woman  for  benefit  of  separate  estate,  estoppel, 
646. 

as  to  place  of  execution,  estoppel,  646. 

in  contemporaneous  agreement  as  an  estoppel,  646. 

as  to  interest,  estoppel,  646. 

in  indorsement  as  an  estoppel,  646. 

in  mortgage,  when  not  estoppel  on  wife,  646. 

as  to  signers  being  principals,  estoppel,  646. 

in  paper  as  an  estoppel,  646. 

describing  payee  by  firm  name,  estoppel,  646. 

expressly  waiving  defenses,  does  not  waive  counterclaim  for  dam- 
ages, 646. 

in  bonds  as  an  estoppel,  647. 

See  Wai\-ku  and  Estoppel. 
RECOUPMENT, 

See  Set-off,  Recoupment  and  Countebclaim. 
REFEREE, 

See  Acceptor  for  Honor. 
RELEASE, 

of  dower  by  wife  as  a  consideration,  194. 

of  all  claims  and  demands  as  a  consideration,  195. 


1064  INDEX. 

[References  are  to  Sections.'] 
RELEASE — Continued. 

of  drawer  and  indorser,  presentment  for  payment,  502. 
estoppel  of  indorsers  by,  673. 
See  Discharge;   Payment;   Presentment  for  Acceptance;    Presentment 

FOR  Payment. 
RENEWAL  NOTE, 

fraud  defense  to  action  on,  116. 

in  procuring  indorsement  to  no  defense  to  original,  126. 
notes  generally,  want  or  failure  of  consideration,  219. 
notes,  waiver  by  principal  precluding  defense  of  failure  of  consid- 
eration, 220. 

implied  or  expressed  consideration,  want  or  failure  of  consid- 
eration, 221. 
of  voidable  note,  want  of  consideration,  222. 
notes,  want  or  failure  of  consideration  generally,  222. 
new  consideration  not  necessary,  222. 
consideration  for  original  note  sufficient,  222. 
of  one  already  paid  is  without  consideration,  n.  222. 
without  consideration  where  original  was,  n.  222. 
discount  before  maturity,  223. 

in  consideration  of  promise  of  seller  to  repair  defects,  265. 
not  affected  by  taint  of  illegality  in  old  note,  288. 
bill  or  note,  where  original  tainted  with  usury,  305. 
note  held  by  l)ona  fide  holder,  failure  of  consideration  of  original 

no  defense,  324. 
collateral  agreement  to  renew  note  no  defense,  339. 
note,  continuance  of  security,  extinguishment  of  debt,  375. 
request  for  as  waiver  of  presentment  for  payment,  525. 
offer  of  as  waiver  of  protest,  540. 
note  as  an  estoppel,  649. 
discharge  by,  688. 

maker's  knowledge  of  ownership  of  as  affecting  payment,  699. 
See  Discharge;    Extension. 
RENT, 

note  given  for  money  loaned  for,  coverture,  57. 

set-off  of  claim  for  against  note  to  one  "as  assignee,"  618. 

surrender  of  notes  for,  discharge,  695. 

RENUNCIATION, 

by  holder,  700. 

See  Discharge. 
REPLEVIN, 

to  recover  stolen  coupons  sold  after  maturity,  426. 

REPRESENTATIONS, 

See  Fraud  and  Fraudulent  Representations;  Misrepresentations. 

REQUISITION, 

procured  to  compel  settlement  of  claim,  109.    • 


INDEX.  1065 

[References  are  to  Sections,'] 
RESCINDING, 

of  contract  and  restoring  consideration,  general  rule  and  exceptions 
to,  210,  211. 

RESCISSION, 

of  contract  and  restoring  consideration,  general  rule  and  exceptions 

to,  210,  211. 
of  sale,  discharge  of  note,  679. 

RESERVATION,        ^ 

of  right  against  indorser  at  time  of  transfer,  702. 

RESIDENCE, 

notice  of  dishonor  may  be  sent  to,  569. 

in  same  place,  see  Check;   Notice  of  Disiioxob;  Presentment  foe 
Acceptance;  Presentment  for  Payment;   Protest. 
See  Presentment  for  Acceptance;  Presentment  for  Payment. 

RESTRAINT  OF  TRADE, 
note  in,  void,  n.  288. 

RETRACING, 

pencil  writing  in  ink  not  material  alteration,  137. 
signature  of  maker  in  ink,  173. 

REVENUE    LAWS, 

See  Stamp. 
REVENUE  STAMP, 

not  affixed  at  time  of  execution,  19. 

RULES, 

of  clearing-house,  availability  of  as  a  defense,  8. 


SALES, 

illegal,  note  given  for,  bona  fide  holder,  294. 
contract  of  and  note  may  be  construed  together,  310. 
of  collateral  and  proceeds  applied  on  bill,  action  for  deficiency,  494. 
rescinded,  discharge  of  note,  679. 
or  surrender  of  collateral,  discharge,  683. 
transfer  or  delivery  of  goods  as  discharge  of  note,  691. 
See  Goods;   Machine;   Machinery;    Merchandise;   Mortgage  Sale; 
Purchase;  Vendee;   Vendor. 
SATISFACTION, 

of  note  other  than  by  payment  of  money,  condition  in  note  as  to, 

344. 
mortgage,  682. 

by  conveyance  of  land  or  agreement  to  take  deed,  690. 
See  Discharge. 


1066  INDEX. 

^References  are  to  Seetions.l 
SATURDAY, 

time  of  maturity,  509,  510. 

where  last  indorser  receives  notice  of  dishonor  on  Saturday,  notice 
to  prior  indorser,  568. 

SAVINGS  ASSOCIATION, 

paper  to  procure  election  of  one  as  trustee  of,  void,  n.  288. 

SCHOOL  BONDS, 

where  fraudulently  issued,  98. 

SCHOOL  DISTRICT, 

bonds,  recitals,  488. 

SEAL, 

accidental  erasure  of,  143. 

addition  of  by  agent  of  maker,  176. 

alteration  by  addition  or  destruction  of,  176. 

when  addition  of  private  seal  not  material,  176. 

addition  of  changes  character  of  note,  176. 

note  under,  want  of  consideration  an  equitable  defense,  217. 

imports  consideration,  217. 

note  under,  want  or  failure  of  consideration  as  defense  to,  217. 

gratuitous  promise  to  pay  no  defense,  218. 
on  lease  does  not  prevent  showing  failure  of  consideration  for  note, 

327. 
notes  under,  bona  fide  holder,  444. 
on  protest,  necessity  of  controlled  by  statute,  530. 
makes  certificate  of  protest  of  notary  presumptive  evidence,  542. 

SECRETARY, 

of  corporation,  want  of  authority  of,  81. 
may  waive  protest,  541. 
SECURITY, 

breach  of  condition  as  to  depositing  collateral,  323. 

See  Collateral  Security;   Mortgage  Secueitt. 

SEDUCTION, 

of  wife,  note  given  because  of  void,  n.  288. 
note  given  after  and  as  compensation  for,  301. 

SEPARATE  ESTATE, 

of  married  woman  as  affecting  defense  of  coverture,  56,  57,  58. 

intention  to  charge  as  affecting  defense  of  coverture,  59. 

of  married  woman,  recital  as  to  estoppel,  646. 
See  Coverture. 
SERIES, 

of  notes  maturing  on  failure  to  pay  one,  423. 

notes  of,  one  overdue  as  notice,  484. 

of  notes,  notice  of  dishonor,  545. 
payment  of,  to  whom,  698. 


INDEX.  1067 

[References  are  to  Sections.'] 
SERVICES, 

note  for  amount  in  excess  of  value  of,  192. 

rendered  by  daughter  to  mother  not  a  consideration,  194. 

when  failure  to  perform  no  defense,  202. 

rendering  of  the  consideration,  that  amount  of  note  exceeds  value 

of  no  defense,  329. 
breach  of  agreement  to  render,  failure  of  consideration,  329. 
condition  that  note  payable  in  cannot  be  shown,  334. 
condition  in  note  as  to,  n.  343. 
set-off  of  claim  for,  596. 
rendered  as  discharge  of  note,  693. 
rendered  attempt  of  maker  to  indorse  amount  of  claim  for  on  note, 

695. 

SET-OFF,  RECOUPMENT  AND  COUNTERCLAIM. 

what  law  governs,  590. 

is  a  mode  of  defense,  590. 

what  essential  to  an  allowance  of,  591. 

must  be  of  claim  due  between  same  parties,  591. 

where  demands  liquidated  an  agreement  to  set-off  not  necessary, 
591. 

equities  from  other  transactions  not  available,  591. 

a  mere  contingent  liability  not  available,  595. 

notes  not  due  when  suit  brought  not  available,  595. 

on  compromise  note  counterclaim  arising  out  of  matters  compro- 
mised not  allowable,  195. 

partial  failure  of  consideration,  208. 

of  damages,  208. 

of  one  note  against  another,  notes  exchanged,  227. 

of  breach  of  agreement  as  to  possession  of  land,  323. 

of  value  of  collateral  lost  by  operation  of  statute  of  limitations,  373. 

of  bank  deposit  against  bank  assignee,  422. 

of  amount  paid  to  clear  title,  422. 

purchasers  after  maturity,  422. 

of  assessment  on  stock  against  note  to  corporation,  422. 

demand  due  to  partnership  of  which  defendant  a  member  not  avail- 
able, 591. 

where  acquired  after  writ  made  out  and  before  service,  592. 

maker  custodian  of  society  funds,  cannot  set  off  debt  due  to  society, 
591. 

right  must  have  been  acquired  prior  to  commencement  of  suit,  592, 

of  note,  where  assignment  dated  back,  592. 
of  partner  in  suit  against  firm,  592. 

where  claim  or  demand  acquired  subsequent  to  transfer,  593. 

of  demand  against  payee,  when  not  available  against  surety,  594. 

where  claim  acquired  after  notice  of  assignment,  594. 

in  action  by  payee  for  use  of  assignee,  594. 

of  unliquidated  damages  arising  from  breach  of  covenant,  594. 

against  assignee  for  benefit  of  creditors,  595. 


1,068  INDEX. 

[References  are  to  Sections.'] 
SET-OFF,  RECOUPMENT  AND  COUNTERCLAIM— Co^ifinued. 
of  claim  for  services  rendered  to  plaintiff,  596. 

where  note  given  for  machine,  breach  of  subsequent  promise  to  re- 
pair not  available,  596. 
of  damages  arising  from  false  representations  inducing  execution 

of  note,  596. 
in  action  by  bank,  stock  of  bank  not  available,  596. 
particular  claims  or  demands  which  may  be  set  off,  596. 
right  to  judgment  for  excess  of  set-off  over  plaintiff's  claim,  596. 
arising  from  agreement  to  pay  debt  of  third  person,  596. 
indebtedness  of  holder  of  certified  check  not  available  against  check, 

596. 
of  damages  recoverable  in  an  action  of  tort,  597. 

for  forcibly  taking  possession  of  property  note  given  for,  597, 

598. 
arising  from  negligence  of  plaintiff  as  agent  cannot  be,  598. 
caused  by  a  slander  on  credit  of  maker,  598. 
of  demand  for  amount  of  note  converted,  598. 
of  unliquidated  damages  for  selling  property  in  violation  of  trust, 

598. 
damages  for  conversion  of  goods  may  be  set  off,  598. 

for  negligence  in  care  of  collateral  cannot  be,  598. 
against  note  given  for  interest  in  partnership  of  damages  by  rea- 
son of  misstatements,  599. 
Of  damages  arising  ex  contractu  and  under  same  contract,  599. 
arising  from  nonperformance  of  contract  obligations,  599. 
arising  from  fraud,  599. 
arising  from  mistake,  599. 
for  breach  of  contract  to  deliver  cans,  600. 
arising  ex  contractu  but  under  different  contract  not  availa- 
ble, 600. 
of  mortgagee's  negligence  in  not  procuring  insurance  not  available, 

600. 
when  breach  of  covenant  against  incumbrances  not  available,  601. 
of  damages  for  fraud  of  mortgagee  in  concealing  material  facts,  601. 
for  breach  of  warranty,  where  note  given  with  knowledge  of 
but  on  promise  to  remedy,  601. 
when  damages  for  false  representation  as  to  land  not,  601. 
damages  for  breach  of  warranty  not  available  to  surety  or  guar- 
antor, 601. 
of  damages  for  breach  of  warranty  or  covenant,  601. 
damages  for  breach  of  warranty  or  covenant  not  available  against 

bona  fide  holder,  602. 
when  error  to  render  judgment  for  excess,  action  on  one  of  several 

notes,  603. 
apportioning  damages  pro  rata  among  several  notes,  603. 
of  money  paid  to  clear  land  of  incumbrances,  603. 
of  bank  deposits,  what  essential  to  right,  604. 


INDEX.  1069 

[References  are  to  Sections.'] 
SET-OFF,  RECOUPMENT  AND  COUNTERChAlM— Continued. 
rule  as  to  bank  deposits,  604. 

of  bank  deposits,  right  of  equitable  but  not  legal,  604. 
evidence  as  to  bank  deposit  at  time  of  maturity  of  note,  n.  604. 
in  action  by  depositor  to  recover  bank  deposit,  605. 
of  judgment  in  action  by  depositor  in  action  to  recover  bank  de- 
posit, 605. 
note  not  available  where  taken  with  notice  of  failure  of  considera- 
tion, 606. 
of  note  not  due  at  time  of  notice  of  assignment,  606. 
note  cannot  be  set  off  against  a  certificate  of  deposit,  606. 
of  note  of  assignor  in  action  by  assignee,'  606. 
of  bill  or  note  generally,  606. 

of  note  transferred  by  delivery  where  indorsement  essential,  606. 
what  essential  to  render  bill  or  note  available  as,  607,  608. 
under  the  code  in  New  York,  607. 

of  bill  or  note,  maker  insolvent,  power  of  court  to  continue  case 
until  defendant  obtains  judgment,  607. 

not  due  in  action  to  recover  bank  deposit  where  depositor  in- 
solvent, 607. 
bill  not  due,  not  available  though  plaintiff  and  acceptor  insolvent, 

607. 
note  should  be  confined  to  transactions  between  same  parties,  608. 
bill  or  note  to  be  available  must  have  been  due  when  action  com- 
menced, 607. 

must  be  due,  607. 
not  allowed  of  note  held  by  defendant  and  another  jointly,  608. 
note  transferred  merely  to  use  as  set-off  not  available,  608. 
bill  or  note  must  be  due  in  same  right  to  be  available,  608. 
of  note  not  allowed  where  fraud  on  plaintiff,  609. 

as  affected  by  statute,  610. 

may  be  prevented  by  statute  of  limitations,  610. 

as  affected  by  laches,  610. 

want  of  title  will  preclude,  611. 
of  bills  or  notes  of  bank,  612. 
of  value  of  collateral  converted  by  pledgee,  613. 
of  note  without  delivering  up  collateral,  613. 
of  value  of  collateral  sold  or  diverted,  613. 
right  of  where  collateral  has  been  given,  613. 
of  value  of  collateral  where  collection  lost  by  negligence  of  pledgee, 

613. 
of  usury,  when  not  available  against  surety,  614. 
usury  in  some  states  can  only  be  recouped,  614. 
rule  as  to  recoupment  of  usurious  interest,  614. 
pro  rata  set-off  of  usury  against  joint  makers,  614. 
of  usurious  interest  in  action  on  renewal  of  note,  614. 
of  usury  not  defeated  by  statute  of  limitations.  614. 

to  be  available  must  attend  same  contract,  614. 


1070  IXDEX. 

[References  are  to  Sections.^ 
SET-OFF,  RECOUPMENT  AND  COUNTERCLAIM— Confintted. 
of  judgment  for  usurious  interest,  615. 
of  usury,  right  of  as  affected  by  Federal  statutes,  615. 
right  of  generally  as  affected  by  statute,  616. 

under  statute  of  demand  acquired  before  notice  of  transfer,  616. 
statute  of  limitations  may  defeat  right  of,  616. 
in  New  York  need  not  be  upon  contract,  616. 

waiver  of  right  of  by  promise  to  {)ay  at  time  of  assignment,  617. 
right  not  waived  by  failure  to  set  it  up  prior  to  verdict  or  judgment, 

617. 
collection  of  judgment  may  be  restrained  to  allow,  617. 
waiver  of  right  of,  617. 
against  note  made  to  "as  assignee,"  618. 
against  third  person  beneficially  interested,  618. 
of  sealed  bill  against  note  to  one  as  "agent  of  the  creditors,"  618. 
against  guardian  of  insane  ward,  618. 

not  of  indebtedness  due  to  corporation  not  a  party  to  note,  618. 
■     availability  in  respect  to  parties  generally,  618. 
against  factor  concealing  principal,  618. 
of  note  against  action  on  account  for  use  of  another,  618. 
in  action  by  holder  of  certified  check  against  bank,  619. 
availability  in  favor  of  acceptor,  619. 
when  note  cannot  be  set  off  to  action  by  administrator  to  recover 

bank  deposit,  620. 
payment  by  one  as  surety  not  set  off  against  administrator,  620. 
what  not  a  set  off  against  note  for  interest  in  partnership,  action 

by  administrator,  620. 
in  action  by  administrator  or  executor,  620. 
note  for  land  sold  by  administrator,  claim  purchased  from  estate 

not  set  oft',  620. 
note  purchased  after  testator  died  insolvent  not  available  against 

administrator,  620. 
against  note  indorsed  to  general  agent  of  payee,  621. 
to  person  named  or  bearer,  621. 
in  hands  of  agent  of  holder  for  collection,  621. 
against  notes  to  or  in  hands  of  agent  or  broker,  621. 
against  bills  remitted  for  discount,  621. 
against  note  put  in  hands  of  broker  for  sale  or  advance,  621. 

indorsed  to  bank  for  collection,  622. 
what  available  generally  against  assignees  and  indorsees,  623,  624. 
against  assignee  of  time  deposit  with  payee,  623. 
by  accommodation  indorser  of  usury,  623. 
against  assignee  of  amount  withheld  by  payee  of  mortgage  coupon 

bonds,  623. 
against  note  indorsed  to  collecting  agent,  623. 
against  assignee  of  debt  paid  by  surety,  623. 
where  note  assigned  to  avoid  a  set-off,  623. 
against  assignee  holding  in  trust  for  payee,  623. 


INDEX.  1071 

[References  are  to  Sections.] 
SET-OFF,  RECOUPMENT  AND  COUNTERCLAIM— Continued. 
against  note  assigned  to  avoid  payment  of  debts,  623. 
against  intermediate  indorser  not  available  generally,  624. 
bank  not  subject  to  set-off  of  dividends  accruing  on  stock,  624. 
statute  affecting  right  of  against  indorsee,  625. 
against  bankrupts  and  insolvents,  626. 
right  of  against  receiver  of  insolvent  bank,  626. 
not  permitted  of  claim  purchased  after  insolvency  of  bank  holding 

note,  626. 
of  bills  purchased  after  insolvency  of  drawer,  626. 
of  debt  due  to  surety  where  note  transferred  after  insolvency  of 

payee,  626. 
in  favor  of  bankrupts  and  Insolvents,  626. 
not  permitted  against  assignee  of  insolvent  to  set  off  note  purchased 

after  maturity,  626. 
accommodation  indorser  paying  note  to  bona  fide  holder  not  subject 

to,  627. 
in  action  by  payee  for  use  of  bona  fide  holder,  627. 
no  right  of  against  bona  fide  holders,  627. 
husband  not  subject  to  set-off  of  debt  of  wife  before  marriage,  note 

to  wife,  628. 
where  note  to  wife  merged  in  judgment  recovered  by  husband,  628. 
against  notes  transferred  by  husband  to  wife,  628. 
note  to  wife  not  set-off  to  action  against  husband,  628. 
pledgee  not  subject  to  set-off  against  wife  of  payee,  628. 
debt  to  wife  of  drawer  of  check  not  set-off  to  action  on,  628. 
note  to  wife,  action  by  husband  and  wife,  liability  of  husband  not 

a  set-off,  628. 
cannot  set  off  claim  for  medical  services  to  husband  against  note 

owned  by  wife,  628. 
in  case  of  joint  creditors  and  debtors,  629,  630,  631,  632. 
in  action  joint  and  several  note,  629,  633. 
joint  note  not  set-off  against  individual  debt,  629. 
liability  on  joint  indorsement  not  available  against  individual,  630. 
action  by  joint  holders  of  mortgage,  note  of  one  not  a  set-off,  629. 
in  favor  of  one  maker  not  available  in  favor  of  joint  makers,  629. 
debt  of  one  payee  not  available  against  joint  payees  except  by  agree- 
ment, 629. 
of  individual  debt  where  note  held  by  two  for  use  of  debtor,  629. 
in  action  by  or  against  principal  or  surety,  632. 
of  joint  liability  where  party  sues  in  his  sole  right,  630. 
right  of  in  case  of  joint  creditors  and  debtors  as  affected  by  statute, 

631. 
of  a  joint  and  several  note,  633. 

against  purchaser  after  maturity  of  note  indorsed  to  a  partner,  634. 
of  a  partnership  account,  634. 
in  action  by  partner  on  individual  note,  634. 
against  purchasers  after  maturity,  635,  636,  637. 


1072  INDEX. 

[References  are  to  Sections.'] 
SET-OFF,  RECOUPMENT  AND  COUNTERCLAIM— Continued. 

against  purchasers  after  maturity,  general  rules  as  to,  635. 
date  of  bank  draft  payable  on  demand,  636. 

against  one  purchasing  after  maturity  note  payable  without  defalca- 
tion or  discount,  636. 

indebtedness  arising  out  of  suit  pending  on  appeal  not  available 
against  purchaser  after  maturity,  636. 
■  against  note  repurchased  by  payee  after  maturity,  636. 

excess  of  cannot  be  recovered  against  purchaser  after  maturity,  636. 

arising  out  of  other  transactions  not  available  against  purchaser 
after  maturity,  637. 

no  right  of  against  state,  638. 

in  favor  of  maker  may  enure  to  benefit  of  surety,  639. 

surety  not  entitled  to  set  off  amount  collected  on  collateral,  639. 

in  action  against  surety  by  assignee  in  insolvency,  639. 

in  favor  of  drawer  enures  to  benefit  of  indorser,  639. 

right  of  generally  in  actions  against  sureties,  639. 

by  surety  of  damages  due  to  principal,  640. 

no  estoppel  as  to  by  clause  in  note  waiving  defenses,  646. 

giving  of  note  as  an  estoppel  to  assert,  648. 

estoppel  by  representations  in  connection  with  transfer,  653. 

to  note,  board  and  lodging  as,  693. 

SETTLEMENT, 

note  given  as,  sufficient  consideration,  195. 

SEVERAL, 

See  Joint  and  Seveeal. 
SEWING  MACHINE, 

coverture  as  defense  to  note  given  for,  57. 

SHEEP, 

diseased,  note  for  sale  of  valid,  n.  288. 

SHORTAGE, 

in  husband's  accounts,  consideration,  194. 

in  accounts,  paper  given  to  cover,  estoppel,  652. 

SICKNESS, 

as  excuse  for  failure  to  tender  back  consideration,  211. 

SIGHT, 

note  payable  at  with  interest,  presentment  for  payment,  reasonable 

time,  507. 
bill  payable  at  or  after,  see  Presentment  fob  Acceptance. 

SIGHT  BILL, 

See  Presentment  for  Acceptance. 
SIGHT  DRAFT, 

in  legal  intent  draft  for  acceptance,  490. 

time  of  payment  of  cannot  be  known  until  acceptance,  490. 

agreement  to  return  on  certain  conditions,  presentment,  491. 


INDEX.  1073 

[References  are  to  Sections.] 
SIGNATURE, 

where  unauthorized,  73. 

of  another  party  or  note,  misrepresentation,   120. 

accidental  tearing  off  of,  subsequently  pasted  on,  143. 

erasure  of,  143. 
alteration  by  addition  of,  174. 
when  addition  of  not  a  defense,  175. 
conditions  that  ot^hers  be  procured,  315,  316. 
delivery  in  escrow  conditioned  on  another  signature,  317. 
of  indorser  in  blank    prima  facie  evidence  of  indorsement,  406. 
on  condition  that  another  be  obtained,  right  of  transferee,  456. 
to  protest  need  not  be  in  writing,  531. 
estoppel  by  acceptance  to  deny,  642. 
affixing  of  as  an  estoppel,  644. 
indorsement  affirms  genuineness  of,  645, 
where  unauthorized,  see  Want  of  Authority. 
See  Altekation;   Execution;   Name;   Waivee  and  Estoppel. 

SIGNING, 

See  Execution. 
SILENCE, 

does  not  estop  to  show  failure  of  consideration,  664. 

no  estoppel  as  to  forgery,  673. 

SISTER, 

note  by  under  threat  to  prosecute  brother,  112. 

SLANDER, 

note  in  consideration  of  forbearance  to  sue  for,  295. 
on  credit  of  maker,  right  to  set  off  damages  for,  598. 

SLOT  MACHINE, 

note  for  illegal,  n.  288. 

SOCIETY, 

maker  of  note  custodian  of  funds  of,  cannot  set  off  debt  due  to,  591. 

SOLE  TRADER, 

woman  as,  55. 

See  Co\t:rtube. 
SPECIALTY, 

simple  note  changed  to  by  adding  seal,  176. 

SPECULATION, 

note  in  connection  with  void,  n.  288. 

SPOLIATION, 

alteration  a  mere  spoliation  no  defense,   137. 
by  agent  of  holder  regarded  as,  141. 
by  third  party  regarded  as,  142. 
of  date  by  stranger  is,  152. 

Joyce  Defenses — 68. 


1074  INDEX. 

[References  are  to  Sections.^ 
STAMP, 

revenue  stamp  not  affixed  at  time  of  execution,  19. 
alternation  of  note  by  affixing,  178. 

failure  to  affix  does  not  subject  holder  to  equities,  464. 
on  note  insufficient,  as  to  notice  of,  474. 

STAMPING, 

of  note,  alteration  by,  178. 

STATE, 

no  right  of  set-off  against,  638. 

officials,  paper  given  to  deceive,  estoppel,  652, 

STATE  NOTES, 

illegally  issued,  received  as  loan  by  maker  of  note  and  used  as 
money,  291. 

STATUTE, 

affecting  defense  of  coverture,  34. 

as  to  coverture  have  no  retroactive  effect,  35. 

coverture  a  defense  when  transaction  not  within  statutory  excep- 
tion, 36. 

burden  of  proof,  statutory  exception  as  to  coverture,  37. 

pleading  statutory  exception  as  to  coverture,  37. 

requiring  assent  of  husband  to  render  wife's  note  valid,  38. 

providing  that  wife  may  be  sued  jointly  with  husband,  40. 

of  New  York  permitting  married  woman  to  contract  construed,  40. 

permitting  wife  to  contract,  coverture,  wife  a  joint  maker,  41. 

forbidding  married  woman  to  become  surety,  45,  46. 

where  no  defense  that  married  woman  signed  as  surety,  47. 

disabling  married  woman  from  accepting  bill  of  exchange,  50. 

requiring  written  assent  to  indorsement  by  wife,   52. 

as  to  assent  of  husband  to  indorsement  by  wife,  53. 

as  affecting  corporate  want  of  authority,  79. 

power  of  public  corporation  to  issue  paper  generally  regulated  by,  87. 

as  to  note  taken  for  insurance  premiums,  non-compliance  with,  79. 

indorser  cannot  show  note  of  corporation  in  violation  of,  95. 

providing  for  recovery  by  bona  fide  holder  when  instrument  al- 
tered, 136. 

permitting  consideration  of  writings  to  be  impeached,  208. 

may  affect  availablity  of  defenses  against  assignee,  237. 

cutting  off  latent  defenses,  n.  237. 

paper  given  for  consideration  in  violation  of,  291,  292. 

sale  void  under,  note  for,  294. 

liquors  sold  contrary  to,  note  for  void,  n.  288. 

prohibting  act,  repeal  of  before  action  brought,  292. 

as  to  notes  for  patent,  non-compliance  with,  292. 

as  to  assignment  of  paper  held  on  gambling  consideration,  n.  296. 

as  to  paper  where  consideration  is  based  on  gambling  transaction, 
297. 

as  to  gambling  transactions  and  notes  based  on,  construction  of,  298, 


I 


INDEX.  1075 

[References  are  to  Sections.'] 

STATUTE— ConiinttefZ. 

availability  of  defense  of  usury  largely  affected  by,  302. 

penalty  under  only  remedy  for  recovery  of  usury,  306. 

paper  transferred  in  violation  of,   innocent  holder,  382. 

non-performance  of  condition  precedent  defense  under,  311. 

as  to  holder  in  due  course  construed,  stolen  paper,  396. 

action  under  for  lost  instrument,  400. 

giving  right  of  action  to  real  party  in  interest,  403. 

making  bills  of^lading  negotiable,  414. 

set-off  under  against  purchaser  after  maturity,  422. 

providing  that  suit  by   assignee   shall   be  without  prejudice,  pur- 
chaser after  maturity,  430. 

may  confer  right  to  set  up  defense  arising  out  of  collateral  matters 
against  purchaser  after  maturity,  431. 

defenses  under  against  bona  fide  holder,  442. 

of  Nebraska  modifies  law  merchant  as  to  what  is  negotiable  instru- 
ment, 460. 

as  to  notice  or  knowledge,  bo^ia  fide  holder,  465. 

as  to  effect  of  alteration,  480. 

as  to  married  woman,  purchaser  of  note  of  must  take  notice,  482. 

as  to  making  protest,  534. 

imposing  upon  notaries  duty  to  give  notice  of  dishonor,  549. 

as  to  notice  of  dishonor  must  be  complied  with,  565. 

affecting  right  of  set-off  note,  610. 

right  to  set  off  usury  as  affected  by  federal  statutes,  615. 

affecting  right  of  set-off  generally,  616. 
against  indorser,  625. 

as  to  personal  property  of  wife,  effect  on  right  to  set-off  against 
husband,  628. 

affecting  set-off  in  case  of  joint  creditors  and  debtors,  631. 

as  to  notes  being  negotiable  by  indorsement,  645. 

authorizing  premium  notes  for  capital  stock,  estoppel,  664. 

act  of  public  or  corporate  official  in  violation  of,  estoppel  to  show, 
672. 

of  limitation,  waiver  of,  677. 
See  Negotiable  Instruments  Law^  in  Appendix;  Statute  of  Limitations. 

STATUTE  OF  LIMITATIONS, 

collection  of  collateral  lost  by  operation  of,  negligence  of  pledgee, 

counterclaim,  373. 
demand  not  necessary  on  bank  certificate  of  deposit  to  start  run- 
ning of,  505. 
may  prevent  set-off  of  note,  610. 
does  not  defeat  right  to  set  off  usury,  614. 
may  defeat  right  to  set  off,  616. 

See  Statutes. 
STATUTORY  DAMAGES, 

action  for,  deficiency  after  sale  of  collateral,  494. 


1076  IXDEX. 

[References  are  to  Sectio7is.'] 

STAY  OF  PROCEEDINGS, 

where  collateral  condition  as  to  not  performed,  325. 

STEALING, 

of  paper,  see  Lost  oe  Stolen  Insteuments. 

STIPULATIONS, 

in  note,  alteration  of,  171. 

addition  of  to  note,  171. 

in  bill  for  presentment  for  acceptance,  490. 

in  note  for  waiver  of  presentment  for  payment,  524. 
See   AoREEiiENT;    Collateral   Conditions;    Contract;    Presentment   foe 

Acceptance. 
STOCK, 

coverture  as  defense  to  note  given  for,  57. 

of  corporation  to  be  formed,  note  for,  corporation  not  formed,  266. 

agreement  to  transfer  as  consideration,  depreciation  by  subsequent 
events,  266. 

of  corporation  fictitious,  note  in  consideration  of  void,  n.  288. 

note  given  in  payment  of,  cannot  show  to  be  paid  out  of  dividends, 
334. 

of  banks  not  set  off  in  action  by  on  note,  596. 

of  bank,  dividend  on  stock  of  not  available  against  bank,  624. 
See  Corporations;    Stock  Certificate. 

discharge  by  taking,  689. 

held  as  collateral,  discharge  of  note,  689. 

STOCK  CERTIFICATE, 
where  stolen,  397. 

STOCKHOLDERS, 

of  corporation,  laches  of  as  an  estoppel,  660. 
check  as  purchase  or  payment,  696. 

STOLEN, 

bond  numbers  altered,  no  defense  against  bona  fide  holder,  151. 
property,  agreement  not  to  search  house  for,  note  consideration  of 
void,  n.  288. 

that  loan  made  from  proceeds  of  no  defense  to  note,  133. 

STOLEN  INSTRUMENTS, 

See  Lost  or  Stolen  Instruments. 
STRANGER, 

effect  of  alteration  of  paper  by,  142. 
alteration  of  date  by  a  mere  spoliation,  152. 

in  amount  by,  165. 
act  of  writing   on   face   of   draft  "Payable   in   United   States   gold 

coin"  no  defense,  167. 
alteration  of  interest  clause  by  no  defense,  168. 
erasure  of  indorsement  by,  180. 

secret  equity  in  favor  of  not  available  against  purchaser  after  ma- 
turity, 437. 

See  Alteration;   Spoliation. 


INDEX.  1077 

• 

[References  are  to  Sections.} 
SUB-CONTRACTORS, 

as  indorsees  of  checks,  presentment  for  payment,  reasonable  time, 
511. 

SUBSCRIPTION  NOTES, 

conditions  affecting,  313. 

SUBSTITUTED  CHECK, 

See  Check. 
SUBSTITUTED  NOTE,  • 

payment  by,  discharge,  688. 

See  DiSCHABGE. 

SUE, 

effect  of  threat  to,  110. 

note  extorted  by  threats  to  not  enforceable,  196. 

condition  or  agreement  not  to,  337. 

agreement  to  simultaneous  or  subsequent  and  for  a  limited  time,  338. 

forbearance  to,  effect  on  right  of  assignee  of  void  note,  450. 
See  Duress;  Forbeabaxce. 
SUFFICIENCY, 

of  consideration,  see  Considebation. 

SUICIDE, 

threat  of  husband  to  commit  suicide  not  duress,  107. 
SUIT, 

set-off  must  have  been  acquired  prior  to  commencement  of,  592. 

SUNDAY, 

instruments  executed,  accepted  or   delivered   on,   29. 

note  made  on  void,  n.  288. 

goods  sold  on,  note  for  void,  n.  288. 

paper  executed  on  valid,  n.  288. 

that  note  executed  on  not  a  defense,  n.  296. 

no  defense  against  bo7ia  fide  assignee  after  maturity,  421. 
presentment  for  payment  on  day  preceding,  510. 
time  of  maturity,  509,  510. 
protest  of  paper  maturing  on,  534. 

SUPPLEMENTAL  PROCEEDINGS, 

admission  made  in  by  maker,  estoppel,  656. 

SUPPLIES, 

coverture  as  defense  to  note  for,  30,  41. 
note  given  for,   coverture,  57. 

See  Coverture;    Infants;    Necessaries. 
SUPPORT, 

note  given  to  secure,  evidence  of  performance,  336. 
See   Consideration;    Co^'ERTURE;    Infants.  . 
SURETY, 

■when  one  joint  maker  may  show  he  signed  as,  3. 
one   signing  joint  and   several   note   can   not   show   he   signed    as 
surety,  3. 


1078  INDEX. 

[References  are  to  Sections.'] 

SURETY— Continued. 

■when  precluded  from  setting  up  defense  of  forgery,  28. 

coverture  as  defense  where  wife  signs  as,  44. 

burden  of  proof  on  married  woman  to  show  she  signed  as,  45. 

where  statute,  forbids  married  woman  to  become,  45,  46. 
•     when  no  defense  that  married  woman  signed  as,  47. 

whether  bona  fide  holder  subject  to  defense  that  married  woman 
signed  as,  48. 

rules  for  determining  whether  married  woman  principal  or  surety, 
49. 

right  to  recover  of  infant  amount  paid  on  note  given  for  neces- 
saries. 63. 

mental  incapacity  of  as  defense,  72. 

sufficiency  of  evidence  showing  mental  incapacity  of,  72. 

can  not  set  up  forgery  of  name  of  one  of  obligors,  104. 

may  show  duress  of  principal,  114. 

where  note  signed  by  with  notice  of  duress  of  principal,  115. 

fraud  of  upon  maker  no  defense  against  bona  fide  holder,  121. 

may  show  note  in  fraud  of  creditors,  action  by  executors  of  payee, 
125. 

fraud  in  procuring  signature  of,  128. 

may  show  fraudulent  concealment  of  facts,  128. 

misrepresentation  to  be  defense  must  be  an  assertion  of  fact,  128. 

where  fraud  waived  by,  128. 

induced  to  sign  by  fraud,  no  defense  against  bona  fide  holder,  129. 

alteration  by  maker  without  consent  of,  139. 

effect  on  rights  of  In  case   of  alteration  by  payee  or  subsequent 
holder,  140. 

not  released  by  alteration  in  date  authorized  by  him,  152. 

is  discharged  by  alteration  in  date,  152. 

immaterial  alteration  in  firm  name  no  defense,  158. 

may  show  alteration  in  name  of  payee,  158. 

memorandum  on  back  reducing  rate  not  material,  169. 

released  by  erasure  of  name  of  maker,  172. 

signature  misplaced,  alteration  to  correct,  181. 

erasure  of  word  "surety"  after  name  of  a  maker,  181. 

effect  of  alteration  or  erasure  of  signature  of,  181. 

addition  of  name  as,  182. 

no  exact  line  of  demarcation  between  sureties  and  guarantors,  213. 

forbearance  to  sue  as  consideration  for  signature,  213. 

liability  of  a  consideration  for  note  by,  213. 

may  show  facts  going  to  consideration,   213. 

may  show  he  signed  as  accommodation  maker,  213. 

signing  note  for  special  purpose,  notice  to  parties  taking,  213. 

one  may  show  he  signed  as,  no  other  consideration,  269. 

accommodation  indorser  occupies  position  of,  281. 

effect  on  of  illegal  consideration,  290. 

usury  between  principal  and  holder  no  defense,  302. 


IXDEX.  1079 

[References  are  to  8ections.'\ 

SURETY — Continued. 

may  show  that  other  signatures  were  to  be  procured,  315,  316. 
discharge  of  for  breach  of  condition  as  to  signatures  releases  co- 
sureties, 315. 
on  non-negotiable  note,   may   show  against  holder   without  notice 

that  other  signatures  were  to  be  obtained,  316. 
action  against  by  bona  fide  holder,  no  defense  that  other  signatures 

were  to  be  procured,  316. 
condition  to  advance  money  to  principal  not  performed,  323. 
may  show  subsequent  extension   of  time  to  principal  debtor,  340. 
on  note  executed  as  collateral,  352. 
discharged  by  diversion  by  principal,  379. 
on  accommodation  note  diverted,  385. 
assignment  of  note  to,  right  to  sue,  407. 
presentment  for  payment,  504. 
notice   of  protest  unnecessary,  529. 
where  notice  of  dishonor  not  given  to,  545. 
entitled  to  personal  notice  of  dishonor,  553. 

where  joint  makers  are,  notice  of  dishonor  need  not  be  given,  561. 
presentment  of  check,  584. 

when  money  paid  by  one  as  cannot  be  set  off,  594. 
when  set-off  of  demand  against  payee  not  available,  594. 
damages  for  breach  of  warranty  not  available  to  as  a  set-off,  601. 
when  set-off  of  usury  not  available  against,  614. 
payment  by  one  as  not  set-off  against  administrator,  620. 
set-off  against  assignee  of  debt  paid  by,  623. 

set-off  of  debts  to  where  note  transferred  after  insolvency  of  payee, 
626. 

set-off  of  debt  paid  by  where  principal  insolvent,  626. 
joint  note  signed   by  one  as  surety  and  another  as  principal   not 
available  against  individual  debt  of,  629. 

right  of  set-off  in  action  by  or  against  principal  or  surety,  632. 

set-off  in  favor  of  maker  may  enure  to  benefit  of,  639. 

right    of    set-off    against    administrator,    639. 
generally  in  actions  against,  639. 

not  entitled  to  set  off  amount  collected  on  collateral,  639. 

right  to  set-off  damages  due  to  principal,  640. 

when  no  right  of  set-off  against  assignee  in  insolvency,  640. 

estoppel  of  by  new  promise,  650. 

estoppel  to  show  forgery  by  signing,  673. 

discharge  and  release  of,  680. 

See  THE  PARTICULAR  DEFENSE. 

SURNAME, 

of  payee,  alteration  by  adding  immaterial,  158. 

SURRENDER, 

of  note  or  collateral  as  consideration  for  note,  244. 
of  void  notes,  note  given  for  void,  n.  288. 
will  not  preclude  holder  from  suing,  403. 


1080  INDEX. 

[References  are  to  Sections.'] 
SURRENDER— Continued. 

of  notes,  discharge  of  guarantor,  681. 

on  execution  of  mortgage,  682. 
of  collateral,  discharge  of  debt,  683. 
of  property  as  affecting  discharge  of  notes,  690,  691. 
of  notes  for  rent,  discharge  of,  judgment,  695. 

SURVEYS, 

note  given  for,  that  in  excess  of  value  of  services  no  defense,  192. 

SUSPICIOUS  CIRCUMSTANCES, 

as  affecting  one's  standing  as  a  6ono  fide  holder,  475,  476,  477. 


T 

TAX  BILLS, 

indorsed  in  blank  and  stolen,  397. 

TELEGRAM, 

waiver  of  protest  consequent  upon,  540. 

TENDER, 

back  of  consideration,  when  not  necessary,  211. 

what  equivalent  to,  presentment,  502. 

deposit  of  funds  in  particular  place  where  not  payable,  502. 

ability  and  willingness  to  pay,  presentment  for  payment,  502. 

discharge  of  note,  678. 

of  payment,  discharge  of  note,  694. 

See  Presentment  for  Payment. 
THEFT, 

See  Lost  or  Stolen  Instruments. 
THIRD  PERSON, 

set-off  arising  from  agreement  to  pay  debt  of,  596. 

THREATS, 

to  sue,  note  extorted  by  not  enforceable,  196. 

by  payee  to  oppose  allowance  of  claim,  note  based  on  void,  n.  288. 
See  Dlress. 
THRESHING   MACHINES, 

note  for  conditioned  that  machine  satisfactory,  327. 

TIME, 

of  payment,  condition  or  agreement  as  to,  399. 

of  payment  of  sight  draft  cannot  be  known  until  acceptance,  490. 
desired,  want  of  funds,  acceptance  not  refused,  492. 
presentment  on  business  day,  498. 

demand  notes  not  to  be  paid  till  expiration  of  certain  time,  pre- 
sentment, 506. 
when   presentment  for  payment  made,  511. 
extension  of  as  waiver  of  presentment  for  payment,  524. 
request  for  as  waiver  of  presentment  for  payment,  524. 


INDEX.  ^^^^ 

{Reference's  are  to  Sections.'] 

TIME — Continued. 

when  protest  should  be  made,  534. 

extension  of  as  an  estoppel,  659.  ^ 

of  payment  extended,  release  of  surety,  680. 

extension  of,  discharge  of  guarantor,  681. 

of  presentment,  see   Presentmkxt   for   Acceptance;   Presentment 

FOR  Payment;   Reasonable  Time. 
when  bill  payable,  see  Diligence;    Presentment  for  Acceptance; 
Reasonable  Time. 

TITLE, 

deed  to  remove  cloud  on  as  consideration,  194. 

note  given  for  information  of  outstanding  title,  consideration    194. 

note  given  to  remove  cloud  on,  sufficiency  of  consideration,  19o. 

defect  in  as  defense,  208. 

indorsement  merely  to  pass,  want  of  consideration,  255,  256. 

outstanding,  failure  of  consideration,  262. 

where  vendor  has  none,  want  or  failure  of  consideration,  263. 

outstanding  no  defense  where  purchaser  in  possession  under  deed 

with  covenant  of  warranty,  264. 
loss  of  as  failure  of  consideration,  264. 
to  vessel  defective,  failure  of  consideration,  n.  265. 

to  land,  defects  not  entire,  266. 

set-off  of  amount  paid  to  clear,  422. 

condition  in  note  as  to  confirming,  n.  343. 

want  of,  402,  418. 

possession  as  evidence  of,  402. 

cannot  rest  upon  proof  of  indorsement,  404. 

one  holding  nominal  title  may  recover,  409. 

transfer  of  after  suit  commenced,  410. 

vitiated  by  illegality  in  transfer,  412. 

possession  prima  facie  shows,  evidence  to  rebut,  416. 

to  checks,  how  may  be  transferred,  413. 

denial  of  ownership   of  by  plaintiff,  417,  418. 

acquired  by  fraud,  hona  fide  holder,  441. 

to  paper,  transfer  of  by  parol,  452. 

nature  of  given  by  transfer  by  delivery,  463. 

deposit,  checks,  n.  578. 

damages  for  breach  of  covenant,  when  available  as  set-off,  594. 

to  check  indorsed  and  deposited,  n.  578. 

See  Assignment;  Lien;  Want  of  Title  or  Interest. 

TORT 

where  note  of  infant  given  in  satisfaction  of,  66. 
right  to  set-off  damages  recoverable  in  action  of,  597,  598. 
in  taking  possession  of  property  note  given  for,   right  to   set  off 
damages,  597,  598. 


1082  INDEX. 

[.References  are  to  Sections.'] 
TRADE, 

note  in  restraint  of  void,  n.  288. 
cannot  show  note  was  to  be  paid  in,  334. 

corporate   certificate  of  indebtedness   issued   in   restraint  of,   anti- 
trust law,  459. 

TRANSFER, 

of  other  notes  as  discharge,  691. 

of  property  as  affecting  discharge  of  notes,  691. 

precluding  holder's  recovery  against  indorser,  702. 

See  Sale. 
where  fraudulent,  see  Diversion  and  Fraudulent  Transfeb. 

TRANSFEREE, 

See  the  particular  defense. 
TREASON, 

note  in  aid  of  void,  293. 

TREASURER, 

of  corporation,  want  of  authority  of,  81. 
of  city,  unauthorized  paper  issued  by,  84. 

TREASURY  NOTES, 

where  stolen,  398. 

TREES, 

note  given  for  price  of,  inadequacy  of  consideration  no  defense,  192. 

TRUST, 

selling  property  in  violation  of,  damages  for  cannot  be  set  off,  598. 
set-off  against  note  held  by  assignee  in  trust  for  payee,  623. 
property  assigned  in,  discharge  of  notes,  691. 

TRUST  CORPORATION, 

not  included  in  note  payable  at  any  bank,  517. 

TRUSTEES, 

want  of  authority  to  give  note,  73. 

notes  issued  or  held  by,  want  or  failure  of  consideration,  231. 

paper  to  secure  election  of  one  as,  void,  n.  288. 

who  has  mortgaged  trust  estate  may  set  up  usury,  302. 

that  note  held  by  one  as,  no  defense,  404. 

equities   ^nd   defenses  against,   457. 

of  insolvent  firm,  notice  of'  dishonor  to,  562. 


U 

ULTRA  VIRES. 

instruments  of  corporations,   84. 

when  corporation  estopped  to  defend  on  ground  of,  85,  86. 

indorsement  by  corporation,  effect  of,  279. 

act,  corporation  estopped  to  show,  671. 

See  Corporations;  Want  of  Authority. 


INDEX. 


1083 


[References  are  to  Sections.'] 

UNAUTHORIZED  PAPER, 

See  Want  of  Authority. 
UNDUE  INFLUENCE, 

in   procuring  transfer   from   payee,   no   defense   to   action   against 

malier,  1. 
on  person  of  alleged  unsound  mind,  when  no  defense,  72. 
See  Duress. 
UNFOUNDED. 

claim,  compromise  of  not  a  good  consideration,  196. 

UNITED   STATES, 

acceptance  of  interest  in  claim  against  as  discharge  of  note,  691. 

UNLIQUIDATED   DAMAGES, 

arising  from  breach  of  covenant,  when  available  as  set-off,  594. 
from  negligence  of  plaintiff  as  agent  cannot  be  set  off,  598. 
for  selling  property  in  violation  of  trust  cannot  be  set  off,  598. 
arising  ex  contractu  but  under  different  contract  cannot  be  set  off, 
600. 

See  Set-Off,  Recoupment  and  Counterclaim. 

"UPON  CONDITION," 

erasure  of  from  note,  171. 

USAGE, 

of  bank  as  affecting  mode  of  giving  notice  of  dishonor,  557. 
See  Custom. 
USURY, 

generally,  302. 

bona  fide  holders,  paper  based  on  usurious  contract  between  original 

parties,  303. 
maker  and  transferee,  discount  and  transfer,  304. 
renewal  bill  or  note,  extensions,  305. 

in  inception  of  note,  as  defense  to  action  against  guarantor,  9. 
in  discounting  note  purchased  from  bank,  11. 
as  defense,  need  not  offer  to  return  benefits  received,  211. 
availability  generally  as  to  parties,  302. 

of  largely  controlled  by  statute,  302. 
action  against  payee  as  indorser  by  bona  fide  holder,  n.  303. 
between  intermediate  holders  no  defense  against  indorsee,  n.  303. 
accommodation  note  in  payment  of  usurious  note  not  tainted,  305. 
corporations,  306. 
'  local  law  controls  banking  associations,  306. 

statutory  penalty  only  remedy  for  recovery  of,  306. 
'  United  States  statutes  apply  to  accommodation  and  business  paper. 

n.  306. 
federal  and  state  laws,  national  state  banks  and  private  bankers, 

n.  30G. 
not  available  against  state  or  national  banks,  n.  306. 
against  assignee  with  knowledge,  412. 


108-i  INDEX. 

[References  are  to  Sections.'] 
USURY— Continued. 

evidence  of  against  purchaser  after  maturity,  421. 

against  purctiaser  after  maturity  from  bona  fide  holder,  434. 

available  against  assignee,  n.  447. 

rule  as  to  recoupment  of,  614. 

in  some  states  can  only  be  recouped,  614. 

set-off  of  cannot  be  defeated  by  statute  of  limitations,  614. 

paid  by  joint  makers,  pro  rata  set-off,  614. 

when  set-off  of  not  available  against  surety,  614. 

that  cannot  be  recovered  in  separate  action  does  not  affect  right  to 

set-off,  614. 
to  be  available  as  set-off  must  attend  same  contract,  614. 
right  to  set-off  as  affected  by  federal  statutes,  615. 
judgment  for  may  be  set  off,  615. 
accommodation  indorser  may  set  off,  623. 
when  acceptor  may  show,  641. 
note  purchased  with  knowledge  of,  representation  not  relied  on  no 

estoppel,  654. 
may  show  though  representation  there  would  be  no  defense,  665. 


V 

"VALUE  RECEIVED," 

words  not  essential,  186. 
evidence  to  rebut,  185,  186. 

where  note  written  for,  no  defense  want  of  consideration,  bona  fide 
holder,  260. 

VENDEE, 

deed  from,  discharge  of  purchase-price  notes,  690. 
See  Consideration;    Covenants;    Damages;   Goods;    Land;    Merchandise; 
Set-Off,  Recoupment  and  Counterclaim;   Vendor;   Warranty. 

VENDOR, 

or  seller  without  title  or  interest,  loss  of  title,  263. 
equitable  defense  against  in  hands  of  assignee,  447. 
.  want  of  knowledge  of,  as  to  vendee's  agreement  with  bank  as  affect- 
ing discharge  of  notes,  690. 
deed  to,  discharges  of  purchase-price  notes,  690. 
See  Consideration;   Covenants;    Damages;   Goods;    Land;    Merchandise; 
Set-Off,  Recoupment  and  Counterclaim;  Warranty. 

VENDOR'S  LIEN, 

as  affecting  discharge  of  note,  682. 

VESSEL, 

title  defective,  failure  of  consideration,  n.  265. 

VIOLENCE, 

actual  threats  of  not  necessary  to  constitute  duress.  111. 
giving  of  paper  induced  by  fear  of.  111. 


INDEX.  1085 

[References  are  to  Sections.] 


VOID, 

consideration  a  defense,  262. 


W 
WAGER, 

on  election,  note  to  secure  void,  n.  288. 

on  collection  of  execution,  note  to  secure  void,  n.  288. 

as  consideration  "for  note,  296,  297,  298. 

WAIVER  AND  ESTOPPEL, 

as  to  defense  of  fraud,  116. 

where  surety  signs  with  knowledge  of  fraud,  128. 

in  case  of  alterations,  150. 

recital  in  certificate  of  deposit  as  to  receipt  of  money,  205, 

hy  retaining  consideration,  210,  211. 

by  principal  precluding  defense  of  failure  of  consideration,  220. 

in  case  of  "peddler's  note"  to  show  violation  of  statute,  292. 

of  conditions  affecting  note,  350. 

diversion  of  paper,  380. 

in  case  of  diversion  of  paper,  393. 

carrier  not  estopped  by  statement  in  bill  of  lading,  n.  414. 

by  silence   where   knowledge   of   suit   and   permitting   payment   of 
judgment,  n.  416. 

only  slight  evidence  to  establish  estoppel  in  pais  as  to  validity,  442. 

as  to  time,  presentment  for  payment,  511. 

of  exhibition  of  instrument,  presentment  for  payment,  513. 

by  knowledge  of  indorser  of  material  facts  and  laches,  presentment 
for  payment,  524,  525. 

of  presentment  and  demand,  524,  525. 

for  payment  by  request  for  time,  524. 

when  no  new  consideration  necessary,  524. 
in  body  of  note,  524. 
stipulation  in  note  for,  524. 

of  demand   included  in  "protest  waived"  and  "waiver  of  protest," 
etc.,  524. 

of  presentment  for  payment  by  extension  of  time,  524. 

indorsement  of  on  note,  presentment  for  payment,  524. 

signed  by  indorser,  presentment  for  payment,  524. 

on  back  of  note  of  presentment  for  payment,  524. 

as  indorser  even  though  guarantor,  of  presentment  for  payment, 
524. 

of  presentment  for  payment  by  promise  by  letter  to  pay,  525. 
by  paying  interest,  525. 
by  request  not  to  do  anything  with  note,  525. 

of  presentment  by  acknowledging  indebtedness,  or  by  partial  pay- 
ment or  promise  to  pay,  knowledge  of  material  facts,  525. 

of  presentment   for   payment  by   agreement  by   which   assignment 
made,  525. 


1086  INDEX. 

[References  are  to  Sections.^ 
WAIVER  AND  ESTOPFELr-Continiied. 

laches  and  check  lost,  duplicate  check  given,  525. 

by  partner  after  dissolution  of  firm,  525. 

by  request  for  renewal,  525. 
waiver  of  protest  generally,  537-541. 
of  protest  by  conduct  of  indorser,  537. 
conditional  waiver  of  protest,  537. 
by  indorsement  of  waiver  of  protest,  538. 
[waiver  of  protest  stamped  on  back  of  note,  538. 

in  body  note  binds  indorser,  538. 
by  indorser  of  protest  by  promise  to  pay,  538. 
what  waiver  of  protest  includes,  539. 
of  protest  by  extension  of  time,  540. 
as  to  protest,  instances  of,  540. 
waiver  of  protest,  parties,  541. 
by  a  partner  of  notice  of  protest,  n.  560. 
as  to  failure  to  give  notice  of  dishonor,  573. 
of  presentment  for  payment  of  check,  589. 

of  right  to  set-off,  not  by  failure  to  set  it  up  prior  to  verdict  or 
judgment,  617. 

of  set-off,  617. 

''      by  promise  to  pay  at  time  of  assignment,  617. 
by  acceptance  generally,  641. 
by  certification  of  bank  check,  642. 
by  bank  by  payment  of  check,  643. 
by  signature  and  execution,  644. 
where  paper  delivered  to  an  impostor,  644. 
by  indorsement,  645. 

where  note  indorsed  in  blank  to  agent,  645. 
indorsement  in  blank  by  married  woman,  645. 
by  leaving  blank  indorsement  on  check,  645. 
by  recitals  in  collateral  mortgage,  646. 

in  paper,  646. 

in  contemporaneous  agreement,  646. 

in  indorsement,  646. 

in  bonds,  647. 
by  bill  or  note,  648. 

as  to  judgment  where  note  given  to  procure  satisfaction  of,  648. 
by  acceptance  of  new  note,  649. 
by  giving  of  new  note,  649. 
by  new  promise,  650. 

new  promise  not  where  no  knowledge  of  defenses,  650. 
by  new  promise,  limitations  of  rule,  651. 
by  giving  paper  to  cover  shortage  in  accounts,  652. 

to  deceive  state  officials,  652. 
by  representation  that  paper  is  business  paper,  653. 
by  representations  inducing  discount,  653. 

in   connection   with   transfer,   what   constitutes   an   estoppel, 
653. 


INDEX.  108T 

[References  are  to  Sections.] 
WAIVER  AND  ESTOPPEL— Continued. 

toy  agent  in  connection  with  transfer,  653. 

in   connection   with   transfer,   what   does   not   constitute   an 
estoppel,  654. 
casual  answers  not,  654. 

effect  of  representations  subsequent  to  transfer,  655. 
by  admission  or  declaration,  656,  657,  658. 

in  supplemental  proceedings,  656. 
admission  by  indorser  does  not  estop  maker,  657. 
by  admission  or  declaration,  limitations  on  rule,  657. 
admission  by  partner  not  binding  on  firm,  657. 

by  maker  does  not  estop  co-maker,  657. 
purchaser  after  maturity  estopped  by  admission  of  prior  holder,  658. 
admission  by  one  binding  on  another  where  identity  of  interest, 

658. 
paper  treated  as  valid  until  account  barred,  estoppel,  659. 
by  acceptor  preventing  performance,  659. 
by  permitting  sacrifice  of  mortgaged  property,  659. 
acceptance  of  part  payment,  659. 
by  acts  or  conduct,  659. 
by  extension  of  time,  659. 

by  action  or  conduct,  corporate  transactions,  660. 
by  laches,  661. 

by  retaining  consideration,  662. 
by  another  action  or  proceeding,  663. 
as  to  consideration  in  general,  664. 
notes  given  by  directors  to  bank,  664. 
by  promise  to  pay  "without  plea  or  offset,"  664. 
by  acceptance  of  warranty  deed,  664. 
where  consideration  illegal,  665. 

signing  for  accommodation,  want  or  failure  of  consideration,  666. 
by  receipt  of  benefits,  failure  of  consideration,  667. 
by  conduct  representation  or  promise,  want  or  failure  of  considera- 
tion, 668. 
knowledge  or  notice,  want  or  failure  of  consideration,  669. 
no  estoppel  to  show,  mental  incapacity,  670. 
as  to  capacity  and  authority  generally,  670. 
want  of  capacity  and  authority,  corporate  transactions,  671. 
where  act  of  public  or  corporate  official  in  violation  of  statute,  672. 
by  erasure  to  show  forgery,  673. 
silence  no  estoppel  as  to  forgery,  673. 
as  to  forgery  and  alteration,  673,  674. 

by  admission  of  signature,  674. 
failure  to  give  notice  of  forgery,  675. 
as  to  forged  checks,  676. 
as  to  statute  of  limitations,  677. 

See  Estoppel. 


1088  INDEX. 

[References  are  to  Sections.'\ 
WAIVER  OP  DEMAND, 

accidental  stamping  of  over  indorsement,  143. 

"WANT  OF  AUTHORITY, 

unauthorized  signature  or  indorsement,  73. 

signing  by  husband  of  wife's  name,  73. 
indorsement  of  firm  name,  73. 

of  trustee  to  give  note,  73. 

of  clerk  to  draw  checks,  73. 

where  unauthorized  signature  satisfied,  estoppel,  74. 

name  of  surety  forged,  estoppel  by  ratification,  74. 

mere  promise  to  pay  does  not  estop  from  showing,  74. 

estoppel  by  delivery  of  note  to  deny  signature,  74. 

of  agent  no  defense  against  dona  fide  holder,  75. 

violation  of  instructions  by  agent,  75. 

where  agent  has  only  authority  to  collect  cash  indorsement  by,  75. 

of  special  agent,  75. 

unauthorized  collection  of  note  given  as  collateral,  76. 

receipt  of  paper  by  public  officer  only  authorized  to  receive  cash,  77. 

paper  given  to  or  transferred  by  administrator  or  executor,  78. 

note  to  bank,  organization  of  not  subject  of  inquiry,  79. 

note  by  corporation  in  violation  of  express  statute,  79. 

corporate  want  of  authority  as  affected  by  illegality  or  statute,  79. 

of  corporate  officers  or  agents,  80,  81. 

non-compliance  with  articles  of  incorporation,  81. 

of  managing  officer  of  corporation,  81. 

of  assistant  secretary  of  corporation,  81. 

effect  of -non-compliance  with  by-laws  of  corporation,  81. 

of  secretary  of  corporation,  81. 

of  president  of  corporation,  81. 

of  treasurer  of  corporation,  81. 

of  bank  officials,  82. 

check  certified  by  bank  letter,  82. 

paper  issued  by  public  officers,  83. 

ultra  vires  instruments,  84. 

acceptance  by  corporation  in  violation  of  statute,  84. 

ultra  vires  instruments,  bona  fide  holder,  84. 

when  corporation  estopped  to  assert  act  ultra  vires,  85,  86. 

of  corporation,  non-compliance  with  by-laws  as  to  manner  of  execu- 
tion no  defense,  85. 

note  in  pursuance  of  contract  prohibited  by  charter  of  corporation, 
86. 

where  paper  issued  by  bank  before  certificate  of  banking  commis- 
sioner received,  86. 

note  given  for  money  loaned  to  corporation,  86. 

to  issue  county  warrants,  87. 

of  municipal  or  public  corporations,  87. 

power  of  municipality  generally  to  issue  paper,  87. 

guarantee  of  checks  beyond  deposits,  58. 


I 


INDEX. 


1089 


[References  are  to  Sectlons.li 
"WANT  OF  AUTHORITY — Continued. 
of  partner,  89,  90,  91. 

to   sign    accommodation   note   in    firm    name,   89. 
question   for  jury,  89. 

to  give  firm  note  for  individual  loan,  90. 
to  accept  bill  of  exchange,  90. 
when  may  be  shown,  91. 
note  between  pa,rtner  and   firm,  92. 
paper  given  in  violation  of  articles  of  partnership,  93. 

executed  in  firm  name  after  dissolution,  94. 
to  whom  defense  available,  95. 
estoppel  as  to  generally,  670. 
of  corporation,  estoppel  to  show,  671. 
See  Agent;    Corporate  Officers;    Corporations;    Officers;   Public 

Officers. 
WANT  OF  CONSIDERATION, 

See  Consideration. 
WANT  OF  FUNDS, 

See  Presentment  for  Acceptance;  Presentment  foe  Patment. 

WANT  OF  NOTICE  OF  PROTEST  AND  DISHONOR, 
See  Notice  of  Dishonor. 

WANT  OP  PRESENTMENT, 

See  Presentment  for  Acceptance;  Presentment  fob  Payment. 

.  WANT  OF  PROTEST, 

See  Protest. 

WANT  OF  TITLE  OR  INTEREST, 

possession  as  evidence  of  title,  402. 

right  of  holder  or  owner  to  sue,  real  party  in  interest,  403. 

of  indorser,  does  not  affect  indorsee,  404. 

right  to  recover  generally,  legal  and  equitable  title,  404. 

payee  named  prima  facie  owner,  405. 

payees,  405. 

note  discounted  in  bank,  405. 

action  by  pledgee  in  name  of  payee,  405. 

indorsee  against  indorser,  406. 

action  by  assignee,  407. 

transferee  agent  of  foreign  merchant,  408. 

agency,  408. 

recovery  for  benefit  of  holder,  beneficial  interest,  409. 

note  indorsed  as  collateral,  payee  may  recover  on,  409. 

where  plaintiff  beneficial  owner,  n.  409. 

transfer  of  title  or  interest  after  suit  commenced,  410. 

character  of  title  or  interest,  411. 

holder  need  not  show  in  what  capacity  he  holds,  411. 

indorsement  by  banks  to  cashier  is  voidable  only,  412. 

conditions  precedent,  412. 

Joyce  Defenses — 69. 


1090  INDEX, 

[References  are  to  Sections.'] 
WANT  OF  TITLE  OR  INTEREST— Continued. 
void  or  voidable  title  or  transfer,  412. 
indorsement  causa  mortis,  revocation  of,  412. 
illegality  in  transfer,  412. 

to  certificates  of  indebtedness  issued  by  municipality,  412. 
to  bank  note,  n.  412. 
where  assignment  voidable  only,   412. 
to  checks,   413. 
to  bill  of  lading,   414. 

where  bill  of  lading  made  negotiable  by  statute,  414. 
carrier  not  estopped  by  statement  in  bill  of  lading,  n.  414. 
to  protect  maker  or  let  in  his  defense,  415,  416. 
where  payment  of  judgment  protects  defendant,  416. 
prima  facie  title  from  possessor,  evidence  to  rebut,  416. 
denial  of  ownership  of  title  by  plaintiff,  417,  418. 
where  no  adminstration  taken  out,  417. 
in  action  by  executor,  417. 
sufficiency  of  affidavit  of  defense,  n.  418. 
in  action  against  members  of  firm,  n.  418. 
will  preclude  set-off  of  note,  611. 

WAR, 

as  excuse  for  delay  in  presentment  for  payment,  521. 

WARD, 

insane,  set-off  against  guardian,  618. 
WAREHOUSE  RECEIPTS, 

fraud  toward  v/arehouseman,  bona  fide  holder,  120. 
transfer  of  by  delivery,  456. 

WARRANTS, 

and  coupons  attached  to  bonds  of  municipality,  want  or  failure  of 
consideration,  232. 

WARRANTY, 

damages  from  breach  of,  partial  failure  of  consideration,  208. 

defective,  guarantor  may  show,  212. 

remedy  for  breach  of,  258. 

breach  of  cannot  be  set  up  by  acceptor,  258. 

cannot  be  set  up  by  guarantor,  259. 
judgment  for  breach  of  good  reply  to  defense  setting  up,  261. 
breach  of  as  defense  to  purchase-price  note  for  land,  264. 
personal  property,  failure  of  consideration,  265. 
breach  of,  accommodation  indorser,  280. 
damages  for  breach  of  as  set-off,  where  note  given  with  knowledge 

but  on  promise  to  remedy,  601. 
damages  for  breach  of  as  a  set-off,  601. 

of  not  available  to  surety  or  guarantor  as  set  off,  601. 
damages  arising  from  breach  of,  availability  as  a  set-off  against 

bona  fide  holder,  602. 


I 


INDEX.  1091 

[References  are  to  Sections.'] 
WARRANTY — Contimied. 

damages   for  breach   of  as  set-off,   apportioning  of  among  several 
notes,  603. 

WARRANTY   DEED, 

acceptance  of  as  an  estoppel,  664. 

WHAT  LAW  GOVERNS, 

lex  loci  contractus  governs  note  taken  as  collateral,  247. 
lex  fori  controls'  plea  of  want  of  consideration,  254. 
as  to  place  of  payment  where  none  stated,  331. 

"WIDOW," 

after  name  of  married  woman  does  not  estop  to  show  coverture,  30. 

WIFE, 

release  of  dower  by  as  a  consideration,  194. 
husband  may  transfer  notes  to  by  gift,  214. 

and  husband,  note  of  stranger  given  to  promote  peace  between,  235. 
joint  note  of  for  outlawed  debt  of  husband,  bona  fide  holder, 
245. 
accommodation   indorsement  by  for  husband,   281. 
as  assignee   may   sue,  407. 

See  Coverture;   Duress;   Married  Woman. 

"WITH  EXCHANGE," 

addition  of  these  words  not  a  material  alteration,  137. 

"WITH  INTEREST," 

effect  of  addition  of.  168. 

WITHOUT  RECOURSE, 

that  indorsement  was  cannot  be  shown  by  parol,  348. 
breach  of  agreement  to  write  over  signature,  342. 

WITNESS, 

note  to  induce  one  not  to  appear  as  void,  n.  288. 
erasure  or  addition  of  name  of,  177. 

WORK, 

contract  for,  where  note  given  in  settlement  of,  195. 

note  given    in   consideration   of   agreement   to   perform,   failure   of 

consideration,  202. 
performed  as  discharge  of  note,   693. 

WRIT, 

claim  acquired  after  issuance  of  cannot  be  set  off,  592. 


Whole  number  of  pag^es  1231. 


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